Nurturing Strengths AR 2012.pdfCorporate Profile Listed on the Main Board of the Singapore Exchange...

Annual Report 2012

Nurturing Strengths

Corporate Profile

Our Products

Letter to Shareholders

主席及总裁献词

Operations and Financial Review

Financial Highlights

Board of Directors

Corporate Information

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09

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12

Contents

Corporate Profile

Listed on the Main Board of the Singapore Exchange in October 2004, Pharmesis International Ltd. specialises in the manufacture of pharmaceutical products, including western medicine and Traditional Chinese Medicine (“TCM”).

Annual Report 2012 PHARMESIS INTERNATIONAL LTD. 01

Under our two subsidiaries, Chengdu Kinna Pharmaceutical Co., Ltd and Sichuan Longlife Pharmaceutical Co., Ltd, we specialise in the manufacturing of pharmaceutical products in the form of tablets, granules, pills, etc, including TCM formulated products for the treatment of illnesses relating to the liver and gall bladder. Our two main products are ATT tablets and Gansu granules. Additionally, our business also includes the research and development, production, sale and marketing of pharmaceutical products.

Our pharmaceutical products are sold in the People’s Republic of China (“PRC”) and they include western medicine products under the “国嘉” brand. Under this brand name, we feature ATT tablets and capsules and over-the-counter (OTC) products such as Lianpu

Shuangqing tablets, Afenka tablets, Bear Bile and Bulbus Fritillariae Oral Liquid, Naoxinshu Oral Liquid, Shengmai Oral Liquid and Semen Zizyphi Oral Liquid.

Our TCM formulated products are sold under the “古蔺肝苏” brand. Products under this brand name include Gansu granules and tablets, Er Ding granules, etc. Leveraging our strong research and development capabilities and in-house expertise in pharmaceutical products for the treatment of illnesses relating to the liver and gall bladder, we have successfully obtained the licence to produce ATT tablets in the PRC. Similarly, we are the only Group with the right to produce Gansu granules from Ganhuangcao in the PRC.

In 2009, we acquired a new wholly-owned subsidiary, Chengdu Pharmesis Pharmaceutical Co.,

Ltd. With this acquisition, the Group has successfully expanded into the distribution of pharmaceutical products.

Comprising an established extensive sales and marketing network across the PRC, our products can be found in 2,000 hospitals in many cities within the PRC. As well-recognised brand names of pharmaceutical products in PRC, Pharmesis’ line of products under the “国嘉” and “古蔺肝苏” brands have received wide acceptance and numerous awards associated with delivering quality and safe products. By adopting an integrated business model, we aim to provide a one-stop solution to our customers in the PRC, with our research and development, manufacturing and distribution services.

02

ATT (ANETHOLE TRITHIONE) 茴三硫

Usage: Treatment of illness relating to the liver and gall bladderForm: Tablets and Capsules功能主治：用于胆囊炎、胆结石以及急、慢性肝炎的辅助治疗。类型：片剂、胶囊

AFENKA 阿酚咖片 Usage: Treatment of migraine, relieves pain, headache, cold, nasosinusitis, muscle pain, menstrual pain, toothache and arthritisForm: Tablets功能主治：用于治疗偏头痛和暂时缓解轻度的持续性隐痛以及头痛、鼻窦炎、感冒、肌肉疼痛、经前与经期疼痛、牙痛和关节炎痛。类型：片剂

LIANpu sHuANgqINg 连蒲双清片

Usage: Treatment of acute inflammation such as dysentery and intestinal infectionForm: Tablets功能主治：清热解毒、燥湿止痢。类型：片剂

ER DINg gRANuLEs 二丁颗粒

Usage: Treatment of jaundice, clears heat toxinForm: Granules功能主治：清热解毒、利湿退黄。用于热疖痈毒、湿热黄疸、外感风热等症。类型：颗粒

sHuLINgHOu TAbLETs 舒灵喉片

Usage: Clears heat and regenerate body fluid. Treatment of acute and chronic pharyngitis, laryngitis, sore throat and hoarsenessForm: Tablets功能主治：清热解毒、润燥生津。用于急、慢性咽炎、喉炎，以及因用噪过度引起的咽喉疼痛，声音嘶哑等。类型：片剂

WuLINg jIAO NANg 五苓胶囊

Usage: Warms Yang and disperses water accumulation; regulates water circulation and dispels dampnessForm: Granules功能主治：温阳化气、利湿行水。用于阳不化气、水湿内停所致的水肿、症见小便不利、水肿腹胀。类型：颗粒

Usage: Treatment of flatus, inappetency, dyspepsy and spleen weaknessForm: Tablets功能主治：消食、健脾。用于脘腹胀满、伤食呕恶、小儿厌食、消化不良、脾胃虚弱。类型：片剂

XIAO sHI jIAN pI 消食健脾片

Our Products

PHARMESIS INTERNATIONAL LTD. Annual Report 2012

Pharmesis International Ltd., is a pharmaceutical company in the PRC which can trace its origins back to 1996.

Our pharmaceutical products include prescribed products and over-the-counter (OTC) drugs.

Pharmaceutical products include western medicine products under the “国嘉” brand and TCM formulated products under the “古蔺肝苏” brand.

Our two GMP-compliant production facilities, with a total land area of approximately 41,000 sqm, are located in Chengdu and Gulin, PRC. We emphasize strict quality control procedures for our products at every stage of our production process, from the selection of raw materials up to finished products.


In November 2012, we obtained the GMP licence to produce oral liquid medicines and commercial production for Huangke has since started. We will continue to focus on streamlining and aggressive marketing for our key products, including Huangke and Gansu. We believe that through building our strengths, we can nurture future growth.

Nurturing Growth

bEAR bILE & buLbus FRITILLARIAE ORAL LIquID (HuANgKE)熊胆川贝口服液

Usage: Treatment of phlegm-heat coughForm: Oral Liquid功能主治：清热化痰、止咳。类型：口服液

gANsu 古蔺肝苏

Usage: Treatment of acute and chronic hepatitisForm: Granules, Tablets and Capsules功能主治：用于慢性活动性肝炎、乙型肝炎，也可用于急性病毒性肝炎。类型：颗粒、片剂、胶囊

Letter to Shareholders

Financial Year ended 31 December 2012 (“FY2012”) was yet another challenging year for the global economy as we continued to face subdued market conditions in the world’s major economies.

Within the industry, policy turbulence, pricing pressures, cost containment measures and a host of other challenges continued to impact the bottom line of the pharmaceutical industry in China. Coupled with keen local and foreign competition, these challenges continued to test our managerial acumen and vigilance.

Year in Review

In FY2012, the Group’s revenue decreased by 9.5% year-on-year from RMB 61.0 million in FY2011 to RMB 55.2 million during the year in review.

This was mainly due to lower revenue from the Group’s manufacturing business as a result of new price cuts arising from continued healthcare reforms in China and keen competition.

These factors had also eroded our gross profit margin in FY2012. Although our distribution business had expanded in volume in FY2012, contributing RMB 13.0 million to revenue in FY2012 as compared to RMB 11.6 million in FY2011, the overall gross profit margin declined from 64.1% in FY2011 to 57.7% in FY2012, mainly due to price reductions in the wake of healthcare reforms in China and higher percentage contribution from the distribution business segment where margins are lower. During the financial year, we had also made an impairment to the Group’s property, plant and equipment for our western drugs business. As a result, the Group reported net loss attributable to equity holders of RMB 19.4 million in FY2012.

Dear Shareholders,

Chew Heng Ching Wu Xuedan

04 PHARMESIS INTERNATIONAL LTD. Annual Report 2012

Focusing on our Core Competence


Nurturing our Strengths

Despite the sluggish business environment, FY2012 saw our efforts paid off as we obtained the Good Manufacturing Practice (“GMP”) licence in November 2012 to produce oral liquid medicines. Commercial production of the new oral liquid medicine, Bear Bile & Bulbus Fritillariae Oral Liquid (Huangke) has commenced since December 2012. Previously, the Group was only licensed to manufacture medicine in tablet, capsule and granule forms. Our achievement in obtaining the license for liquid form production has been the culmination of collective efforts over many years and it is extremely gratifying to have reached this milestone. We believe that we can reap positive contributions from this new production line in the years ahead.

During late 2012, another product of ours, Gansu, was included in Sichuan’s Supplementary Essential Drug List. With this new adjustment by Sichuan Provincial Health Department, we expect to see sales volume improvements as primary health care institutions in Sichuan can only stock and use essential medicines on the prescribed list. Sichuan province, where we have a strong foothold, constitutes 1/4 of our total Gansu sales in China. With this admission to the Essential Drug List, we are optimistic that sales of Gansu will increase.

Looking at the bigger picture, we foresee that healthcare demands in China will remain robust. Increasing disposable income, urbanisation and the country’s aging population are all factors that augur well for the future of the China’s pharmaceutical industry. With China being a major outsourcing hub for the global pharmaceutical industry, there is no doubt that the future of the Chinese pharmaceutical industry holds substantial growth potential.

According to China Economic Information Network, an agency that provides information and analyses of China’s macro-economic trends, China’s

pharmaceutical industry looks set for further development, with output projected to grow to RMB 10 trillion by 2020, as the Chinese government has identified pharmaceutical and biotechnology as one of the seven national “strategic industries” and has established provisions to boost and consolidate the sector, including an investment of RMB 10 billion to support drug innovation.

However, despite the growth potential and support in China’s healthcare industry, China’s deepening reforms to its medical and healthcare system under the Twelfth Five-Year (2011-2015) Plan to provide an universal coverage of a more affordable and equitable national healthcare system to its citizen will continue to pose challenges to our operating environment. Moving forward, the Group will focus on marketing and selling of our key products, including Huangke and Gansu. The Group will also continue to expand our distribution business by selling more of our existing products as well as sourcing for new products. Barring unforeseen further price cuts by the National Development and Reform Commission (“NDRC”) and successful tenders, we are cautiously confident of weathering the challenges ahead with our streamlined operations and aggressive marketing.

Acknowledgements

At this juncture, we would like to express our sincere appreciation to all employees, directors, shareholders and business partners for their strong and loyal support. As we enter the new year, we look forward to a better FY2013.Your support will continue to drive us to forge a better future.

Chew Heng Ching Wu XuedanNon-Executive Chairman Chief Executive Officer

各位尊敬的股东，


主席及总裁献词

强化根基整装待发

2012财政年的全球经济依然充斥着挑战。我们继续面对全球重大经济体疲弱的市场情况。

在业内，政策的不稳定、价格压力、成本控制措施以及接踵而来的挑战继续影响中国药剂业的收益。来自国内与海外的激烈竞争更是雪上加霜，不断考验我们的管理触觉以及危机应对能力。

业务回顾

在2012财政年，本集团的营业额下滑了9.5%，从2011财政年的6100万元人民币跌至2012财政年的5520万元人民币。这主要是因为在不断实施的医疗改革措施下，我们的制造领域受到新一轮的价格下调以及激烈的竞争，导致我们的制造业务收入减少。

因此，我们的毛利率在2012财政年也受到冲击。虽然我们批发领域的销售量有所上升，从2011财政年的1160万元人民币增长至2012财政年的1300万元人民币，但是因为此领域的毛利率较低，加上价格因受到医疗改革措施的影响，导致总毛利率在2012财政年下滑6.4%，从2011财政年的64.1%下跌至2012财政年的57.7%。另外，我们在此财政年也为本集团的西药制造领域提供固定资产减损，以至本集团在2012财政年蒙受1940万元人民币的可归权益持有人应占净亏损。

增强根基，创造优势

虽然处于疲弱的营业环境，但我们多年来付出的努力在2012财政年有所回报。我们在2012年11月成功获得药品生产质量管理规范(“GMP”)认证，获准生产口服液体药品。在这之前，本集团仅有制造片剂、颗粒以及胶囊药物的执照。我们的新产品熊胆川贝口服液（黄刻）自2012年12月已投入商业生产。我们能够获得此生产认证的成就是集团上下多年共同付出的努力所得来的，象征着一个重大的里程碑。我们相信，通过这项新生产线，我们未来可获得更高收益。

在2012年末，我们的另一产品肝苏被列入在《国家基本药物四川省补充药物优化调整目录》中。经四川省卫生厅这项调整，我们预计我们的肝苏销量应可获得提升，因为四川的医疗机构只能储备以及使用处方药物目录中所列的基本药物。四川省目前占我们在中国四分之一的肝苏总销量，而四川既是本集团的重心业务地区，预计将可为本集团创造优势。

以宏观角度来说，我们估计中国对于药品的需求将持续保持蓬勃。随着财富增长、城市化趋势以及人口老化等都将带动中国药剂业市场。以中国目前身为全球重大的药剂品外销国，中国药剂业的展望将有巨大的增长潜力。

根据提供中国宏观趋势资讯以及分析的中国经济信息网，中国药剂市场正蓄势待发，预计到了2020年，总产值将达到10兆元人民币。中国政府已将药剂以及生物科技列为七大国家“策略性工业”之一，并已成立储备金来振兴此领域，其中就包括100亿元人民币的投资以支持药物创新研究。

不过，尽管中国医疗业拥有增长潜力，在“十二五”（2011年至2015年）规划下的医疗改革将继续对我们的行业造成挑战。根据该规划方案，政府将深化医药卫生体制改革，为所有中国人民提供全民医保，让他们能享有合理且负担得起的全国医疗制度。展望未来，本集团将着重于主要产品如黄刻以及肝苏的行销。我们也将通过售卖更多现有的产品并同时开发新产品货源，以扩大我们的批发领域。在国家发展和改革委员会不再对药品进行削价以及获得成功投标的情况下，凭着缩减营运成本以及积极实施行销策略，我们将持谨慎乐观的态度，在未来能够跨过挑战。

鸣谢

最后，我们谨在此向所有员工、董事、股东以及商业伙伴所给予的忠心支持表示由衷的感谢。在我们步入崭新的一年，我们期待2013财政年将有更好的表现。您的支持将继续推动我们往更好的未来迈进。

周亨增吴学丹非执行主席总裁

Revenue

Contending with new price cuts arising from continued healthcare reforms in China and intense competition, the Group generated lower revenue from the manufacturing business, resulting in a 9.5% fall in total revenue from RMB 61.0 million in FY2011 to RMB 55.2 million in FY2012. Distribution business, however, continued to expand in volume, contributing RMB 13.0 million to revenue in FY2012 as compared to RMB 11.6 million in FY2011.

This higher percentage contribution from the distribution business where margins were lower, coupled with price reductions from the healthcare restructuring exercise in China, eroded our gross profit margins. Margins fell from 64.1% in FY2011 to 57.7% for the financial year under review.

Expenses

During the financial year, operating expenses dropped by 10.7% or RMB 6.1 million as a result of reductions in both selling and distribution costs and administrative costs.

Selling and distribution costs decreased by 15.7% to RMB 31.9 million year-on-year mainly due to lower sales and new sales strategies which the Group gradually implemented from FY2010. Administrative costs decreased marginally by 0.6% to RMB 18.5 million in FY2012 mainly due to lower incentives given to customers for early settlement of RMB 1.8 million and lower entertainment costs of RMB 0.2 million. However, this was offset by research and development costs which the Group has undertaken for its Gansu products of RMB 1.0 million, legal costs of RMB 0.3 million and provision for doubtful trade receivables of RMB 0.6 million.

Other operating costs of RMB 4.2 million for FY2012 pertained to impairment made on property, plant and equipment for the Group’s western drugs business.

Operations & Financial Review

Our Integrated Solution for

your Pharmaceutical Needs


强化根基整装待发

Profit

As a result of the above, the Group reported net loss attributable to equity holders of RMB 19.4 million in FY2012.

Financial Position

The Group’s non-current assets were RMB 27.1 million as at 31 December 2012, a decrease of RMB 8.2 million from RMB 35.3 million as at 31 December 2011. This was mainly due to depreciation and amortisation for its fixed and intangible assets of RMB 4.3 million and impairment made on property, plant and equipment made for the Group’s western drugs business of RMB 4.2 million. This was partially offset by additions to fixed assets amounting to RMB 0.3 million.

The Group’s current assets were RMB 74.7 million as at 31 December 2012, a decrease of RMB 11.5 million from RMB 86.2 million as at 31 December 2011 mainly due to improved collections for trade receivables. Inventories increased mainly due to higher stock holdings and pre-paid expenses increased mainly due to pre-payment for manufacturing consumables as a result of replenishment. Other receivables increased mainly due to accrual of interest receivable from a structured deposit, which was subsequently fully received in January 2013.

The Group’s current liabilities increased from RMB 4.0 million as at 31 December 2011 to RMB 6.3 million as at 31 December 2012 mainly due to higher trade payables and payables for research and development costs incurred on its Gansu products of RMB 1.1 million and accrued legal fees of RMB 0.3 million.

Cash Flow And Liquidity

Despite an operating loss, through improved collection, the Group registered a net cash inflow from operating activities of RMB 0.7 million for the financial year ended 31 December 2012. Net cash used by investing activities amounted to RMB 0.3 million, mainly for the purchase of plant and office equipment.

As at 31 December 2012, the Group had a cash and cash equivalents position of RMB 25.8 million.

Shareholders’ Funds

Shareholders’ funds decreased to RMB 90.6 million as at financial year ended 31 December 2012. Based on the Group’s net loss for FY2012, loss per share was 9.72 RMB cents as compared to loss per share of 8.57 RMB cents in FY2011. Net asset value per share stood at 45.32 RMB cents at year-end FY2012.


9

6

3

0

-3

-6

-9

-12

-15

-18

-21

-242008 2009 2010 2011 2012

(Loss)/Profit Before Tax (RMB Million)

Revenue By Sector (RMB Thousand)

WESTERN MEDICINE

TCM

DISTRIBUTION

Financial Highlights


Revenue (RMB Million)

Equity(RMB Million)

20102009 2011 2012

55.2

95.0

40,015

7.7

4.8

0.3

(17.8)

53,182

1,608

46,412

32,479

6,379

23,155

26,225

11,619

20,078

22,113

13,046

(22.0)

MR. CHEW HENg CHINg Non-Executive Chairman and Independent Director

周亨增非执行主席兼独立董事

MR. Wu XuEDAN Chief Executive Officer and Executive Director

吴学丹总裁兼执行董事


Board of Directors

Mr. Chew Heng Ching has been an Independent Non-Executive Director since 9 November 2005. He assumes the role of Non-Executive Chairman on 5 January 2009. Mr. Chew has more than 30 years of senior management experience in both the private and public sectors. In corporate life, Mr. Chew is the founding President of the Singapore Institute of Directors and was Immediate Past Chairman of its Governing Council. He sits on the board of various publicly listed companies in Singapore and chairs their various Board Committees. He was a Member of the Council on Corporate Disclosure and Governance. He is also a Board member and Past Chairman of the Singapore International Chamber of Commerce. He was a Council Member of the Singapore Business Federation. In public life, Mr. Chew was a Member of Parliament from 1984 to 2006 and a former Deputy Speaker of the Singapore Parliament. He currently serves on the Board of various charities. A Colombo Plan scholar, Mr. Chew is a graduate in Industrial Engineering (1st Class Honours) and Economics. He also holds an Honorary Doctorate in Engineering. He is a fellow of the Singapore Institute of Directors and CPA Australia.

周亨增先生自2005年11月被委任为独立兼非执行董事，并在2009年1月5日受委成为非执行主席。他拥有超过30年的高级管理层经验，跨足私人及公共领域。

在企业领域上，周先生是新加坡董事学会的创办人，也是其管理委员会的前主席。他目前是许多本地上市公司的董事，并担任其委员会主席。他曾是企业披露与监管理事会的成员。他是新加坡国际商会的前主席，目前依然是该会成员。他也担任过新加坡工商联合总会的理事会成员。

在公共服务方面，周先生从1984年至2006年担任国会议员，也曾担任国会副议长。他目前在许多慈善机构的董事局里服务。

身为一名科伦坡计划奖学金得主，周先生获得工业工程（一等荣誉）以及经济学位。他也同时拥有工程荣誉博士学位。他目前是新加坡董事学会以及澳大利亚注册会计师学会的成员。

Mr. Wu Xuedan has been an Executive Director since 16 April 2004. He was appointed as our Chief Executive Officer on 5 January 2009. Mr. Wu has years of experience in the pharmaceutical industry.

Mr. Wu handles the Group’s operations in strategic planning, corporate management and business development. Mr. Wu joined Chengdu Kinna in 1996. Prior to that, he was the Production Manager at Chengdu Automobile Maintenance and Repair Factory under the Ministry of Communications (Transport) from 1983 to 1996.

Mr. Wu graduated from Economic Management Correspondence Union University in 1987 specialising in Industrial Enterprise Management. Mr. Wu also holds a Diploma in Mechanical Manufacturing from Wuhan Water Transport Secondary Specialised School.

吴学丹先生在2004年4月16日加入本公司担任执行董事一职，随后在2009年1月5日受委任总裁。他在生物医药领域上拥有丰富的经验。

吴先生负责管理集团的营运策划、企业管理以及商业发展。他在1996年加入成都国嘉，而在之前的1983年至1996年间，他也担任过交通部成都汽车保修机械厂的生产科科长。

吴先生在1987年毕业于经济管理刊授联合大学工业企业管理专科。他也同时拥有武汉水运工业学校的机械制造专业文凭。

MR. CHEW THIAM KENgIndependent Non-Executive Director

周添庆独立兼非执行董事

DR. pu WEIDONgIndependent Non-Executive Director

濮卫东独立兼非执行董事


Mr. Chew Thiam Keng has been an Independent Non-Executive Director since 25 August 2004. He was re-elected as a director on 24 April 2012. Mr. Chew is currently the Chief Executive Officer of Ezion Holdings Limited. Prior to joining Ezion Holdings Limited, Mr. Chew was the Managing Director/CEO of KS Energy Services Limited for about five years and was the Executive Director of Kian Ann Engineering Ltd. between 1996 and November 2001. Before that, Mr. Chew was with The DBS Bank Ltd. for nine years working in the areas of banking such as corporate finance and retail banking. Mr. Chew holds a Master Degree in Business Administration from the University of Hull and a Bachelor Degree (Honours) in Mechanical Engineering from the National University of Singapore.

周添庆先生自2004年8月25日担任独立兼非执行董事，随后在2012年4月24日继续连任。

周先生目前担任毅之安控股有限公司的总裁。在加入毅之安控股有限公司之前，他曾经在金声能源服务担任总裁长达5年，也在1996年至2001年11月间担任建安机械有限公司的执行董事。周先生曾在新加坡发展银行长达9年的时间，主要投身于企业融资和零售银行等银行服务。

周先生拥有赫尔大学工商管理硕士以及新加坡国立大学之机械工程学士荣誉学位。

Dr. Pu Weidong was appointed as a Non-Independent and Non-Executive Director of our Company on 6 March 2008 and was re-elected as a director on 20 April 2011. Dr. Pu was re-designated to Independent Non-Executive Director with effect from 1 January 2011. Dr. Pu is currently the Chief Executive Officer and Executive Director of Sinopipe Holdings Limited. He is also the Managing Director of Triumpus Capital Ltd. Dr. Pu was the Vice President and Chief Financial Officer of Sinomem Technology Limited between 2006 and December 2009. Before his employment with Sinomem Technology Limited in 2006, he was an investment analyst with DMG & Partners, and subsequently UOB Kay Hian for five years. Dr. Pu holds a Bachelor Degree in Environmental Engineering from Suzhou Institute of Urban Construction & Environmental Protection in China. He also holds MSc by Research in Finance and Accounting from National University of Singapore and Master and Ph.D. in Economics from Fudan University, China. Dr. Pu is a CFA charterholder.

濮卫东博士在2008年3月6日受委任本公司之非独立兼非执行董事，并且在2011年4月20日连任董事一职。自2011年1月，他调任成为独立兼非执行董事。

濮博士目前担任中国管业控股有限公司总裁兼执行董事。他也是Triumpus Capital Ltd 的常务董事，并曾经在2006年与2009年12月期间担任新达科技的副总裁兼首席财务官。在加入新达科技之前，他曾在证券行业服务5年，在德意志摩根建富和大华继显担任投资分析员。

濮博士毕业于中国苏州城建环保学院环境工程系。他拥有新加坡国立大学主修财经与会计研究的理学硕士以及复旦大学经济硕士和博士学位。他目前是美国特许证券分析师学会(CFA)的特许资格持有人。

Board of DirectorsChew Heng Ching Non-Executive Chairman and Independent DirectorWu Xuedan Chief Executive Officer and Executive DirectorChew Thiam Keng Independent Non-Executive DirectorPu Weidong Independent Non-Executive Director

Audit CommitteeChew Heng Ching (Chairman)Chew Thiam KengPu Weidong

Nominating CommitteeChew Thiam Keng (Chairman)Chew Heng ChingWu Xuedan

Remuneration CommitteePu Weidong (Chairman)Chew Heng Ching Chew Thiam Keng

Joint Company SecretariesLow Siew TianChan Lai Yin

Registered Office5 Kallang Sector #03-02Singapore 349279Tel: (65) 6846 0766Fax: (65) 6743 7916Email: [email protected]

Head OfficeNo. 8 Yingbin Road, Chengdu, Sichuan, PRC

Share RegistrarBoardroom Corporate & Advisory Services Pte. Ltd.50 Raffles PlaceSingapore Land Tower #32-01Singapore 048623

AuditorsErnst & Young LLPPublic Accountants and Certified Public AccountantsOne Raffles Quay North Tower Level 18Singapore 048583Partner-in-charge: Tan Swee Ho(Appointed since financial year ended 31 December 2009)

Principal BankersAgricultural Bank of ChinaChina Everbright BankIndustrial and Commercial Bank of ChinaSPD Bank

Corporate Information


Corporate Governance Statement

Directors’ Report

Statement by Directors

Independent Auditors’ Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Statements of Financial Position

Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Statistics of Shareholdings

Notice of Annual General Meeting

Proxy Form

14

21

25

26

27

28

29

30

32

33

72

74

Corporate Governance Statement and Financial Contents



Pharmesis International Ltd. (the “Company”) is committed to maintaining a high standard of corporate governance

in complying with the principles and guidelines set out in the Code of Corporate Governance 2005 (the “Code”)

which forms part of the Continuing Obligations of the Singapore Exchange Securities Trading Limited (“SGX-ST”)’s

Listing Manual. This report outlines the Company’s corporate governance practices throughout the fi nancial year

with specifi c reference to the Code issued by the Corporate Governance Committee.

BOARD MATTERS

Principle 1: Board’s Conduct of its Affairs

The Board’s primary role is to protect shareholders’ interests and enhance long-term shareholders’ value. It sets the

overall strategy for the Company and its subsidiaries (the “Group”) and supervises the management. To fulfi ll this

role, the Board is responsible for setting the strategic direction for the Group, establishing goals for management and

monitoring the achievement of these goals.

Apart from its statutory responsibilities, the Board’s principal functions include the following:

(i) approve the Group’s corporate and strategic directions;

(ii) approve annual reports, periodic fi nancial announcements and accounts;

(iii) ensure management leadership of high quality, effectiveness and integrity;

(iv) approve annual budgets, investment and divestment proposals;

(v) appoint key personnel;

(vi) review fi nancial performance and implement fi nancial policies which incorporate risk management, internal

controls and reporting compliance; and

(vii) assume responsibility for corporate governance framework of the Company.

To assist in the execution of its responsibilities, the Board is supported by a number of committees which include

a Nominating Committee, a Remuneration Committee and an Audit Committee. These committees have written

mandates and operating procedures, which are reviewed on a regular basis.

The Board meets at least four times a year to oversee the business affairs of the Group and approve any fi nancial or

business strategies or objectives. Where necessary, additional Board meetings and committee meetings are held to

deliberate on urgent substantive matters. Telephonic attendance and conference via audio communication at Board

meetings are allowed under the Company’s Articles of Association.

The details of the number of Board and Board Committees meetings held during the fi nancial year and the

attendance of each Board member at those meetings are disclosed as follows:

Name Board Audit CommitteeRemuneration

CommitteeNominating Committee

No. of meetings

held

No. of meetings attended

No. of meetings

held


No. of meetings

held


No. of meetings

held


Mr. Chew Heng Ching 4 4 4 4 1 1 1 1

Mr. Wu Xuedan 4 4 N.A. N.A. N.A. N.A. 1 1

Mr. Chew Thiam Keng 4 4 4 4 1 1 1 1

Dr. Pu Weidong 4 4 4 4 1 1 N.A. N.A.



New directors appointed to the Board are given an orientation to the Group’s operational facilities in the People’s

Republic of China (“PRC”) and meet up with senior management to provide background information about the

Group’s history and business operations. In addition, the Board is provided with regular updates with respect to new

laws and regulations in order to adapt to the changing commercial risks relating to the business and operations of

the Group.

Principle 2: Board Composition and Balance

The Board comprises 4 Directors: Three (3) Independent Directors and one (1) Executive Director. Their collective

experience and contribution are valuable to the Group. The Directors as at the date of this report are listed as

follows: -

Mr. Chew Heng Ching Non-Executive Chairman and Independent Director

Mr. Wu Xuedan Chief Executive Offi cer and Executive Director

Mr. Chew Thiam Keng Independent Director

Dr. Pu Weidong Independent Director

The Board constantly examines its size with a view to determining the number for effective decision-making. The

Board is of the view that its current size is appropriate, which facilitates effective decision-making. The Nominating

Committee reviews the independence of each director annually, bearing in mind the circumstances set forth in the

Code.

The directors bring with them a wealth of expertise and experience in areas such as accounting, fi nance, business

or management experience and industry knowledge. Its composition enables the management to benefi t from a

diverse and objective perspective on any issues raised before the Board. Key information of directors is set out on

pages 10 and 11 of this Annual Report. No individual or group of individuals dominates the Board’s decision-making.

Principle 3: Chairman and Chief Executive Offi cer

The Board subscribes to the principle set out in the Code on the separation of the roles of the Chairman and the

Chief Executive Offi cer (“CEO”). The roles and responsibilities of the Chairman and CEO in the Company are distinct

and separate. This is to ensure appropriate balance of power and authority, accountability and decision-making.

The Chairman, Mr. Chew Heng Ching, is an Independent Director. He and the CEO are not related to each other.

The CEO is responsible for the day-to-day management of the affairs of the Group. He takes a leading role in

developing and expanding the businesses of the Group and ensures that the Board is kept updated and informed of

the Group’s business.

The Chairman’s responsibilities include:

(i) scheduling meetings and leading the Board to ensure its effectiveness and approves the agenda of Board

meetings in consultation with the CEO;

(ii) reviewing key proposals and Board papers before they are presented to the Board and ensures that Board

members are provided with accurate and timely information;

(iii) ensuring that Board members engage Management in constructive debate on various matters including

strategic issues and business planning processes; and

(iv) promoting high standards of corporate governance.



Principle 6: Access to Information

From time to time, the directors are furnished with detailed information concerning the Group to enable them to be

fully aware and understand the decisions and actions of the management of the Group. The Board has unrestricted

access to the Group’s records and information. As a general rule, Board papers are required to be sent to directors

at least 4 days before Board meeting so that members may better understand the matters before the Board meeting

and discussion may be focused on questions that the Board has about the Board papers. The Board papers include

suffi cient information from the management on fi nancial, business and corporate issues to enable the directors to be

properly briefed on issues to be considered at Board meetings.

The Independent Directors have separate and independent access to the Group’s senior management and Company

Secretary at all times. The Board also takes independent professional advice as and when necessary to enable it to

discharge its responsibilities effectively. Subject to the approval of the Chairman, directors, whether as a group or

individually, may seek and obtain independent professional advice to assist them in their duties, at the Company’s

expense.

BOARD COMMITTEES

Nominating Committee (“NC”)

Principle 4: Board MembershipPrinciple 5: Board Performance

The NC comprises the following directors, the majority of whom including the Chairman is independent. The

Chairman is not associated with the substantial shareholders of the Company:

Mr. Chew Thiam Keng, Independent Director (Chairman)

Mr. Chew Heng Ching, Independent Director (Member)

Mr. Wu Xuedan, Executive Director (Member)

The Board has approved the written terms of reference of the NC, whose principal functions include the following:

(i) make recommendations to the Board on all Board appointments taking into account the director’s contribution

and performance;

(ii) review the Board’s structure, size and composition, having regard to the principles of corporate governance

and the Code;

(iii) identify and nominate candidates for the approval of the Board to fi ll vacancies in the Board as and when they

arise;

(iv) formulate succession plan;

(v) determine, on an annual basis, whether a director is independent based on the circumstances set forth in the

Code;

(vi) recommend directors who are retiring by rotation to be put up for re-election;

(vii) decide whether or not a director is able to carry out and has been adequately carrying out his duties as a

director of the Company, particularly when he has multiple board representations; and

(viii) assess the effectiveness of the Board as a whole and assess the contribution of each individual director to the

effectiveness of the Board on an annual basis.

Pursuant to the Company’s Articles of Association, all directors must submit themselves for re-election at the Annual

General Meeting (“AGM”) at least once every three years and all newly appointed directors during the year shall retire

at the next AGM. Retiring Directors are eligible for re-election.



During the fi nancial year, the NC met once and had recommended to the Board that Mr. Chew Heng Ching

and Dr. Pu Weidong who are due for retirement by rotation under Article 91, be nominated for re-election at the

forthcoming Annual General Meeting. In making its recommendation, the NC evaluates such directors’ contribution

and performance, such as their attendance at meetings of the Board and Board Committees, where applicable,

participation, candour and any special contributions.

The NC is also responsible for determining annually, the independence of directors. In its annual review, the NC,

having considered the guidelines set out in the Code, has confi rmed the Non-Executive Directors namely, Mr. Chew

Heng Ching, Mr. Chew Thiam Keng and Dr. Pu Weidong are independent. The NC is satisfi ed that suffi cient time and

attention are being given by the directors to the affairs of the Company, notwithstanding that some of the directors

have multiple board representations.

The NC has an annual Board performance evaluation to assess the effectiveness of the Board as a whole and the

contribution of each director to the effectiveness of the Board by having the directors complete a questionnaire. The

fi ndings were analysed and discussed with a view to implementing certain recommendations to further enhance the

effectiveness of the Board.

The NC, in assessing the contribution of each director, had considered his attendance and participation at Board

and Board Committee Meetings, his qualifi cation, experience and expertise and the time and effort dedicated to the

Group’s business and affairs including management’s access to the directors for guidance or exchange of views as

and when necessary. In assessing the effectiveness of the Board as a whole, both quantitative and qualitative criteria

are considered. Such criteria include return on equity and the achievement of strategic objectives.

Remuneration Committee (“RC”)

Principle 7: Procedures for Developing Remuneration PoliciesPrinciple 8: Level and Mix of RemunerationPrinciple 9: Disclosure on Remuneration

The RC comprises entirely Independent Directors. The members of the RC are:

Dr. Pu Weidong, Independent Director (Chairman)

Mr. Chew Heng Ching, Independent Director (Member)

Mr. Chew Thiam Keng, Independent Director (Member)

The role of the RC is to review and recommend to the Board a framework of remuneration of the Board and key

executives of the Group, including but not limited to directors’ fees, salaries, allowances, bonuses, share options and

benefi ts-in-kind.

The RC, in establishing the framework of remuneration policies for its directors and key executives is largely

guided by the fi nancial performance of the Company. The primary objective of the RC is to align the interests of

management with that of the shareholders. In this regard, the RC believes that remuneration should be competitive

and suffi cient to attract, retain and motivate the Executive Director and key executives to better manage the

Company.

The Executive Director does not receive directors’ fees. The remuneration package adopted for the Executive

Director is as per service contract entered into between the Executive Director and the Company. The remuneration

policy for Executive Director consists of fi xed amounts in cash and annual variable incentive. The annual variable

incentive is payable on the achievement of individual and corporate performance targets.

The Independent Directors have no service contracts with the Company and their terms are specifi ed in the

Articles of Association. Save for directors’ fees, Non-Executive Directors do not receive any remuneration from the

Company. Directors’ fees are set in accordance with a remuneration framework comprising basic fees and additional

fees for serving on any of the committees. Directors’ fees are subject to the approval of the shareholders as a lump

sum payment at the Annual General Meeting (“AGM”).

During the fi nancial year, the RC met once to review and recommend the remuneration of the Executive Director and

fees payable to the Non-Executive Directors.



A summary of each Non-Executive and the Executive Director’s remuneration paid during the fi nancial year ended 31

December 2012 is shown below:

Remuneration Band and Name of DirectorDirectors’

Fees (1) Salary Bonus Total% % % %

Below S$250,000Mr. Wu Xuedan – 100 – 100

Mr. Chew Heng Ching 100 – – 100

Mr. Chew Thiam Keng 100 – – 100

Dr. Pu Weidong 100 – – 100

1 The Directors’ Fees for the fi nancial year ended 31 December 2012 has been approved by the shareholders at the Annual General

Meeting held on 24 April 2012.

Key Executives

The remuneration of the top fi ve executives of the Group for the fi nancial year ended 31 December 2012 is shown in

the following bands:

Below S$250,000 Guo Ping

Qi Jie

Shelliane Tee

Wang Ling

Xu Hui Li

Key executives’ remuneration packages are set in accordance with a remuneration framework comprising basic

salary (including variable and benefi ts-in-kind). To preserve the confi dentiality of remuneration packages of these key

executives, the breakdown (in percentage terms) of each executive’s remuneration is not disclosed.

The RC also administers the Pharmesis Share Option Scheme (“Option Scheme”) in accordance with the objectives

and regulations of the Option Scheme and to determine participation eligibility, options offers and share allocation

and to attend to such other matters that may be required. Details of the Option Scheme can be found on page 22

of the Annual Report.

Immediate Family Member of Director

The Company does not have any employee who is an immediate family member of a Director or CEO.

Audit Committee (“AC”)

Principle 10: Accountability

The Group recognises the importance of providing the Board with a continual fl ow of relevant information on an

accurate and timely basis in order that it may effectively discharge its duties. The Group ensures that price-sensitive

information is fi rst publicly released and announced within the prescribed period after the review by the Board.

Principle 11: Audit Committee

The AC comprises entirely Independent Directors. The members of the AC are:

Mr. Chew Heng Ching, Independent Director (Chairman)

Mr. Chew Thiam Keng, Independent Director (Member)

Dr. Pu Weidong, Independent Director (Member)



The Chairman and members of the AC have many years of experience in business management and fi nance. The

Board is of the view that the members of the AC have suffi cient fi nancial management expertise and experience to

discharge the AC’s functions.

The responsibilities of the AC include reviewing the scope and results of the audit and its cost effectiveness, the

independence and objectivity of the external auditors, signifi cant fi nancial reporting issues and judgments to ensure

the integrity of the external auditors, signifi cant fi nancial reporting issues and judgments to ensure the integrity of the

fi nancial statements, any formal announcements relating to the Group’s fi nancial performance, the adequacy of the

Group’s internal controls, the effectiveness of the Group’s internal audit function, and recommending to the Board on

the appointment, re-appointment and removal of the external auditors.

There are arrangements in place, by which staff of the Group may, in confi dence, raise concerns about the possible

improprieties in matters of fi nancial reporting or other matters with the AC. The objective for such arrangement is to

ensure independent investigation of such matters and for appropriate follow-up action.

The AC also has explicit authority to investigate any matters within its terms of reference, full access to and

cooperation by management and full discretion to invite any director or executive offi cer to attend its meetings and

reasonable resources to enable it to discharge its functions properly.

During the fi nancial year, the AC held 4 meetings and met with internal and external auditors, without the presence

of the Company’s management, at least once a year to review the overall scope of both internal and external audits,

and the assistance given by the management to the auditors.

During the fi nancial year, the AC has reviewed the scope and quality of audit by the external auditors and the

independence and objectivity of the external auditors as well as the cost effectiveness. The AC also reviewed the

audit and non-audit fees paid to the external auditors. The AC, having reviewed all non-audit services provided

by the external auditors of the Group, is satisfi ed that the nature and extent of such services would not affect the

independence of the external auditors.

The Group does not appoint different auditors for its signifi cant subsidiaries or associated companies.

The Company is in compliance with Rule 712 and Rule 715 of the SGX-ST’s Listing Manual in relation to its external

auditors.

The AC has recommended and the Board has approved the nomination of Ernst & Young LLP for re-appointment as

the external auditors of the Company at the forthcoming AGM.

Principle 12: Internal Controls

The Board is responsible for the overall internal control framework and is fully aware of the need to put in place

a system of internal controls within the Group to safeguard shareholders’ interests and the Group’s assets, and

to manage risks. The Board recognises that no cost effective internal control system will preclude all errors and

irregularities, as a system is designed to manage rather than eliminate the risk of failure to achieve business

objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss.

The AC had reviewed the internal control systems, work performed by the internal and external auditors and reviews

performed by the management, is not aware of any issues causing it to believe that the system of internal controls

as inadequate and the same was reported to the Board. The Board with the concurrence of the AC is of the opinion

that currently there are adequate internal controls systems in the Company in addressing fi nancial, operational and

compliance risks. The Board regularly reviews the effectiveness of all internal controls, including operational controls.

Principle 13: Internal Audit

The Company has outsourced the internal audit function to a professional fi rm. The Internal Auditor reports directly

to the AC Chairman on internal audit matters and to management on administrative matters. To ensure the

adequacy of the internal audit function, the AC reviews and approves, on an annual basis, the internal audit plans

and the recourses required to adequately perform this function.



Principle 14: Communication with ShareholdersPrinciple 15: Greater Shareholder Participation

The Board is mindful of the obligation to provide regular, effective and fair communication with shareholders.

Information is communicated to the shareholders on a timely basis. The Board provides shareholders with

an assessment of the Company’s performance, position and prospects on a quarterly basis and other ad hoc

announcements as required by the SGX-ST. The Company’s Annual Report is sent to all shareholders and is

available to other investors on request and accessible at the Company’s website.

The Board welcomes the views of shareholders on matters affecting the Company, whether at general meetings or

on an ad hoc basis. Shareholders are encouraged to participate effectively in and to vote at the general meetings.

Shareholders are informed of general meetings through notices published in the newspapers and reports or circulars

sent to all shareholders. Each item of special business included in the notice of the meeting is accompanied by an

explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the

meeting. The Chairmen of the Audit, Remuneration and Nominating Committees are normally available at the meeting

to answer those questions relating to the work of these committees. The external auditors are also present to assist

the directors in addressing any relevant queries by shareholders.

Risk Management

The Group does not have a Risk Management Committee. However, the management regularly reviews the

Company’s business and operational activities to identify areas of signifi cant business risks as well as appropriate

measures to control and mitigate these risks. The management reviews all signifi cant control policies and

procedures and highlights all signifi cant matters to the Board and AC.

Dealings In Securities

The Company has adopted as its own internal compliance code, the best practices guide in Rule 1207(19) of the

SGX-ST’s Listing Manual with regard to dealing in the Company’s securities by the directors and its offi cers. The

directors, management and offi cers of the Group are prohibited from dealing in the Company’s shares on short-term

considerations and while they are in possession of unpublished price-sensitive, fi nancial or confi dential information.

They are also prohibited from dealing in the Company’s securities during the periods commencing two weeks before

the announcement of the Company’s results for the fi rst and third quarters of its fi nancial year and one month before

the half-year and full-year results and ending on the day of the announcement, or when they are in possession of

unpublished price-sensitive information on the Group.

Interested Person Transactions (“IPTs”)

The Group has established procedures to ensure that all transactions with interested persons are reported on a

timely manner to the AC and that the transactions are carried out on normal commercial terms and are not prejudicial

to the interests of the Company and its minority shareholders.

The Board and the AC will review all IPTs to be entered to ensure that the relevant rules under Chapter 9 of the SGX-

ST’s Listing Manual are complied with.

There was no IPT for disclosure according to Rule 907 of the SGX-ST’s Listing Manual in respect of IPTs for the

fi nancial year ended 31 December 2012.

MATERIAL CONTRACTS

There was no material contract entered during the fi nancial year under review.


Directors’ Report

The directors are pleased to present their report to the members together with the audited consolidated fi nancial

statements of Pharmesis International Ltd. (the “Company”) and its subsidiaries (the “Group”) and statement of

fi nancial position and statement of changes in equity of the Company for the fi nancial year ended 31 December

2012.

1. Directors

The directors of the Company in offi ce at the date of this report are:

Wu Xuedan

Chew Heng Ching

Chew Thiam Keng

Pu Weidong

In accordance with Article 91 of the Company’s Articles of Association, Chew Heng Ching and Pu Weidong

retire, and being eligible, offer themselves for re-election.

2. Arrangements to enable directors to acquire shares and debentures

Except as described in paragraph fi ve below, neither at the end of nor or at any time during the fi nancial

year was the Company a party to any arrangement whose objects are, or one of whose objects is to enable

the directors of the Company to acquire benefi ts by means of the acquisition of shares or debentures of the

Company or any other body corporate.

3. Directors’ interests in shares and debentures

The following director, who held offi ce at the end of the fi nancial year, had, according to the register of

directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50 (the

“Act”), an interest in shares of the Company as stated below:

Direct interest Deemed interest

Name of directorAt beginning of fi nancial year

At end of the fi nancial year

At beginning of fi nancial year

At end of the fi nancial year

Ordinary shares

The Company

Wu Xuedan – – 75,150,000 75,150,000

There was no change in any of the above-mentioned interests between the end of the fi nancial year and 21

January 2013.

By virtue of section 7 of the Singapore Companies Act, Cap. 50, Wu Xuedan is deemed to have interests in

shares of the subsidiaries of the Company.

Saved as disclosed, no director who held offi ce at the end of the fi nancial year had an interest in shares and

debentures of the Company or any of the subsidiaries of the Company either at the beginning of the fi nancial

year or at the end of the fi nancial year.


Directors’ Report

4. Directors’ contractual benefi ts

Except as disclosed in the fi nancial statements, since the end of the previous fi nancial year, no director of the

Company has received or become entitled to receive a benefi t by reason of a contract made by the Company

or related corporation with the director or with a fi rm of which the director is a member or, with a company in

which the director has a substantial fi nancial interest.

5. Options

At the Extraordinary General Meeting held on 25 August 2004, shareholders approved the Pharmesis Share

Option Scheme for the granting of non-transferable options that are settled by physical delivery of the ordinary

shares of the Company to eligible employees.

The Remuneration Committee, comprising three directors, Pu Weidong, Chew Heng Ching and Chew Thiam

Keng, administers the Pharmesis Share Option Scheme.

On 12 March 2008, the Company granted options to directors and employees of the Group to subscribe for

21,350,000 shares in the Company. These options are exercisable between the period from 12 March 2010 to

11 March 2018 at the exercise price of S$0.125 if the employee remains in service for two years from the date

of grant.

Details of outstanding options to subscribe for ordinary shares of the Company pursuant to the Pharmesis

Share Option Scheme as at 31 December 2012 are as follows:

Expiry date Exercise price Number of options

11 March 2018 S$0.125 11,650,000

Details of the options to subscribe for ordinary shares of the Company granted to directors of the Company

pursuant to the Scheme as at 31 December 2012 are as follows:

Name of director

Aggregate options

outstanding as at beginning of fi nancial year

Aggregate options granted since

commencement of plan to end of fi nancial year

Aggregate options exercised since

commencement of plan to end of fi nancial year

Aggregate options

outstanding as at end of

fi nancial year

Chew Heng Ching 1,000,000 1,000,000 – 1,000,000

Chew Thiam Keng 1,000,000 1,000,000 – 1,000,000

Pu Weidong 1,900,000 1,900,000 – 1,900,000

3,900,000 3,900,000 – 3,900,000

Since the commencement of the Pharmesis Share Option Scheme till end of the fi nancial year:

• No options have been granted to the controlling shareholders of the Company; and

• No options that entitle the holder to participate, by virtue of the options, in any share issue of any other

corporation have been granted.


Directors’ Report

6. Audit Committee

The members of the audit committee (“AC”) at the date of this report are as follows:

Chew Heng Ching Chairman

Chew Thiam Keng Independent Director

Pu Weidong Independent Director

The AC carried out its functions in accordance with section 201B(5) of the Singapore Companies Act, Cap.

50, including the following:

• Reviews the audit plans of the internal and external auditors of the Company and review the internal

auditors’ evaluation of the adequacy of the Company’s system of internal accounting controls and the

assistance given by the Company’s management to the external and internal auditors;

• Reviews the quarterly, half yearly results and annual fi nancial statements and the auditors’ report on the

annual fi nancial statements of the Company before their submission to the board of directors;

• Reviews effectiveness of the Company’s material internal controls, including fi nancial, operational and

compliance controls and risk management via reviews carried out by the internal auditors;

• Meets with the external auditors, other committees, and management in separate executive sessions

to discuss any matters that these groups believe should be discussed privately with the AC;

• Reviews legal and regulatory matters that may have a material impact on the fi nancial statements,

related compliance policies and programmes and any reports received from regulators;

• Reviews the cost effectiveness and the independence and objectivity of the external auditors;

• Reviews the nature and extent of non-audit services provided by the external auditors;

• Recommends to the board of directors the external auditors to be nominated, approves the

compensation of the external auditors, and reviews the scope and results of the audit;

• Reports actions and minutes of the AC to the board of directors with such recommendations as the

AC considers appropriate; and

• Reviews interested person transactions in accordance with the requirements of the Singapore

Exchange Securities Trading Limited (SGX-ST)’s Listing Manual.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfi ed that

the nature and extent of such services would not affect the independence of the external auditors. The AC

has also conducted a review of interested person transactions.

The AC convened four meetings during the financial year as shown in the Corporate Governance

Statement. The AC has also met with internal and external auditors, without the presence of the Company’s

management, at least once a year.

Further details regarding the AC are disclosed in the Corporate Governance Statement.


Directors’ Report

7. Auditor

Ernst & Young LLP have expressed their willingness to accept reappointment as auditor.

On behalf of the Board of Directors

Wu Xuedan

Director

Chew Heng Ching

Director

Singapore

27 February 2013


Statement by Directors

We, Wu Xuedan and Chew Heng Ching, being two of the directors of Pharmesis International Ltd., do hereby state

that, in the opinion of the directors:

(a) the accompanying statements of fi nancial position, consolidated income statement, consolidated statement of

comprehensive income, statements of changes in equity and consolidated statement of cash fl ows together

with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of

the Company as at 31 December 2012 and the results of the business, changes in equity and cash fl ows of

the Group and the changes in equity of the Company for the fi nancial year ended on that date, and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its

debts as and when they fall due.

On behalf of the Board of Directors

Wu Xuedan

Director

Chew Heng Ching

Director

Singapore

27 February 2013


Independent Auditors’ ReportFor the fi nancial year ended 31 December 2012 to the Members of Pharmesis International Ltd.

Report on the fi nancial statements

We have audited the accompanying fi nancial statements of Pharmesis International Ltd. (the Company) and its

subsidiaries (collectively, the Group) set out on pages 27 to 71, which comprise the statements of fi nancial position

of the Group and the Company as at 31 December 2012, the statements of changes in equity of the Group and

the Company and the consolidated income statement, consolidated statement of comprehensive income and

consolidated statement of cash fl ows of the Group for the year then ended, and a summary of signifi cant accounting

policies and other explanatory information.

Management’s responsibility for the fi nancial statements

Management is responsible for the preparation of fi nancial statements that give a true and fair view in accordance

with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting

Standards, and for devising and maintaining a system of internal accounting controls suffi cient to provide a

reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and

transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and

fair profi t and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our

audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical

requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements

are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial

statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of

material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making those risk

assessments, the auditor considers internal control relevant to the entity’s preparation of the fi nancial statements

that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not

for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes

evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit

opinion.

Opinion

In our opinion, the consolidated fi nancial statements of the Group and the balance sheet and statement of changes

in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial

Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at

31 December 2012 and of the results, changes in equity and cash fl ows of the Group and the changes in equity of

the Company for the year ended on that date.

Report on other legal and regulatory requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company have been properly

kept in accordance with the provisions of the Act.

Ernst & Young LLP

Public Accountants and

Certifi ed Public Accountants

Singapore

27 February 2013


Consol idated Income StatementFor the fi nancial year ended 31 December 2012

The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.

(In Renminbi)

Note 2012 2011RMB’000 RMB’000

Revenue 3 55,237 60,999

Cost of sales (23,375) (21,889)

Gross profi t 31,862 39,110

Other income 15 57

Selling and distribution costs (31,864) (37,813)

Administrative costs (18,505) (18,609)

Other operating costs 4 (4,231) (1,496)

Finance income 5 759 1,055

Finance costs 5 (28) (63)

Loss before tax 6 (21,992) (17,759)

Income tax expense 7 – (1,637)

Loss for the year (21,992) (19,396)

Loss attributable to:

Equity holders of the Company (19,439) (17,144)

Non-controlling interest (2,553) (2,252)

(21,992) (19,396)

Earnings per share (cents)

Basic and diluted 8 (9.72) (8.57)


Consolidated Statement of Comprehensive IncomeFor the fi nancial year ended 31 December 2012


(In Renminbi)

2012 2011RMB’000 RMB’000

Loss for the year (21,992) (19,396)

Other comprehensive income for the year, net of tax – –

Total comprehensive income for the year (21,992) (19,396)

Total comprehensive income attributable to:

Equity holders of the Company (19,439) (17,144)

Non-controlling interest (2,553) (2,252)

(21,992) (19,396)


Statements of Financial PositionAs at 31 December 2012


(In Renminbi)

Group CompanyNote 2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Non-current assetsProperty, plant and equipment 9 17,179 24,396 117 142

Land use rights 10 3,253 3,354 – –

Intangible assets 11 5,355 6,256 – –

Investment in subsidiaries 12 – – 54,999 54,999

Goodwill on consolidation 13 1,323 1,323 – –

27,110 35,329 55,116 55,141

Current assetsStructured deposits 14 11,000 11,000 – –

Inventories 15 6,893 6,408 – –

Trade receivables 16 26,564 39,823 – –

Prepaid expenses 2,019 1,727 63 59

Other receivables 17 2,119 1,546 26 26

Tax recoverable 300 250 – –

Cash and cash equivalents 18 25,785 25,424 2,868 2,682

74,680 86,178 2,957 2,767

Current liabilitiesTrade payables 19 2,381 1,589 – –

Accrued liabilities and other payables 20 3,871 2,388 1,127 732

Tax payable 10 10 10 10

6,262 3,987 1,137 742

Net current assets 68,418 82,191 1,820 2,025

Non-current liabilityDeferred tax liabilities 21 488 488 488 488

Net assets 95,040 117,032 56,448 56,678

Equity attributable to equity holders of the Company

Share capital 22 77,315 77,315 77,315 77,315

Reserves 13,333 32,772 (20,867) (20,637)

90,648 110,087 56,448 56,678

Non-controlling interest 4,392 6,945 – –

Total equity 95,040 117,032 56,448 56,678


Statement of Changes in EquityFor the fi nancial year ended 31 December 2012


(In Renminbi)

Attributable to equity holders of the Company

Share capital

Employee share

options reserve

Statutory reserve@

Accumulated profi ts/(losses) Total

Non-controlling

interestTotal

equity

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Group

At 1 January 2011 77,315 6,951 11,568 31,397 127,231 9,197 136,428

Net loss for the year represents total

comprehensive income for the year – – – (17,144) (17,144) (2,252) (19,396)

Expiry of employee share options – (1,260) – 1,260 – – –

At 31 December 2011 77,315 5,691 11,568 15,513 110,087 6,945 117,032

Net loss for the year represents total

comprehensive income for the year – – – (19,439) (19,439) (2,553) (21,992)

Expiry of employee share options – (630) – 630 – – –

At 31 December 2012 77,315 5,061 11,568 (3,296) 90,648 4,392 95,040

@ In accordance with Foreign Enterprise Law applicable to the subsidiaries in the People’s Republic of China (“PRC”), the

subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the profi t after taxation

as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF

until the cumulative total of the SRF reaches 50% of the subsidiaries’ registered capital of RMB 76,816,480 (2011: RMB

76,816,480). Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses

or increase the capital of the subsidiaries. The SRF is not available for dividend distribution to shareholders.


Statement of Changes in EquityFor the fi nancial year ended 31 December 2012


(In Renminbi)

Sharecapital

Employeeshare options

reserveAccumulated

losses TotalRMB’000 RMB’000 RMB’000 RMB’000

Company

At 1 January 2011 77,315 6,951 (27,685) 56,581

Net profi t for the year represents total comprehensive

income for the year – – 97 97

Expiry of employee share options – (1,260) 1,260 –

At 31 December 2011 77,315 5,691 (26,328) 56,678

Net loss for the year represents total comprehensive

income for the year – – (230) (230)

Expiry of employee share options – (630) 630 –

At 31 December 2012 77,315 5,061 (25,928) 56,448


Consolidated Statement of Cash FlowsFor the fi nancial year ended 31 December 2012


(In Renminbi)

2012 2011RMB’000 RMB’000

Cash fl ows from operating activities

Loss before tax (21,992) (17,759)

Adjustments for:

Amortisation of land use rights 101 101

Amortisation of intangible assets 901 902

Allowance for/(reversal of) doubtful receivables – trade 597 (52)

Allowance for doubtful receivables – non-trade 60 –

Depreciation of property, plant and equipment 3,316 3,443

Impairment loss on goodwill on consolidation – 1,496

Impairment loss on property, plant and equipment 4,231 –

Loss on disposal of property, plant and equipment – 5

Interest income (759) (1,055)

Operating loss before working capital changes (13,545) (12,919)

Changes in working capital:

Decrease in trade receivables 12,662 12,718

Increase in inventories (485) (1,349)

(Increase)/decrease in prepaid expenses and other receivables (276) 2,358

Increase/(decrease) in trade payables 792 (315)

Increase/(decrease) in accrued liabilities and other payables 1,483 (1,315)

Cash fl ows from/(used in) operations 631 (822)

Interest received 110 374

Income tax paid (50) (1,329)

Net cash fl ows from/(used in) operating activities 691 (1,777)

Cash fl ows from investing activities

Acquisition of property, plant and equipment (330) (524)

Income received from structured deposits – 681

Proceeds from disposal of property, plant and equipment – 118

Net cash fl ows (used in)/from investing activities (330) 275

Net increase/(decrease) in cash and cash equivalents 361 (1,502)

Cash and cash equivalents at the beginning of the year 25,424 26,926

Cash and cash equivalents at the end of the year 25,785 25,424


Notes to the Financial StatementsFor the fi nancial year ended 31 December 2012

1. General

Pharmesis International Ltd. (the “Company”) is a limited liability company incorporated in Singapore and is

listed on the Singapore Exchange Securities Trading Limited (“SGX-ST”). The registered offi ce and principal

place of business of the Company is located at 5 Kallang Sector #03-02, Singapore 349279.

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are set

out in Note 12 of the fi nancial statements.

The Group operates principally in the People’s Republic of China (“PRC”).

2. Summary of signifi cant accounting policies

2.1 Basis of preparation

The consolidated fi nancial statements of the Group and the statement of fi nancial position and the statement

of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting

Standards (“FRS”).

The fi nancial statements have been prepared on a historical cost basis except as disclosed in the accounting

polices below. The fi nancial statements are presented in Renminbi (RMB) and all values are rounded to the

nearest thousands (RMB’000) unless otherwise indicated.

2.2 Changes in accounting policies

The accounting policies adopted are consistent with those of the previous fi nancial year except in the current

fi nancial year, the Group has adopted all the new and revised standards that are effective for annual periods

beginning on or after 1 January 2012. The adoption of these standards did not have any effect on the fi nancial

performance or position of the Group and the Company.

2.3 Standards issued but not yet effective

The Group has not adopted the following standards and interpretations that have been issued but not yet

effective:

Description

Effective for annual periods beginning on

or after

Amendments to FRS 1 Presentation of Items of Other Comprehensive Income 1 July 2012

Revised FRS 19 Employee Benefi ts 1 January 2013

FRS 113 Fair Value Measurement 1 January 2013

Amendments to FRS 107 Disclosures – Offsetting Financial Assets and Financial

Liabilities 1 January 2013



2. Summary of signifi cant accounting policies (cont’d)

2.3 Standards issued but not yet effective (cont’d)

Description

Effective for annual periods beginning on

or after

Improvements to FRSs 2012 1 January 2013

– Amendment to FRS 1 Presentation of Financial Statements 1 January 2013

– Amendment to FRS 16 Property, Plant and Equipment 1 January 2013

– Amendment to FRS 32 Financial Instruments: Presentation 1 January 2013

Revised FRS 27 Separate Financial Statements 1 January 2014

Revised FRS 28 Investments in Associates and Joint Ventures 1 January 2014

FRS 110 Consolidated Financial Statements 1 January 2014

FRS 111 Joint Arrangements 1 January 2014

FRS 112 Disclosure of Interests in Other Entities 1 January 2014

Amendments to FRS 32 Offsetting Financial Assets and Financial Liabilities 1 January 2014

Except for the Amendments to FRS 1 and FRS 112, the directors expect that the adoption of the other

standards and interpretations above will have no material impact on the fi nancial statements in the period of

initial application. The nature of the impending changes in accounting policy on adoption of the Amendments

to FRS 1 and FRS 112 are described below.

Amendments to FRS 1 Presentation of Items of Other Comprehensive Income

The Amendments to FRS 1 Presentation of Items of Other Comprehensive Income (OCI) is effective for

fi nancial periods beginning on or after 1 July 2012.

The Amendments to FRS 1 changes the grouping of items presented in OCI. Items that could be reclassifi ed

to profi t or loss at a future point in time would be presented separately from items which will never be

reclassifi ed. As the Amendments only affect the presentations of items that are already recognised in OCI, the

Group does not expect any impact on its fi nancial position or performance upon adoption of this standard.

FRS 112 Disclosure of Interests in Other Entities

FRS 112 Disclosure of Interests in Other Entities is effective for fi nancial periods beginning on or after 1

January 2014.

FRS 112 is a new and comprehensive standard on disclosure requirements for all forms of interests in other

entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet

vehicles. FRS 112 requires an entity to disclose information that helps users of its fi nancial statements to

evaluate the nature and risks associated with its interests in other entities and the effects of those interests

on its fi nancial statements. As this is a disclosure standard, it will have no impact to the fi nancial position and

fi nancial performance of the Group when implemented in 2014.




2.4 Signifi cant accounting judgements and estimates

The preparation of the Group’s fi nancial statements requires management to make judgements, estimates and

assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure

of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates

could result in outcomes that could require a material adjustment to the carrying amount of the asset or

liability affected in the future.

(a) Judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following

judgement, apart from those involving estimations, which has the most signifi cant effect on the

amounts recognised in the fi nancial statements:

Functional currency

The Group measures foreign currency transactions in the respective functional currencies of the

Company and its subsidiaries. In determining the functional currencies of the entities in the Group,

judgment is required to determine the currency that mainly infl uences sales prices for goods and

services and of the country whose competitive forces and regulations mainly determines the sales

prices of its goods and services. The functional currencies of the entities in the Group are determined

based on management’s assessment of the economic environment in which the entities operate and

the entities’ process of determining sales prices.

(b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the

end of the reporting period, that have a signifi cant risk of causing a material adjustment to the carrying

amounts of assets and liabilities within the next fi nancial year are discussed below. The Group based

its assumptions and estimates on parameters available when the fi nancial statements were prepared.

Existing circumstances and assumptions about future developments, however, may change due to

market changes or circumstances arising beyond the control of the Group. Such changes are refl ected

in the assumptions when they occur.

Income taxes

The Group has exposure to income taxes in two jurisdictions, Singapore and the People’s Republic

of China. Signifi cant judgement is involved in determining the Group-wide provision for income taxes.

There are certain transactions and computations for which the ultimate tax determination is uncertain

during the ordinary course of business. The Group recognises liabilities for expected tax issues based

on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is

different from the amounts that were initially recognised, such differences will impact the income tax

and deferred tax provisions in the period in which such determination is made. The carrying amount

of the Group’s income tax receivable, income tax payable, and deferred tax liability are RMB 300,000

(2011: RMB 250,000), RMB 10,000 (2011: RMB 10,000) and RMB 488,000 (2011: RMB 488,000) at

31 December 2012 respectively.




2.4 Signifi cant accounting judgements and estimates (cont’d)

(b) Key sources of estimation uncertainty (cont’d)

Useful lives of property, plant and equipment

The cost of property, plant and equipment are depreciated on a straight-line basis over their estimated

economic useful lives. Management estimates the useful lives of these property, plant and equipment to

be within 5 to 40 years. Changes in the expected level of usage and technological developments could

impact the economic useful lives and the residual values of these assets, therefore future depreciation

charges could be revised. The carrying amount of the Group’s property, plant and equipment at the

end of the reporting period is disclosed in Note 9 to the fi nancial statements. A 1.0% difference in the

expected useful lives of these assets from management’s estimates would result in approximately 0.1%

(2011: 0.1%) variance in the Group’s profi t or loss for the year.

Impairment of non-fi nancial assets

The Group assesses whether there are any indicators of impairment for all non-fi nancial assets at each

reporting date. Goodwill is tested for impairment annually and at other times when such indicators

exist. Other non-fi nancial assets are tested for impairment when there are indicators that the carrying

amounts may not be recoverable.

An impairment exists when the carrying value of an asset or cash generating unit exceeds its

recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The

fair value less costs to sell calculation is based on available data from binding sales transactions in

an arm’s length transaction of similar assets or observable market prices less incremental costs for

disposing the asset. The value in use calculation is based on a discounted cash fl ow model. The cash

fl ows are derived from the budget for the next fi ve years and do not include restructuring activities

that the Group is not yet committed to or signifi cant future investments that will enhance the asset’s

performance of the cash generating unit being tested. The recoverable amount is most sensitive to the

discount rate used for the discounted cash fl ow model as well as the expected future cash infl ows and

the growth rate used for extrapolation purposes.

Further details of the key assumptions applied in the impairment assessment of goodwill, are given in

Note 13 to the fi nancial statements.

Impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that a

fi nancial asset is impaired. Allowances are applied to trade and other receivables where events or

changes in circumstances indicate that the balances may not be recoverable. Management specifi cally

analyses historical bad debts, customer creditworthiness, current economic trends and changes

in customer payment trends when making a judgement to evaluate the adequacy of the allowance

for impairment for receivables. Where the expectation is different from the original estimate, such

difference will impact the carrying amount of trade and receivables. The carrying amount of the

Group’s loans and receivables at the end of the reporting period is disclosed in Note 29 to the fi nancial

statements.




2.5 Subsidiaries and principles of consolidation

(a) Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the fi nancial and operating

policies so as to obtain benefi ts from its activities.

In the Company’s separate fi nancial statements, investment in subsidiary company is accounted for at

cost less impairment losses.

(b) Basis of consolidation

Basis of consolidation from 1 January 2010

The consolidated fi nancial statements comprise the fi nancial statements of the Company and its

subsidiaries as at the end of the reporting period. The fi nancial statements of the subsidiaries used

in the preparation of the consolidated fi nancial statements are prepared for the same reporting date

as the Company. Consistent accounting policies are applied to like transactions and events in similar

circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-

group transactions are eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains

control, and continue to be consolidated until the date that such control ceases.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a defi cit

balance.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an

equity transaction. If the Group loses control over a subsidiary, it:

De-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying

amounts at the date when control is lost;

De-recognises the carrying amount of any non-controlling interest;

De-recognises the cumulative translation differences recorded in equity;

Recognises the fair value of the consideration received;

Recognises the fair value of any investment retained;

Recognises any surplus or defi cit in profi t or loss;

Re-classifi es the Group’s share of components previously recognised in other comprehensive

income to profi t or loss or retained earnings, as appropriate.




2.5 Subsidiaries and principles of consolidation (cont’d)

(b) Basis of consolidation (cont’d)

Basis of consolidation prior to 1 January 2010

Certain of the above-mentioned requirements were applied on a prospective basis. The following

differences, however, are carried forward in certain instances from the previous basis of consolidation:

Acquisition of non-controlling interests, prior to 1 January 2010, were accounted for using the

parent entity extension method, whereby, the difference between the consideration and the book

value of the share of the net assets acquired were recognised in goodwill.

Losses incurred by the Group were attributed to the non-controlling interest until the balance

was reduced to nil. Any further losses were attributed to the Group, unless the non-controlling

interest had a binding obligation to cover these. Losses prior to 1 January 2010 were not

reallocated between non-controlling interest and the owners of the Company.

Upon loss of control, the Group accounted for the investment retained at its proportionate share

of net asset value at the date control was lost. The carrying value of such investments as at 1

January 2010 have not been restated.

(c) Business combinations

Business combination from 1 January 2010

Business combinations are accounted for by applying the acquisition method. Identifi able assets

acquired and liabilities assumed in a business combination are measured initially at their fair values at

the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the

costs are incurred and the services are received.

When the Group acquires a business, it assesses the fi nancial assets and liabilities assumed for

appropriate classifi cation 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.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at

the acquisition date. Subsequent changes to the fair value of the contingent consideration which is

deemed to be an asset or liability will be recognised in accordance with FRS 39 either in profi t or loss

or as change to other comprehensive income. If the contingent consideration is classifi ed as equity, it is

not remeasured until it is fi nally settled within equity.

In business combinations achieved in stages, previously held equity interests in the acquiree are

remeasured to fair value at the acquisition date and any corresponding gain or loss is recognised in

profi t or loss.

The Group elects for each individual business combination, whether non-controlling interest in the

acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s

proportionate share of the acquiree’s identifi able net assets.

Any excess of the sum of the fair value of the consideration transferred in the business combination,

the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s

previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifi able

assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note

2.9(a). In instances where the latter amount exceeds the former, the excess is recognised as gain on

bargain purchase in profi t or loss on the acquisition date.




2.5 Subsidiaries and principles of consolidation (cont’d)

(c) Business combinations (cont’d)

Business combinations before 1 January 2010

In comparison to the above mentioned requirements, the following differences applied:

Business combinations are accounted for by applying the purchase method. Transaction costs directly

attributable to the acquisition formed part of the acquisition costs. The non-controlling interest (formerly

known as minority interest) was measured at the proportionate share of the acquiree’s identifi able net

assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to

those fair values relating to previously held interests are treated as a revaluation and recognised in

equity.

When the Group acquired a business, embedded derivatives separated from the host contract by the

acquiree are not reassessed on acquisition unless the business combination results in a change in the

terms of the contract that signifi cantly modifi es the cash fl ows that would otherwise be required under

the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the

economic outfl ow was more likely than not and a reliable estimate was determinable. Subsequent

measurements to the contingent consideration were recognised as part of goodwill.

(d) Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to

owners of the Company, and are presented separately in the consolidated statement of comprehensive

income and within equity in the consolidated balance sheet, separately from equity attributable to

owners of the Company.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of

control are accounted for as equity transactions. In such circumstances, the carrying amounts of the

controlling and non-controlling interests are adjusted to refl ect the changes in their relative interests

in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted

and the fair value of the consideration paid or received is recognised directly in equity and attributed to

owners of the Company.

2.6 Functional and foreign currency

Functional currency

The management has determined the currency of the primary economic environment in which the Company

and the subsidiaries operates i.e. functional currency, to be RMB. Sales prices and major costs of providing

goods and services including major operating expenses are primarily infl uenced by fl uctuations in the

functional currency of the Company and its subsidiaries.




2.6 Functional and foreign currency (cont’d)

Foreign currency transactions

Transactions in foreign currencies are measured in the functional currency of the Company and its subsidiaries

and are recorded on initial recognition in the functional currencies at exchange rates approximating those

ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated

at the rate of exchange ruling at the end of the reporting period. Non-monetary items that are measured in

terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the

initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the

exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the

end of the reporting period are recognised in the income statement except for exchange differences arising

on monetary items that form part of the Group’s net investment in foreign operations, which are recognised

initially in other comprehensive income and accumulated under foreign currency translation reserve in equity.

The foreign currency translation reserve is reclassifi ed from equity to profi t or loss of the Group on disposal of

the foreign operation.

2.7 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. Such cost includes the cost of

replacing part of the property, plant and equipment and borrowing costs that are directly attributable to the

acquisition, construction or production of a qualifying property, plant and equipment. The accounting policy for

borrowing costs is set out in Note 2.17. The cost of an item of property, plant and equipment is recognised

as an asset if, and only if, it is probable that future economic benefi ts associated with the item will fl ow to the

Group and the cost of the item can be measured reliably.

Subsequent to recognition, property, plant and equipment are measured at cost less accumulated

depreciation and accumulated impairment losses. When signifi cant parts of property, plant and equipment are

required to be replaced in intervals, the Group recognises such parts as individual assets with specifi c useful

lives and depreciation respectively. Likewise, a major inspection is performed, its cost is recognised in the

carrying amount of the property, plant and equipment as a replacement if the recognition criteria are satisfi ed.

All other repair and maintenance costs are recognised in the income statement as incurred.

Depreciation is computed on the straight-line basis over the estimated useful life of the assets as follows:

Buildings – 8 – 40 years

Leasehold improvement – 3 – 5 years

Plant and machinery – 5 – 10 years

Motor vehicles – 5 – 10 years

Other equipment – 5 – 10 years

Assets under construction included in plant and equipment are not depreciated as these assets are not yet

available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in

circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each fi nancial year-end to ensure that

the amount, method and period of depreciation are consistent with previous estimates and the expected

pattern of consumption of the future economic benefi ts embodied in the items of property, plant and

equipment.




2.7 Property, plant and equipment (cont’d)

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts

are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the

income statement in the year the asset is derecognised.

2.8 Land use rights

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost

less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over

the lease term of 20 - 50 years.

2.9 Intangible assets

(a) Goodwill

Goodwill acquired in a business combination is initially measured at cost. Following initial recognition,

goodwill is measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, 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 benefi t

from the synergies of the combination, irrespective of whether other assets or liabilities of the acquire

are assigned to those units.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually

and whenever there is an indication that the cash-generating unit may be impaired. Impairment is

determined for goodwill by assessing the recoverable amount of each cash-generating unit (or group

of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-

generating unit is less than the carrying amount, an impairment loss is recognised in the income

statement. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-

generating unit is disposed of, the goodwill associated with the operation disposed of is included in

the carrying amount of the operation when determining the gain or loss on disposal of the operation.

Goodwill disposed of in this circumstance is measured based on the relative fair values of the

operations disposed of and the portion of the cash-generating unit retained.

(b) Other intangible assets

Intangible assets acquired separately are measured initially at cost. The cost of intangible assets

acquired in a business combination is their fair value as at the date of acquisition. Following

initial acquisition, intangible assets are measured at cost less any accumulated amortisation and

accumulated impairment losses. The useful lives of the Group’s intangible assets are assessed to

be fi nite. Intangible assets with fi nite lives are amortised on a straight-line basis over the estimated

economic useful lives and assessed for impairment whenever there is an indication that the intangible

asset may be impaired. The amortisation period and the amortisation method for an intangible asset

with a fi nite useful life are reviewed at least at each fi nancial year-end. The amortisation expense on

intangible assets with fi nite lives is recognised in the income statement through the “Administrative

costs” line item.

(i) Product rights

Costs which relate to purchase of patents and licensing rights for Bear Bile and Bulbus

Fritillariae Oral Liquid, Naoxinshu Oral Liquid, Shengmai Oral Liquid and Semen Zizyphi Oral

Liquid, are capitalised and amortised on a straight-line basis over 10 years.




2.9 Intangible assets (cont’d)

(b) Other intangible assets (cont’d)

(ii) Goods Supply Practice (“GSP”) certifi cate

Costs which relate to purchase of GSP certifi cate is capitalised and amortised on a straight-line

basis over 5 years.

2.10 Impairment of non-fi nancial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If

any such indication exists, or when annual impairment testing for an asset is required, the Group makes an

estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s 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

infl ows that are largely independent of those from other assets or group of assets. In assessing value in use,

the estimated future cash fl ows expected to be generated by the asset are discounted to their present value

using a pre-tax discount rate that refl ects current market assessments of the time value of money and the

risks specifi c to the asset. In determining fair value less costs to sell, recent market transactions are taken into

account, if available. If no such transactions can be identifi ed, an appropriate valuation model is used. Where

the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is

written down to its recoverable amount.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared

separately for each of the Group’s cash-generating units to which the individual assets are allocated. These

budgets and forecast calculations are generally covering a period of fi ve years.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any

indication that previously recognised impairment losses recognised may no longer exist or may have

decreased. If such indicator exists, the Group estimates the asset’s or cash-generating unit’s recoverable

amount. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That

increased amount cannot exceed the carrying amount that would have been determined, net of depreciation,

had no impairment loss been recognised previously. Reversal of an impairment loss is recognised in the

income statement.

2.11 Financial assets

Financial assets are recognised on the statement of fi nancial position when, and only when, the Group

becomes a party to the contractual provisions of the fi nancial instrument. The Group determines the

classifi cation of its fi nancial assets at initial recognition. When fi nancial assets are recognised initially, they

are measured at fair value, plus, in the case of fi nancial assets not at fair value through profi t or loss, directly

attributable transaction costs.

A fi nancial asset is derecognised where the contractual right to receive cash fl ows from the asset has expired.

On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum

of the consideration received and any cumulative gain or loss that has been recognised directly in other

comprehensive income is recognised in the income statement.

Loans and receivables

Non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market

are classifi ed as loans and receivables. Subsequent to initial recognition, loans and receivables are measured

at amortised cost using the effective interest method, less impairment losses. Gains and losses are

recognised in the income statement when the loans and receivables are derecognised or impaired, as well as

through the amortisation process.




2.12 Impairment of fi nancial assets

The Group assesses at each end of the reporting period whether a fi nancial asset or group of fi nancial assets

is impaired.

Assets carried at amortised cost

For fi nancial assets carried at amortised cost, the Group fi rst assesses individually whether objective evidence

of impairment exists individually for fi nancial assets that are individually signifi cant, or collectively for fi nancial

assets that are not individually signifi cant. If the Group determines that no objective evidence of impairment

exists for an individually assessed fi nancial asset, whether signifi cant or not, it includes the asset in a group

of fi nancial assets with similar credit risk characteristics and collectively assesses them for impairment.

Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be

recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on fi nancial assets carried at amortised cost has been

incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the

present value of estimated future cash fl ows discounted at the fi nancial asset’s original effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is

recognised in the income statement.

When the asset becomes uncollectible, the carrying amount of impaired fi nancial assets is reduced directly

or if an amount was charged to the allowance account, the amounts charged to the allowance account are

written off against the carrying value of the fi nancial asset.

To determine whether there is objective evidence that an impairment loss on fi nancial assets has been

incurred, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of

the debtor and default or signifi cant delay in payments.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related

objectively to an event occurring after the impairment was recognised, the previously recognised impairment

loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the

reversal date. The amount of reversal is recognised in the income statement.

2.13 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and cash in banks.

For the purpose of the statement of cash fl ows, cash and cash equivalents consist of cash on hand and cash

in banks.

2.14 Structured deposits

Structured deposits are short-term deposits placed with a bank and earns interest at fi xed rates. Structured

deposits are accounted for as loans and receivables under FRS 39 and the accounting policy is set out in

Note 2.11.




2.15 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to

their present location and condition are accounted for as follows:

- Raw materials: purchase costs on a weighted average basis;

- Finished goods and work-in-progress: costs of direct materials and labour and a proportion of

manufacturing overheads based on normal operating capacity. These costs are assigned on a

weighted average basis.

Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust the carrying

value of inventories to the lower of cost and net realisable value.

Net realisable 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.

2.16 Financial liabilities

Financial liabilities are recognised on the statement of fi nancial position when, and only when, the Group

becomes a party to the contractual provisions of the fi nancial instrument. The Group determines the

classifi cation of its fi nancial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value, plus, in the case of fi nancial liabilities other than

derivatives, directly attributable transaction costs.

Subsequent to initial recognition, all fi nancial liabilities are measured at amortised cost using the effective

interest method, except for fi nancial liabilities held for trading and fi nancial liabilities designated upon initial

recognition at fair value through profi t or loss, which are measured at fair value through profi t or loss.

A fi nancial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

For fi nancial liabilities other than fi nancial liabilities held for trading and fi nancial liabilities designated upon initial

recognition at fair value through profi t or loss, gains and losses are recognised in the income statement when

the liabilities are derecognised, and through the amortisation process.

The Group does not have fi nancial liabilities held for trading or fi nancial liabilities designated upon initial

recognition at fair value through profi t or loss.

2.17 Borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to

the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences

when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and

borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for

their intended use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs

consist of interest and other costs that an entity incurs in connection with the borrowing of funds.




2.18 Research and development costs

All research costs are charged to the income statement as incurred.

Development costs incurred on projects to develop new products are capitalised and deferred only when

the projects are clearly defi ned, the costs are separately identifi able and can be measured reliably, and there

is reasonable certainty that the projects are technically feasible and the products have commercial value.

Development expenditure which does not meet these criteria is expensed as incurred.

2.19 Government grants

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be

received and all attaching conditions will be complied with. When the grant relates to an expense item, it is

recognised as income over the periods necessary to match them on a systematic basis to the costs that it is

intended to compensate. Where the grant relates to an asset, the fair value is credited to a deferred income

account and is released to the income statement over the expected useful life of the relevant asset by equal

annual instalments.

2.20 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past

event, it is probable that an outfl ow of economic resources will be required to settle the obligation and the

amount of the obligation can be estimated reliably.

Provisions are reviewed at each end of the reporting period and adjusted to refl ect the current best estimate.

If it is no longer probable that an outfl ow of economic resources will be required to settle the obligation, the

provision is reversed. If the effect of the time value of money is material, provisions are discounted using a

current pre tax rate that refl ects, where appropriate, the risks specifi c to the liability. When discounting is used,

the increase in the provision due to the passage of time is recognised as a fi nance cost.

2.21 Employee benefi ts

The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has

operations.

(i) Defi ned contribution plans

PRC

The subsidiaries in the PRC are required to provide certain staff pension benefi ts to their employees

under existing PRC regulations. Pension contributions are provided at rates stipulated by PRC

regulations and contributed to a pension fund managed by government agencies, which are

responsible for administering these amounts for the subsidiaries’ employees.

Singapore

The Company makes contribution to the Central Provident Fund (“CPF”) Scheme in Singapore, a

defi ned contribution pension scheme.

Contributions to national pension schemes are recognised as an expense in the period in which the

related services are performed.




2.21 Employee benefi ts (cont’d)

(ii) Employee leave entitlement

Employee entitlements to annual leave are recognised as liability when they accrue to employees. The

estimated liability for leave is recognised for services rendered by employees up to end of the reporting

period.

(iii) Pharmesis Share Option Scheme

Directors and employees of the Group receive remuneration in the form of share options as

consideration for services rendered. The cost of these equity-settled transactions with directors and

employees is measured by reference to the fair value of the options at the date on which the options

are granted. This cost is recognised in the income statement, with a corresponding increase in the

employee share options reserve, over the vesting period. The cumulative expense recognised at each

reporting date until the vesting date refl ects the extent to which the vesting period has expired and the

Group’s best estimate of the number of options that will ultimately vest. The charge or credit to the

income statement for a period represents the movement in cumulative expense recognised as at the

beginning and end of that period.

No expense is recognised for options that do not ultimately vest, except for options where vesting is

conditional upon a market condition, which are treated as vesting irrespective of whether or not the

market condition is satisfi ed, provided that all other performance and/or service conditions are satisfi ed.

The employee share options reserve is transferred to retained earnings upon expiry of the share

options. When the options are exercised, the employee share options reserve is transferred to share

capital if new shares are issued, or to treasury shares if the options are satisfi ed by the reissuance of

treasury shares.

2.22 Operating leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the

arrangement at inception date whether fulfi lment of the arrangement is dependent on the use of a specifi c

asset or assets or the arrangement conveys a right to use the asset. For arrangements entered into prior to

1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional

requirement of INT FRS 104.

Leases where the lessor effectively retains substantially all the risks and benefi ts of ownership of the leased

assets are classifi ed as operating leases. Operating lease payments are recognised as an expense in the

income statement on a straight-line basis over the lease term.

The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over

the lease term on a straight-line basis.

2.23 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and

the revenue can be reliably measured, regardless of when the payment is made. Revenue is measured at

the fair value of consideration received and receivable, net of value-added tax, after allowance for returns,

trade discounts and various types of business tax and government surcharges where applicable. The Group

assesses its revenue arrangements to determine if it is acting as principal or agent. The Group has concluded

that it is acting as a principal in all of its revenue arrangements. The following specifi c recognition criteria must

also be met before revenue is recognised:




2.23 Revenue recognition (cont’d)

(a) Sale of goods

Revenue is recognised upon the transfer of signifi cant risk and rewards of ownership of the goods to

the customer, which generally coincides with delivery and acceptance of the goods sold. Revenue

is not recognised to the extent where there are signifi cant uncertainties regarding recovery of the

consideration due, associated costs or the possible return of goods.

(b) Interest income

Interest income is recognised using the effective interest method.

2.24 Taxes

(a) Current income tax

Current 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. The tax rates and tax laws used to compute

the amount are those that are enacted or substantively enacted by the end of the reporting period, in

the countries where the Group operates and generates taxable income.

Management periodically evaluates positions taken in the tax returns with respect to situations in which

applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

(b) Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the end of the

reporting period between the tax bases of assets and liabilities and their carrying amounts for fi nancial

reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

Where the deferred tax 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 profi t nor taxable profi t or loss; and

In respect of temporary differences associated with investments in subsidiaries where the timing

of the reversal of the temporary differences can be controlled by the Group and it is probable

that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward

of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will

be available against which the deductible temporary differences and the carry-forward of unused tax

credits and unused tax losses can be utilised except:

• Where the deferred income 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 profi t nor taxable profi t or loss;

and

• In respect of deductible temporary differences associated with investments in subsidiaries,

deferred income tax assets are recognised only to the extent that it is probable that the

temporary differences will reverse in the foreseeable future and taxable profi t will be available

against which the temporary differences can be utilised.




2.24 Taxes (cont’d)

(b) Deferred tax (cont’d)

The carrying amount of deferred income tax assets is reviewed at each end of the reporting period and

reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow

all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are

reassessed at each end of the reporting period and are recognised to the extent that it has become

probable that future taxable profi t will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to

the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have

been enacted or substantively enacted at the end of the reporting period.

Deferred income tax relating to items recognised outside profi t or loss is recognised outside profi t

or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other

comprehensive income or directly in equity and deferred tax arising from a business combination is

adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off

current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity

and the same taxation authority.

(c) Value added tax (“VAT”) and Goods and Services Tax (“GST”)

Revenues, expenses and assets are recognised net of the amount of VAT/GST except:

Where the VAT/GST incurred on a purchase of assets or services is not recoverable from the

taxation authority, in which case the VAT/GST is recognised as part of the cost of acquisition of

the asset or as part of the expense item as applicable; and

Receivables and payables that are stated with the amount of VAT/GST included.

The net amount of VAT/GST recoverable from, or payable to, the taxation authority is included as part

of receivables or payables in the statement of fi nancial position.

2.25 Segment reporting

For management purposes, the Group is organised into operating segments based on their products which

are independently managed by the respective segment managers responsible for the performance of the

respective segments under their charge. The segment managers report directly to the management of the

Group who regularly review the segment results in order to allocate resources to the segments and to assess

the segment performance. Additional disclosures on each of these segments are shown in Note 31, including

the factors used to identify the reportable segments and the measurement basis of segment information.

2.26 Share capital and share issue expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly

attributable to the issuance of ordinary shares are deducted against share capital.




2.27 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose

existence will be confi rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly

within the control of the Group.

A present obligation that arises from past events but is not recognised because it is not probable that an

outfl ow of resources embodying economic benefi ts will be required to settle the obligation or the amounts of

the obligation cannot be measured with suffi cient reliability.

Contingent liabilities and assets are not recognised on the statement of fi nancial position of the Group.

2.28 Related parties

A related party is defi ned as follows:

a) A person or a close member of that person’s family is related to the Group and Company if that

person:

i) Has control or joint control over the Company;

ii) Has signifi cant infl uence over the Company; or

iii) Is a member of the key management personnel of the Group or Company or of a parent of the

Company.

b) An entity is related to the Group and the Company if any of the following conditions applies:

i) The entity and the Company are members of the same group (which means that each parent,

subsidiary and fellow subsidiary is related to the others).

ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a

member of a group of which the other entity is a member).

iii) Both entities are joint ventures of the same third party.

iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

v) The entity is a post-employment benefi t plan for the benefi t of employees of either the Company

or an entity related to the Company. If the Company is itself such a plan, the sponsoring

employers are also related to the Company;

vi) The entity is controlled or jointly controlled by a person identifi ed in (a);

vii) A person identifi ed in (a)(i) has signifi cant infl uence over the entity or is a member of the key

management personnel of the entity (or of a parent of the entity).

3. Revenue

Revenue represents the net invoiced value of goods sold, net of value-added tax, after allowance for returns,

trade discounts and various types of business tax and government surcharges where applicable. All

signifi cant intra-group transactions are eliminated on consolidation.



4. Other operating costs

Group

2012 2011

RMB’000 RMB’000

Impairment loss on goodwill on consolidation – 1,496

Impairment loss on property, plant and equipment 4,231 –

4,231 1,496

5. Finance income/Finance costs

Group

2012 2011

RMB’000 RMB’000

(i) Finance income

- interest income 759 1,055

(ii) Finance costs

- others (28) (63)

6. Loss before tax

The following items have been included in arriving at loss before tax:

Group

2012 2011

RMB’000 RMB’000

Amortisation of land use rights 101 101

Amortisation of intangible assets 901 902

Depreciation of property, plant and equipment 3,316 3,443

Directors’ remuneration 1,083 1,110

Directors’ fees 783 797

Audit fees paid to auditors of the Company 443 472

Audit fees paid to other auditors 742 897

Non-audit fees paid to auditors of the Company 28 28

Loss on disposal of property, plant and equipment – 5

Personnel expenses* 30,723 32,141

Allowance for/(reversal of) doubtful trade receivables 597 (52)

Allowance for doubtful non-trade receivables 60 –

Foreign exchange loss 51 22



6. Loss before tax (cont’d)

* Personnel expenses include amounts shown as directors’ remunerations and remuneration of key management

personnel in Note 25:

Group

2012 2011

RMB’000 RMB’000

Wages, salaries and bonuses 28,605 30,241

Pension contributions 1,423 1,216

Other personnel expenses 695 684

30,723 32,141

7. Income tax expense

Group

2012 2011

RMB’000 RMB’000

Current tax

- current year – 14

- under provision in respect of previous years – 915

Deferred tax

- current year – –

- under provision in respect of previous years – 708

– 1,637

The reconciliation between tax expense and the product of accounting loss multiplied by the applicable tax

rate for the year ended 31 December was as follows:

Loss before tax (21,992) (17,759)

Tax at domestic rates applicable to losses in the countries where

the Group operates (3,940) (2,591)

Adjustments:

Non-deductible expenses 733 847

Utilisation of tax losses carried forward (22) (19)

Under provision in prior years – 1,623

Deferred tax assets not recognised 3,229 1,771

Others – 6

Income tax expense recognised in the income statement – 1,637

The reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.

On 27 July 2011, Caishui [2011] 58 on Tax Policy Issues Concerning Deeply Implementation of the Western

China Development Strategy (“Circular 58”) was issued which entitled enterprises established in the western

regions in China which are engaged in encouraged industries as stipulated in the Catalog of Encouraged

Industries of the Western Regions (“Revised Catalog”) and having 70% of their total annual income from the

encouraged industries to a reduced corporate income tax rate of 15% upon approval from the tax authorities

in charge for the period from 1 January 2011 to 31 December 2020.



7. Income tax expense (cont’d)

On 6 April 2012, State of Administration of Taxation Announcement No. 12 Enterprise Income Tax Issues

Concerning Deeply Implementation of the Western Region Development Strategy (“Announcement 12”) was

issued to allow enterprises whose activities qualifi ed under the list of approved industries from previously

issued catalogs of encouraged industries to continue enjoying the reduced tax rate of 15% until the Revised

Catalog in Circular 58 is issued and is subject to approval from the tax authorities.

Chengdu Kinna Pharmaceutical Co., Ltd. continues to enjoy the reduced tax rate of 15% granted under

Announcement 12 for the fi nancial years ended 31 December 2011 and 2012.

At the balance sheet date, the Company has tax losses of RMB 150,000 (2011: RMB 279,000) that are

available for offset against future taxable profi t of the Company, for which no deferred tax asset is recognised

due to uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax

authority and compliance with certain provision of the tax legislation of Singapore.

At the balance sheet date, the subsidiaries in PRC have tax losses and deductible temporary differences of

RMB 24,477,000 and RMB 8,612,000 (2011: RMB 12,864,000 and RMB 2,417,000) that are available for

offset against future taxable profi t for the respective entities where the tax losses and deductible temporary

differences arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability. The

use of these tax losses and deductible temporary differences is subject to the agreement of the tax authority.

The tax losses of the PRC subsidiaries can only be utilised within the fi ve-year period commencing from the

year in which the loss is incurred. As at balance sheet date, tax losses amounting to RMB 11,616,000, RMB

11,864,000 and RMB 1,000,000 will expire in the fi nancial years ending 31 December 2017, 2016 and 2015

respectively.

8. Earnings per share

Basic earnings per share amounts are calculated by dividing profi t for the year that is attributable to ordinary

equity holders of the Company by the weighted average number of ordinary shares outstanding during the

fi nancial year.

Diluted earnings per share amounts are calculated by dividing profi t for the year that is attributable to ordinary

equity holders of the Company 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 the conversion of all the

dilutive potential ordinary shares into ordinary shares.



8. Earnings per share (cont’d)

The following tables refl ect the loss and share data used in the computation of basic and diluted earnings per

share for the years ended 31 December:

Group

2012 2011

RMB’000 RMB’000

Loss for the year attributable to ordinary equity holders of the Company

used in computation of basic and diluted earnings per share (19,439) (17,144)

No. of shares No. of shares

’000 ’000

Weighted average number of ordinary shares for basic earnings

per share computation 200,000 200,000

Dilutive effect of share options* – –

200,000 200,000

Cents Cents

Earnings per share

- basic and diluted (9.72) (8.57)

* As at 31 December 2012, the Company has outstanding share options granted to directors and employees of

11,650,000 (2011:13,100,000). Since the exercisable price of these share options are above the quoted market

price of the Company’s shares for the fi nancial years, the options are non-dilutive. As such, the options have no

dilution effect on the earnings per share of the Group for the fi nancial years.



9. Property, plant and equipment

BuildingsLeasehold

improvementPlant and machinery

Motor vehicles

Other equipment

Construction in progress * Total

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Group

Cost:

At 1 January 2011 26,345 2,968 15,268 4,304 2,058 2,664 53,607

Additions – – 108 – 79 337 524

Disposals (114) – (220) (377) (120) – (831)

At 31 December 2011

and 1 January 2012 26,231 2,968 15,156 3,927 2,017 3,001 53,300

Additions – – 222 – 66 42 330

Transfer from construction

in progress – – 3,029 – – (3,029) –

At 31 December 2012 26,231 2,968 18,407 3,927 2,083 14 53,630

Accumulated depreciation and impairment loss:

At 1 January 2011 9,911 2,166 11,409 1,818 865 – 26,169

Charge for the year 1,340 338 1,073 431 261 – 3,443

Disposals (21) – (217) (350) (120) – (708)

At 31 December 2011

and 1 January 2012 11,230 2,504 12,265 1,899 1,006 – 28,904

Charge for the year 1,303 287 1,074 402 250 – 3,316

Impairment loss 3,197 – 1,034 – – – 4,231

At 31 December 2012 15,730 2,791 14,373 2,301 1,256 – 36,451

Net carrying amount:

At 31 December 2012 10,501 177 4,034 1,626 827 14 17,179

At 31 December 2011 15,001 464 2,891 2,028 1,011 3,001 24,396

* Construction in progress represents production equipments under installation and was stated at cost. No borrowing

costs were capitalised during the year.



9. Property, plant and equipment (cont’d)

Other equipment

RMB’000

Company

Cost:

At 1 January 2011, 31 December 2011 and 1 January 2012 240

Additions 5

At 31 December 2012 245

Accumulated depreciation:

At 1 January 2011 68

Charge for the year 30

At 31 December 2011 and 1 January 2012 98

Charge for the year 30





Impairment of assets

During the fi nancial year, a subsidiary of the Group within the western drugs segment, Chengdu Kinna

Pharmaceutical Co., Ltd, carried out a review of the recoverable amount of its property, plant and equipment

because the identifi ed segment has been making losses. An impairment loss of RMB 4,231,000 (2011: RMB

nil), representing the write-down of the property, plant and equipment related to the identifi ed segment to its

recoverable amount was recognised in “Other operating costs” (Note 4). The recoverable amount was based

on its value in use and the pre-tax discount rate used was 14%.



10. Land use rights

Group

2012 2011

RMB’000 RMB’000

Cost:

At 1 January and 31 December 4,191 4,191

Accumulated amortisation:

At 1 January 837 736

Amortisation for the year 101 101


Net carrying amount 3,253 3,354

Amount to be amortised:

- Not later than one year 101 101

- Later than one year but not later than fi ve years 404 404

- Later than fi ve years 2,748 2,849

The Group has land use rights over two plots of state-owned land in the People’s Republic of China (“PRC”)

where the Group’s PRC manufacturing and storage facilities reside. The land use rights are not transferable

and have a remaining tenure of 32 to 37.5 years (2011: 33 to 38.5 years).

11. Intangible assets

Group

Product rightsGSP

certifi cation Total

RMB’000 RMB’000 RMB’000

Cost:

At 1 January and 31 December 7,340 835 8,175

Accumulated amortisation:

At 1 January 2011 795 222 1,017

Amortisation for the year 734 168 902

At 31 December 2011 and 1 January 2012 1,529 390 1,919

Amortisation for the year 734 167 901

At 31 December 2012 2,263 557 2,820


At 31 December 2012 5,077 278 5,355

At 31 December 2011 5,811 445 6,256

Average remaining amortisation (year):

At 31 December 2012 7 2

At 31 December 2011 8 3



11. Intangible assets (cont’d)

GSP certifi cate

On 20 July 2009, Chengdu Kinna Pharmaceutical Co. Ltd (“Kinna Pharm”), a wholly-owned subsidiary of the

Company, entered into an agreement to acquire 100% equity interest in Chengdu Pharmesis Pharmaceutical

Co., Ltd (“Chengdu Pharmesis”) for a total purchase consideration of RMB 835,000.

Chengdu Pharmesis owns a valid Goods Supply Practice (“GSP”) certifi cate but has not commenced its

operations as at the date of acquisition. Therefore, the acquisition of Chengdu Pharmesis does not fall within

the defi nition of business combination under FRS 103. The acquisition cost of RMB 835,000 is allocated in

entirety as intangible asset acquired. The intangible asset acquired is amortised over the economic useful life

of 5 years.

Product rights

Product rights relates to the technical know-how for Bear Bile and Bulbus Fritillariae Oral Liquid, Naoxinshu

Oral Liquid, Shengmai Oral Liquid and Semen Zizyphi Oral Liquid acquired. As disclosed in Note 2.9(b), the

useful life of these product rights is estimated to be 10 years.

12. Investment in subsidiaries

Company

2012 2011

RMB’000 RMB’000

Unquoted equity shares, at cost 50,016 50,016

Investment via issuance of share options to employees of subsidiaries 4,983 4,983

At 31 December 54,999 54,999

Details of the subsidiaries of the Group are as follows:

Subsidiaries (Country of incorporation and place of business) Principal activities

Effective equity held by Group

2012 2011

% %

* Chengdu Kinna Pharmaceutical Co., Ltd

(成都国嘉联合制药有限公司)

(PRC)

Development, manufacture and

sale of western medicines and

health tonic products

100 100



12. Investment in subsidiaries (cont’d)

Subsidiaries (Country of incorporation and place of business) Principal activities

Effective equity held by Group

2012 2011

% %

Held through subsidiary company

* Sichuan Longlife Pharmaceutical Co., Ltd

(四川古蔺肝苏药业有限公司)

(PRC)

Development, manufacture

and sale of Traditional Chinese

medicines

51 51

+ Chengdu Pharmesis Pharmaceutical

Co., Ltd

(成都中嘉医药有限公司)

(PRC)

Wholesale of chemical drugs,

biological raw products,

Traditional Chinese medicines,

antibiotics and antibiotics agent

100 100

+ Gulin Pharmesis Health and Medical

Devices Co., Ltd

(古蔺中嘉健康医疗器械有限公司)

(PRC)

(Liquidated on 31 January 2013)

Dormant 100 100

* Audited by Ernst & Young Hua Ming, Chengdu Branch.

+ Audited by Ernst & Young Hua Ming, Chengdu Branch, for consolidation purpose.

13. Goodwill on consolidation

Kinna Pharm Sichuan Longlife

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

At 1 January – 1,496 1,323 1,323

Impairment loss – (1,496) – –

At 31 December – – 1,323 1,323

Goodwill acquired through business combinations have been allocated to the cash-generating units (“CGU”),

namely Chengdu Kinna Pharmaceutical Co., Ltd (“Kinna Pharm”) and Sichuan Longlife Pharmaceutical

Co., Ltd (“Sichuan Longlife”) for impairment testing. The recoverable amounts on cash-generating units

are determined based on a value-in-use calculation using cash fl ow projections based on fi nancial budgets

approved by senior management covering a fi ve-year period.

The pre-tax discount rate applied to the cash fl ow projections and the forecasted growth rates used to

extrapolate cash fl ow projections beyond the fi ve-year period are as follows:

Kinna Pharm Sichuan Longlife

2012 2011 2012 2011

Growth rates – 4% 0% 4%

Pre-tax discount rates – 16% 14% 16%



13. Goodwill on consolidation (cont’d)

The calculations of value-in-use for the CGUs are most sensitive to the following assumptions:

Budgeted revenue and gross margins - The budgeted revenue and gross margins are based on past

performances and its expectations of market developments for each entity.

Budgeted growth rate - Management determined the budgeted growth rate based on past experience and its

expectation for market development. The budgeted growth rate used by the Group does not exceed the long-

term average growth rate for the industries relevant to the CGUs.

Discount rate - The discount rate used represent the current market assessment of the risk specifi c to each

CGU, regarding the time value of money and individual risks of the underlying assets which have not been

incorporated in the cash fl ow estimates. The discount rate calculation is based on the specifi c circumstances

of the Group and its operating segments and derived from its weighted average cost of capital (WACC).

The WACC takes into account both debt and equity. The cost of equity is derived from the expected return

on investment by the Group’s investors. The cost of debt is based on the interest bearing borrowings the

Group is obliged to service. Segment-specifi c risk is incorporated by applying individual beta factors. The beta

factors are evaluated annually based on publicly available market data.

Impairment loss recognised

During the fi nancial year, an impairment loss of RMB nil (2011: RMB 1,496,000) was recognised to write-down

the carrying amount of goodwill on consolidation relating to Kinna Pharm. The impairment loss of RMB nil

(2011: RMB 1,496,000) has been recognised in the income statement under the line item “Other operating

costs”.

14. Structured deposits

Structured deposits earn interest of 5.9% (2011: 6.2%) per annum and have a maturity period of 1 year.

15. Inventories

Group

2012 2011

RMB’000 RMB’000

Balance sheet:

Raw materials 2,832 3,621

Work in progress 2,102 1,276

Finished goods 1,959 1,511

At 31 December 6,893 6,408

Income statement:

Inventories recognised as an expense in cost of sales 23,375 21,889

No inventories were written down to the income statement (2011: RMB nil).



16. Trade receivables

Group

2012 2011

RMB’000 RMB’000

Trade receivables 21,774 31,530

Less: Allowance for doubtful receivables (1,461) (1,120)

20,313 30,410

Note receivables 6,251 9,413

26,564 39,823

Trade receivables and note receivables are non-interest bearing and are generally on 90 to 180 days’ terms.

They are recognised at their original invoice amounts which represents fair values at initial recognition. The

trade receivables are denominated in RMB.

Receivables that are past due but not impaired

The Group has trade receivables amounting to RMB 3,063,000 (2011: RMB 7,742,000) that are past due at

the end of the reporting period but not impaired.

The Group’s trade receivables consisted of sales predominately from prescribed drugs. Certain receivables

from the sales of the prescribed drugs are covered by social insurance and are included in the list of medicine

approved by the Social Insurance Bureau in PRC. A longer period is required for the settlement of trade

receivables as the payment process is dependent on receipts of the appointed distribution agents from the

hospitals and clinics, which are in-turn dependent on the settlement of medical bills out of the patients’

medical fund.

These receivables are unsecured and the analysis of their aging at the end of the reporting period is as

follows:

Group

2012 2011

RMB’000 RMB’000

Trade receivables past due:

60 days and less 1,248 3,037

61 - 120 days 798 3,942

121 - 180 days 459 309

More than 181 days 558 454

3,063 7,742



16. Trade receivables (cont’d)

Receivables that are impaired

The Group’s trade receivables that are impaired at the end of the reporting period and the movement of the

allowance accounts used to record the impairment are as follows:

Collectively impaired Individually impaired

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Group

Trade receivables – nominal amounts 4,707 8,862 – –

Less: Allowance for doubtful receivables (1,461) (1,120) – –

3,246 7,742 – –

Movement in allowance accounts:

At 1 January 1,120 1,473 – –

Allowance/(reversal) for the year 597 (52) – –

Written off (256) (301) – –

At 31 December 1,461 1,120 – –

Trade receivables that are individually determined to be impaired at the end of the reporting period relate to

debtors that are in signifi cant fi nancial diffi culties and have defaulted on payments.

17. Other receivables

Group Company

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Interest receivable 990 341 – –

Other receivables – nominal amounts 1,189 1,205 26 26

Less: Allowance for doubtful receivables (60) – – –

2,119 1,546 26 26

Analysis of allowance for doubtful receivables is as follows:

At 1 January – – – –

Allowance for the year 60 – – –

At 31 December 60 – – –

Included in the other receivables of the Group and the Company is an amount of RMB 26,000 (2011: RMB

26,000) which is denominated in Singapore dollar.



18. Cash and cash equivalents

Cash and cash equivalents comprise of cash at banks and on hand. Cash at banks earns interest at fl oating

rates based on daily bank deposit rates ranging from 0.3% to 0.9% (2011: 0.4% to 1.6%) per annum. Cash

at banks and on hand denominated in foreign currencies at 31 December are as follows:

Group Company

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Singapore dollar 240 54 240 54

United States dollar 129 130 129 130

19. Trade payables

Trade payables are non-interest bearing and normally settled on 30 to 90 days terms. Trade payables are

denominated in RMB.

20. Accrued liabilities and other payables

Group Company

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Accruals 1,386 819 1,114 700

Other payables 1,876 600 13 32

VAT payable 538 954 – –

Advances from customers 71 15 – –

3,871 2,388 1,127 732

Other payables are unsecured, non-interest bearing and have an average term of three to six months.

Advances from customers are unsecured and non-interest bearing.

Included in the accrued liabilities and other payables of the Group and the Company is an amount of RMB

1,127,000 (2011: RMB 732,000) which is denominated in Singapore dollar.

21. Deferred tax liabilities

Deferred tax liabilities relate to withholding tax accrued on distributable profi ts of the Group’s subsidiaries

under the new China tax regime whereby remittance of distributable profi ts out of China will attract a 10%

withholding tax with effect from 1 January 2008.

At the balance sheet date, RMB 488,000 (2011: RMB 488,000) has been recognised for taxes that would be

payable on the undistributed profi ts of the Group’s subsidiaries.

Such temporary differences for which no deferred tax liability has been recognised aggregate to RMB nil

(2011: RMB 3,637,000). The deferred tax liability is estimated to be RMB nil (2011: RMB 364,000).



22. Share capital

Group and Company

2012 2011

Number of shares RMB’000

Number of shares RMB’000

Issued and fully paid ordinary shares:

At 1 January and 31 December 200,000,000 77,315 200,000,000 77,315

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All

ordinary shares carry one vote per share without restriction. The ordinary shares have no par value.

23. Employee benefi ts

Under the Pharmesis Share Option Scheme (the “ESOS”), share options are granted to directors, executives

and employees of the Group. The exercise price of the options is equal to the market price of the shares

on the date of grant. The option vesting period is two years from the date of grant. The option may be

exercisable for the period from 12 March 2010 to 11 March 2018.

Movement of share options during the fi nancial year

The following is the movement in share options during the fi nancial year:

2012 Number of share options

2011 Number of share options

Outstanding as at 1 January 13,100,000 16,000,000

- Forfeited (1,450,000) (2,900,000)

Outstanding as at 31 December 11,650,000 13,100,000

Exercisable at 31 December 11,650,000 13,100,000

The weighted average fair value of options granted was RMB 0.16 (2011: RMB 0.16).

Fair value of share options

The fair value of services rendered in return for share options granted are measured by reference to the fair

value of share options granted under the ESOS. The estimate of the fair value of the services received is

measured based on a Trinomial Options Pricing model, taking into account the terms and conditions upon

which the share options were granted. The following table states the inputs to the model used.

12.3.2008 grant

Expected volatility (%) 71

Risk-free interest rate (%) 1.5

Expected life of options (years) 6.7

Exercise price (S$) 0.125

Share price at date of grant (S$) 0.14



23. Employee benefi ts (cont’d)

The fair value of options granted charged to the income statement during the fi nancial year was RMB nil

(2011: RMB nil). The expected volatility refl ects the assumptions that the historical volatility of companies in

the similar industry is indicative of future trends, which may not necessarily be the actual outcome.

All outstanding options have vested since fi nancial year ended 31 December 2010.

24. Commitments and contingencies

Operating lease commitments

The Group and Company had entered into commercial leases for its offi ce premises in Singapore and the

PRC. These non-cancellable leases have remaining non-cancellable lease terms of between 1 to 3 years.

Operating lease payments recognised in the consolidated income statement during the fi nancial year

amounted to RMB 2,065,000 (2011: RMB 2,065,000).

Future minimum lease payments under non-cancellable operating leases as at 31 December are as follows:

Group Company

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Within one year 2,092 1,863 77 63

In the second to fi fth year 2,959 5 163 5

More than fi ve years 1,641 – – –

6,692 1,868 240 68

25. Related party disclosures

Related parties are entities with common direct or indirect shareholders and/or directors. Parties are

considered to be related if one party has the ability to control the other party or exercise signifi cant infl uence

over the other party in making fi nancial and operating decisions.

(a) Compensation of key management personnel

Group

2012 2011

RMB’000 RMB’000

Short-term employee benefi ts 2,699 2,735

Central Provident Fund contributions 55 71

2,754 2,806

Comprise amounts paid to:

Directors of the Company 1,866 1,907

Other key management personnel 888 899

2,754 2,806



25. Related party disclosures (cont’d)

(b) Directors’ interests in employee share option plan

At the balance sheet date, the total number of outstanding share options granted by the Company to

the directors under the ESOS amounted to 3,900,000 (2011: 3,900,000).

26. Financial risk management objectives and policies

The Group and the Company is exposed to fi nancial risks arising from its operations and the use of fi nancial

instruments. The key fi nancial risks include foreign currency risk, credit risk and liquidity risk. The board of

directors reviews and agrees policies and procedures for the management of these risks, which are executed

by the Financial Controller, Head of Treasury and Head of Credit Control. The audit committee provides

independent oversight to the effectiveness of the risk management process. It is, and has been throughout

the current and previous fi nancial year, the Group’s policy that no derivatives shall be undertaken except for

the use as hedging instruments where appropriate and cost-effi cient. The Group and the Company do not

apply hedge accounting.

The following sections provide details regarding the Group’s and Company’s exposure to the above-

mentioned fi nancial risks and the objectives, policies and processes for the management of these risks.

(i) Foreign currency risk

The Group’s operations are primarily in the PRC, of which sales, purchases and its accounts are

recorded in Renminbi. The foreign currency risk of the Group arises mainly from its foreign currency

cash deposits, other receivables and accrued liabilities and other payables. The Group does not enter

into transactions to hedge against its currency risk.

Sensitivity analysis

A 10% strengthening of Renminbi against Singapore dollar at the reporting date would decrease

the Group’s loss net of tax by RMB 86,000 (2011: RMB 65,000). A 10% weakening of Renminbi

against Singapore dollar would have an equal but opposite effect. This analysis assumes that all other

variables, in particular interest rates, remain constant.

(ii) Credit risk

Credit risk is the risk of loss that may arise on outstanding fi nancial instruments should a counterparty

default on its obligations. The Group’s exposure to credit risk arises primarily from trade and other

receivables. For other fi nancial assets (including cash at banks and structured deposits), the Group

minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to

increased credit risk exposure. The Group trades only with recognised and creditworthy third parties.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit

verifi cation procedures. In addition, receivable balances are monitored on an ongoing basis.

Exposure to credit risk

At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is

represented by the carrying amount of each class of fi nancial assets recognised in the statements of

fi nancial position.

The trade and other receivables of the Group are not secured by any credit enhancements.



26. Financial risk management objectives and policies (cont’d)

(ii) Credit risk (cont’d)

Credit risk concentration profi le

Concentration of credit risk exists when changes in economic, industrial or geographic factors similarly

affect groups of counterparts whose aggregate credit exposure is signifi cant in relation to the Group’s

total credit exposure. The Group has substantial credit exposure to hospitals and medical institutions

operating in the PRC.

At the end of the reporting period, approximately:

47% (2011: 45%) of the Group trade receivables were due from 5 major customers who are

hospitals and medical institutions located in PRC.

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good

payment record with the Group. Cash and cash equivalents and structured deposits that are neither

past due nor impaired are placed with or entered into with reputable fi nancial institutions or companies

with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding fi nancial assets that are either past due or impaired is disclosed in Note 16 (Trade

receivables) and Note 17 (Other receivables).

(iii) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter diffi culty in meeting fi nancial

obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises

primarily from mismatches of the maturities of fi nancial assets and liabilities. The Group’s and the

Company’s objective is to maintain a balance between continuity of funding and fl exibility through the

use of stand-by credit facilities.

Typically, the Group ensures that it has suffi cient cash on demand to meet expected operational

expenses for a period of 60 days, including servicing of fi nancial obligations; this excludes the potential

impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.




(iii) Liquidity risk (cont’d)

The table below summarises the maturity profi le of the Group’s and the Company’s fi nancial assets and

liabilities at the end of the reporting period based on contractual undiscounted payments.

1 year or less

RMB’000

2012

Group

Financial assets

Structured deposits 11,000

Trade receivables 26,564

Other receivables 2,119

Cash and cash equivalents 25,785

65,468

Financial liabilities

Trade and accrued liabilities and other payables 6,181

Company

Financial assets

Other receivables 26


2,894


Accrued liabilities and other payables 1,127




(iii) Liquidity risk (cont’d)

1 year or less

RMB’000

2011

Group

Financial assets

Structured deposits 11,419

Trade receivables 39,823

Other receivables 1,546


78,212


Trade and accrued liabilities and other payables 3,962

Company

Financial assets

Other receivables 26


2,708


Accrued liabilities and other payables 732

27. Fair value of fi nancial instruments

The carrying amounts of trade and other receivables, structured deposits, cash and cash equivalents, trade

payables and accrued liabilities and other payables approximate their fair values due to their short-term nature.

28. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in

order to support its business and maximise 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 the dividend payment to

shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives,

policies or processes during the fi nancial years ended 31 December 2012 and 2011.

The subsidiaries of the Group are required by the Foreign Enterprise Law of the PRC to contribute to and

maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC

authorities. This externally imposed capital requirement has been complied with by the subsidiaries for the

fi nancial years ended 31 December 2012 and 2011.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt.

The Group’s policy is to keep the gearing ratio between 0% and 30%. The Group includes within net debt,

interest-bearing loans (if any) less cash and cash equivalents. Capital includes equity attributable to the equity

holders of the Company less the abovementioned restricted statutory reserve fund.



28. Capital management (cont’d)

As at 31 December 2012 and 2011, the Group’s gearing ratio is zero as the Group does not have any

outstanding borrowing.

29. Loans and receivables

Group Company

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Structured deposits 11,000 11,000 – –

Trade receivables 26,564 39,823 – –

Other receivables 2,119 1,546 26 26

Cash and cash equivalents 25,785 25,424 2,868 2,682

65,468 77,793 2,894 2,708

30. Financial liabilities carried at amortised cost

Group Company

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Trade payables 2,381 1,589 – –

Accrued liabilities and other payables 3,800 2,373 1,127 732

6,181 3,962 1,127 732



31. Segment information

Western drugsTCM formulated

drugs Distribution Eliminations Group

2012 2011 2012 2011 2012 2011 2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

RevenueExternal sales 22,113 26,225 20,078 23,155 13,046 11,619 – – 55,237 60,999

Inter segment sales 872 625 4,313 2,258 – – (5,185) (2,883) – –

Total revenue 22,985 26,850 24,391 25,413 13,046 11,619 (5,185) (2,883) 55,237 60,999

ResultSegment result (13,239) (11,822) (5,211) (3,088) (543) (390) (18,993) (15,300)

Unallocated corporate

expenses (3,730) (3,451)

Loss from operations (22,723) (18,751)

Finance income 746 2,326 12 6 1 2 – (1,279) 759 1,055

Finance costs (14) (44) (11) (1,118) (3) (180) – 1,279 (28) (63)

Income tax expense – (1,228) – (395) – (14) – (1,637)

Loss before non-

controlling interest (21,992) (19,396)

Non-controlling interest 2,553 2,252

Net loss (19,439) (17,144)

Assets and liabilitiesSegment assets 66,676 80,224 25,683 34,273 6,357 4,101 98,716 118,598


assets 3,074 2,909

Total assets 101,790 121,507

Segment liabilities 1,769 1,527 2,539 935 817 783 5,125 3,245


liabilities 1,625 1,230

Total liabilities 6,750 4,475

Other segment informationCapital expenditure 218 457 84 45 28 22 330 524

Depreciation and

amortisation 2,638 2,709 1,619 1,678 61 59 4,318 4,446

Allowance for doubtful

receivables – non-trade – – – – 60 – 60 –

(Reversal of)/

allowance for doubtful

receivables – trade 118 186 160 (238) 319 – 597 (52)

Impairment loss on

goodwill on

consolidation – 1,496 – – – – – 1,496

Impairment loss on

property, plant and

equipment 4,231 – – – – – 4,231 –



31. Segment information (cont’d)

Note

A: Capital expenditure consists of purchase of property, plant and equipment.

For management purposes, the Group is organised into business units based on their products, and has 3

reportable operating segments as follows:

(i) Western drugs

Western drugs refer mainly to chemically formulated drugs and are marketed under the “Kinna” brand.

(ii) TCM formulated drugs

TCM formulated drugs refer to Traditional Chinese Medicine and are marketed under the “Longlife”

brand.

(iii) Distribution

This segment refers to agency products and internally manufactured products which are marketed

through the distribution arm.

Geographical segment

No segmental analysis by geographical segment is provided as the principal assets employed by the Group

are located in the PRC and the Group’s turnover and profi ts were mainly derived from the sale of medicines

and health tonic products to domestic customers in the PRC.

Information about major customers

Information regarding customers which account for more than 10% of the revenue derived by any of the

entities within the Group is as follows:

Western drugs Distribution

2012 2011 2012 2011

RMB’000 RMB’000 RMB’000 RMB’000

Customer A 3,605 2,711 – –

Customer B 4,992 4,998 – –

Customer C – – 3,225 –

Customer D – – 2,480 –

Customer E – – 2,654 –

8,597 7,709 8,359 –

32. Authorisation of fi nancial statements for issue

The fi nancial statements for the year ended 31 December 2012 were authorised for issue in accordance with

a resolution of the directors on 27 February 2013.


Statistics of ShareholdingsAs at 15 March 2013

Issued and fully paid-up capital : S$15,586,956

Total no. of issued shares : 200,000,000

Class of shares : Ordinary Share

Voting rights : one vote per share

DISTRIBUTION OF SHAREHOLDINGS

Size of ShareholdingsNo. of

Shareholders %

No. of Shares %

1 - 10,000 483 43.40 3,070,000 1.53

10,001 - 1,000,000 617 55.43 36,331,000 18.17

1,000,001 and above 13 1.17 160,599,000 80.30

TOTAL : 1,113 100.00 200,000,000 100.00

TWENTY LARGEST SHAREHOLDERS

No. Name No. of Shares %

1. Top Entrepreneur Limited 75,150,000 37.58

2. Suntar Investment Pte Ltd 47,700,000 23.85

3. UOB Kay Hian Pte Ltd 16,292,000 8.15

4. CIMB Securities (S’pore) Pte Ltd 5,714,000 2.86

5. Long Biao 3,217,000 1.61

6. OCBC Securities Private Ltd 2,098,000 1.05

7. Wang Jia 2,000,000 1.00

8. United Overseas Bank Nominees Pte Ltd 1,978,000 0.99

9. Zhao Jie 1,621,000 0.81

10. Lee Chay Giam Joel 1,360,000 0.68

11. Kiw Sin Wa 1,278,000 0.64

12. Ngin Choon Kay 1,130,000 0.57

13. Bank of Singapore Nominees Pte Ltd 1,061,000 0.53

14. Tan Tiat Huang 1,000,000 0.50

15. Chen Bei 714,000 0.36

16. DBS Nominees Pte Ltd 652,000 0.33

17. The Wing On Investment Company (S) Pte Ltd 600,000 0.30

18. Chen Jun 540,000 0.27

19. Tan Khay Sin 521,000 0.26

20. Chong Sohhar Harold 500,000 0.25

TOTAL 165,126,000 82.59


Statistics of ShareholdingsAs at 15 March 2013

SUBSTANTIAL SHAREHOLDERS

Substantial shareholders of the Company (as recorded in the Register of Substantial Shareholders) as at 15 March

2013

No. of Ordinary shares

Name Direct Interest % Indirect Interest %

Top Entrepreneur Limited 75,150,000 37.58 – _

Suntar Investment Pte Ltd 47,700,000 23.85 – _

Wu Xuedan 1 – – 75,150,000 37.58

Lan Weiguang 2 – – 47,700,000 23.85

Wu Shangzhi 3 – – 47,700,000 23.85

Jiao Shuge 4 – – 47,700,000 23.85

Clean Water Investment Limited 5 – – 47,700,000 23.85

Notes:

1. Mr. Wu Xuedan is deemed to be interested in the shares held by Top Entrepreneur Limited through his controlling interest in Top

Entrepreneur Limited.

2. Dr. Lan Weiguang is deemed to be interested in the shares held by Suntar Investment Pte Ltd through his majority shareholding

interest in Clean Water Investment Limited, which is the sole shareholder of Sinomem Technology Pte Ltd which is the holding

company of Suntar Investment Pte Ltd.

3. Dr. Wu Shangzhi is deemed to be interested in the shares held by Suntar Investment Pte Ltd through his deemed interest in Clean

Water Investment Limited, which is the sole shareholder of Sinomem Technology Pte Ltd which is the holding company of Suntar

Investment Pte Ltd.

4. Mr. Jiao Shuge is deemed to be interested in the shares held by Suntar Investment Pte Ltd through his deemed interest in Clean

Water Investment Limited, which is the sole shareholder of Sinomem Technology Pte Ltd which is the holding company of Suntar

Investment Pte Ltd.

5. Clean Water Investment Limited is deemed to be interested in the shares held by Suntar Investment Pte Ltd as it is the sole

shareholder of Sinomem Technology Pte Ltd which is the holding company of Suntar Investment Pte Ltd.

FREE FLOAT

As at 15 March 2013, approximately 38.57% of the issued share capital of the Company was held in the hands of

the public (based on information available to the Company). Accordingly, the Company has complied with Rule 723

of the Listing Manual of the Singapore Exchange Securities Trading Limited.



NOTICE IS HEREBY GIVEN that the 9th Annual General Meeting of Pharmesis International Ltd. (“the Company”) will

be held at No. 5 Kallang Sector, #03-02, Singapore 349279 on Friday, 26 April 2013 at 2.30 p.m. for the following

purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and the Audited Financial Statements of the Company for the

fi nancial year ended 31 December 2012 together with the Auditors’ Report thereon. (Resolution 1)

2. To re-elect the following Directors retiring pursuant to Article 91 of the Company’s Articles of Association:

Mr. Chew Heng Ching (Resolution 2)

Dr. Pu Weidong (Resolution 3)

(Mr. Chew Heng Ching will, upon re-election as a Director of the Company, remains as the Non-Executive

Chairman, Chairman of the Audit Committee and a member of the Nominating and Remuneration

Committees. He is considered independent for the purpose of Rule 704(8) of the Listing Manual of the

Singapore Exchange Securities Trading Limited.)

(Dr. Pu Weidong will, upon re-election as a Director of the Company, remains as the Chairman of the

Remuneration Committee and a member of the Audit Committee. He is considered independent for the

purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.)

3. To approve the payment of Directors’ fees of SGD 155,000 (equivalent to approximately RMB 800,000) for the

fi nancial year ending 31 December 2013 to be paid quarterly in advance. (Resolution 4)

4. To re-appoint Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fi x their

remuneration. (Resolution 5)

5. To transact any other business which may properly be transacted at an Annual General Meeting.

AS SPECIAL BUSINESS

To consider and, if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without any

modifi cations:

6. Ordinary Resolution: Authority to allot and issue shares

“That, pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806(2) of the Listing Manual of the

Singapore Exchange Securities Trading Limited (“SGX-ST”), authority be and is hereby given to the Directors

of the Company to:-

(a) (i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonus or

otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would

require shares to be issued, including but not limited to the creation and issue of (as well as

adjustments to) warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the

Directors may in their absolute discretion deem fi t; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue

shares in pursuance of any instrument made or granted by the Directors while this Resolution was in

force,



provided that:

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to

be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not

exceed fi fty per cent. (50%) of the Company’s total number of issued shares excluding treasury

shares (as calculated in accordance with sub-paragraph (2) below), of which the aggregate

number of shares to be issued other than on a pro-rata basis to existing shareholders of the

Company (including shares to be issued in pursuance of Instruments made or granted pursuant

to this Resolution) does not exceed twenty per cent. (20%) of the Company’s total number of

issued shares excluding treasury shares (as calculated in accordance with sub-paragraph (2)

below). Unless prior shareholder approval is required under the Listing Manual of the SGX-ST, an

issue of treasury shares will not require further shareholder approval, and will not be included in

the aforementioned limits.

(2) (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose

of determining the aggregate number of shares that may be issued under sub-paragraph (1)

above, the total number of issued shares excluding treasury shares is based on the Company’s

total number of issued shares excluding treasury shares at the time this Resolution is passed,

after adjusting for:

(i) new shares arising from the conversion or exercise of any convertible securities or share

options or vesting of share awards which are outstanding or subsisting at the time this

Resolution is passed; and

(ii) any subsequent bonus issue, consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with

the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such

compliance has been waived by the SGX-ST) and the Articles of Association for the time being

of the Company; and

(4) (unless revoked or varied by the Company in general meeting) the authority conferred by this

Resolution shall continue in force until the conclusion of the next Annual General Meeting of the

Company or the date by which the next Annual General Meeting of the Company is required by

law to be held, whichever is the earlier.”

[See Explanatory Note (i)]

(Resolution 6)

7. Ordinary Resolution: Authority to allot and issue shares under the Pharmesis Employee Share Option Scheme

“That, pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be and are

hereby authorised to offer and grant options in accordance with the provisions of the Pharmesis Employee

Share Option Scheme (“Scheme”) and to allot and issue from time to time such number of shares as may

be required to be issued pursuant to the exercise of the options under the Scheme provided always that the

aggregate number of shares to be issued pursuant to the Scheme shall not exceed 15% of the total number

of issued shares excluding treasury shares in the capital of the Company from time to time.”

[See Explanatory Note (ii)]

(Resolution 7)



By Order of the Board

Low Siew Tian

Company Secretary

Singapore, 11 April 2013

Explanatory Notes:

(i) Ordinary Resolution 6 proposed in item 6 above, if passed, will authorise and empower the Directors of the Company from the

date of the above Meeting until the next Annual General Meeting to issue shares and/or convertible securities in the Company up

to an amount not exceeding in aggregate 50% of the total number of issued shares excluding treasury shares of which the total

number of shares and convertible securities issued other than on a pro-rata basis to existing shareholders shall not exceed 20% of

the total number of issued shares excluding treasury shares of the Company at the time the resolution is passed, for such purposes

as they consider would be in the interests of the Company. This authority will, unless revoked or varied at a general meeting, expire

at the next Annual General Meeting of the Company.

(ii) Ordinary Resolution 7 proposed in item 7 above, if passed, will empower the Directors of the Company, from the date of this

Meeting until the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held

or when varied or revoked by the Company in general meeting, whichever is the earlier, to issue and allot shares in the Company of

up to a number not exceeding in total 15% of the total number of issued ordinary shares excluding treasury shares in the capital of

the Company from time to time pursuant to the exercise of the options under the Scheme.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint one or two proxies to

attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the offi ce of the Company’s Share Registrar, Boardroom Corporate &

Advisory Services Pte. Ltd. at 50 Raffl es Place, Singapore Land Tower #32-01, Singapore 048623, not less than forty-eight (48)

hours before the time appointed for holding the Meeting.

Pharmesis International Ltd.(Incorporated in the Republic of Singapore)

(Company Registration Number 200309641E)

IMPORTANT:

1. For investors who have used their CPF monies to buy shares in the capital of Pharmesis International Ltd., this Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent for information only.

2. This Proxy Form is not valid for use by such CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specifi ed. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specifi ed to enable them to vote on their behalf.

PROXY FORMAnnual General Meeting(Please read notes overleaf before completing this form.)

I/We (Name)

of (Address)

being a member/members of Pharmesis International Ltd. (the “Company”) hereby appoint:

Name NRIC/ Passport No. Proportion of Shareholdings

No. of Shares %

Address

and/or (delete as appropriate)

Name NRIC/ Passport No. Proportion of Shareholdings

No. of Shares %

Address

or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the

Annual General Meeting (the “Meeting”) to be held at 5 Kallang Sector, #03-02, Singapore 349279, on 26 April 2013

at 2.30 p.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions

proposed at the Meeting as indicated hereunder. If no specifi c direction as to voting is given or in the event of any

other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting

at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on

a poll.

(Please indicate your vote “For” or “Against” with a tick [ √ ] within the box provided.)

No. Ordinary Resolutions *For *Against

ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Audited Financial Statements for the

fi nancial year ended 31 December 2012

2. To re-elect Mr. Chew Heng Ching, who is retiring under Article 91 of the Company’s

Articles of Association

3. To re-elect Dr. Pu Weidong, who is retiring under Article 91 of the Company’s Articles of

Association

4. To approve payment of Directors’ Fees

5. To re-appoint Ernst & Young LLP as Auditors of the Company and to authorise the

Directors to fi x their remuneration

SPECIAL BUSINESS

6. To authorise the Directors to allot and issue new shares

7. To authorise the Directors to allot and issue shares under the Pharmesis Share Option

Scheme

Dated this 2013

Total number of Shares in: No. of Shares

(a) CDP Register

(b) Register of Members

Signature of Shareholder(s) or Common Seal of Corporate Shareholder*Delete where inapplicable

IMPORTANT: PLEASE READ NOTES ON THE REVERSE

NOTES:

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as

defi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have

Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered

against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the

aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of

Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by

you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to

attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifi es the proportion of his/her

shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company’s Share Registrar,

Boardroom Corporate & Advisory Services Pte. Ltd. at 50 Raffl es Place, Singapore Land Tower #32-01, Singapore 048623, not less

than 48 hours before the time appointed for the Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing.

Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under

the hand of an offi cer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on

behalf of the appointor, the letter or power of attorney or a duly certifi ed copy thereof must be lodged with the instrument.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to

act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50, of Singapore.

7. General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly

completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor

specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the

Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have

Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as

certifi ed by The Central Depository (Pte) Limited to the Company.

5 Kallang Sector #03-02

Singapore 349279

www.pharmes is .com

PHARMESIS INTERNATIONAL LTD.Company Registration Number:200309641E

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