Coland Holdings Limited

Transcription

Stock Code：4144
2014 Annual Report
Website this annual report may be read : http://mops.twse.com.tw
Our Company’s Website : http://www.colandpharma.com
P r i n t e d
o n
2 7
M a r c h
2 0 1 5
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 of Headquarter and Subsidiaries
(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
Tel : 86-21-5137-1880
Name of Seychelles Subsidiary: 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 Seychelles Subsidiary : Auspicious Day Group Limited 祥日集團有限公司
Address : P.O. Box 1239, Offshore Incorporations Centre, Victoria, Mahé, Republic of
Seychelles
Tel : 86-21-5137-1880
Name of Seychelles Subsidiary : Majestic Trade Holdings Limited 弘貿控股有限公司
Address : P.O. Box 1239, Offshore Incorporations Centre, Victoria, Mahé, Republic of
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 China Subsidiary : Hainan Quanyuan Pharmaceutical Company Limited 海南全
原醫藥有限公司
Address : Room 406, 4F, Building of Property Mall, Yuanyang Road, Yangpu, Hainan
Tel : 86-77-1576-6511
Name of China Subsidiary : Shanghai Pengzi Medical Devices Company Limited 上海鵬
智醫療器械有限公司
Address : Room 111, Building 2, No.179, Chuanchang Road, Xuhui District, Shanghai
Tel : 86-21-5137-1880
Name of Taiwan Subsidiary : Coland Development Company Limited 康聯發展股份有限
公司
Address: Rm. D, 10F., No. 170, Dunhua N. Rd., Songshan Dist., Taipei
Tel : 886-2-2546-9288
Name of 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.:
Name: Lee Hsin
Title: Director and CEO of Coland Holdings Limited
Tel: 886-2-2546-9288
Email: [email protected]
4. 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 : 886-2-6636-5566
5. Names of Auditors auditing the latest financial statesmen, Name, Address, Website and
Telephone No. of the Accounting Firm
Name of accountants : Accountants Wang Yan Jun and Lin Li Huang
Name of accounting firm : Ernst & Young
Address : 9F, No. 333, Sec 1, Keelung Road, Taipei
Website : http://www.ey.com/
Tel : 886-2-2757-8888
6. Company website: http://www.colandpharma.com
7. List of Board of Directors：
Title
Name
Nationality
Chairman
William
Robert Keller
Director
Lee Hsin
Director
Ye Xiao Ping
Director
Tang Li Da
Independent
Director
Shen Jen Lin
Independent
Director
Chang Li Yen
Independent
Director
Chne Li
Education and Experience
Vice President of Roche Brazil Ltd.
Switzerland 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
Taiwan
Sales Director of Johnson&Johnson
Director of Schering-Plough
Vice President of Roche China Ltd.
University of Oxford, PhD in Immunology
China
Chief Medical Officer, Roche China Ltd.
Tianjin Institute of Pharmaceutical Research,
Researcher in Pharmacology
China
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,
Taiwan
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
Taiwan
COO, ScinoPharm
President, Da-Hwa Venture Capital Company
President, Hui-Hwa Venture Capital Company
Director, Cheng-Yu Venture Capital Company
PhD of Chemistary Department, Iowa State
University
Chief Science Officer, Roche R&D Center (China)
Limited
China
Head of Hish Thro ughput Chemistry Department,
Co-head of Combinatorial Chemistry Department
and Co-project leader of MC-4 Agonist,
Hoffmann-La Roche Inc. Nutley, NJ
Table of Contents
I.
II.
III.
IV.
V.
VI.
REPORT TO SHAREHOLDERS
COMPANY INTRODUCTION
CORPORATE GOVERNANCE REPORT
1. Organizational System
2. Information of directors, general manager, deputy general manager,
assistant general manager, heads of each departments and branches
3. Remuneration paid to directors, CEO and vice president in 2014
4. Status of corporate governance
5. Information on fees charged by auditors
6. Change of auditors
7. Disclosure on whether the chairman, the general manager or managers of
the Company responsible for financial or accounting affairs, served within
the latest year at the auditors’ firm or related affiliates in the lastest year
8. Disclosure of the change of 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
9. Information on the relation among top 10 shareholders as related parties
referred to in No. 6 Publication of the Financial and Accounting Principles
10 Number of shares and shareholding percentage in any company jointly
incested by the Company, the directors, the managers, or any company
directly or indirectly controlled by the Company
STATUS OF FUNDRAISING
1. Capital and shares
2. Status of bonds
3. Status of special shares
4. Status of overseas depository receipts
5. Status of employees share option
6. Status on the issue of employees restricted new shares
7. Status on issue of newshares for mergers, acquisitions and spin off
8 Status on use of proceeds
OPERATION STATUS
1. Business content
2. Market and sales status
3. Number of employees for the past 2 years and up to the date of printing
of the annual report
4. Environmental protection expenditure
5. Labor relationship
6. Material contracts
FINANCIAL HIGHLIGHTS
1. Condensed financial information in recent five years
2. Financial analysis in recent five years
3. Audit committee’s review report on 2014’s financial reports
4. Individual financial report of 2014
5. Audited consolidated financial statements of 2014
6. Any financial impact to the Company and its affiliated resulting from
financial or cash flow difficulties in 2014 and as of the date of this annual
report
i
1
4
7
7
10
20
24
44
44
44
44
46
47
48
48
52
52
52
52
54
54
54
55
55
70
75
76
76
78
80
80
83
86
86
86
86
VII.
REVIEW AND ANALYSIS OF FINANCIAL STATUS, FINANCIAL
PERFORMANCE AND RISK MANAGEMENT
1. Financial status
2. Operating results
3. Cash flow
4. Any financial or business impact arising from major capital expenditure
in the latest year
5. Investment policy, reasons for gain/loss of investment and plan for
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
2. Status of conducting any private placing for the latest year and up to the
date of printing of this annual report
3. Status on subsidiaries holding or disposing shares of the Company in the
latest year and up to the date of printing of this annual report
4. Other supplement information
5. Any matters as set out in Article 36(3)(ii) of the Securities Trading Law
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
protection of shareholders right of the Company and those in Taiwan
ii
87
87
87
88
88
89
90
97
97
101
101
101
101
101
I.
REPORT TO SHAREHOLDERS
Dear Shareholders of Coland:
1. Introduction
Thank you all for the trust in and support on Coland. The Company is rooted in China's medical
market and since established, we have been committing to create the best medical platform
between China and Taiwan, so as to be the best partner of those companies engaging in the fields
of pharmaceuticals, medical devices and IVD reagents who are going to enter into these markets.
With the joint efforts of our staff and business partners, we continue to maintain stable operation
the profitability. Below is our 2014 operation result.
2. The Result of 2014 Business Operation\
(1) The Operation Result:
In 2014, all our energies are gathered together and we achieved the following operating results:
(a) Extended Pharmaceutical Product Lines: we obtained license from Daewong for the sale
of URSA capsules in various areas in China. In developing new products, we established
strategic collaboration with Taiwan ScinoPharm in developing oncology products:
Azacitidine, partnered with PharmaDax Taiwan in developing special formulation drugs
targeting Taiwan and Asian markets.
(b) Medical Devices: we cooperated with Mathys, a Swiss manufacturer of orthopedic
products, as its distributor in northern part of China. Through strategical investment in
Revlis-ECG and Joinsmart-Orthopedics, we respectively enriched our product lines in
medical devices and aimed at the introduction of professional surgery equipment to
Taiwan market.
(c) IVD Reagents: we took part in the field of molecular test reagent by cooperating with
Rendu. In 2014, Rendu obtained approval of price in 7 places in China and started
marketing and sales of molecular test reagent for respiratory disease, hand-foot-mouth
disease, reproductive tract disease as well as tuberculosis.
(d) Expansion of the Sales Network: subsequent to the acquisition of Heilongjiang Tongze
Pharmaceutical in July 2012 and Hefei Guozhen Pharmaceutical Company in September
2013, we completed acquisition of Hannan Quanyuan Pharmaceutical in September 2014
to further extend our channel coverage in China. Through merger and acquisition of
district distribution channels, we continued to expand our business network and increase
our scale of operation.
1
(2) Profitability Analysis:
We maintained stable operation and profit growth in 2014 and achieved consolidated net sales
revenue of NTD2,204,967,000, representing a 19% increase as compared to last year, net
profit of NTD482,353,000, after deducting the minority interest of NTD 65,712,000, net profit
attributable to the Company’s shareholders was NTD416,641,000, representing a 17%
increase as compared to last year. Earnings per share were NTD5.35, according to the
calculation of net income divided by the weighted average of the number of circulated
ordinary shares.
(3) Research and Development Status:
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 2014 was NTD21,898,000, accounting for about 1% of total revenue. At present,
there are about 15 products under development by us together with our business partners. We
expected to obtain drug certificate for these products in between 2016 and 2025.
3. 2015 Business Plan and Development Strategy
(1) We would gather the advantages of our numerous business partners and spare no efforts to
develop the following three sectors: pharmaceutical product, medical devices and IVD
reagents in 2015.
(a) In pharmaceutical product sector: maintain stable sales of existing matured products, focus
the development of the sales of Daewong’sURSA capsules and Pfizer’s Tolterodine Ltartrate sustained release capsules for the treatment of overactive bladder and cooperate
with the acquired 3 pharmaceutical subsidiaries to strengthen the consolidated effects of
sales.
(b) In medical devices sector: enrich the product lines by cooperating with US Carestream as
its distributor of dental imaging products and Shenzhen Yiti Pharmaceutical as its
distributor of ultrasonic detector for cirrhosis in Guangxi province.
(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) Through closer cooperation with our strategically invested partners, together we expand the
market and build up a medical platform in a win-win situation
4. The Impact under External Competitiveness, Regulations External and Overall Operation
Condition
According to the forecast of the pharmaceutical market in 2015 published by CMH, a professional
research institute in China, the increase rate of the use of drugs by the terminal market will
generally be dropped in 2015. However, the overall market is forecasted to be increased by 13.1%.
Over 80% of our income was from pharmaceutical products, while near 20% from medical
devices. We aggressively establish our new product lines and set up over 10 projects for new
2
products in the past few years. Due to the slowed down pace for approval of new drugs by China’s
FDA, the time for the introduction of new drugs in the pharmaceutical industry, including our
Company was prolonged. Fortunately, by the inclusion of medical devices, strategical investment
as well as the merger and acquisition of district business partners, our operating results maintained
stable increase. For the outlook of 2015, the policy governing China’s pharmaceutical industry
still is hard to predict, it is also a year with great opportunity for transformation and innovation
for pharmaceutical industry. We surely will grasp the opportunity to gather all the synergy and
pave our way for greater success.
We are grateful for all shareholders’ support. By joint development with our excellent business
partners, we rooted in China’s market and expect to extend to 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: TsaoJohua
II.
COMPANY INTRODUCTION
1. Company and Group Introduction
(1) Date of Incorporation: March 23, 2010
(2) Group Introduction：
Coland is a bio-pharmaceutical group focusing in China’s medical market, and engaging in
the development of professional medical products and brand marketing, involving in hepatitis,
respiratory, oncology, cardiovascular, medical device, dental materials, orthopedic implants,
IVD reagents and etc. 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, we stepped into cardiovascular field in 2012. In 2013,
we further acquired Anhui Guozhen. We enlarged our sales cover by the aforesaid acquisition.
In 2014, a new subsidiary, Shanghai Pengzi Medical Devices Company Limited was
established. Over the past 11 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 highefficent, 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.
(3) Group Structure:
2014.12.31
4
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 was established as the group’s investment holding
company
September 2009
Central Chief Limited resolved to establish Coland Pharmaceutical
Company Limited in Hong Kong as the window and bridge among China,
Hong Kong and Taiwan
December 2009
Shanghai Municipal Chamber of Commerce approved the acquisition of
100% equity interest in Shanghai Guochuang Pharmaceutical Company
Limited by Coland Pharmaceutical Company Limited
January 2010
With the approval by 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
The Company 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 was between the Company 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 way of cash injection
July 2010
The Company obtained China’s exclusive distribution right for the
tiotropium bromide spray from Zhejiang Xianju Pharmaceutical Company
Limited
September 2010
The Company obtained distribution right of orthopedic implants in certain
designated hospitals in Shanghai from Medtronics
January 2011
The Company obtained distribution right of aspartate injection of ornithine
in certain districts of China from Merz’s
February 2011
The Company obtained China’s exclusive distribution right of Taiwan
Biotech Company’s compound ipratropium bromide inhalation solution
February 2011
Conducted increase of capital by way of cash injection
September 2011
Conducted IPO
5
October 2011
Stocks listed on the Taiwan Stock Exchange (stock code: 4144)
Established the subsidiary, Coland Development Stock Company Limited
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 for Pfizer’s Le Zhi Ping (lipid-lowering
drugs) in China
January 2013
Our 100% owned subsidiary, Central Chief Limidted acquired 13.6% equity
interest in Shanghai Rendes pursuant to an investment agreement and we
start to engage in the field of IDV reagents
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, 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
October 2013
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
August 2014
Auspicious Day Group Limited, which owned 100% of Hainan Quanyuan
Pharmaceutical Company Limited
September 2014
Majestic Trade Holdings Limited, which owned 100% of Shanghai Pengzi
Medical Devices Company Limited
3. Risks: please refer to Chapter VII, Financial Status and Review and Analysis of Operating Results
and Risk Management.
6
III. CORPORATE GOVERNANCE REPORT
1. Organizational System
(1) Organization Chart
Shareholders
Audit
Committee
Board of Directors
Remuneration
Committee Committee
Internal Audit
CEO
Sles
Marketing
Medical
Product
Medical
Finance,
Extern
Taiwan
Dept
Dept
Registration
Developm
Devices
Logistics,
alAffai
Business
Dept
ent Dept
Dept
HR &
rs
Developm
Business
Dept
ent Dept
Dept
(2) Functions of Major Department
We emphasize the diversification of job functions as well as the cooperation and coordination
among different departments. The functions of the major departments as set out below:
Department
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 directors
Remuneration Committee and managers.
2. On a regular basis, assess and fix the salary and compensation of
directors and managers.
Board of Directors
7
Department
Internal Audit
CEO
Sales Dept
Marketing Dept
Medical Registration
Dept
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.
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.
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 productivity and develop and enhance the productivity of 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. Assist the CEO to make the Group’s strategy for development,
be responsible for the Company’s short term and long term policy
and strategy, assist the achievement of mid to long term goals.
2. Establish business in the market and proceed with the relevant
promotion, including enhance the management and progress,
establish the market operation system.
3. Analyze and forecast the sales market, grasp the trend of the
market in order to provide the accurate information for decision
making and develop sales market.
4. Plan and manage budget for marketing activities, effectively and
reasonably apply the budgets toward advertising and marketing
activities.
5. Be responsible for the daily operation of sales department,
establish and maintain stable and competitive sales team.
1. Control law compliance in selection, projection and research of
products and collect the latest domestic and oversea development
for registration of products.
2. Apply for product registration, registration for clinical trials and
support registration related matters.
3. Compile the information for imported products and apply for the
registration.
8
Department
Major Function
1. Select, project and research of the products; collect the latest
domestic and overseas research development of the products the
Company is paying attention to.
2. Assess the markets, the sales forecast of products in research and
Product Development
development, prepare the pre-listing of products, negotiate and
Dept
sign contracts for products to be licensed and prepare the listing
thereof.
3. Maintain business relationship with exited business partners and
introduce new business partners.
4. Ensure the production and quality of listed products.
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.
3. Establish sales team and lead the direction and progress of sales
Medical Devices Dept
work by training and promoting the teams’s development as a
whole.
4. Inspect and selection of agents, assist agents to establish the
marketing and sales activities through effectively organizing
information.
1. Manage finance, accounting and logistic operation.
2. Maintain relationship with shareholders and investors and promote
Finance, Logistics, HR &
capital market related plans.
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
industry (State Food and Drug Administration, Dept of Health,
External Affairs Dept National Development and Reform Commission, and Ministry of
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.
(Coland Development
2. Search, evaluate, and implement strategic investment and assist in
Company Limited)
specific cooperation projects.
9
2. Information of Directors, CEO, Deputy General Manager, Assistant General Manager, Heads of Each Departments and Branches
(1) Directors
(a) Information of Directors
24 March 2015
Title
Nationality
Name
Date of
Term
Appointment
First
selected
Date
Chairman Switzerland William
Robert
Keller
2014.6.30
3yrs 2010.12.5
Director
2014.6.30
3yrs
Taiwan
Lee Hsin
2010.3.23
Shares held
Current
when appointed shareholding
Current
shareholding by
spouse and minor
children
# of
Shares
-
-
# of
Shares
-
-
-
-
-
# of
Shares
-
-
-
%
%
%
# of Shares
%
-
523,572
(Note 1)
0.67
-
10
Shares held in
other’s names
Education and
Experiences
Vice President of
Roche Brazil Ltd.
 Deputy General
Manager of Roche
Colombia Ltd.
 General Manager of
Roche China Ltd.
23,856,141 30.56  Feng-Chia
(Note 2)
University, Dept of
Urban Planning
 Guanghua School of
Management,
Beijing University,
EMBA
 Chief Sales Officer
of Johnson&Johnson
 Director of
Schering-Plough
 Vice President of
Roche China Ltd.

Executive positions,
Board of Directors,
Supervisors held by
Other positions held in the
spouse or relatives of the
Company and other
second degree
companies
Title
Name Relation
Director of Alexion
Pharmaceutical Inc.
 Independent Director of
Wuxi Mingkangde New
Drugs Development
Company Limited
None
None
None
CEO of the Company
Director of Business
Enterprise Investments
Group Limited
 Director of Central
Chief Limited
 Managing Director of
Exquisite Creation
Limited
 Director of Majestic
Trade Holdings Limited
Auspicious Day Group
Limited
 Legal representative,
executive director and
GM of Shanghai
Guochuang
Pahrmaceutical
Company Limited
Heilongjiang Province
Tongze Pharmaceutical
Company Limited
None
None
None



Title
Nationality
Name
Date of
Term
Appointment
First
selected
Date
Shares held
Current
Current
shareholding by
spouse and minor
children
# of
Shares
# of
Shares
%
# of
Shares
%
%
Shares held in
other’s names
# of Shares
Education and
Experiences
Board of Directors,
Supervisors held by
Company and other
second degree
companies
%
Title
Managing Director of
Hefei City Guozhen
Pharmaceutical Sales
Limited
 Legal representative and
executive director of
Hangzhou Sheng You
Medical Technology
Development Company
Limited
 Director of Shanghai
Pengzi Medical Devices
Company
 Director of Shanghai
Rendu Bio-Tech
Company Limited
 Director of Suzhou
Microclear Medical
Instruments Co., Ltd
 Director of Coland
Pharmaceutical
Company Limited
 Managing Directorof
Coland Development
Co., Ltd.
 Managing Directorof
Shechen Pharmaceutical
Ltd.
Zan Ho Biotech Inc.
 Director of Hung Chun
BIO-S Co., Ltd.
 Supervisor of Bora
Pharmaceuticals
CO.,Ltd.

11
Name Relation
Title
Director
Director
Nationality
Name
Date of
Term
Appointment
First
selected
Date
Shares held
Current
Chian
Ye Xiao
Ping
2014.6.30
3yrs
# of
Shares
2010.12.5
-
China
Tang Li
Da
2014.6.30
3yrs
2010.12.5
-
-
# of
Shares
-
-
-
%
%
-
-
Current
shareholding by
spouse and minor
children
# of
Shares
7,137,871
(Note 3)
-
12
Shares held in
other’s names
%
# of Shares
%
9.17
-
-
-
-
-
Education and
Experiences
Univerisity of
Oxford, PhD in
Immunology
 Chief Medical
Officer, Roche
China Ltd
Board of Directors,
Supervisors held by
Company and other
second degree
companies
Managing Director,
Tigermed
 Supervisor,
Company Limited
 Supervisor, Hefei City
Guozhen Pharmaceutical
Sales Limited
 Supervisor, Hangzhou
Sheng You Medical
Technology
Development Company
Limited
 Supervisor of Shanghai
Guochuang
Pharmaceutical
Company Limited
 Tianjin Institute of
 President, Tianjin
Pharmaceutical
Institute of
Research Researcher Pharmaceutical
in Pharmacology,
Research
Doctor of Science
 Visiting Scholar, UC
Berkeley
 Editor of Chinese
Traditional and
Herbal Drugs
Journal


Title
Name Relation
None
None
None
None
None
None
Title
Nationality
Name
Date of
Term
Appointment
First
selected
Date
Shares held
Current
Independe
nt Director
China
Shen Jen
Lin
2014.6.30
3yrs
# of
Shares
2010.12.5
-
Independe
nt Director
Taiwan
Chang Li
Yen
2014.6.30
3yrs
2010.12.5
-
-
# of
Shares
-
-
-
%
Current
shareholding by
spouse and minor
children
-
# of
Shares
-
-
-
%
13
Shares held in
other’s names
%
# of Shares
%
-
-
-
-
-
-
Education and
Experiences
Master, 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

Board of Directors,
Supervisors held by
Company and other
second degree
companies
Title
Name Relation
Independent Director,
GIO Optoelectronics
 Independent Director,
Parade Technologies,
LTD. (Cayman)
None
None
None
CEO and Director,
Grand Cathay Venture
Capital III Co., Ltd
 CEO and Director,
China Investment &
Development Co.
 CEO, Maxigen Biotech
Inc.
None
None
None


Title
Independe
nt Director
Nationality
China
Name
Chne Li
Date of
Term
Appointment
2014.6.30
3yrs
First
selected
Date
Shares held
Current
# of
Shares
2014.6.30
-
%
-
# of
Shares
-
%
-
Current
shareholding by
spouse and minor
children
# of
Shares
-
Shares held in
other’s names
%
# of Shares
%
-
-
-
Education and
Experiences
PhD of Chemistary
Department, Iowa
State University
 Chief Science
Officer, Roche R&D
Center (China)
Limited
 Head of Hish Thro
ughput Chemistry
Department, Cohead of
Combinatorial
Chemistry
Department and Coproject leader of
MC-4 Agonist,
Hoffmann-La Roche
Inc. Nutley, NJ

Note 1: Golden Hexagon Investments Limited, a company 100% owned by William Robert Keller, held 523,572 shares of the Company both on 24 March 2015..
Note 2: Business Enterprise Investments Group Limited, a company 100% owned by Lee Hsin, held 23,856,141 shares of the Company both on 24 March 2015.
Note 3: Xin Ping Holdings Ltd, a company 100% owned by Ye Xiaoping’s spouse, held 7,137,871 shares of the Company both on 24 March 2015.
14
Board of Directors,
Supervisors held by
Company and other
second degree
companies
President and CEO of
Hua Medicine Limited
 Manging Director and
GM of Hua Medicine
(Shanyhai) Limited

Title
Name Relation
None
None
None
(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:
Whether having over 5 years’ working experience
and the following professional qualification
24 March 2015
No. of
Conform to independence requirement (Note)
listed
issuers
serving in
as an
independe
nt director
a lecturer or
Judge, District
working
above position Attorneys, lawyers, experience in
of commerce,
accountants or
commerce,
law, finance,
professional or law, finance or
Condition accounting or technical personnel
experience
Name
the related
passed the national required by
subjects as
examination and the business of 1
required by
obtained related
the Company
the business of
certificates as
the Company
required by the
in 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
Chne Li













2
3
4
5
6
7
8
9
10









1










































0
0
0
2
0
0







Note: Two years prior to, and during the term of his/her appointment, the director is/does:
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 the
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, or shareholder owning over 5% of a company which has financial or business
relation with the Company.
7. not a professional person, sole proprietor, partner, or a 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.
15
(2) CEO, Vice President, Assistant General Manager, Heads of Each Departments and Branches
24 March 2015
No. of Shares Held
Title
CEO
Nationality Name
Taiwan
Lee
Hsin
Date of
Appointment
2010.12
Current shareholding
of spouse and minor
children
Shares held in
other’s names
Education and Experiences
No. of Shares
%
No. of
Shares
%
No. of
Shares
23,856,141
shares
(Note 1)
30.56
-
-
-
16
%
-
Positions held in other
companies
Managers that are either
spouse or 2nd degree
related family
Title Name Relation
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
ScheringPlough
 Vice President of Roche
China Ltd.

 CEO of the Company
None None
 Director of Business
Enterprise Investments
Group Limited
 Director of Central Chief
Limited
 Managing Director of
Exquisite Creation
Limited
 Director of Majestic
Trade Holdings Limited
Limited
 Legal representative,
executive director and
GM of Shanghai
Guochuang
Pahrmaceutical Company
Limited
Company Limited
Hefei City Guozhen
Limited
 Legal representative and
executive director of
Hangzhou Sheng You
Medical Technology
Development Company
Limited
None
No. of Shares Held
Title
Nationality Name
Date of
Appointment
No. of Shares
%
of spouse and minor
children
No. of
Shares
Shares held in
other’s names
No. of
Shares
%
%
Title Name Relation
Director, Sales &
Marketing Dept
China
Hu
Tong
2013.03
-
-
-
-
-
-
 East China Normal
University, Department of
Biochemistry
 Sales Manager, Roche
China Ltd.
 Regional Manager,
Novartis
 Regional Manager,
Sanofi-Aventis
CFO
Taiwan
Tsao
Johua
2008.7
300,671
0.39
-
-
-
-
 National Taiwan
University, Dept of
Economics
 Finance & Accounting
MBA, University of
Chicago
17
companies
related family
 Director of Shanghai
Pengzi Medical Devices
Company
 Director of Shanghai
Rendu Bio-Tech
Company Limited
 Director of Suzhou
Microclear Medical
 Director of Coland
Pharmaceutical Company
Limited
 Managing Directorof
Coland Development Co.,
Ltd.
 Managing Directorof
Shechen Pharmaceutical
Ltd.
Zan Ho Biotech Inc.
 Director of Hung Chun
BIO-S Co., Ltd.
 Supervisor of Bora
Pharmaceuticals CO.,Ltd.
None
None None
 Director of Exquisite
None None
Creation Limited
 Director of Heilongjiang
Province Tongze
Limited
None
None
No. of Shares Held
Title
Nationality Name
Date of
Appointment
No. of Shares
%
of spouse and minor
children
No. of
Shares
Shares held in
other’s names
No. of
Shares
%
%
Title Name Relation
 Financial Analyst
Manager,
P&G Taiwan
 Finance Head, Dairy Farm
North Asia
Director,
Medical Device
Dept
Taiwna
Peng
Rui
Hong
2014.12
-
-
-
-
-
-
Director, Product
Development
Dept
China
Lou Jin
Fang
2013.03
-
-
-
-
-
-
18
companies
related family
 Director of Hefei City
Guozhen Pharmaceutical
Sales Limited
 Supervisor, Suzhou
Microclear Medical
 Supervisor, Hung Chun
BIO-S Co., Ltd.
 Director of Coland
Development Co., Ltd.
 Kaohsiung Medical
None
University master of
EMHA
 Professional Sales
Specialist, Bayer Taiwan
 District Supervisor, MSD
Taiwan
 Associate Product
Manager, OEP Pharma
 Product Manager of
Oncoloay CV. BU, BMS
Taiwan
 Key Account Manager,
Janssen-Cilag Taiwan
 Sales Director, Pingtin
Enterprises
 Taiwan Overesal
Volunteer by ICFD
 CEO of Changan Nursing
Home
 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 Pharmaceutical
Company
None None
None
None None
None
No. of Shares Held
Title
Nationality Name
Date of
Appointment
of spouse and minor
children
Shares held in
other’s names
No. of Shares
%
No. of
Shares
%
No. of
Shares
%
Director,
Medical
Registration
Dept
China
Han
Wen
Ge
2013.03
-
-
-
-
-
-
Director,
Marking Dept
China
Liu Qi
Jia
2014.11
-
-
-
-
-
-
Director,External
Affairs Officer
China
Guo
Zhi
Min
2008.5
-
-
-
-
-
-
companies
Title Name Relation
 Beijing Medical
None
University, 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.
 Jinlin University Biologo None
and Medicine
 Senior Sales
Representative of
Shanghai Ankang
Pharmacentical Company
Limited
 Shanghai Second Medical None
University, Faculty of
Clinical Medicine
 Anesthesiology
Residency, Shanghai First
People’s Hospital
 Sales Executive, ScheringPlough
 National Government
Affairs Manager, Roche
China Ltd.
 National Government
Affairs Manager,
GENZYME (Shanghai)
Note 1: Business Enterprise Investments Group Limited, a company 100% owned by Lee Hsin, held 23,856,141 shares of the Company both on 24 March 2015.
19
related family
None None
None
None None
None
None None
None
3. Remuneration paid to directors, CEO and vice President in 2014
(1) Remuneration paid to directors (including independent directors)
Unit:NTD’000
Director’s Remuneration
Unit: NTD’000
Salary (A)
Title
William
Robert
Keller
Director
& GM
Lee
Hsin
Director
Independe
nt
Director
Independ
ent
Director
Remuneratio
n from Profit
Distribution
(C)
Allowance
(D)
Remuneration
Salary,
Bonus &
Allowance
(E)
obtained as an employee of the Consolidated Entities
Severance
Payment &
Pension
(F)
Name
Chairman
Director
Severance
Payment &
Pension
(B)
The
Aggregate of
A to
D as a ％
to t he 2014
Net Income
The
Com
pany
Cons
olida
ted
Entit
ies
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
9,412
9,412
-
-
-
-
-
-
2.26
2.26
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
-
-
-
-
Bonus from Profit
Distribution
(G)
The
Compan
y
Bo
Bo
nu
nu
s
s
in
in
Sh
Ca
ar
sh
es
Consolid
ated
Entities
Bo
Bo
nu
nu
s
s
in
in
Sh
Ca
ar
sh
es
-
-
No. of Shares
exercisable
under
Employees’
Share Option
(H)
No. of
Employees’
Restricted
Shares
(I)
The
Aggregate of
A to G as a %
to the 2014
Net Income
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
The
Co
mpa
ny
Cons
olidat
ed
Entiti
es
-
-
-
-
2.26
2.26
Remun
eration
from
Nonconsoli
dated
Entities
Ye Xiao
Ping
Tang Li
Da
Shen
Jen Lin
Chang
Li yen
Independ
ent
Director
Han
Feng
(Note)
Independ
ent
Director
Chen Li
(Note)
Note: Ms Han Feng resigned and Mr. Chen Li was elected as independent director both with effect from 30 June 2014.
20
-
-
-
Table of Remuneration Range
Name of Director
Range of remuneration paid to
each directors
Total Amount of the aggregate of A to D
Total Amount of the aggregate of A to G
The Company
The Company
All Consolidated Entities
All Consolidated Entities
William Robert Keller,
Lee Hsin, Ye Xiao Ping,
Lee Hsin, Ye Xiao Ping, Lee Hsin, Ye Xiao Ping, Lee Hsin, Ye Xiao Ping,
Below NTD2,000,000
Tang Li Da, Shen Jen Lin, Tang Li Da, Shen Jen Lin, Tang Li Da, Shen Jen Lin, Tang Li Da, Shen Jen Lin,
Chang Li Yen, Han Feng Chang Li Yen, Han Feng Chang Li Yen, Han Feng Chang Li Yen, Han Feng
(Note), Chen Li(Note)
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
8 Persons
8 Persons
8 Persons
8 Persons
Note: Ms Han Feng resigned and Mr. Chen Li was elected as independent director both with effect from 30 June 2014.
21
(2) CEO’s and Vice President’s Remuneration
Unit: NTD’000, ’000 shares
Salary (A)
Title
CEO
Director,
Marketing &
Sales Dept
Director,
Medical
Registration
Dept
Director,
Product
Development
Dept
Name
Bonus from Profit
Distribution Salary（D)
Bonus，Allowance
etc. Salary (C)
The Aggregate of A to
D as a % to the 2014
Net Income
No. of Employees’
Restricted Shares
Remuneration
from NonThe
Consolidated
consolidated
Company
Entities
Entities
The
Consolidated
The
Consolidated
The
Consolidated
The
Consolidated
The
Consolidated
The
Consolidated
Bonus Bonus Bonus Bonus
Company
Entities
Company
Entities
Company
Entities
Company Entities Company Entities Company Entities
in
in
in
in
Cash Shares Cash Shares
Lee Hsin
Hu Tong
Han Wen-ge
Lou Jin-fang
Director,
Liu Qi Jia
Marking Dept
CFO
Head of
External
Affairs Dept.
Head of
Medical
Devices Dept.
Head of
Medical
Devices Dept.
Severance Payment &
Pension Salary
(B)
No. of Shares
exercisable under
Employees’ Share
Option
15,959
34,094
-
-
-
-
-
-
-
-
3.83
8.18
Tsao Johua
Guo Zhi min
Jiang Yan fei
(Note)
Peng Rui
Hong
(Note)
Chief
Cheng Ching
Investment
chi
Officer
(Note)
Note: Cheng Ching-chi resigned and left in June 2014; Jiang Yan-fei resigned and left in November 2014; Peng Rui Hong reported to duty in December 2014.
22
305
305
-
-
-
Table of Remuneration Range
Range of remuneration paid to each CEO／VP
Name of the general manager and vice general manager
The Company
Consolidated Entities
-
Han Wen-ge, Lou Jin-fang, Liu Qi Jia,
Peng Rui Hong(Note)
NTD2,000,000 to NTD5,000,000
NTD5,000,000 to NTD10,000,000
Tsao Johua
Lee Hsin, Cheng Ching Chi(Note)
Hu Tong, Guo Zhi-min, Jiang Yan-fei(Note)
Lee Hsin, Tsao Johua, Cheng Ching Chi(Note)
NTD10,000,000 to NTD15,000,000
-
-
NTD30,000,000 to NTD50,000,000
NTD50,000,000 to NTD100,000,000
-
-
-
-
NTD100,000,000 and above
-
-
Below NTD 2,000,000
NTD15,000,000 to NTD30,000,000
Total
3 persons
10 persons
Note: Cheng Ching-chi resigned and left in June 2014; Jiang Yan-fei resigned and left in November 2014; Peng Rui Hong reported to duty in December
2014.
23
(3) The Company did not pay any employees’ bonus from profit to any mangers.
(4) An explanation on remuneration paid to directors, mangers, president, and vice presidents in
the past two years, the remuneration policy, standard and combination, the formula to
determine the remuneration and the connection between the aforesaid and the operation result
and future risk.
(a) Analysis of total remuneration paid to the directors, CEO, and VP as to the company's net
income：
Unit：NTD’000
2013
2014
Consolidated
Consolidated
Item
The Company
The Company
Entities
Entities
Amount
%
Amount
%
Amount
%
Amount
%
Directors
9,421 2.65%
9,421 2.65%
9,412 2.26%
9,412 2.26%
CEO(Note) and VP
21,327 6.00% 40,562 11.42% 15,959 3.83% 34,094 8.18%
Total
30,748 8.65% 49,983 14.07% 25,371 6.09% 43,506 10.44%
Note: The remuneration of the CEO, Mr. Lee Hsin was calculated 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.
4. Status of Corporate Governance
(1) The operation of the board of directors
There were 12【A】meetings held by the board of directors of the Company in 2014, the
attendance status of the directors and independent directors is set out below:
Title
Chairman
Name
William Robert
No. of
Attendance in
Person【B】
No. of
Attendance by
Proxy
Actual Attendance Rate
(%)【B/A】
10
0
83.33
Keller
Director
Ye Xiao Ping
8
1
66.67
Director
Tang Li Da
9
0
75
Director
Lee Hsin
12
0
100
Independent Director
Shen Jen Lin
12
0
100
Chang Li Yen
10
1(Note 3)
83.33
Han Feng
4
0
66.67(Note 1)
Chen Li
6
0
100(Note 2)
24
Other Matters:
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:
(1) In the meeting held on 14 January 2014, Mr Lee Hsin abstained from voting on the 2013
bonus proposal for CEO. Such proposal was unanimously approved by the board of directors
with Mr. Lee Hsin abstaing from voting.
(2) In the meeting held on 12 March 2014, Mr Lee Hsin abstained from voting on the 2014
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.
Note1: Madam Han Feng was one of the independent directors in the First Session of the
Board of Directors of the Company, with a term from 7 April 2011 to 6 April 2014,
which was extended to 30 June 2014 (being the date of our 2014 Annual
Shareholders’ Meeting). There were 6 meetings of Board of Directors held during
her term in 2014.
Note2: Mr. Chen Li was elected as an independent director of the 2nd Session of the Board
of Directors of the Company pursuant to the proposal resolved at the 2014 Annual
Shareholders’ Meeting with a term from 30 June 2014 to 29 June 2017. There were
6 meetings of Board of Directors held during his term in 2014.
Note3: Independent Director Chang Li Yen appointed Independent Director Shen Jen Lin as
his proxy to attend and vote for all matters to be resolved in accordance with his
instruction and authorised Mr Shen to vote for any extraordinary motion at Mr Shen’s
discretion at the meeting of board of directors held on 8 July 2014.
25
(2) The operation of the Audit Committee
There were 11【A】meetings held in 2014 by the Audit Committee of the Company, the
attendance status of the members is set out below:
No. of
No. of
Actual Attendance
Title
Name
Attendance in
Attendance by
Rate (%)【B/A】
Person【B】
Proxy
Independent Director Shen Jen Lin
11
0
100
Independent Director Han Feng
4
0
66.67(Note 1)
Independent Director Chang Li Yen
9
1(Note 3)
81.81
Independent Director Chen Li
5
0
100(Note 2)
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.
Note1: Madam Han Feng was one of the members in the First Session of the Audit Committee, with
a term from 7 April 2011 to 6 April 2014, which was extended to 30 June 2014 (being the
date of our 2014 Annual Shareholders’ Meeting). There were 6 meetings of the First Session
of the Audit Committee held in 2014.
Note2: Mr. Chen Li was elected as a member of the Second Session of the Audit Committee at the
2014 first meeting of the Second Session of the Board of Directors. Since its first meeting
held on 8 July 2014, there were 5 meetings of the Second Session of the Audit Committee
held in 2014.
Note3: Director Chang Li Yen appointed Director Shen Jen Lin as his proxy to attend and vote for
all matters to be resolved in accordance with his instruction and authorised Mr Shen to vote
for any extraordinary motion at Mr Shen’s discretion at the meeting of the Audit Committee
held on 8 July 2014.
26
(3) Status of Corporate Governance, Deviation from the Corporate Governance Practice
Principles for Listed Issuers and the Reason for the Deviation (if any)
Status of Implementation
Item
Yes No
Description
Deviation from the
Corporate Governance
Practice Principles for
Listed Issuers and the
Reason thereof
1. Whether the Company set up
and disclose its Corporate
Governance Practice Codes
in accordance with “The
Practice Principles for Listed
Issuers”?
2. Shareholding Structure and
Shareholders’ Right
(1) Internal procedures for
the handling of
shareholders’ suggestion,
question, dispute and
litigation and the
implementation
(2) Information of the list of
major shareholders as
well as their respective
ultimate controlling
shareholders
(3) Mechanism for risk
control and management
and fire wall with its
affiliates

The Company adopted its Corporate Governance
Practice Codes by the Board on 5 September 2011 in
accordance with “The Corporate Governance Practice
Principles for Listed Issuers”, which was published No material deviation.
on our website (For enquiries, please go to our websit
www.colandpharma.com in the section headed
“Investors’ relationship/Corporate Governance”.)

The Company set up and implement the rules that all
the suggestion and disputes and etc. shall be handled
and responded by the spokesperson, who in turn
No material deviation.
would coordinate the relevant department for
execution.

The Company has designated personnel to manage
the relevant information and therefore knows the list
of its major shareholders as well as their respective
ultimate controlling shareholders.

(4) Internal regulation for
the prohibition of
securities dealing of
insiders by using any
unpublished information

The assets and financial management among the
affiliates were independent from each other and they
all followed the Company’s “Procedures for the
acquisition and disposal of assets”, “Internal Control No material deviation.
System”, “Measures for the Management of Related
parties’ Transaction” and etc. and implemented the
risk control and firewall mechanism.
The Company adopted “Measures for the Prevention
of Insider Dealing” pursuant to a resolution passed by
the Board of Directors on 29 March 2012 as part of
our mechanism for disclosure of material
information. Further, the Company would draw the
Directors’ attention at each meeting of the Board of
directors and informed the insiders on non-regular
basis to those material information so as to comply
with the requirement of the existing laws and
regulations.
3. Composition and duty of the
board of directors
(1) Diversified policy on the
constitution of the
members of the Board of
Directors and its
implementation

There contained the method of election of directors in
the Company’s Corporate Governance Practice
Rules. Nationality of our Directors includes
Switzerland, R.O.C. and China. The specialty and
expertise of our 3 independent Directors covered
finance, accounting, bio-medical treatment and
chemistry.
27
Item
Yes No
(2) Functional committee
other than audit
committee and
remuneration committee
established voluntarily
(3) Measure for the
evaluation of the
performance of the
Board of Directors and
the implementation
thereof
(4) Assessment of the
independency of the
auditors periodically
4. Channel for communication
with interested person and
the designation of a section
specially for interested
persons on the Company’ s
website and respond properly
to important corporate social
responsibility concerned by
interest persons
5. Designated agent for
handling matters in relation
to shareholders’ meetings
6. Publication of Information
(1) Website set up and
disclosure of financial
and corporate
governance information
(2) Other methods for
information disclosure





Description
 The Company established Remuneration Committee
in accordance with the relevant regulation and Audit
Committee according to the Securities Dealing Law
and for the strengthen of our corporate governance.
Based on the existing over-all operation, there is no
need to establish other functional committee at
present.
 The operation of the Board of Directors completely
complies with our “Regulations for the Meetings of
the Board of Directors”. Averagely, meetings of the
Board of Directors are held once a month and the
attendance rate of the majority of the Directors
reached 80% to 100%. Having considered the
aforesaid performance and the fact that no bonus was
recommended to be paid to the Directors from our
profits, we consider there is no need to establish the
measures nor method for the evaluation of the
performance of the Board of Directors.
The Board of Directors reviews our financial
statements and the “Discussion matter to be
communicated with the Corporate Governance
Department and Management” and assess the
independency of the auditors periodically.
The Company has designated department and
personnel to serve as the channel to communicate
with the interested persons. They collect the relevant
information in order to maintain the mutual legal and
reasonable right. As at the date of publication of this
annual report, we did not receive any material
corporate social responsibility issue from any
interested person. In future, should we have received
such issue, we will ensure to respond to them
properly.
We have designated ChinaTrust Bank Transfer
Agency to assist us to handle matters in relation to
shareholders’ meeting.
Deviation from the
Reason thereof
Please refer to the left
column.
Please refer to the left
column.
We disclose financial and corporate governance
information on our corporate website as well as on
the Market Observation Post System in due course
and in accordance with the relevant regulations.
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.
28
Deviation from the
Item
Yes No
Description
Reason thereof
7. Other important information 
1. Please refer to the table below for the status of the No material deviation.
enabling a better
continuing education taken by the directors and the
understanding of the
management in 2014.
Company’s corporate
2. There are regulations set out in our articles of
governance
association to limit and require those directors who
have conflict of interest in the matter to be resolved
to abstain from voting.
3. The status of implementation of the policy for risk
management and the standard for evaluation of risk:
Prior to the convening of the meeting of the board of
directors, the management would submit financial
information and the execution of the budget plan for
the board of directors to evaluate risk exposure and
to provide professional opinion. Our internal audit
department would submit its annual internal audit
plan based on the risk assessment opinion from the
board of directors and submit the same for the
approval by the board of directors. Thereafter the
internal audit department would execute such
approved plan accordingly. 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
implementation thereof.
4. We purchased insurance for directors’ liabilities.

8. Corporate governance self1. In order to strengthen corporate governance and No material deviation.
assessment report from the
form its culture as well as to let the investors and
Company or corporate
enterprises understand our execution thereof, we
governance assessment report
reported to our Board of Directors on 5 May 2014
from other professional
on the First Session of Appraisal System of
organization
Corporate Governance, so as to comply with the
requirement of the Taiwan Stock Exchange.
2. On 14 August 2014, we reported to our Board of
Directors on the Blue Print of Corporate
Governance and our self-assessment on corporate
governance.
3. We completed our self-assessment of 2014
Corporate Governance in January 2015 as required
by the Taiwan Stock Exchange.
Status of 2014 Directors’ Continuing Education:
Title
Name
Date of
Attendance
Chairman
William
Robert
Keller
2014.09.23
China Corporate
Governance
Association
Director and
GM
Lee Hsin
2014.10.24
China Corporate
Governance
Association
Organizing Agent
29
Subject
Discuss important issues of
Group Corporate
Governance.
Group Corporate
Governance.
Duration
(Hours)
3
3
Date of
Attendance
Title
Name
Director
Ye Xiao
Ping
2014.10.24
Director
Tang Li Da
2014.10.24
2014.09.19
Independent
Director
Shen Jen Lin
2014.12.12
Independent
Director
Chang Li
Yen
2014.12.31
2014.10.24
Independent
Director
Chen Li
2014.12.16
Organizing Agent
Subject
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
Securties & Futures
Institure service
foresight innovation
Group Corporate
Governance.
Group Corporate
Governance.
Mergers and acquisitions
jobs.
Duration
(Hours)
3
3
3
Directors and supervisors
Advanced Practice Seminar
3
Securities Exchange Act
gives corporate liability and
illegal scraped case analysis
3
Group Corporate
Governance.
3
12
Directors and supervisors
practice workshops
(4) The composition, duty and operation status of the Remuneration Committee
(a) Information of the members of the Remuneration Committee
condition
Title
Whether having over 5 years’ working
experience and the following professional
qualification
a lecturer or
judge, district
working
above position
attorneys, lawyers,
experience
of commerce,
accountants or
in
law, finance,
professional or
commerce,
accounting or
technical personnel
law, finance
the related
passed the national
or
subjects as
examination and
experience
required by the
obtained related
required by
business of the
certificates as
the business
Company in
required by the
of the
private or public business of the
Name
Independent
Director
Independent
Director
Independent
Director
Shen
Jen Lin
Chang
Li Yen
Chen Li
college
Conform to independence requirement
（Note 1）
No. of
listed
issuers Remarks
serving in （Note 2）
as a
member
of the
remunerat
ion
committee
1
2
3
4
5
6
7
8









2










0










0

Company
Company

Note 1: Two years prior to and during his/her term of appointment, each member 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 the 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 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 relatives of the 3 persons listed above.
(5) not a director, supervisor or employee of a corporate shareholder holding 5% or more of the entire issued
shares of the Company or a top 5 corporate shareholder of the Company.
30
(6) 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.
(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.
(8) 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 extended to 30 June 2014. Term of the second session of the Remuneration
Committee: From 30 June 2014 to 29 June 2017. There were 4【A1】meetings held
by the First session Remuneration Committee of the Company in 2014 and 2【A2】
meetings held by the Second session of the Remuneration Committee in 2014., status
of the attendance of the members is set out below:
Title
Convenor
Member
Member
Member
No. of
Attendance in
Person【B】
6
6
3
2
Name
Shen Jen Lin
Chang Li Yen
Han Feng
Chen Li (Note )
No. of
Attendance in
Person
0
0
0
0
Actual Attendance Rate
(%)【B/A】
100%
100%
75%
100%
Other Matters:
1. There were no recommendations made by the Remuneration Committee but not accepted by
the board of directors.
2. There were no resolutions passed by the Remuneration Committee with member(s) opposing
or expressing qualified opinions on record or in writing.
Note: Mr. Chen Li was elected as the Convenor of the Second Session of the Remuneration Committee after
the Second Session of the Remuneration Committee was formed.
(5) Fulfilment of corporate social responsibility: System and measures adopted by the Company
in relation to environmental protection, community participation, social contribution, social
services, social interests, social consumers’ right, human safety, hygiene and other activities
and execution thereof.
Item
Yes NO
1. Implementing Corporate
Governance
(1) Adoption by the Company of
policy/system regarding
corporate social
responsibility and the review
of the performance thereof.

Description
Deviation from the “Corporate
Social Responsibility Best
Issuers” and the reasons thereof
Every year, our employees
would raise fund for our
Coland Charity Fund and we
have designated personnel
enacting and executing the use
of the fund.
31
Item
Yes NO
Description
(2) Periodical social
 We educate our employees on Please refer to the left column.
responsibility training.
the social responsibility
through letting them
participated in various social
responsibility activities held
by the Company every year,
such as Charity Dinner,
Charity Sale and so on.
(3) Establishment of designated 
Our HR department is in
department (full or part
charge of the promotion of
time) for the promotion of
corporate social responsibility
social responsibility and
activities on part time basis.
authorization by the Board
The manager of the HR
of Directors of the senior
department would report to the
management to handle and
employees, including the
report to the Board of
Directors the promotion and
Directors on the status
the execution status thereof.
thereof.
(4) Regular training and
 We make reasonable
Please refer to the left column.
promotion on corporate
remuneration policy, KPI
ethics to directors and
system and assessment flow
employees and associate the
by taking into account that of
aforesaid with employees’
the same industry, annual CPE
performance appraisal, and
and the employees personal
effective reward or
experience and performance.
disciplinary system.
Given our employees
aggressively participated all
the social responsibility
activities held by us on
voluntary basis, at present we
do not consider to link the
employees’ appraisal with our
corporate social responsibility
policy.
2. Foster Sustainable Environment
(1) Commitment to the efficient 
We are a service provider with No material deviation.
use of available resources
specialty of pharmaceutical
and renewables to minimize
development and sales,
the impact to the
without engaging in any
environment.
manufacture or production
activities. In order to comply
with the 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

Given we do not have any
environment management
factory, it is our administrative
system.
and HR departments to in
charge of the promotion of
energy saving and carbon
reduction and office
environmental management.
32
Item
Yes NO
(3) Awareness of the impact on
the operation by climate
change and the strategy for
energy saving and carbon
reduction.
3. Maintain Public Welfare
(1) Establishment of the
relevant management policy
and procedure in accordance
with the relevant regulations
and International Human
Right Covenant.
Description

With the principle of
environmental protection, we
use electricity saving bulbs
and restrict the time for use of
air-conditioner so as to serve
the purpose of energy/carbon
saving/reduction.

We provide social insurance in
accordance with the local
regulation in various operation
location, such as retirement,
medical, jobless, birth, work
injury and housing fund. In
addition, we enacted our
Employees’ Manual in
accordance with the relevant
rules and regulations so as to
protect and maintain our
employees right.
We have set up our
mechanism and channel for
employees toile their
complaints. Employees may
file their complaints to their
department head for HR
department. We handle our
employees’ complaints by
communicating or discussing
with employees and so on.
We conduct safety and fire
equipment inspection
periodically and have
designated personnel to
inspect and remind our
employees of the maintenance
of safety working environment
and hygiene.
All departments’ head would
review and communicate with
the employees of their
performance and set up the
work target on regular basis.
We also set up an on-line AO
system to inform the
employees on material event,
new information, charity
activities, etc, and receive the
employees feedback.
(2) Mechanism and channel for
employees to file and their
complaints and the
execution thereof.

(3) Provision of safe and
healthy working
environment and the
relevant training thereof.

(4) Mechanism for regular
communication with
employees and reasonable
method to notify any
material impact on our
operation.

33
Item
Yes NO
Description
(5) Establishment of effective

We provide all kinds of work No material deviation.
career capability
training in accordance with the
development training plan
relevant laws and regulations,
for employees.
our business need and the need
of the employees’ personal
development. Our HR
department would be
responsible to make the
training plan and the budget
thereof in accordance with the
Company’s strategy and
training requirement.
(6) Establishment of policy and 
For the protection of
procedures for consumers’
consumers’ right, we
rights and complaints in
designated the relevant
relation to R&D,
department to handle
merchandising, production,
consumers’ complaints and
and service.
consolidate the information for
the Company to respond and
improve.
(7) Compliance with the

We comply with all the
relevant laws and
relevant laws and regulations
regulations and international
and publish the same on our
codes for the sales and
website (Please refer to our
labeling of products.
web site:
www.colandpharma.com).
(8) Assessment of suppliers

Prior to making business with No material deviation.
prior to making business
suppliers, we would assess
with them regarding any
their financial credit and
record affecting
inspect whether they obtained
environment and society.
all the necessary certificate
and license required by the
relevant laws and regulations,
such as GMP, GSP, ISO and
etc..
(9) Inclusion of terms in the

In the majority of contracts
contracts with main
with our suppliers, we include
suppliers that if the supplier
product liability requirement.
breaches its corporate social
In the contract with our
responsibility which has
distributors, they are also
obvious impact on the
required to comply with anti
environment and society,
improper competition, laws
we are able to terminate the
and regulations in relation to
contract.
bidding, anti-corruption of the
US and etc.. Breach of such
condition, we are entitled to
terminate the contract.
4. Strengthen Information
Disclosure
(1) Measure for the disclosure of 
We disclose all material and No material deviation.
material and reliable
reliable corporate social
corporate social
responsibility information on
responsibility.
our corporate website
(www.colandpharma.com) at
any time when such
information is available.
34
Item
Yes NO
Description
5. We did not enact our own “Codes of Corporate Social Responsibility” in accordance with “Codes of Practice
by Listed Issuances of Corporate Social Responsibility”.
6. Other important information will help to understand the operation of the case of corporate social
responsibility:
Mr. Lee Hsin and Mr. Ye Xiao Ping, both are directors of the Company initiated the establishment of Beijing
Century Charity Foundation on 21 January 2010 with an initial capital of RMB2.1million, which was all
donated by our subsidiary, Shanghai Guochuang Pharmaceutical Company Limited. The objective of the
foundation is to help the poor and the disadvantaged minority to get rid of poverty and illness, receive basic
education and improve living environment through the provision of funding support and social propagation.
the charitable activities held by us are as below follows:
(1) In 2008, the employees and business partners of the Company raised and donated RMB700,000 to build
an educational building 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.
(2) In 2009, the Company donated RMB 2.1 million to set up Beijing Century Charity Foundation, a nonprofitable organization.
(3) 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.
(4) 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”.
(5) 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.
(6) 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”.
(7) In 2014, our Coland Education Fund funded 40 students in 3 universities in Guangzhou and Nanjing
RMB160,000.
7. We did not prepare any corporate social responsibility report.
(6) Ethics Implementation and Measures Adopted:
Item
Yes No
1. Establishment of Corporate
Conduct and Ethics Policy
and Implementation
Measures
(1) Policy on corporate

conduct and ethics
provided in internal
regulation and disclosure
publicly And commitment
by the Board of Directors
and management to
implement such policy.
Description
Deviation from the
Codes of Corporate
Conduct and Ethics
of the Listed Issuers
(1) We adopt our own “Corporate Governance No material deviation.
Codes” in accordance with the “Codes of
Corporate Conduct and Ethics of the Listed
Issuers”, aiming to regulate the protection
of investors’ interest, the relationship
between the Company and its related
interested parties, the strength of the
function of the Board of Directors, the right
of the related interested parties and the
transparency of information disclosure.
There contain specific codes to require the
Company to treat the corresponding banks,
35
Item
Yes No
(2) Policy for preventing
unethical conduct and the
implementation of the
relevant procedures,
guidelines and training
mechanism provided for
such policy.
(3) Prevention measures
aiming to prevent those
operation activities
involving high risk of
unethical conduct as set
out in article 7(2) of the
“Codes of Ethical
Operation for Listed
Issuers”.
2. Compliance with corporate
conduct and ethics
(1) Assessment of ethical
records of transacting
parties and inclusion of
ethical conduct terms in
the contract with such
parties.



Description
Deviation from the
Codes of Corporate
Conduct and Ethics
creditors, employees, customers, suppliers,
communities or other party with related
interest in the Company based on ethics and
provide sufficient information to the parties
with related interest in the Company for
them to form their view on the operation
and finance condition of the Company. We
also adopted internal control system as the
principles for the all the departments to
perform their respective duties.
(2) 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.
When employees first reported to their duty, No material deviation.
they 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 and
be bound by the regulations set out in the
employees’ manual.
When setting up our policy for prevention of No material deviation.
unethical 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.
In addition to regulate our employees not to
engaging 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.
36
Deviation from the
Codes of Corporate
Item
Conduct and Ethics
Yes No
Description
(2) Designated department

We authorize senior management of the No material deviation.
(full or part time) under
respective departments as the main person for
the Board of Directors
the promotion, supervision and the execution
and report to the Board of
of, the corporate conduct and ethics policy. A
Directors the status of
hearing by the general manager together with
performance periodically.
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 
(1) According to our Procedural Rules No material deviation.
of conflict of interest and
Governing Meetings of the Board of
provision of
Directors, for any proposals in which a
communication channel.
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.
(2) 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
(3) Employees may express their opinions and
file their complaints through mailbox to
their upper level chief in charge or HR
department.

The allocation of duty and function of internal No material deviation.
effective accounting
audit department includes a department head
system, internal control
and an internal audit officer. According to our
system which would be
internal audit system, the internal audit
reviewed by internal
department would periodically conduct review
control department or
and assessment based on all operation manual.
appointed auditors
If any deviation found, they would report to the
periodically.
Audit Committee and the Board of Directors
their review result, including the progress of
improvement.
In the meeting of Board of Directors held on 18
December 2014, our internal audit head
reported to the Board of Directors that
according the the present legal requirement and
amendments rules by the relevant Taiwan
authorities, and a series of management
measures and system regarding internal system
were approved to be adopted or amended by the
Board of Directors.
37
Deviation from the
Codes of Corporate
Conduct and Ethics
Yes No
Description

We provide educational training including No
material
ethical operation from time to time
deviation.
Item
(5) Internal and external
ethical management
training periodically
provided.
3. Operation of report system

reporting and
encouragement system
and convenient reporting
channel and designation
of personnel for receiving
such report.
(2) Procedures and
mechanism for the
investigation of reported
matters and relevant
confidentiality
(3) Measures for protection
of reporters from
improper treatment.
4. Information Disclosure
(1) Disclosure of Codes of
Ethical Operation and the
execution thereof on the
Company’s website and the
Market Observation Post
System.


The employees may through the AO system or No material deviation.
personal e-mail box to report their opinion or
complaints to their direct chief or HR
departments. Breach of ethical operation rules
will be handled in accordance with the relevant
regulations set out in our Employees’ Manual.
For serious breach, the relevant department
head together with HR department will
determine the corresponding punishment.
We have designated communication channel No material deviation.
managed by HR department, which would
follow our confidentiality mechanism to handle
the reported matters.
In order to protect reporters, the HR department No material deviation.
would be responsible for the prevention of
receiving improper treatment by the reporters.

Through our corporate website, we deliver the No material deviation.
corporate culture and spirit of「Diligent and
Simple and 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.
5. We did not adopt our own “code of corporate conduct and ethico” based on the “Codes of Corporate Conduct
and Ethics of Listed Issuances”.
6. Other important information which would help for the understanding of the Company’s ethical operation
status: We aggressively promote ethical principles to our employees and business transacting partners.
(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 9 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.
38
(9) The Status of the implementation of the internal control system:
(a) Statement of Internal Control System
English translation of a statement originally issued in Chinese)
COLAND HOLDINGS LIMITED
Statement of Internal Control System
Date: 26 February 2015
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 2014:
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 2014,
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 2014 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.
39
7.
This Statement was passed by the Board of Directors in their meeting held on 26 February 2015.
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.
(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:
(a) The Company held one annual general meeting and 14 meetings of the Board of
Directors in 2014 and up to the date of printing of this annual report, significant
resolutions passed were as follows:
Type of
Meeting
Meeting
of Board
of
Directors
Date of Meeting
Contents of Resolutions passed in the Meeting
14 January2014
1.
2.
Approved the 2013 Incentive Bonus Plan for Manager;
Approved 2014 Employees Share Option Plan.
24 January 2014
1.
Approved the investment in Bora Pharmaceuticals.
1.
Noted and acknowledged the 2013 Operation Report and
recommended the same to 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 the same to be submitted to the
shareholders for their acknowledgement at the 2014 annual
general meeting of the Company;
12 March 2014
2.
40
Type of
Meeting
Date of Meeting
3.
4.
5.
6.
7.
1.
2.
3.
11 April 2014
4.
5.
6.
Meeting
of Board
of
Directors
7.
1.
5 May 2014
2.
3.
1.
24 June 2014
2.
3.
4.
1.
2.
30 June 2014
3.
1.
8 July 2014
2.
Acknowledged and approved the 2013 Financial Statement
Acknowledged and approved the Profit Distribution Plan
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.
Approved the revision of the Handling Procedures of
Acquisition and Disposal of Assets;
Approved increase of share capital of Coland Development
Taiwans;
Approved the adjustment of the investment frame of
Shenchen Pharma;
Approved for the List of the Candidates of the Independent
Directors;
Adoption of the revised 2014 Employees Share Option Plan;
Approved amended articles of association and the
submission of the same to the shareholders for their approval
at the 2014 annual general meeting; and
Approved the convening of the 2014 annual general meeting.
Approved and acknowledged the consolidate financial
statement and the operation report for the 1st quarter of 2014;
Approved the release of the Non-Competition Restriction on
the Chief Investment Officer of the Company; and
Approved the review and publication of information of the
candidates of the independent directors.
Approved the acquisition of the right to use of land and
subsequently construction of warehouse and office space by
Guozhen Pharmaceutical;
Approved the proposed investment in Company M;
Approved the proposed investment in China Development
Biomedical Fund; and
Rectify the revised 2014 Employees Share Option Plan.
Establishment of the 2nd session of the Audit Committee;
Elect the Chairman of the 2nd session of the Board of
Directors; and
Approve the appointment of the members of the
remuneration committee.
Approved the record dates for the payment of the 2013
final dividend; and
Approved the adjustment of the subscription price per share
in Company M.
41
Type of
Meeting
Date of Meeting
1.
14 August 2014
29 August 2014
12 November
2014
Meeting
of Board
of
Directors
18 December
2014
Annual
General
Meeting
30 June 2014
Approved and acknowledged the consolidate financial
statement and the operation report for the second quarter of
2014; and
2. Approved the application for renewing and increasing the
credit facility from China Trust Commercial Bank.
1. Approved the grant list of 2014 employees share options;
2. Approved the Audit fee schedule for 2014; and
3. Approved the propose acquisition and investment in
Auspicious Day Group Limited and its subsidiary Hainan
Quanyuan.
1. Approved the application for renewing the credit facility
from Bank SinoPac;
2. Approved and acknowledged the consolidate financial
statement and the operation report for the third quarter of
2014; and
3. Approved the purchase of a company car by Shanghai
Guochuang.
1. Approved the adoption and revision of regulations of the
Company:
(a) Adoption of regulation for protection of personal
information and regulations for financial and nonfinancial information; and
(b) Revision of regulations for supervision and management
of subsidiaries;
2. Approved the revision of internal audit regulations;
3. Approved the revision of standard procedures and rules for
internal audit of labor and wage cycle;
4. Approved the revision of Internal Audit Operation System;
5. Approved the revision of Approval Authority;
6. Approved the providing loans to Hainan Quanyuan by
Shanghai Guochuang;
7. Approved the application of the credit facility to Mega
International Commercial Bank; and
8. Approved the 2015 Operation and Budget Plan.
i. Matters reported:
1. 2013 Operation Report; and
2. Report by the Audit Committee on the review of the
2013 audited consolidated financial statements and
operation report.
ii. Matters acknowledged:
1. 2013 Audited Consolidated Financial Statements and
Operation Report; and
2. 2013 Profit Distribution Plan.
iii. Matters resolved:
1. Amendments of Handling Procedures of Acquisition
and Disposal of Assets;
2. Amendments of Articles of Association;
3. Election of the Second Session Directors (including
Independent Directors); and
4. Proposal of Releasing the Non-Competition Restriction
of new Directors.
42
Type of
Meeting
Date of Meeting
1.
2.
3.
Meeting
of Board
of
Directors
(b)
Approved the 2014 KPI bonus for managers;
Approved the 2015 KPI of the senior management; and
22 January 2015
Approved the salary increase rate of the Company and its
subsidiaries in 2015.
1. Noted and acknowledged the 2014 Operation Report and
2. Acknowledged and approved the 2014 financial Statement
3. Acknowledged and approved the Profit Distribution Plan and
26 February 2014
4. Approved the convening of the 2015 ammual general
meeting;
5. Approved the form and substance of the Internal Control
Statement; and
6. Approved the application of the Credit Facility to KGI
Commercial Bank.
2014 Annual General Meeting important resolutions passed and the execution there of:
I. 2013 Profit Distribution Plan:
Execution: For the 2013 dividends distribution, a total of NTD280,249,200 was
distributed to the shareholders (NTD3.6 per share). The ex-dividend date was 30 July
2014 and the payment date was 29 August 2014. Payment of the 2013 dividends was
completed.
II. Amendments of Handling Procedures of Acquisition and Disposal of Assets:
Execution: The subsequent acquisition or disposal of assets by the Company was all
conducted in accordance with the amended Procedures.
III. Amendments of Articles of Association:
Execution: The election of the Second Session of our Independent Directors was in
accordance with the amended nomination system.
IV. Election of the Second Session Directors (including Independent Directors):
Execution: There were 8 meetings of the Board of Directors held after the Second
Session of the Independent Directors and the Directors were elected on 30 June 2014
and up to the date of printing of this annual report. Please refer to 4(11)(a) for
contents of important resolutions passed
V. Shareholders' Recommendations: None.
(12) In the latest year and up to the date of printing of this annual report, no directors expressing
dissenting opinion with record or written statement on significant resolutions passed at the
meetings of the Board of Directors.
43
(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 reliant 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
1
-
7
2
9
1
-
1
US CMA
China Junior Accountant
Certificate
China Middle-level Accountant
Certificate
International Internal Auditor
CIA held by Internal Audit
Association
5. Information on fees charged by auditors
Name of CPA firm
Ernst & Young, Certified
Public Accountant
Name of Accountant
Wang Yan Jun
Lin Li Huang
Audited Period
1 Jan. 2014 to 31 Dec. 2014
Items
Audit Fees
Fee Range
1
2
3
4
5
6
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
Non-audit Fees
6,128,000
-
-
Total
6,128,000
-
(1) No non-audit fees were paid to the auditors, their firm and their related affiliates.
(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.
6. There were no change of auditors.
7. 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.
8. 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 204 and up to the date of printing of this annual report:
44
2014
Title
Chairman
Director and CEO
Director
Director
Independent
Director
Independent
Director
Independent
Director
Independent
Director
Name
As at 24 March 2015
Increase/ (decrease) Increase/ (decrease) Increase/ (decrease) Increase/ (decrease)
of Number of
of Number Shares
of Number of
of Number Shares
Shares Held
Pledged
Shares Held
Pledged
William Robert
Keller
Lee Hsin
Ye Xiao Ping
Tang Li Da
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Shen Jen Lin
0
0
0
0
Chang Li Yen
0
0
0
0
0
0
0
0
0
0
0
0
Han Feng
(2014/6/30 resigned
on)
Chen Li
(2014/6/30
Appointed on)
CFO
Tsao Johua
(260,000)
0
0
0
Chief Investment
Officer
Cheng Ching Chi
(2014/6 resigned in)
0
0
0
0
Director, External
Affairs Officer
Guo Zhi-min
0
0
0
0
0
0
0
0
Director, Medical
Jiang Yan-fei
Device Dept
(2014/11 resigned in)
Director, Medical
Device Dept
Peng Rui Hong
(2014/12 appointed
in)
0
0
0
0
Director, Sales &
Marketing Dept
Hu Tong
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
0
0
0
0
(648,000)
0
0
0
Liu Qi Jia
Director, Marketing
(2014/11 appointed
Dept
in)
Holding Over 10%
shares
Business Enterprise
Investments Group
Limited
(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
9. Information on the relation among top 10 shareholders as related parties referred to in No. 6
Publication of the Financial and Accounting Principles
Shares held
Name
Shares held by
spouse and
minor children
Aggregate
shares held in
other’s name
No of
shares
0
No of
shares
0
No of shares
%
Business Enterprise
Investments Group
Limited
Representative: Lee
Hsin
Xin Ping Holdings
Ltd.
Representative: Zhu
Xiao-qing
23,856,141
30.56
0
0
0
0
7,137,871
9.14
0
0
0
0
0
0
Morgan Stanley
International
Company Limited
Cheerful Gold
Limited
Representative: Zhu
Xiao-qing
2,609,411
3.43
0
2,407,031
3.08
0
5
Fidelity Fund
6
Customouser
Investment Account
Yong-feng Securities
(Asia) Custodians
Company Limited
Hong-Ding Venture
Capital Stock
Company Limited
Representative: Hung
Jia-cong
1
2
3
4
7
8
TransGlobe Life
Insurance Inc
Representative: Liu
Xian jue
9
10
Peak Crown Holdings
Limited
Representative:
Angela Lee
China Development
Industrial Bank.
Representative:
Chang Chia chu
%
0
%
0
24 March 2015
Name of the related party as referred
to in no. 6 publication of the financial
and accounting principles or being
the spouse or second degree family
of the top 10 shareholders
Title
Relationship
(or name)
Peak Crown
Shareholders of
Holdings
the relevant
Limited
companies are
second degree
relatives
0
0
Cheerful
Gold Limited
0
0
0
None
0
0
0
0
0
0
0
Xin Ping
Holdings
Ltd.
2,007,454
2.57
0
0
0
0
None
Shareholders of
the relevant
companies are
second degree
relatives
None
1,422,000
1.82
0
0
0
0
None
None
0
0
0
0
None
None
0
0
0
0
None
None
0
0
0
0
0
0
0
0
Business
Enterprise
Investments
Group
Limited
None
Shareholders of
the relevant
companies are
second degree
relatives
None
1,343,820
620,637
571,100
561,402
Shareholders of
the relevant
companies are
second degree
relatives
None
1.72
0.80
0.73
0.72
46
10. 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 December 2014
Invested Company
（Note）
Central Chief Limited
Coland Pharmaceutical
Company
Limited
(Hong Kong)
Shanghai Guochuang
Pharmaceutical
Company Limited
Coland Development
Company Limited
Hung Chun BIO-S Co.,
Ltd.
Exquisite Creation
Limited
Limited
Majestic Trade
Holdings Limited
Company Limited
Suzhou Microclear
Medical Instruments
Co., Ltd
Hefei City Guozhen
Limited
Hainan Quanyuan
Pharmaceutical
Company Limite
Shanghai Pengzi
Medical Devices
Company Limited
Shechen
Pharmaceutical Ltd.
Taiwan Tigermed
Consulting Co. Ltd.
Zan Ho Biotech Inc.
Investment by
company
Investment by the directors,
managers, and companies
directly or indirectly controlled
by the Company
No. of
%
Shares
No. of
Shares
%
100
100%
-
-
-
-
Aggregate Investment
No. of
Shares
%
-
100
100%
1
100%
1
100%
-
Not
applicable
100%
Not
applicable
100%
-
-
10,000,000
100%
10,000,000
100%
-
-
4,800,000
18%
4,800,000
18%
-
-
75
60%
75
60%
66
60%
66
60%
51
51%
51
51%
-
-
Not
applicable
51%
Not
applicable
51%
-
-
Not
applicable
25%
Not
applicable
25%
-
-
Not
applicable
60%
Not
applicable
60%
Not
applicable
60%
Not
applicable
60%
Not
applicable
51%
Not
applicable
51%
-
-
5,500,000
55%
5,000,000
55%
-
-
300,000
25%
300,000
25%
-
-
1,000,000
40%
1,000,000
40%
Note: The Company’s long term investment.
47
IV. STATUS OF FUNDING
1. Capital and shares
(1) Source of capital
(a) Formation of capital
Unit: share, NTD 1
Authorised Capital
Year/Month
2010/3
(Note)
2010/4
(Note)
Issue
Price
1
No. of
Shares
Amount
1,500,000
Issued Capital
No. of
Shares
1,500,000
Amount
1,000
1,000
Remarks
Source of Capital
Establishment
Consideration
other than Others
Cash
None
Share swap with shareholders of
Cash injection of
2010/5
10
200,000,000 2,000,000,000 11,500,200 115,002,000
None
NTD115,000,000
Cash injection of
2011/2
440 200,000,000 2,000,000,000 12,113,156 121,131,560
None
NTD 6,129,560
Capitalisation of
2011/4
10
200,000,000 2,000,000,000 26,909,042 269,090,420
profit of
None
NTD147,958,860
Capitalisation of
2011/4
10
200,000,000 2,000,000,000 62,222,000 622,220,000 share premium of
None
NTD353,129,580
Cash injection of
2011/10
87
200,000,000 2,000,000,000 70,000,000 700,000,000
None
NTD77,780,000
Exercise of share
2013/10
10
200,000,000 2,000,000,000 70,347,000 703,470,000 option of NTD
None
3,470,000
Cash injection of
2013/12
72
200,000,000 2,000,000,000 77,847,000 778,470,000
None
NTD 75,000,000
Exercise of share
None
2014/8
10 200,000,000 2,000,000,000 77,867,000 778,670,000 option of NTD
200,000
Exercise of share
None
2014/10
10 200,000,000 2,000,000,000 77,959,000 779,590,000 option of NTD
920,000
Exercise of share
None
2014/12
10 200,000,000 2,000,000,000 78,065,000 780,650,000 option of NTD
1,060,000
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 authorised share capital was increased to NTD2,000,000,000 by
a resolution passed by the shareholders.
1
1,500,000
1,500,000
2,000
2,000
(b) Class of shares
24 March 2015
Authorised Share Capital
Class
Ordinary
No. of Shares circulated
No. of unissued shares
78,065,000
121,935,000
48
Total Number of
Authorised Shares
200,000,000
(2) Types of Shareholders
24 March 2015
Quantity
Type Governmental Financial Other Legal
Individual
Organisation Organisation Person
Foreign
Entity and
Foreigner
Total
Number of
0
2
37
5,915
33
5,987
Shareholders
Number of Shares
0
1,182,039 2,884,771 32,078,444 41,919,746 78,065,000
Held
％ of
0.00%
1.51%
3.70%
41.09%
53.70%
100.00%
Shareholding
Note: To the best of our knowledge, the Company does not have investors from Mainland China.
(3) Status of spread of shares
(a) Ordinary shares
24 March 2015
No. of
Shareholders
No. of Shares Held
(Note)
% of Shareholding
1-999
448
79,578
0.10%
1,000-5,000
4,241
8,665,515
11.10%
5,001-10,000
646
5,104,334
6.54%
10,001-15,000
218
2,787,562
3.57%
15,001-20,000
122
2,204,434
2.82%
20,001-30,000
125
3,180,638
4.07%
30,001-40,000
58
2,029,550
2.60%
40,001-50,000
39
1,839,100
2.36%
50,001-100,000
47
3,112,315
3.99%
100,001-200,000
23
3,226,058
4.13%
200,001-400,000
8
2,318,477
2.97%
400,001-600,000
4
2,113,074
2.71%
600,001-800,000
1
620,637
0.80%
800,001-1,000,000
0
0
0.00%
1,000,001or above
7
40,783,728
52.24%
78,065,000
100.00%
Share Range Held
Total
5,987
Note: Nominal value of NTD 10/per share.
(b) The Company did not issue any special shares.
49
(4) List of main shareholders
24 March 2015
Shares
No of Shares
Name of Main Shareholders
Business Enterprise Investments Group Limited
%
23,856,141
30.56%
Morgan Stanley International Company Limited
7,137,871
2,609,411
9.14%
3.34%
Cheerful Gold Limited
2,407,031
3.08%
Fidelity Fund
2,007,454
2.57%
Customer Investment Account Yong-feng Securities (Asia)
Custodians Company Limited
1,422,000
1.82%
Hong-Ding Venture Capital Stock Company Limited
1,343,820
1.72%
TransGlobe Life Insurance Inc
620,637
0.80%
Peak Crown Holdings Limited
571,100
0.73%
China Development Industrial Bank.
561,402
0.72%
Xin Ping Holdings Ltd.
(5) Market price, net value and earnings per share, dividend and the related information for the
latest 2 years
Unit：NTD;’000 shares
Year
2013
2014
Highest
94.7
93.6
Lowest
67.8
65.5
Average
80.94
79.79
Before Distribution
34.43
39.71
After Distribution
30.44
Not yet approved by
sharehold
No. of Weighted Average
Shares
Earnings per Share （Note 3）
70,237
77,847
5.06
1.72
Cash Dividend
3.6
3.6*
-
-
-
-
-
14
Item
Market Price per
Share（Note 1）
Net value per Share
（Note 2）
Earnigns per Share
Scrip Dividend
Dividend per Share Non-chas
Dividend Capitalisation Issue
Dividend Payable（Note 4）
Price/Earnings Ratio（Note 5）
16
Return on
Price／Dividend Ratio（Note
22
22
Investment
6）
4.51%
Cash Dividend Yield（Note 7）
4.45%
*The dividend was recommended by the board of directors and subject to the shareholders’approval
at the 2015 annual general meeting to be held on 22 May 2015.
Note1: These are the highest and lowest market price in the relevant years and the average market
price are calculated based on the translation value and transaction quantity of the relevant
years.
50
Note2: 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.
Note3: No adjustment is required to be made, as we do not issue shares at nil consideration.
Note4: 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.
Note5: Price/Earnings Ratio＝The average closing price per share at the relevant year／Earnings per
share.
Note6: Price／Dividend Ratio＝The average closing price per share at the relevant year／Cash
dividend per share
Note7: Cash Dividend Yield＝Cash Dividend per share／the average closing price per shareat the
relevant 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”) of the Company, 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) Up to 10% as bonus to employees, including employees of an affiliate of the Company;
(ii) Up to 5% as remuneration for the Directors; and
(iii) No less than 30% of any part of the remaining profits after tax for the relevant financial
year to the Members as dividends (by way of cash or stock or a combination of both)
after taking into consideration the Company’s then operational conditions, working
capital requirement and long term financial plan, provided to the extent that the
Company has sufficient available funds. Cash dividends shall not be less than 10% of
the total amount of dividends proposed to be distributed.
(b) Dividend recommended for 2014(Note)
Unit: NTD1
Year
Item
Cash Dividend NTD)
Capitalisation of Profit （NTD)
Total
Amount per Share
Total
2014
(to be distributed in 2015)
3.6
281,034,000
Amount per Share
－
Total
－
Amount per Share
3.6
281,034,000
Total
Note: The dividend was recommended by the Board of Directors and subject to the
shareholders’ approval.
51
(7) No bonus shares were proposed to the 2015 general meeting.
(8) Bonus for employees and remuneration for Directors (including Independent Director)：
(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 each of 2014 and 2013.
(9) We did not repurchase any of our shares during 2014.
2. We did not issue any bonds, special shares or overseas depository receipts.
3. Employees Share Option：
(1) Share Option Schemes not yet expired
24 March2014
Share options granted
Approval Date
Grant Date
No. of Units
No. of shares under
Exercisable Option/Total
Issued Shares(%)
2010 First Grant
2012 First Grant
2012 Second Grant
2014 First Grant
2011/08/23
2010/12/10
238,220 unit
2012/06/13
2012/06/20
315 unit
2012/06/13
2012/11/01
440 unit
2014/05/05
2014/08/29
900 unit
1.59
0.45
0.6285
1.15582
5 years from 5
5years from the
5years from the
October
grant date
grant date
Option Period
2011(being the
listing date of the
Company)
Execution Measure
Issue of new shares Issue of new shares Issue of new shares
Type A：
2 years after the
listing date：50%
3 years after the
Limitation on the
listing date：75%
2 years after the grant date：50%
Exercise Period and % of 4 years after the
3 years after the grant date：75%
option shares
listing date：100% 4 years after the grant date：100%
Type B：
5 years from the
listing date:
100%
5years from the
grant date
No. of Shares Exercised
481,000
Total Consideration for
4,810,000
the Exercised Option
No. of Shares under
126,000
Options not yet Exercised
Subscription Price per
Share for Options not yet NTD 10
Exercised
Issue of new shares
2 years after the
grant date：50%
3 years after the
grant date：75%
4 years after the
grant date：100%
39,000
45,000
0
2,262,000
3,150,000
0
71,000
145,000
830,000
NTD 58
NTD 70
NTD 71.7
52
Share options granted
No. of shares under
Options not yet
Exercised/ Total Issued
Shares(%)
Impact on Shareholders’
Equity
2010 First Grant
2012 First Grant
2012 Second Grant
2014 First Grant
0.18
0.09
0.19
1.08
No material impact 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
24 March 2015
MANAGERS
Title
No. of
Shares
under
Name No. of Shares
the
（Note underthe
Options
1）
Options
／Total
Issued
Shares
Director of
Sales
Department
Hu
Tong
CFO
Tsao
Johua
CIO
Cheng
Ching
Chi
Medical
Device
Director
Product
Development
Director
Medical
Registration
Director
Marking
Development
Director
External
Affairs
Officer
Jiang
Yan
Fei
Lou
Jin
Fang
Han
Wen
Ge
Exercised
Not Yet Exercised
No. of
No. of Shares
Shares under
Subscription
under Option
No. of
Total
Subscription
Total
Exercised No. of Shares Priceper
Grantedbut Not
Shares
Consideration
Price Consideration Option/Total
Share
Yet
(NTD‘000)
Issued
（NTD）
Exercised/Total
Shares
IssuedShares
720,000
(Among
0.92%
which
(Note 137,000
180,000
2)
lapsed)
(Note 1)
10
1,370
Liu Qi
Jia
Guo
Zhi
Min
53
0.18%
(Note 2)
48,000
50,000
305,000
10.0
70.0
71.7
25,849
0.52%
(Note 2)
Title
No. of
Exercised
Shares
under
No. of
Name No. of Shares
the
Shares under
（Note underthe
No. of
Options
Subscription
Total
Exercised
1）
Options
Shares
／Total
Price Consideration Option/Total
Issued
Issued
Shares
Shares
Not Yet Exercised
No. of
Shares
No. of Shares
Subscription
under Option
Total
Priceper
Grantedbut
Consideration
Share
Not Yet
(NTD‘000)
（NTD）
Exercised/Total
IssuedShares
EMPLOYEES
Commerical Tan
Manager
Anjiang
Commerical
Manager
Commerical
Director
Regional
Manager
Zhang
Hao
Dong
Lei
Song
Tao
Sales
Manager
Chen
Wei
Sales
Director
Financial
Manager
Yang
Yan
Hua
Yang
Jun
Wang
Ting
Audit
Manager
Zhu
Lin Jun
HR Manager
Gu Yan
Fei
Sales
Manager
440,000 0.56% 153,000
(Among (Note
7,000
which
2)
20,000
50,000
lapsed)
(Note 1)
10
58
70
3,336
0.23%
(Note2)
42,000
38,000
60,000
70,000
10.0
58.0
70.0
71.7
11,843
0.29%
(Note 2)
Note1: Cheng Ching Chi, CIO, Jiang Yan Fei, Medical Device Director and Zhang Hao, Commerical Manager and left
the Company and their options not yet exercised were lapsed.
Note 2: The percentage is calculated base on 78,065,000 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 fully used in accordance
with the relevant plans.
54
V.
OPERATION STATUS
1. 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
Product
2013
Sales Income
Unit: NTD’000; %
2014
Sales Income
%
%
Medicines
Medical
Devices
Others (Note)
1,610,798
86.75%
1,831,550
83.06%
225,146
12.13%
371,693
16.86%
20,820
1.12%
1,724
0.08%
Total
1,856,764
100.00%
2,204,967
100.00%
Note: Income of service fees.
(c) Existing Products
The Company’s existing products mainly cover medicine, medical devices and IVD
reagents:
Therapeutic Area
Listing
Year
2005
Product
name
Generic name
Dai Ding
Adefovir
Hepatology
Indications
Anti-HBV
Supplier
Tianjin Institute
of Pharmaceutical
Research
chole
cystolithiasis,
cholestalic
liver desease,
bile-regurgitatronal gastritis
Daewoong
Pharmaceutical
Co., Ltd.
2014
Wulusa
Ursodeoxycholic
acid
Respiratory
2011
Bi Duo Yi
Tiotropium
Bromide
COPD
Zhejiang Xianju
Pharmaceutical
Cardiovascular
2014
Lezhiping
Acipimox
Capsule
Treatment of
Hyperlipidem
ia
Pfizer
55
Therapeutic Area
Listing
Year
Product
name
Generic name
Immuno-suppressant
2008
Shun You
Mycophenolate
Mofetil
Urology
2013
Detrol
Tolterodine
Tartrate
2010
Spine Implants
IDV
2014
Organ
Transplant
Rejection
Urinary
Incontinence
Fracture or
deformation
of bone pillar
Supplier
Zhejiang Jianfeng
Pharmaceutical
Pfizer
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
Medical Device
2013
Indications
(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) and etc.
(iii) Therapeutics for cancers, with special attention to medicines for target therapy,
indications focused on leukemia, prostate cancer, liver cancer, breast cancer,
multiple myeloma and other cancers.
(iv) Medical devices, including orthopedics, dental instrument and implants,
ophthalmic equipment and ECG instrument.
(v) IVD reagent: including eugenic screening, screening of immunodeficiency cirus/
hepatitis B virus/ hepatitis C virus and cancer screening.
(2) Industry Overview
(a) The overall economic environment status
China is the second largest economic entity to the US. According to the National Bureau
of Statistics of the People’s Republic of China, the domestic GDP for 2014 was
RMB63.6463 billion, representing 7.4% increase as compared to 2013. In order to
maintain a stable development of economy, China started its thirteenth five year plan: The
development of economy would enter into a new normal, from high speed to middle-high
56
speed. The economic structure will be feasibly adjusted and optimized and it will proceed
to transformation of increase of quality and efficiency of the industry.
At present, the ratio of China’s health care spending is lower than that of the global average
standard. Following the medical reformation promoted by the Chinese government, the
ratio of medical and health care spending to the GDP increase from 4.6% of 2008 to 5.6%
of 2013. Although such increase was still 10.1% lower than the global average standard.
With the inclusion of medical and health care industries as focused planning in the 13th
5-year plan and the overall increase of China’s economy, the future medical and health
care spending is expected to catch up with the global average standard.
China's per capita medical and health care spending
Source：National Bureau of Statistics of the People’s Republic of China
In addition, according to the promotion of urban planning, the infrastructural construction
continues and a huge amount of capital is injected into medical and health care industry.
“The National New Urban Planning” proposed that in order to improve the living standard,
the government plans to increase the rate of Urbanization from 53.7% of 201 to 60% in
the end of 2020. In other words, during this period, more than 100 million population
will be moved from rural area to urban area. In order to achieve such goal, the government
needs to inject huge amount of capital in infrastructural construction and medical and
health care.
China's urbanization rate
(b) Current Status and development of pharmaceutical industry
China’s market for the sale of pharmaceutical products: maintaining rapid growth
57
According to the information published by China’s National Development and Reform
Commission, the main business income of pharmaceutical industry was RMB 2,168.2
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 wealthy 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 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 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 reagents
According to the market research report by Frost & Sullivan, the scale of China’s
market for IVD in 2011 exceeded RMB14 billion. The market scale for 2012 would
be around RMB16.7 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 was
only about 5% of that of the world. In 2012, the average expenses for IVD per person
58
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
According to “The Chinese Pharmaceutical Industry 6 Terminal Drug Market
Analysis Report (2013 to 2014)”, the scale of China’s drug combustion market
reached RMB1,146.3 billion, being the first breakthrough of thousand billion. It
was estimated that in 2014, the market scale would reach RMB1,332.6billion, an
increase of 16% as compared to 2013. The speed of increase was basically stable.
Status of the overall terminal market based on “The Chinese Pharmaceutical Industry
6 Terminal Drug Market Analysis Report (2013 to 2014)” China’s Health Statistic
Yearbook 2012 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 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
2500
2000
1500
1000
Retail Channel
Town Health Clinic
County Hospital
Community Health Service Center
City Hospital
500
0
2008
City Hospital
2011
2008~2011
Annual Average
Compound
Growth Rate(%)
21%
2015
2011~2020
Annual Average
Compound
Growth Rate(%)
13%
2020
2011~2020
Contribution to the
Market Growth
Unit : RMB billion
660
Community Health
26%
12%
54
Service Center
County Hospital
24%
16%
352
Town Health Clinic
10%
9%
69
Retail Channel
19%
11%
215
Total
20%
13%
1349
Source：China Health Statistics Yearbook 2012；National Health and Family Planning
Commission of the PRC；China Food and Drug Aaministration
59
(c) 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 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.
Connection among the Upstream , Middle Stream and Downstream
(d) Development trends for all products
The key licensed products under the development by the Company for distribution are
mainly in the areas of hepatitis, respiratory system, oncology, cardiovascular,
medicaldevices and IVD reagents. Below is a description of each markets for the products.
(i) Market for Hepatitis 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, cholesteric or severe
60
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.
In 2014, market of drugs for the treatment of hepatitis reached RMB 8.4 billion.
Among all kinds of anti-hepatitis drugs in China, the largest use is nucleoside,
which is about 82% use. Interferon is the second, about 18% of use . In 2014, the
whole market of anti-HBV nucleoside was 6.85 billion, increased by 16% as
compared with that of 2013 and maintained a relatively fast increase. In the
market of oral nucleoside., There are mainly 5 components, namely, Lamivudine,
Adefovir, Entecavir, Telbivudine and Tenofovir armory which, Entecavir had the
highest use rate of 55%(3.8 billion), the second was Adefovir of 21%(1.42 billion),
Lamivudine of 15% (1 billion), Our products include 3 of them, namely Entecavir,
Adefovir and Lamivudine.
China’s Anti-HBV
Drug Market (Unit : RMB Million )
2010-2014年抗肝炎病毒药市场
8,388
9,000
8,000
7,268
7,000
6,197
6,000
5,000
4,000
3,000
3,949
2,853
2,000
1,000
0
2010
2011
2012
2013
2014
Chinese HBV oral nucleoside therapy proportion (Unit : RMB Million )
Source：IMS Health Inc.
61
(bb)Hepatobiliary adjuvant
Bile-therapy and cholagogue (ACT Classification AO5A) 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 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 on 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, in between 2010 and 2014, the market
grew rapidly from 7.3 billion to 13.5 billion. including liver protective agent,
cholagogues and etc.. In general, the market growth of cholagogues is faster than
that of liver protective agent. The market scale of cholagogues increased from 480
million in 2010 to 1.8 billion in 2014, among which, ursodeoxycholic acid was the
main component of cholagogues, occupying 59% of the market. In 2014, sales
of ursodeoxycholic acid was 606 million, increased by 26% as compared to that
of 2013.
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 of ursodesoxycholic acid in the China market is
Youfosi from Phileas Fogg and Youdishe from Keruide in Sichuan.
62
Market of Bile-therapy and Cholagogue in China Market (Unit: RMB million)
Source：IMS Health Inc
(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. Symptoms 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 particles and smoking 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 threaten 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$3.799billion,
US$4.399billion and US$4.58 billion respectively, which already became the top
10 popular drugs worldwide. (Source: 1. Therapeutic Directory for Chronic
Obstructive Pulmonary Disease 2007 Revision; and 2. EvaluatePharma)
In China, COPD is also an important chronic respiratory disease seriously
endangers people’s health. According to the Therapeutic Directory for Chronic
Obstructive Pulmonary Disease, they have investigated a total of 20,245 audits 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 sales of was not obvious
63
due to the low popularity rate of the overall medical treatment at first. Later,
following the increase of the popularity rate of medical treatment and the inclusion
fo it in China’s List of Medical Insurance, sales of Spiriva leaped. In 2011 and
2012, sales of Spiriva reached RMB140 million and RMB200 million
respectively.Accordeg to IMS information, in between 2010 to 2014, sales of
tiotropium bio-made increased from 50.17 million to 362 million.
Our Tiotropium Bromide the main competitors are Boehringer Ingelheim.
Following the recognition of and attention to, COPD by the vast patients in China,
the product has immense potential in China market.
Rank
1
Major causes of
death from
diseases for
urban dwellers
in 2012
Malignant
Tumors
Death Rate
2011
2012
up/down
27.79%
26.81%
-0.98%
Major causes of
death from
diseases for
rural dwellers in
2012
Malignant
Tumors
Death Rate
2011
2012
up/down
23.62%
22.96%
-0.66%
2
Heart Disease
21.30%
21.45%
0.15%
Cerebrovascular
Disease
21.72%
20.61%
-1.11%
3
Cerebrovascular
Disease
20.22%
19.61%
-0.61%
Heart Disease
19.37%
18.11%
-1.26%
4
Respiratory
Disesdes
10.56%
12.32%
1.76%
Respiratory
Disesdes
13.31%
15.75%
2.44%
5
Injury and
Poisoning
5.47%
5.67%
0.20%
Injury and
Poisoning
8.85%
10.29%
1.44%
Source：China Health Statistics Yearbook 2013
(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 was primarily applied to
hyperlipidemia with the character of elevated TG index number or mixed treat
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 audits 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 2014, the overall market for lipid lowering drugs in China exceeded RMB 8.8billion,
among which, 92% was contributed by statins. Acipimox was ranked number 8 among
all lipid lowering drugs, representing about 1% of the market share. According to
information from IMS, sales of acipimox in between 2010 and 2014 grew slowly. At
present, the overall market is about RMB85million and the leading product is Yiping
(from Nonan Bate) and 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 potential targeted patients.According to information from
IMS, in 2014, China’s drugs used for urinary syetem was RMB1.74 billion and the
OAB market scale was about RMB120 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 globally 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 Implants
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 market ofotpesic products will maintain an
annual growth of 18-20% up to year 2015. China’s orthopedic products are further has
divided into 3 main Catngories-namely spine/joint/trama. The market scale in 2009
was around RMB6 billion and 2012 itreached RMB10 billion. It is estimated the
growth of joint and products the growth of trauma.
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 possibly grows 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 the total market share, mainly J&J,
Medtronic, Syntex, Stryker and etc, Sofamor, the Company’s licensed product from
Medtronic, is the leading product of medtronicl 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
extended from spine to joint.
(vi)IVD reagents
In recent years, subsequent to China’s continuous medical reform, people’s more and
more attention to their health drives the demand of the IVD reagents. IVD reagents
mean the in vitro diagnosis made by samples from human beings in the process of
prevention of diseases, diagnosis, therapeutic monitoring, prognosis observation,
65
health state evalu-ation and prevention of genetic diseases. Blood types, genes and
genetic diseases re-quire IVD reagents to examine.
According to the latest information published by AMR in 2014, in the future 7 years,
the global IVD market will grow by 5.34% CAGR and reaches USD74.7 billion in
2020. In 2013, the market value was USD53.3 billion.
The industrial scale of IVD reagents in China is relatively small. China’s population occupies 1/5 of that of the world. but the ashore of IVD reagents is only 4%.
China’s average use of IVD products per person is USD2, while the use of IVD
products in devel-oped countries is USD25 to 30 per person. According to the statistics
by the Chinese Drug Manufacturing Net, China’s IVD reagents industry grows fast.
In 2013, China’s market scale of IVD reagents industry was 20.8 billion. The CAGR
is over 20%.
The whole scale of in vitro diagnostics industry in china (Unit: RMB million)
According to the analysis of statistics, 2/3 of medical decisions depends on diagnosis
in-formation. However, income of diagnosis is only 1% of the total medical spending.
It is believed that the improvement of diagnosis skill will have a positive effect on the
preven-tion of diseases, diagnosis and treatment. Especially for emerging countries,
IVD rea-gents are still in the fast-grown stage. In future, space for the development of
this indus-try is large. At present, the whole IVD reagents industry is at the high point
of the econo-my cycle. In future, China’s IVD market will keep the growth rate of 15%
to 20%
China’svitro diagnostics market (by biagnostic methods)
66
The main fields of IDV reagents include blood, biochemistry, immunity, molecular
biology, bacterium and POCT, among which molecular diagnosis grows the fastest.
The share of global molecular diagnosis in IVD market increased from 2% in 1995 to
10% in 2009, rep-resenting a10% CAGR. China’s market reaches over 20%.
Molecular diagnosis products are mainly applied in all clinical diagnosis, such as
tumor, infection and heredity. Shanghai Rendu, our strategic partner, is the only
company developing the 2nd genera-tion of RNA nucleic acid amplification products
in China. Its international competitors, such as Gen-Probe (TMA),
Biomerieux(NASBA), has not yet entered into China’s market. Its domestic
competitors are traditional PRC manufacturers, such as Daan, Kehua, Shengxiang,
Shenzhen Huada and etc, which entered into the market one after another.
(e) Competition
Drug Market
Over 80% of our income is from drugs, among which, 53% is from drugs for the treatment
of hepatitis. The second is drugs for the treatment of cardiovascular diseases for 9%
respiratory drugs for 3% 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 years, although we suffered from the drug price adjustment by
China’s National Reform and Development Commission. We extended our products from
drugs to orthopedic medical devices and IDV riggings and through the acquisition of our
district business partners, we built the medical platform together with them
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 from international brands. =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 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
We are not the type of company engaging in the research and development of new drugs.
However, we invest every year a certain amount of money to jointly develop new products
with our business partners.
Product development mainly involves the search of drugs
67
and medical devices with market potential and pharmaceutical enterprise with good
quality and introduction of products to China and cooperation with strategic partner to
jointly develop China’s market. The function is more product-development oriented, with
an emphasis in the therapeutic fields of anti-hepatitis, respiratory system, medical devices
and anti-tumors In 2014, our expenses for product development was 21,898,000, representing 1% of our operating income. In future, we will continue to invest.
(b) Products in development
In the recent yean and up the date of printing of this annual report main products jointly
developed with business partners and their repective expected time for the obtaining of
the drug permit are set out below:
(i) Pharma products:
Indications
Medicine Name
Hepatitis
Entecavir dispersible tablets
Tenofovir
Respiratory
Compound ipratropium bromide
2016
Irinotecan Injection
Temozolomide capsule
Vorinostat
Capecitabine
Imatinib
Bortezomib
Azacitidine
Erlotinib
Metoprolol succinate sustained-release
tablets
Aviner
Eparestat
2017
2019
2018
2020
2020
2018
2020
2020
2018
Oncology
Cardiovascular
Other
Expected time to
obtain drug permit
2017
2020
2016
2020
(ii) Medical device:
Indications
Products Name
Dental
Artificial Toothroot
Scanning Laser Ophthalmoscope
Fluorescence Scanning Laser
Ophthalmoscope
Handheld-Fundus Camera
Portable ECG Instrument
HIV/HBV/HCV Diagnosis IVD reagents
Ophthalmology
Cardiology
RNA Diagnosis
Expected time to
obtain permission
2016
2015
2016
2015
2015
2016
(4) Long term and short term development strategy and plan
(a) Short Term Development Strategy and Plan
(i) For drugs:
Stabilize sales of the existing mature products, focus in the expansion of the sales of
ur-sodeoxycholic acid capsule of Daewoong Pharmaceutical Co., Ltd. for cholestalic
68
liiver disease and tolterodine tartrate sustained release capsule of Pfizer for OBA in
China and cooperate with the 3 acquired pharmaceutical companies to strengthen the
combined ef-fects of sales.
(ii) For medical devices:
Enrich product lines, cooperate with Carestream Health, which develops and
manufactures medical-imaging products for the distribution of its oral imaging
products and signing of distribution agreement with Shenzhen Yiti for the sale of
ultrasonic detector of cirrhosis in Guangxi Province.
(iii) For IVD regents:
Continue to promote the molecular diagnostic reagents from Shanghai Rendu
(respirato-ry system/enterovirus/reproductive tract infection).
(b) Mid Term Development Stretegy and Plan
(i) For Drugs:
Increase the combination of products, from strong to large, from hepatitis to respiration/tomour and other fields with niche markets, be the leading pharmaceutical
company for specialty pharma in China.Continue to invest in high value-added
products, develop gradually from branded gener-ics to innovative generics and
innovative new drugs and introduce products originated from overseas and Taiwan.
(ii) For Medical Devices:
Develop the market together with our invested medical devices partners jointly,
continue to introduce series of relevant products in ophthalmology,dentistry and
orthopedics.
(iii) For IVD Reagents:
Cooperate with Shanghai Rendu to obtain the product approvals for HBV/HIV/HCV
and introduce them to the market.
(c) Long Term Development Strategy and Plan:
(i) For Drug Products:
Continueto invest in new product development, develop of 1 ~ 2 Chinese class one
new drugs and self-develop oneinternational class new drugs.
(ii) For Medical Devices：
Continue to expand the field of medical devices through 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:
Strengthen the relationship with business partners and expand the introduction of high
quality produce pipeline through joint ventures and investment.
69
2. Market and Sales Status
(1) Market Analysis
(a) Markets for main products
Market Location
China
Taiwan
Total
2013
Amount
1,856,764
1,856,764
%
100%
100%
Unit：NTD’000
2014
Amount
%
2,204,967
100%
2,204,967
100%
(b) Market Share
According to 2013 IMS statistics, market share of Adefovir in China’s HBV oral
nucleoside therapy was 21% and the collective sales from GSK, Jiangsu Zheng Da
Tianqing and our Company had a market share of approximately 80%.in 2014.
(c) Market’s Future Demand and Supply and Growth
Our products mainly cover drugs, medical devices and IDV reagents, which are mainly
solde in China at present. Drugs include the therapeutics of hematology, respiratory,
cardiovascular, oncology and etc.; medical devices are mainly orthopedic products and
IVD reagents cover the diagnosis of respiratory disease, enterovirus, influenza and reproductive tract infection. Our suppliers include outstanding bio-tech companies both
domestic and overseas, each has its unique market advantage.
Our strategical direction of development is through the cooperation and develop-ment
with strategic business partners to introduce high value-added products, which in term will
be promoted to the market through our one stop medical platform. In the past few years,
due to the slow approval procedure and the control of price by the government, the growth
of China’s drug market slowed down gradually. However, medical devices and IDV
reagents (in particular, molecular diagnostic reagents) grows fast in the market. We have
our unique operation mode to grasp the developing trend of the market so as to maintain
stable growth.
(d) Competitive Edge
(i) Experienced management team, capabilities of professional brand development and
marketing and familiarity with the relevant laws and regulations for the pharmaceutical
industry in China.
(ii) Integrated service management – one stop services management from product
development / registration / clinical / health insurance / drug prices / bidding/
marketing / channel / brand.
(iii) Focus on the development and marketing of highvalue-added products, maintain good
partner relationship with top research institutions to develop medical products with
high efficiency, safety and high quality and provide pro-fessional medical services to
the vast of doctors and patients.
70
(iv) Based on market characteristics in different regions of China, using different strategies
and different characteristics according to regional needs and develop appropriate
pipeline network.
(e) Advantageous and disadvantageous factors on our future development and corresponding
strategies
(i) Advantageous Factors
The 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 the growth of market demand. 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 and 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 wealthy 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 mearly 7% in 2020. During the aforesaid period,
the average annual grow rate of pharmaceutical market is expected to reach 1315%.
(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 Caused by 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 be over
USD 500 billion by 2015.
(cc)Government’s devotion to the medical device industry
According to the “Certain Opinions on the Promotion of the Development of
Health Care Service Industry” issued by China’s State Council, it raised the overall
concept of “health care service industry” and brings it up to the state strategy level
that they will work hard to enlarge the scale of health care service industry from
the existing RMB2,000 billion to 8,000 billion in 2020. Medical devices are
included in the health care management field. According to the “Research Report
on the Chinese Medical Devices Industry (2014)” pub-lished by CCID Consulting,
71
it is expected that the market scale of China’s medical devic-es industry will reach
RMB300 billion in 2015. The enlargement of the market will provide more
opportunity to both domestic and multi-nation medical device enterprises. In the
new edition of the “Supervision and Mangagement of Medical Devices Ordinance”
issued by the State Council, contents for the support of the development of the
industry were in-cluded therein, which are more in line with the present
development trend, further en-courage the innovation of technology and actively
promote the upgrade and innovation of medical device products
(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 in futureinclude: enhance the autonomous innovation
capability; lift up generic drug development; consolidate the industry by
promoting merger and acquisition. In the past 10 years, Chinese companies have
grown quickly by making generic and cutting into high end specialty segments
with certain competitive barriers and higher profitability and further enter into new
drug development. High end specialty pharmaceutical companies have
accumulated techniques, capital, sales and pipelines and have gradually replaced
imported medicines. Under the expense control of health care system, the basic
demand and price advantage will further enlarge the market share.
(ii) Disadvantageous Factors and Corresponding Strategies
(aa)The medical reform reshaped the market structure
2014 was the year the reform of the medical and health system continued in depth.
Following the set up of the basic structure of national health system, the basic drug
system and the new operation mechanism of basic health institutes, the furher
improvement of medical service system by basic health institutes in countries and
towns and the trial spot of the public hospitals,the structure of the medical market
is experiencing great change. We can see that 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 expanding, which
encourages the use of basic drugs, price of drugs included in the List of Medical
Insurance continues to be adjust downward. drug category with price fixed by
the government is decreased and most of the drugs with price fixed by the
government is cancelled.
Corresponding strategy:
Diversifying our product combination, in addition to drugs, we actively make our
layout in the fields of medical devices and IVD reagents. For drugs, we gradually
change our de-velopment from branded generics to innovative generics and new
dugs so as to differen-tiate from the general generics. At the same time, we will
further penetrate and enlarge our coverage of the market, speed up the pace of
72
mergers and acquisition with special attention to the development of middle to
small sized hospitals in middle to small sized cities. With the brand promotion, we
will enlarge our coverage of sales so as to increase sales income, guarantee our
profit and grows fast.
(bb)The characteristic of low profit operation of the industry would be more
highlighted
since 2012, profits for the part of pharmaceutical circulation were reduced due to
many factors. The first one was the pressure from price reduction of drugs in
2012, the National Development and Reform Committee conducted twice drug
price reduction with large scale, which were 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 previous 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 change of policies in the use, supervision and
bidding of d rug also brought more pressure to the enterprises.
Corresponding strategy：
As for product development, we introduced differentiated products so as to obtain,
competitive edge in the market and room for profits. As for cash flow, we maintain
our principle of stable and healthy 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
Adefovir
Anti-HBV
Wulusa
Ursodexycholic acid
chole cystolithiasis,
cholestalic liver desease,
bile-regurgita-tronal
gastritis
Bi Duo Yi
Tiotropium
Bromide
COPD
Dai Ding
Hepatology
Respiratory
Indications
73
Therapeutic
Area
Product
Cardiovascul
ar
Lezhiping
Olbetam
Treatment of
Hyperlipidemia
Immunosuppressant
Shun You
Organ Transplant
Urology
Detrol
Mycophenolate
Mofetil
Tolterodine
Tartrate
Medical
Device
IVD
Reagents
Generic name
Indications
Treatment of OAB
Spine Implants
Spine Surgery
Artificial Knee/hip joints replacement
replacement of knee/hip
joint
RNA test reagents
Sexually transmitted
diseases screening, test
of Chlamydia
Trachomatis, gonococci,
ureaphasma,
tuberculosis
(b) The production processes and products
(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
2013
2014
Project
Name
Amount
% of Annual
Total Net
Purchase
Relationship
with the
Company
1
TIPR
D Company
(Note 2)
Other
394,758
37.91
Note 1
146,082
14.03
500,340
48.06
Net Purchase
1,041,180
100.00
2
Name
Amount
% of Annual
Total Net
Purchase t
Relationship
with the
Company
TIPR
D Company
(Note 2)
Other
Net
Purchases
500,207
38.46
Note 1
147,840
11.37
652,528
50.17
1,082,332
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:
Our customers are quite diversified. In the recent 2 years, the customers with sales amount
less than 10%.
74
(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
(7) Unit:NTD’000
YYear
2013
DomesticSales(Note 1)
2014
Overseas Sales
Domestic Sales(Note 1)
Overseas Sales
Quantity and
Value
Amount
Main
Amount
Value
(unit:’000
(Note 2)
Value
Amount
Amount
(Note 2)
pcs)
Products
Value
(Note 2)
Value
（Or by depts）
Medical Drugs
-
1,610,798
-
-
-
1,830,140
-
-
Medical Devices
-
225,146
-
-
-
371,693
-
-
Test reagents
-
-
-
-
-
1,410
-
-
Other(Note 3)
-
16,114
-
4,705
-
1,724
-
-
Total
-
1,852,059
-
4,705
-
2,204,967
-
-
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
2013
2014
the date of printing
of this annual repor
94
Management
96
303
No. of Employees
Staff
268
397
Total
364
33.4
Average Age
33.5
2.0
Average year of service
1.95
Ph. D
0.3%
0.3%
Masters
3.4%
3.6%
Education range
Bachelors
84.4%
85.0%
High school
11.2%
10.6%
Below high school
0.8%
0.5%
Note：The above numbers include employees of Tongze and overseas subsidiaries.
75
92
282
374
33.5
1.8
0.3%
4.8%
85.6%
8.8%
0.5%
4. Environmental Protection Expenditure
No losses or fines incurred by the Company due to environmental pollution for 2014 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 benefits.
(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.
(ii) Training and education
Project
New
employee
orientation
Implementation
Provision of induction training to new staff in the workplace for new staff
by their titles, at least once a year focused on orientation, including
corporate culture, "Employee Manual", labor regulations, business skill
training, professional ethics and conduct examination for the aforesaid
training
External
Training
Select potential employees to attend external training for the improvement
of business skills
Internal
Training
Engage qualified teachers for internal training by departments and
specialties, including corporate culture, sales skills, teamwork, business
skills, professional ethics and conduct examinations relating to the training.
Marketing
Professional
Training
GSP
Compliance
Training
Monthly training of employees in sales department by marketing
department in sales skills and product knowledge.
To cope with regulations of GSP (Good Supply Practice) learning and
training the related state’s policies quarterly and conduct examinations for
the aforesaid learning
76
(iii) 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 hygiene
protection. Regularly check and remind employees to maintain the safety and hygiene
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 the Company, other
employees or the customers.
(vi) Agreements between the Company and the employees and the implementation of the
prection of employees right
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.
77
(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
Term of Contract
Exclusive
Distribution
Agreement
Company A
Nov. 2002 to Nov.
2022
Distribution
Agreement
Company B
May 1 2014 to April Obtained the distribution
30 2015
right in certain regions for
spine implants products
Import and Service
Agreement
Company C
Jan 1 2013 to Dec 31 Obtained the exclusive
2017, if agreed to
distribution right in China
extend for 3 years
for Acipimox capsules
Import and Service
Agreement
Company D
Mar 15 2013 to Mar Obtained the exclusive
14 2018, if agreed to distribution right in China
extend for 3 years
for Tolterodine tartrate
extended release capsules
Exclusive
Distribution
Agreement
Company E
7 years after listing
of the product
Exclusive
Distribution
Agreement
Company F
Exclusive
Distribution
Agreement
Company F
20 years after listing Obtained the exclusive
of the product
distribution right in China,
HK, Macau, and Taiwan
for Capecitabine tablets
Confidentiality
of the product
distribution right in China,
HK, Macau, and Taiwan
for Imatinib Nepalese
tablets
78
Main Content
Restriction
Clauses
Not sell to
products with the
same chemical
ingredients
(Adefovir
dipivoxil) is
forbidden
Distribution area
is in certain
designated
hospitals in
Shanghai,
confidentiality
Confidentiality
Not allowed to
sell competing
products within
one year after
termination of the
Agreement
Confidentiality
Not allowed to
sell competing
products within
one year after
termination of the
Agreement
Without
permission
confidentiality not
allowed to sell
competing
products
Confidentiality
Other Party
Obtained the exclusive
for hepatitis drugs
for compound Ipratropium
Bromide Solusion for
inhalation in China
Nature of Contract
Other Party
Term of Contract
Technology
Development
Agreement
Company F
Project Cooperation
agreement
Company G
Project Cooperation
agreement
Company G
Exclusive
Distribution
Agreement
Company H
Registration and
Distribution
Agreement
Company I
of the product
Product Agent
Framework
Agreement
Company J
of the product
Project Agreement
Company K
of the product
Logistic Services
Agreement
Company L
2013.8.1~2016.7.31
Production
Distribution
Agreement
Company M
Expiry date: Dec 31
2018
Cooperation
Agreement
Company N
of the product
Cooperation Project
agreement
Company N
of the product
Project Cooperation
Agreement
Company N
Company O
of the product
Project Cooperation
Agreement
Company N
Company O
20 years after
registration of the
product
Main Content
20 years after listing Jointly research and
of the product
develop, register,
manufacture and sell of
API and Capsules of
Alvimopan
10 years after listing Cooperation in the R&D,
of the product
registration, production
and sale of Epalrestat
tablets/capsules
10 years after listing Cooperation in R & D,
of the product
registration, manufacture
and sale of Tenofovir
of the product
for Irinotecan
Hydrochloride injection
79
Restriction
Clauses
Confidentiality
Confidentiality
Confidentiality
Without
permission not
allowed sell
competing
products
confidentiality
Being the agent for the
Confidentiality
product, registration and Not allowed to
sell competing
distribution right in China products within
for Temozolomide
one year after
Capsules
termination
Confidentiality
for metoprolol succinate
sustained release tablets
Cooperation on the R&D, Confidentiality
and sale of Entecavir
Obtained the distribution Confidentiality
importing medical devices
and provide logistic
services
Obtained the distribution Confidentiality
Ursodeoxycholic acid
capsules
Cooperation in R & D,
Confidentiality
registration, manufacture
and sale of Vorinostat
and sale of Erlotinib
and sale of Bortezomib
and sale of AZA cytidine
for injection
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）
Year
Item
2010
2011
2012
2013
2014
1,805,988
Current Assets
1,490,706
1,882,693
199,897
Property, plant and equipment
8,602
12,536
1,169,261
Intangible asset
382,853
615,390
10,651
Other assets
14,578
26,717
4,413,234
Total assets
2,337,404
3,685,892
605,850
Before Distribution 141,767
256,901
Current
liabilities
*
After Distribution 365,767
537,150
-
-
142,651
160,990
293,763
Before Distribution -
-
284,418
417,891
899,613
Non-current liabilities
Total
liabilities
After Distribution
Equity attributable to the parent
company
Common stock
Additional paid-in capital
Before Distribution
Retained
earnings
After Distribution
-
-
508,418
698,140
*
-
-
1,936,705
3,049,992
3,099,803
-
-
700,000
613,007
424,839
778,470
1,083,825
556,029
780,650
1,115,187
692,421
-
-
200,839
275,780
*
Other components equity
-
-
198,859
631,668
511,545
Treasury stock
-
-
-
-
-
Non-controlling interests
-
-
116,281
218,009
413,818
Before Distribution -
-
2,052,986
3,268,001
3,513,621
Total equity
After Distribution 1,828,986
2,987,752
*Pending shareholder’s approval
Note：The Company’s 2012 to 2014 First Quarter financial information was audited on
reviewed by auditors.
80
*
( 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 noncontrolling interests
Comprehensive income
attributable to stokholders of the
parent
Comprehensive income
attributable to non-controlling
interests
Earnings per share (NTD)
2010
-
2011
-
2012
1,721,749
1,016,046
378,338
2013
1,856,764
997,592
230,886
251,340
2014
2,204,967
1,122,635
331,656
265,251
-
-
53,816
-
-
432,154
314,770
482,226
392,504
-
596,907
596,907
-
-
-
-
-
-
314,770
392,504
-
142,382
439,143
482,353
(133,280)
-
-
457,152
831,647
-
-
302,944
355,190
-
-
11,826
37,314
-
-
445,326
787,999
-
-
11,826
43,648
-
-
4.33
5.06
349,073
416,641
65,712
296,518
52,555
5.35
Note: The Company’s financial information for 2012, 2013 and 2014 was reviewed by
auditors.
(2)Condensed balance sheet and income statements - ROC GAAP
(a) Condensed balance sheet in recent five years
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
Capital Stock
Capital Surplus
Unit: NTD’000
Financial information in recent five years（note）
2010
2011
2012
2013
443,577
1,748,488
1,505,284
59,303
85,147
247,173
9,390
8,580
8,602
34,261
34,307
283,316
0
211
0
546,531
1,876,733
2,044,375
-
2014
-
114,861
110,077
141,767
-
-
114,861
390,077
365,767
-
-
0
0
0
0
91,988
25,964
-
-
114,861
110,077
259,719
-
-
114,861
390,077
483,719
-
-
115,002
11,837
700,000
608,284
700,000
613,007
-
-
81
Year
Item
2010
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
Financial information in recent five years（note）
2011
2012
2013
2014
326,517
401,895
424,839
-
-
178,558
121,895
188,890
-
-
0
0
3,960
-
-
(21,686)
56,477
2,072
-
-
0
0
0
-
-
-
-
40,778
-
-
431,670
1,766,656
1,784,656
-
-
431,670
1,486,656
1,560,656
-
-
Note：The Company’s financial information from 2010-2012 was all audited, provided that the
(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）
2010
2011
2012
2013
1,508,993
1,502,992
1,721,749
988,768
890,866
1,016,046
-
2014
-
460,835
352,309
383,617
-
-
51,822
72,258
69,443
-
-
6,482
1,883
15,627
-
-
506,175
422,684
437,433
-
-
369,129
313,962
318,729
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
369,129
313,962
302,944
-
-
6.25
4.94
4.32
-
-
Note: The financial information for 2010 to 2012 was audited, provided that the information
for 2010 was from consolidated proforma financial statement.
82
(3) Auditors’ Name and audit opinions in recent five years
Year
2010
Audit Opinion
Modified unqualified
opinion(note 1)
2011 Wa ng Y a n Ju n, Lin Li Huang Ernst & Young
Modified unqualified
opinion(note 2)
Unqualified Opinion
Unqualified Opinion
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.
CPA
Name of the Firm
Wang Yan Jun, Cheng Wu Shui Ernst & Young
Financial analysis in recent five years
(1)
Financial analysis in recent five years-IFRS
Year
Analysis Item
Capital
Structure
Analysis
Liquidity
Analysis
Operating
Perfor mance
Analysis
Profitability
Analysis
Cash
Flow
Debt Ratio(%)
Property, plant and
equipment to Fixed Assets
Ratio (%)
Current Ratio (%)
Quick Ratio (%)
Times Inter est
Earned(times)
Average Accounts
Receivable Turnover
(times)
Days Sales Outstanding
Average Inventor y
Turnover(times)
Average Payment
Turnover(times)
Average Inventor y
turnover days
Property, plant and
equipmentturnover(times)
Total assets turnover
(times)
Return on Total Assets
(%)
Return on Equity (%)
Profit before income tax to
Common Stock(%)
Net Margin(%)
Cash Flow Ratio (%)
Cash Flow Adequacy
Ratio (%)
2010
-
Financial Analysis in recent five years
2011
2012
2013
2014
12.17
11.34
20.38
1904.67
25,524.73 27,353.15
-
-
1,051.52
932.93
732.85
562.92
-
-
5,972.99
2,776.90
-
-
5.35
4.48
-
-
68
81
-
-
9.4
6.25
-
-
387.11
276.66
-
-
39
58
-
-
200.41
175.68
-
-
0.82
0.62
-
-
15.15
13.45
-
-
16.48
14.75
-
-
61.74
61.95
-
-
18.28
4.33
134.97
21.14
5.06
(Note3)
-
-
(Note 2)
298.09
235.23
3,104.96
3.94
83
92
4.53
35.90
80
20.75
0.54
12.27
14.22
76.46
21.87
5.35
18.18
(Note 2) (Note 2)
Cash Flow Reinvestment
(Note 3) (Note 3) (Note 3)
Ratio (%)
Operating Leverage
1.00
1.00
1.14
Leverage
Financial Leverage
1.00
1.08
1.06
Reasons for variations of financial ratios in r ecent two years:
1. Debt Ratio:Mainly due to increases in accounts payable caused by acquisition in
2014
2. Property, plant and equipment to Fixed Assets Ratio: Mainly due to the procurement
of office flat in Shanghai Xuhui district in 2014
3. Current Ratio and Quick Ratio: Mainly due to short ter m borrowings for operation
needs in 2014
4. Average Inventor y Turnover(times) and Average Inventory turnover days:: Mainly
due to incr ease in inventory caused by new pr oducts and acquisition of Quan Yuan
5. Average Payment Turnover : Mainly due to increase in accounts payables
6. Profit before income tax to Common Stock: Mainly due to steady gr owth of 2014
revenues
7. Cash Flow Ratio:Mainly due to net inflow of operating cash flow
Note 1:The Company’s financial information for 2012 to 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
84
(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
Financial analysis for Recent 5 years
Analysis Item
2010
2011
2012
2013
Capital
Debt Ratio (%)
21.02
5.87
12.7
Structure
Long-ter m Fund to
4,597.12 20,589.62 22,118.21
Analysis Fixed Assets Ratio (%)
Current Ratio (%)
386.19
1,588.42 1,061.80
Liquidity
Quick Ratio (%)
301.10
1,492.69
943.22
Analysis
Times Inter est
130,961.92 5,742.84
Earned(times)
Average Accounts
Receivable Turnover
11.86
7.07
5.35
(times)
Days Sales Outstanding
31
52
68
Average Inventor y
8.14
7.80
9.40
Turnover(times)
Operating
Performa
Average Payment
669.53
0
387.11
nce
Turnover(times)
Analysis
Average Inventor y
45
47
39
turnover days
Fixed Assets
229.54
167.28
200.41
Turnover(times)
Total assets
2.39
1.24
0.88
turnover (times)
Return on Total Assets
58.50
25.91
16.55
(%)
Return on Equity (%)
79.60
28.56
17.95
Operating
400.66
50.33
54.80
Profitabili Paid-in
Income
ty
Capital
Pre- tax
Analysis
(%)
440.14
60.38
62.49
Income
Net Margin (%)
24.46
20.89
18.51
Earnings per
32.10
4.94
4.32
share(NTD)
Cash Flow Ratio (%)
186.52
189.24
141.50
Cash Flow Adequacy
(Note2)
(Note2) (Note2)
Cash
Ratio (%)
Flow
Cash Flow
Reinvestment Ratio
(Note 3)
11.98 (Note3)
(%)
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
2014
-
Note 1: The financial information from 2010 to 2012 was audited, provided that information
from 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:
85
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
(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 2014’s financial reports: Please refer to page 102.
4.
Individual Financial Report of Current Year: Not applicable
5.
Audited consolidated financial statements of Year 2014: please refer to pages 104.
6.
The Company and its affiliated companies did not incure any financial or cash flow
difficulties in 2014 and as of the date of printing of this annual report.
86
VII.
1.
REVIEW AND ANALYSIS OF FINANCIAL STATUS AND
FINANCIAL PERFORMANCE AS WELL AS RISK
MANAGEMENT
Financial Highlights
Unit: NTD’000
Year
Difference
2013
2014
Item
Amount
%
Current Assets
1,882,693
1,805,988
(76,705)
(4.07)%
Non-current Assets
1,803,199
2,607,246
804,047
44.59%
Current Liabilities
256,901
605,850
348,949
135.83%
Non-current Liabilities
160,990
293,763
132,773
82.47%
Total Stock holders’ Equity
3,268,001
3,513,621
245,620
7.52%
Explanation for major variation (for change over 10% or account for 1% of total asset):
2.
1.
Non-current asset: increased mainly due to the increase of intangible assets caused
by acquisition in 2014.
2.
Current liabilities: increased mainly due to the short term borrowings for operation
needs
3.
Non-current liability: increased mainly due to acquisition which caused the
increase of other payables and other current liability.
Operating Results
(1)
Analysis of Operating Results of last two years
Year
Item
2013
2014
Unit: NTD’000
Difference
Amount
%
348,203
18.75
223,160
25.97
125,043
12.53
24,273
3.17
100,770
43.64
Net Sales
1,856,764 2,204,967
Cost of goods sales
859,172 1,082,332
Gross profit
997,592 1,122,635
790,979
Operating expenses
766,706
331,656
Operating income
230,886
Non-operating income and
251,340
265,251
13,911
5.53
expenses
596,907 114,681
23.78
482,226
Explanation for major variation (for change over 10% or account for 1% of total assets
1.
2.
3.
4.
Net sales: The growths were mainly contributed by the effect of acquisitions and
growth in medical device business
Cost of goods sales and gross profit: Mainly due to revenue growths as well as higher
costs of sales ratio of acquired businesses
Operating income: Mainly due to revenue growths and lower operating expense ratio
in 2014
Profit before income tax: Mainly due to revenue growth in 2014
87
(2)
3.
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 2015 as compared to 2014
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.
Cash Flow
(1)
Cash flow Analysis of last two years
Year
Item
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Unit: NTD’000
Difference
Percentage (%)
2013
2014
Difference
Amount
(95,682)
110,149
205,831
215.12%
(332,768)
(582,493)
(249,725)
(75.04%)
306,171
13,556
(292,615)
(95.57)%
1.Cash flow from operating activities: mainly due to the increase of operating profits
2.Cash flow from investment activities: mainly due to the acquisition of Quan Yuan and
increase in strategic investments
3.Cash flows from financing activities:
2013
mainly due to the increase of share capital in cash in
(2) Analysis of the cash flow in the future year
We estimated that in 2015 the business will continue to grow healthily and bring in
positive cash flow as we will focus on existing product sales, new products introduction
as well as Shanghai Rendu’s IVD product promotion. The Company has obtained
credit facilities with various banks which enables the Company to maintain sufficient
liquidity.
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
Bank loan
Actual or
expected
completion
date
Total fund
required
2015.12.31
2015.12.31
290,880
1,175,392
(2) Expected Future Benefits
88
Actual or expected utilization
status
Year
Year
Year
2013
2014
2015
7,928
195,195
87,757
405,103 602,976
167,313
(a)
(b)
5.
Among the capital expenditures of fixed assets, it mainly included the warehouse and
office building located at Shuang-Feng Industrial Park, Chang Feng County, Hefei
City for subsidiary Guozhen Company as well as procurement of vehicle and
computing system due to business requirements. They are purchased as the tools
for our business development, which may expedite the development of new products
and increase our employees’ work efficiency.
Strategic investments are mainly for the investments related to our business model.
Such as acquisition in order to expand our sales network or participate in good new
product development via equity investment or joint venture to form strategic alliance
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.
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
nit: NTD’000
Company Name of investment
2014 investment
gains and losses
217,024
Coland Pharmaceutical Company
Limited
155,068
Coland Development Co., Ltd.
(9,047)
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.
HUNG CHUN BIO-S Co., Ltd.
(27,172)
Under development.
EXQUISITE CREATION
LIMITED
36,213
Auspicious Day Group Limited
16,141
Majestic Trade Holdings Limited
(141)
Shechen Pharmaceutical Ltd.
(3,223)
Taiwan Tigermed Consulting Co.
Ltd.
5,119
Zan Ho Biotech Inc.
2,361
Shanghai Guochuang
Pahrmaceutical Company
Limited
126,622
recognition of the loss and profit from Heifei
Guozhen.
recognition of the loss and profit from Hainan
Quanyuan.
recognition of the loss and profit from Shanghai
Pengzi.
In the stage of R&D.
Operation scale is maintained stably.
89
Company Name of investment
2014 investment
gains and losses
Heilongjiang Province Tongze
Limited
Suzhou Microclear Medical
Hefei City Guozhen
Pharmaceutical Sales Limited
Hainan Quanyuan
Limited
Shanghai Pengzi Medical
Devices Company Limite
Losses, principally for reasons of profit and
improvement plans
43,542
In the stage of R&D.
(3,720)
28,322
9,899
In the stage of product development
(71)
(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)
Board：Establish the Company’s risk management policy and authorization level.
90
(ii)
(iii)
(iv)
(v)
(vi)
Audit Committee：Monitor and review work done by internal audit
Remuneration committee：Review regularly the compensation and performance
of the board members and managers to effectively retain talents
General Manager：Implement and monitor the risk management program in
accordance with the plans approved by the board. Review and monitor the result
on a regular basis.
Internal Audit：Evaluate potential risks from the Company’s operational/financial
activities. Make annual audit plan based on risk assessment and help the board to
track and monitor the Company’s improvement as well as report the internal audit
results as well as financial status to the Audit Committee on a regular basis.
Risk Management Cabinet：In charged by the department head of each function,
the risk management cabinet is responsible for the implementation of risk
management and communication across departments. It includes the following
functions：
Finance/Accounting: Is responsible to provide transparent and credible financial
information/reports. Provide risk assessment and good risk control based on sound
financial planning/treasury/tax planning.
Legal：In charge of legal risk management, review of contracts, legal advice and
taking care of legal disputes if any.
IT: In charge of designing a safe and sound information management system;
implement risk control and protection from network safety risk
Human Resource：Responsible of human resource planning, training and retention
of people
Marketing: Responsible for product planning, market study, customer service
management.
Investor Relation management：Responsible to establish management system of
shareholders’ affairs as well as communication with investors to ensure the
disclosure of information is updated, and accurate.
(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 always maintains good relationship with banks as well as stable
financial conditions, good standing credits and the interest rate available to the
Company is relatively low. It is expected that the changes of interest rates will not
have significant impact to the company.
(b) Exchange rate
As the Company’s accounts are recorded in RMB and the sales are all for China market
and most of the operational expenditure are paid in RMB, the change in RMB
exchange rate will not have uncertain impact to the Company’s cash flow as well as
financial conditions.
(c) Inflation
There was no significant impact of inflation to the profit and loss of the Company in
the past. In addition, the Company pays attention to the fluctuation of market price
and keeps good relationship with suppliers. Therefore, the inflation dose not necessary
result in significant impact to the company
( 3 ) The policies of engaging in high risks, high leverage investments, lending others,
endorsement/guarantee and derivative instruments, reasons for gain/loss and future
plans
91
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. In 2014, the Company has provided fund of TWD30,513 thousands
to subsidiary Hainan QuanYuan for working capital needs.
(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
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
92
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.
( 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:
93
(i) Lack of information, and professional experiences, resulting in incorrect
evaluation.
(ii) Loss of talent due to difference in corporate culture gap.
(iii) The operating performance is below expectation.
(c) Actions taken:
(i) Risk due to lack of information and professional experiences resulting in incorrect
evaluation:
The Company has setup M&A task force internally and has built up strong
external professional resources (such as financial advisor, accountant, legal
advisor etc). In addition to select target carefully, during the due diligence stage,
the task force will thoroughly evaluate the information collected as well as
conduct various investment return and risk assessment analysis. At the same time,
the Company will engage external professional parties to conduct financial and
legal review. The Company has setup standard operating procedure for evaluation
and approval of investment project. The investment project will be conducted
under sound review and evaluation procedure as well as legal review to minimize
the investment risk.
(ii) Risk in talent loss due to corporate culture gap:
It is essential for the Company to embrace newly acquired company, new business
and new coworkers from acquisition. The Company mitigates the corporate cultural
gap by adopting standard operation procedure and management policies as well as
holding various training program.
(iii) Risk due to operation performance below expectation:
The Company will request the acquired target company to provide operation and
financial review periodically in order to monitor the operation status. The Company
also works with the target company to setup annual business goals in order to
achieve the benefits of acquisition and minimize the risk of under performance by
the target.
In June 2012, the Company’s subsidiary in China, Shanghai Guochuang
Pharmaceutical Co. Ltd acquired 51% of Heilongjiang Province Tongze
Pharmaceutical Co. Ltd. In September 2013, we, through Exquisite Creation
Limited, indirectly acquired 60% equity interest in Hefei Guozhen. In August 2014,
we, through Auspious Day Group Limited, indirectly acquired 60% equity interest
in Hainan Quanyuan. 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 23%, Guozhen accounted for 14%, and Hainan
Quanyuan accounted for 3% of the total sale of the Company in 2014.
(9) The expected effects, potential risks of plant expansion and actions to be taken
Based on the Company’s “procedures governing acquisition or disposition of assets”
which has been approved by the board of directors and shareholders, our Subsidiary
Guozhen has procured a piece of land from ShuanFeng Industrial Park, ChangFeng
County in Heifei City to build warehouse and office building.
(a) Expected Benefits: By consolidating the locations of office and warehouse,
Guozhen expects to lift the efficiency of warehouse and operation managements,
improve the work environment and Company image. Overall, it helps to build a
solid foundation for Guozhen’s long term development.
94
(b) Potential Risk: the County government of ChangFeng County has listed some
economic and other performance evaluation indicators at the investment
cooperation pact with Changfeng County Government.
(c) Actions taken: The Company monitors the progress of the project closely and
undertake the evaluation of various performance indicators on regular basis.
(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 to45% and 64% in 2013 and 2014respectively.
Actions taken：
(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.
(v) 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 2013 and 2014, being 8.99% and 9.10% 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 nonlitigation 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,
95
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 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.
96
VIII.
1.
PARTICULAR MATTERS TO NOTE
Information of related companies
(1) Group structure of related companies
2014.12.31
(2) Basic information of related companies
Record date as at 31 December 2014
Unit:US$/NTD’000/RMB’000
Name
Central Chief
Limited
Coland
Pharmaceutical
Company
Limited
Shanghai
Limited(HK)
Guochuang
Pharmaceutical
Company
Limited
Date of
Incorporation
2009.7
2009.9
2003.3
Address
P.O. Box 957, Offshore
Incorporations Centre,
Road Town,Tortola, British
Virgin Islands
19F, Cameron
Commercial
Centre 468 Hennessy Rd,
Causeway Bay, Hong Kong
1st Fl.,No. 866 Halei Road,
Zhangjiang HiTech Park,
Pudong, Shanghai
97
Capital Paid
Main Operation Scope
USD
13,846,768
Investment Holding
USD
5,967,517
Investment Holding
USD
5,600,000
Trading and research
and development of
generic medicine
Name
Date of
Incorporation
Address
Capital Paid
Main Operation Scope
Heilongjiang
Tongze
Pharmaceutical
Company
Limited
2004.03
No. 4, 28th Fl., Huashan
Road, Nangang District,
Hairbin, China
RMB 12,000
Trading of generic
medicine
Coland
Development
Company
Limited
2011.10
Room D No. 170 Dunhua
North Road, Taipei
NTD 100,000
Research and
development of
generic medicine
2010.04
2 of 9F., No.42, Sec.1,
Fuxing South Road, Taipei
Shechen
Pharmaceutical
Ltd.
Exquisite
Creation Limited
2F, Capital City,
Independence Avenue, P.O.
Box 1008, Victoria, Mahe,
Seychelles
No.25 Jincui Road,
Shuangfeng Economic
Development Zone, Heifei
City, China
PO Box 1239, Offshore
Incorporation Centre,
Victoria, Mahe', Republic of
Seychelles
RMB 18,000
2009.07
Room 406, 4F, Building of
Property Mall, Yuanyang
Road, Yangpu, Hainan
RMB 10,000
2014.01
P.O. Box 1239, Offshore
Incorporations Centre,
Victoria, Mahé, Republic of
Seychelles
USD 500,000
Investment Holding
2014.06
Room 111, Building 2,
No.179, Chuanchang Road,
Xuhui District, Shanghai
USD 500,000
Medical devices
development and sales
2013.03
Hefei City
Guozhen
Pharmaceutical
Sales Limited
2006.09
Auspicious Day
Group Limited
2014.01
Hainan
Quanyuan
Pharmaceutical
Company
Limited
Majestic Trade
Holdings Limited
Shanghai Pengzi
Medical Devices
Company
Limited
NTD 100,000
Western medicine,
medical equipment,
cosmetics and other
retail and wholesale,
biotechnology
services
Investment Holding
USD 125
USD 110
Chemical preparation
of proprietary Chinese
medicine, Chinese
herbal medicine
drinks, drugs,
antibiotics, chemical
Investment
Holding
raw materials,
biopharmaceuticals,
biologics, cosmetics
wholesale
Trading
of generic
medicine
(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.
98
(5) Information on the directors, supervisors and general manager manager of the related
companies
Company Name
Title
CENTRAL CHIEF
LIMITED (CCF)
Coland
Pharmaceutical
Company Limited
Shanghai
Guochuang
Pahrmaceutical
Company Limited
Director
Heilongjiang
Province Tongze
Pharmaceutical
Company Limited
Coland
Development Co.,
Ltd.
Director
0%
0
0%
0
0%
Chairman
Lee Hsin
0
0%
Director &
CEO
Director
Director
Wei Jiang Min
0
0%
Huo Ying Jun
Tsao Johua
0
0
0%
0%
Director
Supervisor
Supervisor
Chairman
0
0
0
0%
0%
0%
Supervisor
Director
Lee Ling
Ye Xiao Ping
Wang Hon
Representative of
CCF：Lee Hsin
Representative of
CCF：Tsao Johua
Representative of
CCF：Chu,Jia Yu
Representative of
CCF：Cai Wei Yang
Representative of
Coland
Development：Lee
Hsin
Representative of
Coland
Development：Tsao
Johua
Representative of
Pharmadax Inc.：
Zhan,Hui Ru
Huang Yi Bing
Lee Hsin
Director
10,000
100%
10,000
100%
10,000
100%
10,000
100%
5,550
55.5%
5,550
55.5%
4,000
40%
0
0
0%
0%
Tsao Johua
0
0%
Supervisor
Ye Xiao Ping
Director
Director
Lee Hsin
Representative of
0
0
0
0%
100%
100%
Director
Director
Director
Director
Hefei City
Guozhen
Lee Hsin
0
Ye Xiao Ping
Director
Exquisite Creation
Limited
Lee Hsin
Director &
CEO
Supervisor
Supervisor
Shechen
Pharmaceutical
Ltd.
Record Date：31 December 2014
Shares
Name/Representive
ratio
holding
Lee Hsin
0
0%
99
Company Name
Title
Shares
holding
Name/Representive
Pharmaceutical
Sales Limited
Exquisite Creation
Limited：Tsao
Johua
Wang Yu
Director &
CEO
Supervisor
Ye Xiao Ping
Director
Lee Hsin
Auspicious Day
Tsao Johua
Director
Group Limited
Pan Shi Ping
Director
Director
Lee Hsin
Hainan Quanyuan
Director
Pan Shi Ping
Pharmaceutical
Director
Tsao Johua
Company Limited
Supervisor
Wang Ting
Director
Lee Hsin
Majestic Trade
Director
Pan Shi Ping
Holdings Limited
Director
Tsao Johua
Director
Lee Hsin
Shanghai Pengzi
Medical Devices
Supervisor
Tsao Johua
Company Limited
CEO
Pan Shi Ping
(6) Operation status of the related companies for 2014
ratio
0
100%
0
0
0
0
0
0
0
0
0
0
0
0e
0
0
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Date：31 December 2014
Unit：NTD’000
Company Name
CENTRAL
CHIEF LIMITED
Amount of
paid
capital
(Note 1)
Total
Assets
(Note 1)
1,367,475 1,743,706
Coland
Pharmaceutical
Company Limited
(HK)
200,852
Shanghai
Guochuang
Pahrmaceutical
Company Limited
187,463 1,651,846
Heilongjiang
Province Tongze
Pharmaceutical
Company Limited
Coland
Development Co.,
Ltd.
Shechen
Pharmaceutical
Ltd.
Exquisite
Creation Limited
239,166
Total
Liabilities
(Note 1)
Net Asset
Value
(Note 1)
52,554 1,691,152
Sales
Income
(Note 2)
Profit/(Lo
ss) after
tax
(Note 2)
Sales
Profit
(Note 2)
Earnings
per share
（after
tax)
(NTD)
0
128
217,024
(Note 3)
238,980
5,326
(4,897)
155,068
(Note 3)
122,961 1,528,885
1,445,579
210,999
126,622
(Note 3)3
186
61,026
412,731
62,456
350,275
500,302
113,711
85,376
(Note 3)
100,000
75,540
(42)
75,582
2,929
(9,259)
(9,047)
(0.9)
100,000
74,184
(588)
74,772
57
(3,452)
(3,223)
(0.32)
4
91,540
0
91,540
0
0
36,213
(Note 3)
100
Company Name
Amount of
paid
capital
(Note 1)
Total
Assets
(Note 1)
Total
Liabilities
(Note 1)
Net Asset
Value
(Note 1)
Sales
Income
(Note 2)
Sales
Profit
(Note 2)
Profit/(Lo
ss) after
tax
(Note 2)
Earnings
per share
（after
tax)
(NTD)
Hefei City
Guozhen
Pharmaceutical
Sales Limited
91,539
301,900
58,176
243,724
306,431
63,339
47,204
(Note 3)
Auspicious Day
Group Limited
3
80,701
0
80,701
0
(643)
16,141
(Note 3)
Hainan Quanyuan
Pharmaceutical
Company Limited
50,855
330,418
100,682
229,736
67,367
11,363
16,499
(Note 3)
Majestic Trade
Holdings Limited
3
15,626
0
15,626
0
(3)
(141)
(Note 3)
Shanghai Pengzi
Medical Devices
Company Limited
15,625
14,701
(780)
15,481
0
(139)
(139)
(Note 3)
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 2014. 1US$=NTD31.5710; 1RMB=NTD5.0855.
Note 2: Not a company incorporated in Taiwan. The net asset value was calculated by the
translation of foreign currency into NT dollars based on the average exchange rate in
2014. 1US$=NTD30.2391; 1RMB=NTD4.9025.
Note 3: Not a joint stock company limited, not being able to calculate earnings per share.
(7) For the consolidated financial statements of affiliated companies and the relationship report,
please refer to page 103 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 Pharmadax Inc. for the joint development of
Asia medical market (including Taiwan, South Eastern Asia Japan and etc.) , with the
long control dosage form under Pharmadax’ 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 difference between the regulations for the protection of
shareholders right of the Company and those in Taiwan.
101
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: 26 February 2015
102
Report by the Audit Committee on Their Review of the 2013 Audited
Consolidated Financial Statements and Operation Report
To:
2015 Annual General Meeting of Coland Holdings Limited
The Board of Directors prepared the Company’s 2014 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:26 February, 2015
103
English Translation of a Report Originally Issued in Chinese
AUDIT REPORT OF INDEPENDENT ACCOUNTANTS
To Coland Holdings Limited
We have audited the accompanying consolidated balance sheets of Coland Holdings Limited and subsidiaries
(collectively, the “Group”) as of December 31, 2014 and December 31, 2013 and the related consolidated
statements of comprehensive income, changes in equity, and cash flows for the years ended December 31,
2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with “Guidelines for Certified Public Accountants’ Examination and
Reporting on Financial Statements” and generally accepted auditing standards in the Republic of China.
Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Coland Holdings Limited and its subsidiaries as of December 31, 2014
and December 31, 2013, and the consolidated results of their operations and their cash flows for the years
ended December 31, 2014 and 2013, in conformity with the requirement of the Regulations Governing the
Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards,
International Accounting Standards, Interpretations developed by the International Financial Reporting
Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China.
ERNST & YOUNG
CERTIFIED PUBLIC ACCOUNTANTS
Taipei, Taiwan
Republic of China
February 26, 2015
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position
and results of operations and cash flows in accordance with accounting principles and practices generally accepted in
the Republic of China and not those of any other jurisdictions. The standards, procedures and practice to audit such
consolidated financial statements are those generally accepted and applied in the Republic of China.
104
English Translation of Consolidated Financial Statements Originally Issued in Chinese
COLAND HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2014 and December 31, 2013
(Expressed in Thousands of New Taiwan Dollars)
Assets
Current assets
Cash and cash equivalents
Debt instrument investments for which no active
market exists, current
Notes receivable, net
Accounts receivable, net
Other receivables
Inventories, net
Prepayment
Other current assets
Total current assets
Non-current assets
Available-for-sale financial assets, noncurrent
Financial assets measured at cost, noncurrent
Investments accounted for under the equity method
Property, plant and equipment
Intangible assets
Deferred tax assets
Other noncurrent assets - others
Total non-current assets
As of
December 31,
December 31,
2014
2013
Notes
4 and 6(1)
4 and 6(4)
$605,723
25,682
$930,104
-
4 and 6(5)
4 and 6(6)
4
4 and 6(7)
65,502
587,019
141,247
283,029
94,512
3,274
1,805,988
34,433
429,596
51,974
193,965
242,569
52
1,882,693
693,628
380,041
153,768
199,897
1,169,261
9,687
964
2,607,246
843,257
168,174
137,125
12,536
615,390
25,704
1,013
1,803,199
4 and 6(2)
4 and 6(3)
4 and 6(8)
4 and 6(9)
4, 6(10), 6(11) and 6(25)
4 and 6(23)
Liabilities and Equity
Current liabilities
Short-term borrowings
Accounts payable
Other payables
Income taxes payable
Other current liabilities
Receipt in advance
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Long-term payables
Total non-current liabilities
Notes
6(12)
$261,393
57,731
102,076
21,399
157,101
6,150
605,850
$2,565
160,782
23,027
65,584
4,943
256,901
125,244
168,519
293,763
75,932
85,058
160,990
899,613
417,891
780,650
1,115,187
778,470
1,083,825
6(16)
6(16)
97,209
595,212
511,545
61,690
494,339
631,668
6(16)
413,818
218,009
3,513,621
3,268,001
$4,413,234
$3,685,892
6(13) and 7
4 and 6(23)
4, 6(15) and 6(25)
4 and 6(23)
4, 6(15) and 6(25)
Total liabilities
Equity attributable to the parent company
Common stock
Retained earnings
Legal reserve
Unappropriated earnings
Other components equity
6(16)
4, 6(16) and 6(17)
Total equity
Total assets
$4,413,234
$3,685,892
Total liabilities and equity
The accompanying notes are an integral part of the consolidated financial statements.
Note:
Exchange rate of RMB1=NTD5.0855 as of December 31, 2014 is used for all assets, liabilities and equity accounts as of December 31, 2014, except for common stock is at historical rate.
Exchange rate of RMB1=NTD4.9040 as of December 31, 2013 is used for all assets, liabilities and equity accounts as of December 31, 2013, except for common stock is at historical rate.
105
As of
December 31,
December 31,
2014
2013
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2014 and 2013
(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share)
For the Years Ended December 31,
Item
Notes
2014
2013
Net Sales
4 and 6(18)
$2,204,967
Cost of goods sold
4 and 6(7)
(1,082,332)
(859,172)
1,122,635
997,592
Sales and marketing expenses
525,391
531,112
General and administrative expenses
243,690
213,488
Gross profit
Operating expenses
$1,856,764
6(13), 6(14), 6(17), 6(19) and 6(20)
Research and development expenses
Subtotal
Operating income
Non-operating income and expenses
21,898
22,106
790,979
766,706
331,656
230,886
4 and 6(21)
Other income
Other gains and losses
Finance costs
Share of profit or loss of associates and joint ventures
6(8)
Subtotal
Income tax expense
4 and 6(23)
Net income
Other comprehensive (loss) income
59,295
72,365
237,496
207,340
(19,864)
(16,762)
(11,676)
(11,603)
265,251
251,340
596,907
482,226
(114,554)
(89,722)
482,353
392,504
6(22)
Exchange differences on translation of foreign operations
82,174
105,631
(215,454)
333,512
Total other comprehensive (loss) income, net of tax
(133,280)
439,143
$349,073
$831,647
$416,641
$355,190
$65,712
$37,314
$296,518
$787,999
$52,555
$43,648
Earnings per share-basic
$5.35
$5.06
Earnings per share-diluted
$5.28
$5.01
Unrealized gain or loss on available-for-sale financial assets
Net income attributable to:
Stockholders of the parent
Comprehensive income attributable to:
Stockholders of the parent
4 and 6(24)
Note: Average exchange rate of RMB1=NTD4.9025 is used for all revenue and expenses accounts for the years ended December 31, 2014.
Average exchange rate of RMB1=NTD4.8203 is used for all revenue and expenses accounts for the years ended December 31, 2013.
106
CONSOLIDATED STATEMENTS OF CAHNGES IN EQUITY
Others
Retained Earnings
Description
Balance as of January 1, 2013
Common Stock
Additional Paidin Capital
Unappropriated
Earnings
$700,000
$613,007
$31,396
Legal Reserve
$393,443
Exchange
Differences on
Translation of
Foreign
Operations
$1,408
Unrealized Gain
or Loss on
Available-forSale Financial
Assets
$197,451
Non-Controlling
Interests
Total
$1,936,705
$116,281
Total
$2,052,986
Appropriation and distribution of 2012 retained earnings
Legal reserve
-
-
30,294
(30,294)
-
-
Cash dividends
-
-
-
(224,000)
-
-
(224,000)
75,000
463,650
-
-
-
-
3,470
6,292
-
-
-
-
-
876
-
-
-
-
Cash injection
Share-based payment transaction
Share of changes in net assets of associates and
-
-
-
-
(224,000)
538,650
-
538,650
9,762
-
9,762
876
-
876
joint ventures accounted for using equity method
Net income in 2013
-
-
-
355,190
-
-
355,190
37,314
392,504
Other comprehensive income in 2013
-
-
-
-
99,297
333,512
432,809
6,334
439,143
-
-
-
355,190
99,297
333,512
787,999
43,648
831,647
Changes in non-controlling interests
Balance as of December 31, 2013
$778,470
$1,083,825
$61,690
$494,339
$100,705
$530,963
$3,049,992
58,080
$218,009
58,080
$3,268,001
Balance as of January 1, 2014
$778,470
$1,083,825
$61,690
$494,339
$100,705
$530,963
$3,049,992
$218,009
$3,268,001
Appropriation and distribution of 2013 retained earnings
Legal reserve
-
-
35,519
(35,519)
-
-
Cash dividends
-
-
-
(280,249)
-
-
(280,249)
2,180
8,410
10,590
Share-based payment transaction
Share of changes in net assets of associates and
-
(73)
-
-
-
-
-
-
-
-
-
(73)
-
-
-
(280,249)
-
10,590
-
(73)
joint ventures accounted for using equity method
Net income in 2014
-
-
-
416,641
-
416,641
65,712
482,353
Other comprehensive income in 2014
-
-
-
-
95,331
(215,454)
-
(120,123)
(13,157)
(133,280)
(215,454)
296,518
52,555
349,073
-
-
-
416,641
95,331
-
-
-
-
-
-
-
$780,650
23,025
$1,115,187
$97,209
$595,212
$196,036
$315,509
23,025
$3,099,803
Interest in subsidiaries acquired/disposed of
Balance as of December 31, 2014
(18,826)
162,080
$413,818
(18,826)
185,105
$3,513,621
Note: Exchange rate of RMB1=NTD5.0855 as of December 31, 2014 is used for all assets, liabilities and equity accounts as of December 31, 2014, except for common stock is at historical rate and net income in average rate of RMB1=NTD4.9025.
Exchange rate of RMB1=NTD4.9040 as of December 31, 2013 is used for all assets, liabilities and equity accounts as of December 31, 2013, except for common stock is at historical rate and net income in average rate of RMB1=NTD4.8203.
107
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2014
2013
Description
Cash flows from operating activities:
Net income before tax
Adjustments for:
Bad debts expenses
Depreciation
Amortization
Share-based payments expense
Interest revenue
Dividend income
Share of net loss of associates and joint ventures accounted for using equity method
Gain on disposal of investment
Gain on disposal of property, plant and equipment
Changes in operating assets and liabilities:
Notes receivable, net
Accounts receivable, net
Inventories, net
Other receivables
Prepayment
Other current assets
Accounts payable
Other payables
Receipt in advance
Cash provided by (used in) operations
Interest received
Income tax paid
Net cash provided by (used in) operating activities
$596,907
$482,226
2,155
6,737
40,401
8,410
(16,392)
(258)
11,676
(219,745)
(29)
844
5,084
26,198
6,292
(33,605)
(1,923)
11,603
(215,050)
(57)
(31,069)
(154,891)
(80,566)
(88,092)
155,987
(3,223)
38,303
(60,246)
(1,862)
204,203
16,392
(110,446)
110,149
24,747
(100,412)
(88,003)
(15,267)
(151,761)
(3,117)
36,528
4,517
(11,156)
33,605
(118,131)
(95,682)
Cash flows from investing activities:
Acquisition of debt instrument investments for which no active market exists, current
Acquisition of available-for-sale financial assets, non-current
Acquisition of financial assets measured at cost, non-current
Acquisition of investments accounted for under the equity method
Acquisition of property, plant and equipment
Proceeds from disposal of available-for-sale financial assets, non-current
Proceeds from disposal of investments accounted for under the equity method
Proceeds from disposal of property, plant and equipment
Finance costs from acquisition of subsidiaries
Acquisition of intangible assets
Increase in prepayment for equipment
Decrease in other non-current assets
Dividends received
Payment of contingent liabilities
Acquisition of subsidiaries
Net cash used in investing activities
(25,682)
(15,722)
(327,706)
(10,787)
(195,195)
311,450
1,035
1,241
19,864
(1,143)
(411)
460
258
(75,672)
(264,483)
(582,493)
(217,456)
(113,389)
(145,527)
(7,928)
325,207
98
16,762
(1,252)
1,923
(45,019)
(146,187)
(332,768)
Cash flows from financing activities:
Increase in short-term borrowings
Cash dividends
Disposal of subsidiaries (without a chang of control)
Cash injection
Exercise of employee stock options
Acquisition of subsidiary stock
Net cash provided by financing activities
261,393
(294,517)
50,000
2,180
(5,500)
13,556
(235,949)
538,650
3,470
306,171
Net foreign exchange difference
Cash acquired from acquisition of a subsidiary
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
50,405
84,002
(324,381)
930,104
$605,723
70,210
52,250
181
929,923
$930,104
Note:
Exchange rate of RMB1=NTD5.0855 as of December 31, 2014 is used for all assets, liabilities and equity accounts as of
December 31, 2014, except for common stock is at historical rate.
Exchange rate of RMB1=NTD4.9040 as of December 31, 2013 is used for all assets, liabilities and equity accounts as of
December 31, 2013, except for common stock is at historical rate.
108
English Translation of Financial Statements Originally Issued in Chinese
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)
1. History and organization
Coland Holdings Limited (“the Company”) was incorporated on March 23, 2010, in Cayman
Islands. The Company was reorganization as a holding company to be registered under Taiwan
Stock Exchange (“TWSE”). Guochuang Pharmaceutical Co., Ltd. (“Guochuang”), Tongze
Pharmaceutical Co., Ltd. (“Tongze”), Hefei Guozhen Pharmaceutical Co., Ltd., (“Guozhen”) and
Hainan Quanyuan Pharmaceutical Co., Ltd. (Quanyuan) are the main operation entities of the
Group to engage in research and development, innovation and sales of generic medicine,
traditional Chinese patent medicine, biochemical drugs and medical equipment. The Company’s
common shares were publicly listed on the TWSE on October 5, 2011.
Its registered office in
Cricket Square, Hutchins Drive P.O. Box 2681, Grand Cayman KY1-1111 Cayman Islands and
the main operations base 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 issue
The consolidated financial statements of the Company and its subsidiaries (“the Group”) for the
years ended December 31, 2014 and 2013 were authorized for issue by the Board of Directors on
February 26, 2015.
3. Newly issued or revised standards and interpretations
(1) International Financial Reporting Standards, International Accounting Standards, and
Interpretations issued, revised or amended, which are recognized by Financial Supervisory
Commission (“FSC”) and would be applicable for annual periods beginning on or after 1
January 2015, but not yet adopted by the Group at the date of issuance of the Group’s
financial statements are listed below.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
(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 1 January 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
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.
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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 1 July
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 1 January 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 1 January 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 1 January 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
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 1 January 2011.
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(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 1 July 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 1 July 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 1
July 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
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 1 January 2012.
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(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 1 January 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 beginning on or after 1 January 2013.
(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
presents 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
113
(j) IAS 1 “Presentation of Financial Statements” — Presentation of Items of Other
Comprehensive Income
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 1 July 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 recognized under IAS 37 Provisions, Contingent
Liabilities and Contingent Assets, etc.. The revised standard is effective for annual
(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 1 January 2013.
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(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 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 1
January 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
(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
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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 1 January
2013.
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
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 1
January 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
1 January 2013.
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(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 1 January 2014.
The abovementioned standards and interpretations issued by IASB and recognized by FSC so
that they are applicable for annual periods beginning on or after 1 January 2015. Apart from
item (h) to (k) which would affect the presentation of financial statements and increase the
level of disclosure in the financial reports, the remaining standards and interpretations have
no material impact on the Group.
(2) Standards or interpretations issued by IASB but not yet recognized by FSC at the date of
issuance of the Group’s financial statements are listed below.
(a) 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 in measurement. The amendment is effective for annual periods beginning on or
after 1 January 2014.
(b) 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 1 January 2014.
117
(c) 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
(d) 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 1 July 2014.
(e) Improvements to International Financial Reporting Standards (2010-2012 cycle):
IFRS 2 “Share-based Payment”
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
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 recognized 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 1 July 2014.
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IFRS 8 “Operating Segments”
The amendments require an entity to disclose the judgements 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 1 July 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 1 July 2014.
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 1
July 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 1 July 2014.
119
(f) 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 1 July 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
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 1 July 2014.
120
(g) IFRS 14 “Regulatory Deferral Accounts”
IFRS 14 permits first-time adopters to continue to recognize 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
recognize 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 1 January 2016.
(h) IFRS 11 “Joint Arrangements” (Accounting for Acquisitions of Interests in Joint
Operations)
The amendments provide new guidance on how to account for the acquisition of an
interest in a joint operation that constitutes a business. The amendments require the
entity to apply all of the principles on business combinations accounting in IFRS 3
“Business Combinations”, and other IFRS (that do not conflict with the guidance in
IFRS 11), to the extent of its share in a joint operation acquired. The amendment also
requires certain disclosure. The amendment is effective for annual periods beginning on
(i) IAS 16“Property, Plant and Equipment and IAS 38 “Intangible Assets” — Clarification
of Acceptable Methods of Depreciation and Amortization
The amendment clarified that the use of revenue-based methods to calculate depreciation
of an asset is not appropriate because revenue generated by an activity that includes the
use of an asset generally reflects factors other than the consumption of the economic
benefits embodied in the asset, such as selling activities and change in sales volumes or
prices. The amendment also clarified that revenue is generally presumed to be an
inappropriate basis for measuring the consumption of the economic benefits embodied in
an intangible asset. This presumption, however, can be rebutted in certain limited
circumstances. The amendment is effective for annual periods beginning on or after 1
January 2016.
121
(j) IFRS 15 “Revenue from Contracts with Customers”
The core principle of the new Standard is for companies to recognize revenue to depict
the transfer of goods or services to customers in amounts that reflect the consideration to
which the company expects to be entitled in exchange for those goods or services. The
new Standard will also result in enhanced disclosures about revenue, provide guidance
for transactions that were not previously addressed comprehensively and improve
guidance for multiple-element arrangements. The Standard is effective for annual periods
(k) IAS 16“Property, Plant and Equipment and IAS 41 “Agriculture” — Agriculture:
Bearer Plants
The IASB decided that bearer plants should be accounted for in the same way as
property, plant and equipment in IAS 16 Property, Plant and Equipment, because their
operation is similar to that of manufacturing. Consequently, the amendments include
them within the scope of IAS 16, and the produce growing on bearer plants will remain
within the scope of IAS 41. The amendment is effective for annual periods beginning on
(l) IFRS 9“Financial Instruments”
The IASB has issued the final version of IFRS 9, which combines classification and
measurement, the expected credit loss impairment model and hedge accounting. The
standard will replace IAS 39 Financial Instruments: Recognition and Measurement and
all previous versions of IFRS 9 Financial Instruments (which include standards issued on
classification and measurement of financial assets and liabilities and hedge accounting).
Classification and measurement: Financial assets are measured at amortized cost, fair
value through profit or loss, or fair value through other comprehensive income, based on
both the entity’s business model for managing the financial assets and the financial asset’s
contractual cash flow characteristics. Financial liabilities are measured at amortized cost
or fair value through profit or loss. Furthermore there is requirement that ‘own credit
risk’ adjustments are not recognized in profit or loss.
Impairment: Expected credit loss model is used to evaluate impairment. Entities are
required to recognize either 12-month or lifetime expected credit losses, depending on
whether there has been a significant increase in credit risk since initial recognition.
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Hedge accounting: Hedge accounting is more closely aligned with risk management
activities and hedge effectiveness is measured based on the hedge ratio.
The new standard is effective for annual periods beginning on or after 1 January 2018.
(m) IAS 27“Separate Financial Statements” — Equity Method in Separate Financial
Statements
The IASB restored the option to use the equity method under IAS 28 for an entity to
account for investments in subsidiaries and associates in the entity’s separate financial
statements. In 2003, the equity method was removed from the options. This amendment
removes the only difference between the separate financial statements prepared in
accordance with IFRS and those prepared in accordance with the local regulations in
certain jurisdictions. The amendment is effective for annual periods beginning on or after
1 January 2016.
(n) IFRS 10“Consolidated Financial Statements” and IAS 28“Investments in Associates
and Joint Ventures” — Sale or Contribution of Assets between an Investor and its
Associate or Joint Ventures
The amendments address the inconsistency between the requirements in IFRS 10
Consolidated Financial Statements and IAS 28 Investments in Associates and Joint
Ventures, in dealing with the loss of control of a subsidiary that is contributed to an
associate or a joint venture. IAS 28 restricts gains and losses arising from contributions
of non-monetary assets to an associate or a joint venture to the extent of the interest
attributable to the other equity holders in the associate or joint ventures. IFRS 10
requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28
was amended so that the gain or loss resulting from the sale or contribution of assets that
constitute a business as defined in IFRS 3 between an investor and its associate or joint
venture is recognized in full. IFRS 10 was also amended so that the gains or loss
resulting from the sale or contribution of a subsidiary that does not constitute a business
as defined in IFRS 3 between an investor and its associate or joint venture is recognized
only to the extent of the unrelated investors’ interests in the associate or joint venture.
The amendment is effective for annual periods beginning on or after 1 January 2016.
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(o) Improvements to International Financial Reporting Standards (2012-2014 cycle):
IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”
The amendment clarifies that a change of disposal method of assets (or disposal groups)
from disposal through sale or through distribution to owners (or vice versa) should not
be considered to be a new plan of disposal, rather it is a continuation of the original plan.
The amendment also requires identical accounting treatment for an asset (or disposal
group) that ceases to be classified as held for sale or as held for distribution to owners.
The amendment is effective for annual periods beginning on or after 1 January 2016.
IFRS 7 “Financial Instruments: Disclosures”
The amendment clarifies that a servicing contract that includes a fee can constitute
continuing involvement in a financial asset and therefore the disclosures for any
continuing involvement in a transferred asset that is derecognized in its entirety under
IFRS 7 Financial Instruments: Disclosures is required. The amendment also clarifies
that whether the IFRS 7 disclosure related to the offsetting of financial assets and
financial liabilities are required to be included in the condensed interim financial report
would depend on the requirements under IAS 34 Interim Financial Reporting. The
IAS 19 “Employee Benefits”
The amendment clarifies the requirement under IAS 19.83, that market depth of high
quality corporate bonds is assessed based on the currency in which the obligation is
denominated, rather than the country where the obligation is located. The amendment is
IAS 34 “Interim Financial Reporting”
The amendment clarifies what is meant by “elsewhere in the interim financial report”
under IAS 34; the amendment states that the required interim disclosures must either be
in the interim financial statements or incorporated by cross-reference between the interim
financial statements and wherever they are included within the greater interim financial
report. The other information within the interim financial report must be available to
users on the same terms as the interim financial statements and at the same time. The
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(p) IAS 1 “Presentation of Financial Statements” (Amendment):
The amendments contain (1) clarifying that an entity must not reduce the
understandability of its financial statements by obscuring material information with
immaterial information or by aggregating material items that have different natures or
functions.
The amendments reemphasize that, when a standard requires a specific
disclosure, the information must be assessed to determine whether it is material and,
consequently, whether presentation or disclosure of that information is warranted, (2)
clarifying that specific line items in the statement(s) of profit or loss and OCI and the
statement of financial position may be disaggregated, and how an entity shall present
additional subtotals, (3) clarifying that entities have flexibility as to the order in which
they present the notes to financial statements, but also emphasize that understandability
and comparability should be considered by an entity when deciding on that order, (4)
removing the examples of the income taxes accounting policy and the foreign currency
accounting policy, as these were considered unhelpful in illustrating what significant
accounting policies could be, and (5) clarifying that the share of OCI of associates and
joint ventures accounted for using the equity method must be presented in aggregate as a
single line item, classified between those items that will or will not be subsequently
reclassified to profit or loss. The amendment is effective for annual periods beginning on
(q) IFRS 10“Consolidated Financial Statements”, IFRS 12 “Disclosure of Interests in
Other Entities”, and IAS 28“Investments in Associates and Joint Ventures” —
Investment Entities: Applying the Consolidation Exception
The amendments contain (1) clarifying that the exemption from presenting consolidated
financial statements applies to a parent entity that is a subsidiary of an investment entity
when the investment entity measures all of its subsidiary at fair value, (2) clarifying that
only a subsidiary that is not an investment entity itself and provides support services to
the investment entity is consolidated when all other subsidiaries of an investment entity
are measured at fair value, and (3) allowing the investor, when applying the equity
method, to retain the fair value measurement applied by the investment entity associate
or joint venture to its interests in subsidiaries. The amendment is effective for annual
125
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)~(f), (i)~(j) and (l)~(q), 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, 2014
and 2013 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 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.
126
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:
Investor
Subsidiary
The Company
Central Chief Limited Coland Pharmaceutical
Company (Coland HK)
Central Chief Limited Coland Development Co.,
Ltd. (Coland Development)
Central Chief Limited Exquisite Creation Limited
(Exquisite)
(Note 4)
Central Chief Limited Majestic Trade Holdings
Limited (Majestic Trade)
(Note 1)
Central Chief Limited Auspicious Day Group
Limited (Auspicious Day)
(Note 2)
Coland Development Shechen Pharmaceuticals
(Note 3)
Inc. (Shechen)
Coland HK
Guochuang Pharmaceutical
Co., Ltd. (Guochuang)
Guochuang
Exquisite
Majestic Trade
Auspicious Day
Main businesses
Investment holding
Investment holding and
trading of generic medicine
Research and development
of generic medicine
Investment holding
100%
100%
60%
60%
Investment holding
51%
-
Investment holding
60%
-
Trading of generic medicine
and others
Trading and research and
development of generic
medicine
Tongze Pharmaceutical Co., Trading of generic medicine
Ltd. (Tongze)
Hefei Guozhen
Pharmaceutical Co., Ltd.
(Guozhen)
Shanghai Pengzi Medical
Trading of medical devices
Devies Co., Ltd. (Pengzi)
and engineering services
Hainan Quanyuan
Pharmaceuttical Co., Ltd.
(Quanyuan)
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Percentage of ownership (%)
December 31, December 31,
2014
2013
100%
100%
100%
100%
55.5%
100%
100%
100%
51%
51%
100%
100%
100%
-
100%
-
Note 1: Acquire 50% ownership of Majestic Trade by its subsidiary, Central Chief Limited.
Since September 30, 2014, Majestic Trade has been included in consolidated
financial statements of the Group.
Note 2: On August 29, 2014, the Board of Directors approved to acquire 60% ownership of
Auspicious Day by its subsidiary, Central Chief Limited. Since August 29, 2014,
Auspicious Day has been included in consolidated financial statements of the Group.
Note 3: Acquire 100% Ownership of Shechen by its subsidiary, Central Chief Limited.
Since December 5, 2013, Shechen has been included in consolidated financial
statements of the Group.
On January 10, 2014, Central Chief Limited subscribed 2,500,000 shares of the
newly issued 7,500,000 shares from Shechen. Consequently, interest of Shechen
held by Central Chief Limited decreased from 100% to 50%.
On April 1, 2014, to facilitate management, the Group transferred Shechen from
Central Chief Limited to Coland Development.
On June 26, 2014, Coland Development acquired 550,000 shares (5.5%) from
Shechen’s minority shareholders at cost, without a change of control.
Note 4: 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.
(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.
128
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.
(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.
129
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.
(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.
130
(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.
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).
131
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.
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.
132
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
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.
133
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.
write-off is later recovered, the recovery is credited to profit or loss.
134
If a future
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.
135
(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
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.
i.
A financial liability is classified as held for trading if:
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).
136
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 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.
137
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
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.
138
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
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.
139
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. 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.
140
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:
Buildings
Transportation equipment
Office equipment
Leasehold improvements
45 years
4~10 years
3~5 years
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.
141
(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 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.
142
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).
Exclusive distribution right
The cost of exclusive distribution right is amortized on a straight-line basis over the estimated
useful life (3 to 10 years).
143
A summary of the policies applied to the Group’s intangible assets is as follows:
Exclusive distribution
Licences
Computer software
right
Useful lives
Indefinite
Finite
Finite
Amortization method used
No amortization
Amortized on a
Amortized on a
straight-line basis over
straight-line basis over
the estimated useful life the estimated useful life
Internally generated or
Acquired
Acquired
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.
144
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
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.
145
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
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.
146
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.
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.
147
(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.
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:
148
(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
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.
149
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 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.
150
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 Auspicious Day Group Limited,
Exquisite Creation Limited and Tongze Pharmacentical Co., Ltd., a contingent consideration
has been recognized. As at the acquisition date, the fair value of the contingent considerations
were estimated at NT$224,517 thousand, NT$80,474 thousand and NT$84,623 thousand,
respectively. The contingent consideration at the reporting date has been remeasured to
NT$225,791 thousand, NT$71,224 thousand and NT$28,605 thousand, respectively, and
classified under other financial liabilities. Please refer to Note 6(25) for more details.
151
(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(17).
(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(18) 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 strategies. Please refer to Note 6 for more details on unrecognized
deferred tax assets.
152
6. Contents of significant accounts
(1) Cash and cash equivalents
As at
2014
2013
$321
$629
599,177
659,755
6,225
122,600
147,120
$605,723
$930,104
Cash on hand
Checking and saving accounts
Time deposits
Cash equivalents
Total
(2) Available-for-sale financial assets
As at
2014
2013
$378,119
$312,294
315,509
530,963
$693,628
$843,257
Stocks
Valuation adjustment
Total
Current
Non-current
Total
$693,628
$693,628
$843,257
$843,257
Available-for-sale financial assets were not pledged.
(3) Financial assets measured at cost
As at
2014
2013
Stocks
Total
$380,041
$380,041
$168,174
$168,174
Current
Non-current
Total
$380,041
$380,041
$168,174
$168,174
153
The fair value of the above investments in unlisted entities are not reliably measurable as the
variability in the range of reasonable fair value measurements is significant for the investment
and the probabilities of the various estimates within the range cannot be reasonably assessed
and used when measuring fair value.
Therefore these investments are measured at cost.
Bora Pharmaceuticals Co., Ltd., held by the Group, listed in Emerging Stock Market in
October 2014.
The fair value can be reasonably assessed, and therefore, it transferred out
from financial assets measured at cost to available-for-sale financial assets.
Original BioMedicals Co., Ltd., held by the Group, listed in Emerging Stock Market in
December 2014.
The fair value can be reasonably assessed, and therefore, it transferred out
from financial assets measured at cost to available-for-sale financial assets.
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 transferred out from financial
assets measured at cost to available-for-sale financial assets.
The Group disposed of financial assets measured at cost in the carrying amount of NT$9,185
thousand and NT$0 thousand in the years ended December 31, 2014 and 2013, respectively.
The resulting disposal gain or loss recognized was NT$10,615 thousand and NT$0 thousand.
Financial assets measured at cost were not pledged.
(4) Debt instrument investments for which no active market exists
As at
2014
2013
Fixed term deposit
$25,682
$-
Current
$25,682
$-
-
-
$25,682
$-
Non-current
Total
Debt instrument investments for which no active market exists were not pledged.
154
(5) Notes receivables, net
Notes receivables arising from operating activities
Less: allowance for doubtful debts
Total
As at
2014
2013
$65,502
$34,433
$65,502
$34,433
Notes receivables were not pledged.
(6) Accounts receivable, net
As at
2014
2013
$589,225
$429,790
(2,236)
(194)
$587,019
$429,596
Trade receivables
Less: allowance for doubtful debts
Total
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):
As at January 1, 2014
Charge/reversal for the current period
Write off
Exchange differences
As at December 31, 2014
Individually
impaired
$194
2,155
(200)
87
$2,236
Collectively
impaired
$$-
Total
$194
2,155
(200)
87
$2,236
Charge/reversal for the current period
Write off
$53
844
(720)
17
$194
$$-
$53
844
(720)
17
$194
155
Aging analysis of trade receivables that are past due as at the end of the reporting period but
not impaired is as follows:
Past due but not impaired
Neither
past due
As at
nor
31~60
61~90
91~120
>=121
days
days
days
days
Total
impaired
<=30 days
December 31, 2014 $557,617
$9,220
$11,808
$3,264
$2,448
$2,262
$587,019
December 31, 2013 396,997
21,658
5,648
3,751
546
996
429,596
(7) Inventories, net
As at
Finished goods
Less: allowance for inventory valuation losses
Net amount
2014
2013
$291,814
$193,965
(8,785)
$283,029
$193,965
The cost of inventories recognized in expenses amounts to NT$1,082,332 thousand and
NT$859,172 thousand for the year ended December 31, 2014 and December 31, 2013,
respectively, including the reversal of write-down of inventories to NT$(8,785) thousand.
No inventories were pledged.
156
(8) 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, 2014
December 31, 2013
Percentage of
Investees
Percentage of
Carrying
ownership
Carrying
ownership
amount
(%)
amount
(%)
Investments in associates:
HungChun Bio-s Co., Ltd.
$107,579
18%
$100,710
24%
2,219
25%
258
21%
-
1,021
33%
32,578
25%
35,136
25%
11,392
40%
-
Tiger Medicals (Taiwan) Ltd.
Weigao Group Medical Polymer Co., Ltd.
-
Suzhou Microclear Medical Instruments
Co., Ltd.
Zan Ho Biotech Inc.
Total
$153,768
-
$137,125
No investment in the associate was pledged.
The following table illustrates summarized financial information of the Group’s investment in
the associate:
As at
Total assets (100%)
Total liabilities (100%)
2014
2013
$508,254
$290,018
$64,745
$37,467
For the years ended
December 31,
Revenue (100%)
Profit (loss) (100%)
157
2014
2013
$76,215
$34,366
$(34,724)
$(34,436)
(9) Property, plant and equipment
Construction in
process and
equipment
Transportation
Buildings
equipment
awaiting
Leasehold
Office equipment improvements
examination
Total
Cost:
$-
$16,808
$7,116
$3,888
$-
$27,812
Additions
186,012
5,132
3,566
11
474
195,195
Disposals
-
-
-
(2,009)
-
357
1,247
143
-
1,747
$186,012
$20,408
$11,809
$4,042
$474
$222,745
$-
$10,505
$4,617
$3,212
$-
$18,334
Additions
-
5,614
1,815
499
-
7,928
Disposals
-
(96)
(69)
-
-
(165)
-
201
483
-
-
684
-
584
270
177
-
1,031
$-
$16,808
$7,116
$3,888
$-
$27,812
$-
$9,732
$2,404
$3,140
$-
$15,276
3,549
1,347
1,656
185
-
6,737
-
-
(1,889)
(120)
Acquisitions through business
combinations
Depreciation and impairment:
Depreciation
Disposals
-
(768)
(29)
(797)
132
240
1,137
123
-
1,632
$3,681
$10,551
$5,168
$3,448
$-
$22,848
$-
$6,146
$1,280
$2,306
$-
$9,732
Depreciation
-
3,307
1,077
700
-
5,084
Disposals
-
(89)
(35)
-
-
(124)
-
368
82
134
-
584
$-
$9,732
$2,404
$3,140
$-
$15,276
December 31, 2014
$182,331
$9,857
$6,641
$594
$474
$199,897
December 31, 2013
$-
$7,076
$4,712
$748
$-
$12,536
Net carrying amount as at:
No property, plant and equipment were pledged.
158
(10) Intangible assets
Goodwill
Exclusive
distribution
right
Licences
Computer
software
$277,728
-
$344,470
-
$31,445
-
$2,890
1,143
$656,533
1,143
344,228
10,281
$632,237
227,617
12,928
$585,015
1,163
$32,608
17
128
$4,178
571,862
24,500
$1,254,038
$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
Amortization and
impairment:
Amortization
$$-
$40,744
40,112
3,183
$84,039
$$-
$399
289
50
$738
$41,143
40,401
3,233
$84,777
Amortization
$$-
$13,611
25,969
1,164
$40,744
$$-
$160
229
10
$399
$13,771
26,198
1,174
$41,143
Net carrying amount as at:
December 31, 2014
$632,237
$500,976
$32,608
$3,440
$1,169,261
December 31, 2013
$277,728
$303,726
$31,445
$2,491
$615,390
Cost:
Additions
Acquisitions through
business combinations
Additions
Acquisitions through
Total
Amortization expense of intangible assets under the statement of comprehensive income:
For the years ended
December 31,
2014
2013
$40,401
$26,198
Operating expenses
159
(11) Impairment testing of goodwill and intangible assets with indefinite lives
Goodwill acquired through business combinations and licences with indefinite lives have been
allocated to five cash-generating units for impairment testing as follows:
(a)
(b)
(c)
(d)
(e)
Tongze cash-generating unit;
Gouzhen cash-generating unit;
Taiwan cash-generating unit;
Guochuang cash-generating unit; and
Quanyuan cash-generating unit.
Carrying amount of goodwill and licences allocated to each of the cash-generating units:
Tongze unit
As at
Goodwill
Guozhen unit
December
December
December
December
December
December
31, 2014
31, 2013
31, 2014
31, 2013
31, 2014
31, 2013
161,467
157,641
103,758
98,117
22,784
21,970
-
-
-
-
-
-
Licences with indefinite lives
Guozhen unit
Quanyuan unit
Total
December
December
December
December
December
December
31, 2014
31, 2013
31, 2014
31, 2013
31, 2014
31, 2013
Goodwill
Licences with indefinite lives
Taiwan unit
-
-
344,228
-
632,237
227,728
32,608
31,445
-
-
32,608
31,445
Tongze cash-generating unit
The recoverable amount of the Tongze cash-generating unit has been determined based on a
value-in-use calculation using cash flow projections from financial budgets approved by
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 are 17.73% (2013: 18.30%) and cash flows beyond the five-year period
are extrapolated using a 5.0% growth rate (2013: 2.0%). Those growth rates are equivalent
to the long-term average rate for the same industry. As a result of this analysis,
management did not identity an impairment for goodwill of NT$161,467 thousand which is
allocated to this cash-generating unit.
160
Gouzhen cash-generating unit
The recoverable amount of the Gouzhen cash-generating unit has been determined based on a
value-in-use calculation using cash flow projections from financial budgets approved by
management covering a five-year period. The project cash flows have been update to reflect
the change in demand for products and services. The pre-tax discount rate applied to cash
flow projections is 18.0% and cash flows beyond the five-year period is extrapolated using a
5.0% growth rate. These growth rate is equivalent to the long-term average growth rate for
the same industry. As a result of the analysis, management did not identify an impairment
for goodwill of NT$103,758 thousand which is allocated to this cash-generating unit.
The goodwill of the Guozhen cash-generating unit acquired through business combinations
on August 30, 2013 was based on an assessment from an independent valuer. There is no
impairment loss or amount which approximates the acquisition amount recognized as of
December 31, 2013, since it is still under measurement period the recoverable.
Taiwan cash-generating unit
The recoverable amount of the Taiwan cash-generating unit has been determined based on a
value-in-use calculation using goodwill evaluated by the management, indefinite lives, and
intangible assets. One of them was no indication of impairment. As a result, the
management did not identify impairment for goodwill of NT$22,784 thousand which is
allocated to this cash-generating unit.
The goodwill of the Taiwan cash-generating unit acquired through business combinations on
December 5, 2013 was 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.
Quanyuan cash - generating unit
The goodwill of NT$344,228 thousand of the Quanyuan cash-generating unit acquired
through business combinations on August 29, 2014 was based on an assessment from an
independent valuer. There is no impairment loss recognized as of December 31, 2014,
because it is still under measurement period, the recoverable amount approximates the
acquisition amount.
161
Key assumptions used in value-in-use calculations
The calculation of value-in-use for Tongze unit and Gouzhen unit are 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.
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 reasons
explained above, a conservative way of the long-term average growth rate was used to
extrapolate the budget for the Tongze unit.
162
Sensitivity to changes in assumptions
With regard to the assessment of value-in-use of the Tongze unit, 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.
(12) Short-term borrowings
As at
Interest Rate
(%)
Unsecured bank loans
1.394%
2014
2013
$261,393
$-
The Group’s unused short-term lines of credits amount to US$4,600 thousand and US$0
thousand as of December 31, 2014 and 2013, respectively.
(13) Accrued expenses
As at
2014
2013
Salary payable
$24,099
$30,062
Other payable-related parties
14,875
48,594
Accrued marketing expenses
23,935
17,146
Other taxes payable
21,284
26,730
Others
17,883
38,250
$102,076
$160,782
Total
(14) 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.
163
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, 2014 and
2013 are NT$50,777 thousand and NT$37,297 thousand, respectively.
(15) Other liabilities
Other liabilities are the contingent consideration from business combination.
Other financial liabilities
$150,642
Acquisitions during the period
224,517
Payment during the period
(75,672)
Discount rate adjustment and unwinding of discount from the
passage of time
19,864
6,269
$325,620
Current-December 31, 2014
$157,101
Non-current-December 31, 2014
168,519
Current-December 31, 2013
$65,584
Non-current-December 31, 2013
85,058
$150,642
(16) Equities
(a) Common stock
The Company’s authorized capital was NT$2,000,000 thousand and issued capital was
NT$780,650 thousand and NT$778,470 thousand as at December 31, 2014 and
December 31, 2013, respectively, each at a par value of NT$10.
voting right and a right to receive dividends.
164
Each share has one
As at December 31, 2014 and 2013, the employee stock option issued in December 2010
have been converted into 134 thousand and 347 thousand shares, respectively, and
exercised by issuing additional shares. The issuance processes have been approved by
the authority and the share registry has been updated correspondingly.
As at December 31, 2014, the employee stock option issued in June 2012 have been
converted into 39 thousand shares and exercised by issuing additional shares. The
issuance processes have been approved by the authority and the share registry has been
updated correspondingly.
As at December 31, 2014, the employee stock option issued in November 2012 have
been converted into 45 thousand shares and exercised by issuing additional shares. The
issuance processed have been approved by the authority and the share registry has been
updated correspondingly.
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 process had been approved by the authority and share registry has been updated
correspondingly on December 31, 2013.
(b) Capital surplus
As at
2014
2013
Increased through changes in ownership interests in
subsidiaries that do no result in loss of control
Employee stock option
Total
$1,084,486
23,025
$1,075,177
-
7,676
8,648
$1,115,187
$1,083,825
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 pay 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.
165
(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:
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, 2014 and 2013 are both to
be NT$0 thousand.
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.
166
Details of the 2014 and 2013 earnings distribution and dividends per share as approved
by the board of directors’ meeting on February 26, 2015 and approved by the
shareholder’s meeting on June 30, 2014, respectively, are as follows:
Appropriation of earnings
Legal reserve
Common stock –cash
dividend
Total
2014
2013
$41,664
$35,519
281,034
280,249
$322,698
$315,768
Dividend per share (NT$)
2014
2013
3.60
3.60
There is no significant difference between the actual employee bonuses and remuneration
to directors and supervisors distributed from the 2013’s earnings and the estimated
amount in the financial statements for the year ended 2013.
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
For the years ended
December 31,
Beginning balance
Profit attributable to non-controlling interests
2014
2013
$218,029
$116,281
65,712
37,314
(13,157)
6,334
Other comprehensive income, attributable to
non-controlling interests, net of tax:
Exchange differences resulting from translating the
financial statements of a foreign operation
Acquisition of additional interest in a subsidiary
91,926
-
Cash dividend distributed by a subsidiary
(18,826)
(11,948)
Acquisition of a subsidiary
701,054
70,028
$413,818
$218,009
Ending balance
167
(17) 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 prescribed by the plan after two 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
shares 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.
On January 14, 2014, the Board of Directors’ meeting approved and the Company was
authorized by the Securities and Futures Bureau under the Financial Supervisory
Commission, Executive Yuan, to issue employee stock options with a total number of 1,000
units (Plan D); each unit entitles an optionee to subscribe for 1,000 shares of the Company’s
common stock, upon the exercise of the options, settlement 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 option 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.
168
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 and plan D, the exercise price has been adjusted. After the assessment, there is no
incremental the 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:
Date of grant
Total numbers of Total numbers Shares available to
option holders
Exercise price
options granted
of options
(in thousand)
(unit)
outstanding (unit)
(NTD)
December 10, 2010
231,651
26,037
136
$10.00
December 10, 2010
6,569
-
-
$10.00
June 20, 2012
315
71
71
$58.00
November 2, 2012
440
145
145
$70.00
August 29, 2014
900
840
840
$71.70
(a) A summary of the Company’s stock options plan, and related information for the years
ended December 31, 2014 and 2013 are as follows:
For the years ended December 31,
2014
2013
Shares available
Shares available
to option
Weighted-
to option
Weighted-
holder’s
average exercise
holder’s
average exercise
(in thousands)
price (NTD)
(in thousands)
price (NTD)
$35.63
Outstanding at beginning of year
773
$44.00
1,540
Granted
900
71.70
-
Expired
(263)
60.60
(420)
39.26
Exercised
(218)
31.00
(347)
10.00
Forfeited
Outstanding at end of year
Exercisable at end of year
-
-
-
-
-
1,192
$63.60
773
46.06
65
$10.00
8
10.00
Weighted-average fair value of options
granted during the period (NTD)
$169
$-
(b) The information on outstanding share options as of December 31, 2014 and December
31, 2013 are as follows:
Outstanding Stock Options
Range of
Shares
Weighted-average
exercise
available to
expected
Authorization
price
option holder’s
remaining life
date
(NTD)
(in thousands)
(years)
Exercisable Stock Options
Shares
Weighted-average
available to
Weighted-average
exercise price per option holder’s exercise price per
share(NTD)
(in thousands)
share(NTD)
2010.12.10
$10
136
1.76
$10.00
-
$10.00
2012.06.20
$58
71
2.50
$58.00
15
$58.00
2012.11.02
$70
145
2.83
$70.00
50
$70.00
2014.08.29
$71.7
840
4.66
$71.70
-
1,192
$-
65
Outstanding Stock Options
Range of
Shares
Weighted-average
exercise
available to
expected
Authorization
price
option holder’s
remaining life
date
(NTD)
(in thousands)
(years)
Exercisable Stock Options
Shares
Weighted-average
available to
Weighted-average
exercise price per option holder’s exercise price per
share(NTD)
(in thousands)
share(NTD)
2010.12.10
$10
290
2.76
$10.00
5
$10.00
2010.12.10
$10
3
2.76
$10.00
3
$10.00
2012.06.20
$60.9
210
3.50
$60.90
-
$-
2012.11.02
$73.7
270
3.83
$73.70
-
$-
773
8
The expenses recognized for employee services received during the years ended
December 31, 2014 and 2013,ares shown in the following table:
Total expense arising from equity-settled share-based
payment transactions
170
For the years ended
December 31,
2014
2013
$8,410
$6,292
(18) Operating revenue
For the years ended
December 31,
2014
2013
$2,238,189
$1,791,665
3,314
129,963
(36,536)
(64,864)
$2,204,967
$1,856,764
Sale of goods
Service revenue
Less: Sales returns, discounts and allowances
Total
(19) 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,
2014 and December 31, 2013 are as follows:
As at
2014
2013
$4,287
$18,098
2,622
Not later than one year
Later than one year and not later than five years
Total
$4,287
$20,720
(20) Summary statement of employee benefits, depreciation and amortization expense by function
during the years ended December 31, 2014 and 2013:
For the year ended December 31,
2014
2013
Personnel expenses
Salaries
Labor and health insurance
Other personnel expenses
Depreciation
Amortization
$194,052
50,777
2,572
6,737
40,401
171
$173,223
37,297
4,509
5,084
26,198
(21) Non-operating income and expenses
(a) Other income
For the years ended
December 31,
Interest income
2014
2013
$16,392
$33,605
258
1,923
37,308
36,837
5,337
-
$59,295
$72,365
Dividend income
Government grant income
Other income
Total
(b) Other gains and losses
For the years ended
December 31,
Gains on disposal of investments
Foreign exchange gains (losses), net
2014
2013
$219,745
$215,050
3,195
Gains on disposal of property, plant and equipment
Other gains (losses)
(7,193)
29
57
14,527
Total
$237,496
(574)
$207,340
(c) Finance costs
For the years ended
December 31,
Unwinding of discount on provisions
172
2014
2013
$19,864
$16,762
(22) Components of other comprehensive income
For the year ended December 31, 2014
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
$82,174
$-
$82,174
$-
$82,174
Unrealized gains (losses) from
available-for-sale financial assets
Total of other comprehensive income
557
(216,011)
(215,454)
-
(215,454)
$82,731
$(216,011)
$(133,280)
$-
$(133,280)
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
173
(23) Income tax
The major components of income tax expense are as follows:
Income tax expense recognized in profit or loss
For the years ended
December 31,
2014
2013
Current income tax expense:
Current income tax charge
Adjustments in respect of current income tax of prior periods
$110,516
$104,502
2,651
1,898
1,387
(16,678)
Deferred tax expense (income):
Deferred tax expense (income) relating to origination and
reversal of temporary differences
Total income tax expense
$114,554
$89,722
A reconciliation between tax expense and the product of accounting profit multiplied by
applicable tax rates is as follows:
For the years ended
December 31,
2014
Accounting profit before tax from continuing operations
2013
$596,907
$482,226
149,227
120,557
(45,349)
(44,424)
Tax effect of expenses not deductible for tax purposes
7,071
10,803
Adjustments in respect of current income tax of prior periods
2,651
1,898
954
888
$114,554
$89,722
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 different domestic rates between entities
Total income tax expense recognized in profit
174
Deferred tax assets (liabilities) relate to the following:
Beginning
balance as at
January 1,
2014
Temporary differences
Unrealized expenses
Unrealized sales allowances
Unrealized bad debts expenses
Unrealized inventory reserve
Unrealized amortization of
Deferred tax
Deferred tax
assets (liabilities)
income
acquired in
(expense)
business
recognized in
profit or loss combinations
$21,353
4,303
48
-
$(17,234)
(1,732)
491
2,117
(75,932)
14,971
$(1,387)
Deferred tax income/(expense)
Net deferred tax assets/(liabilities)
$-
Exchange
differences
Ending
balance as at
December 31,
2014
$148
94
20
79
$4,267
2,665
559
2,196
(59,799)
(4,484)
(125,244)
$(59,799)
$(4,143)
$(50,228)
$(115,557)
Reflected in balance sheet as
follows:
Deferred tax assets
$25,704
$9,687
$75,932
$125,244
Beginning
balance as at
January 1,
2013
Temporary differences
Unrealized expenses
Unrealized sales allowances
Unrealized bad debts expenses
Unrealized amortization of
Deferred tax
Deferred tax
income
assets (liabilities)
acquired in
(expense)
business
recognized in
profit or loss combinations
$10,762
3,803
13
$9,856
296
34
(50,911)
6,492
$16,678
Deferred tax income/(expense)
Net deferred tax assets/(liabilities)
$-
Exchange
differences
Ending
balance as at
December 31,
2013
$735
204
1
$21,353
4,303
48
(28,400)
(3,113)
(75,932)
$(28,400)
$(2,173)
$(36,333)
$(50,228)
Reflected in balance sheet as
follows:
Deferred tax assets
$14,578
$25,704
$50,911
$75,932
175
Unrecognized deferred tax assets
As of December 31, 2014 and December 31, 2013, deferred tax assets that have not been
recognized as they may not be used to offset taxable profits amount to NT$1,647 thousand,
and NT$4,478 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 subsidiaries, as the Group has determined that
undistributed profits of its subsidiaries will not be distributed in the foreseeable future.
The assessment of income tax returns
As of December 31, 2014, the assessment of the income tax returns of the
subsidiary-Shechen assessed and approved up to 2013.
(24) 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,
2014
2013
(a) Basic earnings per share
Profit attributable to ordinary equity holders of the
Company (in thousand NTD)
Weighted average number of ordinary shares outstanding
for basic earnings per share (in thousands)
Basic earnings per share (NTD)
176
$416,641
$355,190
77,878
$5.35
70,237
$5.06
For the years ended
December 31,
2014
2013
(b) Diluted earnings per share
Company (in thousand NTD)
$416,641
$355,190
$416,641
$355,190
77,878
70,237
1,052
595
78,930
70,832
$5.28
$5.01
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.
(25) Business combinations
(a) Acquisition of Auspicious Day Group Limited.
On August 29, 2014, the Group acquired 60% of the voting shares of Auspicious Day
Group Limited, an investment holding company. Hainan Quanyuan Pharmaceutical Co.,
Ltd. is the main operation entities of the Auspicious Day Group Limited. Quanyan is
located at Hainan, China; the major operation is to trade generic medicine in Guangxi.
Quanyan has a close and wide international cooperation in the medical field, and it has
great reputation in Guangxi area.
It was great to resource integration and to expand
the market, and to improve the Group’s market competitiveness.
177
The fair value of the identifiable assets and liabilities of Auspicious Day Group Limited
as of the acquisition date were:
Fair value recognized on
the acquisition date
Assets
Accounts receivables
Inventories
Prepayment
Intangible assets
$76,593
6,067
8,786
2,860
17
227,617
321,940
Liabilities
Accounts payables
Income taxes payable
Receipt in advance
Total identifiable net assets at fair value
Goodwill of Auspicious Day Group 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
(17,435)
(648)
(940)
(3,173)
(56,904)
(79,100)
$242,840
$489,932
97,136
(242,840)
$344,228
The fair value and the total contractual amount of the trade receivables amounts to
NT$4,687 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 September 30, 2014 were
based on provisional assessment of fair value as the Group had sought an independent
valuation for the tangible assets and intangible assets owned by Auspicious Day Group
Limited. The results of this valuation had not been received at the date the financial
statements ended September 30, 2014 were approved by management for issue.
178
The valuation of the tangible assets and intangible assets were completed in February
2015 and showed that the fair value at the date of acquisition was NT$587,068
thousand, an increase of NT$68,889 thousand compared to the provisional value.
The comparative information for the ended December 31, 2014 has been restated to
reflect this adjustment. The value of the exclusive distribution right increased by
NT$17,007 thousand, there was an increase in the deferred tax liabilities of NT$4,252
thousand, an increase in the purchase consideration of NT$62,839 thousand, and an
increase in the non-controlling interest of NT$6,050 thousand. These was also a
corresponding increase of goodwill of NT$53,764 thousand, to give total goodwill
arising on the acquisition of NT$344,228 thousand.
The goodwill of NT$344,228 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, Auspicious Day Group Limited, has contributed NT$15,448
thousand of revenue and NT$4,361 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 NT$2,313,103 thousand and the profit before tax
from continuing operations for the Group would have been NT$627,434 thousand.
Acquisition consideration
Cash paid
Contingent consideration liability
Total consideration
$256,746
224,517
8,669
$489,932
Analysis of cash flows on acquisition:
Cash paid
Net cash acquired with the subsidiary
Net cash flow on acquisition
$(256,746)
76,593
$(180,153)
The transaction costs comprise attorney expense and expenses arising from the
acquisition, and are included in the general and administrative expenses.
179
Contingent considerations
According to the share purchase agreement, the acquisition price is RMB$17,280
thousand in USD and within fourteen days the Company should made a payment of
RMB$25,920 thousand in USD within three 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 Auspicious Day Group Limited.
As at the acquisition date, the fair value of the contingent consideration was estimated at
NT$224,517 thousand.
The contingent consideration as at December 31, 2014, has been increased to
NT$225,791 thousand due to changes in the underlying assumptions which reflects the
fair value of the discounted cash payment (see Note 5). The fair value adjustment of
NT$1,274 thousand is recognized in profit or loss.
(b) Acquisition of Majestic Trade Holdings Limited
On September 30, 2014, the Group acquired 100% of the voting shares of Majestic
Trade Holdings Limited, an investment holding company Shanghai Pengzi Medical
Devices Co., Ltd. which is the main operation entities of the Majestic Trade Holdings
Limited. Pengzi is located at China; the major operation is to trade medical devices and
engineering services. This acquisition improves the Group’s business performance and
competitiveness in China.
The fair value of the identifiable assets and liabilities of Majestic Trade Holdings Limited
as at the date of acquisition were:
Current assets
Current liabilities
acquisition
$9,925
5,164
(6)
$15,083
Goodwill of Majestic Trade Holdings Limited is as follows:
Cash consideration
at fair value)
Goodwill
180
$7,737
7,346
(15,083)
$-
The net assets recognized in the financial statements as at December 31, 2014 were
based on the independent valuation assessment.
Majestic Trade Holdings Limited contributed NT$0 thousand from the date of
acquisition and NT$0 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 NT$2,204,967 thousand and the profit before tax for the
year from continuing operations for the Group would have been NT$596,907 thousand.
Cash paid
$7,737
-
Total consideration
$7,737
Cash paid
$(7,737)
9,925
$2,188
(c) 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 operation entities of the Exquisite Creation Limited. Guozhen is located at Hefei,
China; its major operation is to trade generic medicine in Hefei. A market leader for
Hepatitis and immunosuppressant products in Anhui and Hebei area, Guozhen has
exclusive distribution rights for Hepatitis products in China. It has acquired sole
exclusive distribution rights for numerous medicines to improve the Group’s business
performance and competitiveness.
181
The fair value of the identifiable assets and liabilities of Exquiste Creation Limited as at
the date of acquisition were:
the acquisition date
Assets
Inventories
Other current assets and non-current assets
Liabilities
Accounts payables
Receipt in advance
Goodwill of Exquiste Creation Limited is as follows:
Purchase consideration
at fair value)
Goodwill
$50,026
32,664
24,898
4,440
113,598
225,626
(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 amounts to
NT$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
The goodwill of NT$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.
182
From the acquisition date, Exquiste Creation Limited, has contributed NT$92,998
thousand of revenue and NT$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 NT$2,042,761 thousand and the profit before tax
from continuing operations for the Group for 2013 would have been NT$511,282
thousand.
Cash paid
$121,187
80,474
Total consideration
$201,661
Cash paid
$(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
NT$80,474 thousand.
The contingent consideration as at December 31, 2013, has been increased to
NT$85,706 thousand due to changes in the underlying assumptions which reflects the
fair value of the discounted cash payment (see Note 5).
183
(d) Acquisition of Shechen Pharmaceuticals Inc.
On December 5, 2013, the Group acquired 100% of the voting shares of Shechen
Pharmaceuticals Inc., a company founded in Taiwan. Its major operations are medicine
research and development of medical and trading of medicine, improving the Group’s
competitiveness outside of China.
The fair value of the identifiable assets and liabilities of Shechen Pharmaceuticals Inc. as
at the date of acquisition were:
acquisition
Current assets
Current liabilities
$2,225
812
(7)
$3,030
Goodwill of Shechen Pharmaceuticals Inc. 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
The goodwill of NT$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.
Shechen Pharmaceuticals Inc. contributed NT$5,223 thousand from the date of
acquisition and NT$(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 NT$1,914,212 thousand and the profit before tax for the
year from continuing operations for the Group for 2013 would have been NT$429,837
thousand.
184
Cash paid
Total consideration
$25,000
$25,000
Cash paid
$(25,000)
2,225
$(22,775)
7. Related party transactions
(1) Other payables
As at
2014
2013
$14,875
$48,594
Other related party
(2) Key management personnel compensation
For the years ended
December 31,
2014
2013
$43,506
$49,983
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.
185
12. Others
(1) Categories of financial instruments
Financial assets
As at
2014
2013
Held for trading :
Measured at fair value
$693,628
$843,257
380,041
168,174
1,073,669
1,011,431
605,402
929,475
25,682
-
65,502
34,433
587,019
429,596
Other receivables
141,247
51,974
1,424,852
1,445,478
$2,498,521
$2,456,909
Measured at cost (noncurrent)
Loans and receivables:
Cash and cash equivalents (exclude cash
on hand)
Debt instrument investments for which no active market
exists, current
Notes receivable
Subtotal
Total
As at
2014
2013
Financial liabilities at amortized cost:
$261,393
$-
57,731
2,565
Other payables
102,076
160,782
157,101
65,584
Long-term payables
168,519
85,058
$746,820
$313,989
Accounts payables
Total
186
(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 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.
187
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.
(a) When NTD strengthens/weakens against USD by 1%, the profit or loss for the years
ended December 31, 2014 and 2013 is decreased/increased by NT$1,344 thousand and
NT$3,623 thousand, respectively, the equity is decreased/increased by NT$1,344
thousand and NT$3,623 thousand, respectively.
(b) 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 applying 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 criteria.
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 4 basis points of interest
rate in a reporting period could cause the profit for the years ended December 31, 2014 and
2013 to decrease by NT$6,054 thousand and NT$9,295 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.
188
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.
At December 31, 2014 and 2013, a decrease of 5% in the price of the listed equity securities
classified as available-for-sale could have an impact of NT$34,681 thousand and NT$42,163
thousand 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, 2014 and December 31, 2013, amounts receivables from top ten
customers represent 48% and 38% 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.
189
(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.
Non-derivative financial instruments
Less than 1
year
2 to 3 years 4 to 5 years
> 5 years
Total
Accounts payables
Other payables
Long-term payables
$262,121
57,731
102,076
157,101
-
$142,832
$172,129
$-
$262,121
57,731
102,076
157,101
314,961
Accounts payables
Other payables
Long-term payables
$2,565
160,782
65,584
-
$108,177
$-
$-
$2,565
160,782
65,584
108,177
(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:
190
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 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
191
Level 1
Level 2
Level 3
Total
$693,628
$-
$-
$693,628
-
-
325,620
325,620
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
During the years ending December 31, 2014 and 2013, 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
follows:
Beginning balances as at January 1, 2014
Total gains and losses recognized for the year ended
December 31, 2014:
Amount recognized in profit or loss
(presented in “other profit or loss”)
Acquisition for the year ended December 31, 2014
Settlements for the year ended December 31, 2014
Ending balances as at December 31, 2014
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
192
Contingent Consideration
for Business Combination
$150,642
19,864
212,265
(75,672)
18,521
$325,620
Contingent Consideration
for Business Combination
$91,740
16,762
80,474
(45,019)
6,685
$150,642
(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, 2014
Foreign currencies Foreign exchange rate
NTD
Financial assets
Monetary items:
RMB
$280,179
5.0855
$1,424,852
211,124
5.0855
1,073,669
146,853
5.0855
746,820
Non-monetary items:
RMB
Monetary items:
RMB
December 31, 2013
Foreign currencies Foreign exchange rate
NTD
Financial assets
Monetary items:
RMB
$294,755
4.9040
$1,445,478
206,246
4.9040
1,011,431
64,027
4.9040
313,989
Non-monetary items:
RMB
Monetary items:
RMB
(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.
193
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:
For the years ended
December 31,
China
2014
2013
$2,204,967
$1,856,764
The revenue information above is based on the location of the customer.
Non-current assets:
As at
2014
2013
China
Taiwan
$2,603,442
3,804
$1,779,879
23,320
Total
$2,607,246
$1,803,199
(3) Information about major customers
For the years ended
December 31,
A customer
B customer
194
2014
2013
199,941
135,409
27,989
152,424

Coland Holdings Limited

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