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ASCENT Annual Report 2018

Jul 2, 2019

51802_rns_2019-07-02_d379e66f-1e4c-4d24-8ae4-289ac27125dc.pdf

Annual Report

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Stock Code ： 1439

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Chuwa Wool Industry Co., (Taiwan) Ltd.

2018 Annual Report

Website to Search for the Annual Report: http://mops.twse.com.tw Company website http: //www.chuwa.com.tw Printed on April 26, 2019

1 、 Spokesperson Acting Spokesperson Name ： CHIANG, CHUNG-WEI Name ： CHEN, YI-JU Title ： AVP, Financial accounting Title ： Special Assistant to the Chairman Tel ： +886-2-2773-0678 Tel ： +886-2-2773-0678 E-mail ： [email protected] E-mail ： [email protected]

  • 2 、 Primary Location of Business

Address ： 9F-7, 57 Fuxing North Rd., Taipei, Taiwan (R.O.C.) Tel ： +886-2-2773-0678

  • 3 、 Stock Transfer Information

Name ： CTBC Bank Co., Ltd. Transfer Agency Department

Address ： 5F., No.83, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei , Taiwan (R.O.C.) Website ： https://ecorp.chinatrust.com.tw/cts/index.jsp Tel ： +886-2-6636-5566

  • 4 、 Independent Auditor

Certified Public Accountants: Mr. Hsu, Jung-Huang, C.P.A., Mr. Huang, Chien-Che , C.P.A. Accounting Firm: Ernst & Young, Taiwan

Address: 9F, 333 Keelung Road, Sec. 1, Taipei, Taiwan (R.O.C.)

Website ： https://www.ey.com/tw/zh_tw Tel ： +886-2-2757-8888

  • 5 、 Name of Trading Site for Listed Securities Overseas and Inquiry Information: None 。

  • 6 、 Company Website ： http://www.chuwa.com.tw

Notice to Readers

THIS IS A TRANSLATION OF THE 2018 ANNUAL REPORT OF CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. (THE “COMPANY” OR “CHUWA”). THIS TRANSLATION IS INTENDED FOR REFERENCE ONLY. THE COMPANY HEREBY DISCLAIMS ANY AND ALL LIABILITIES WHATSOEVER FOR THE TRANSLATION. THE COMPANY TEXT OF THE ANNUAL REPORT SHALL GOVERN ANY AND ALL MATTERS RELATED TO THE INTERPRETATION OF THE SUBJECT MATTER STATED HEREIN.

Index

**I. ** Letter to Shareholders........................................................... 1
**II. ** Company Profile................................................................ 3
**III. ** Corporate Governance Report.................................................... 5
1. Organization................................................................... 5
2. Directors, Supervisors and Management Team...................................... 6
3. Remuneration of Directors, Supervisors, President, and Vice President................. 15
4. Corporate Governance Implementation............................................ 23
5. Information of CPAs Service Fee................................................. 48
6. Information on the Replacement of CPAs.......................................... 49
7. Disclosure of Name, Position, and Duration of Service at Firms or Their Associated
Enterprises within Past Year of Chairman, General Manager, and Managers in Charge of
Financial or Accounting Affairs................................................... 49
8. Changes in the stock options of directors, supervisors, managers, and heavyweight
shareholders................................................................... 49
9. The Top-10 shareholders who are the spouses or relatives within second-degree to each other 51
10. The shares of the invested company held by the Company, the Company’s directors,
supervisors, managers, and companies controlled directly or indirectly, and the aggregated
overall shareholding ratio....................................................... 52
**Ⅳ. ** Capital raising................................................................... 52
1. Capital and shares.............................................................. 56
2. Corporate bonds................................................................ 56
3. Special Shares.................................................................. 56
4. Global Depositary Receipt........................................................ 56
5. Employee Stock Option Certificate................................................ 56
6. Restricted Employee Shares...................................................... 56
7. M&A or acceptance of transferred shares of another company for issuance of new shares. 56
8. Implementation of capital utilization plan.......................................... 56
**Ⅴ. ** Operational Highlights........................................................... 57
1. Business Activities.............................................................. 57
2. Market and Sales Overview...................................................... 58
3. Human Resours................................................................ 60
4. Environmental-protection-related expenses......................................... 60
5. Labor-management relations...................................................... 60
6. Material contracts............................................................... 61
**Ⅵ. ** Financial Information............................................................ 62
1. Five-Year Financial Summary.................................................... 62
2. Five-Year Financial Analysis..................................................... 66
3. Supervisor's Review Report for the Most Recent Year................................ 72
4. Financial statements for the years ended December 31, 2018 and 2017, and Independent
Auditors’ Report................................................................ 73
5. Entity financial statement of the latest year inspected and authenticated by CPAs......... 152
6. Impacts of latest financial difficulties encountered by company and its associated enterprises
on company's financial standing as of date of printing of annual report................. 230
**Ⅶ. ** Review of Financial Conditions, Financial Performance, and Risk Management....... 231
1. Analysis of Financial Status...................................................... 231
2. Analysis of Financial Performance................................................ 232
3. Analysis of cash flow............................................................ 232
4. Major capital expenditures and impact on financial and business....................... 233
5. Reinvestment policy in the most recent year, reasons of profit or loss, improvement plan
and investment plan for next year.................................................. 233
6. Analysis of risk management...................................................... 233
7. Other significant matters.......................................................... 234
**Ⅷ. ** Subsidiary Information and Other Special Notes.................................... 235
1. Subsidiaries.................................................................... 235
2. Private placement of company’s common shares.................................... 236
3. Status of company common shares held by subsidiaries.............................. 236
4. Other supplementary invormation................................................. 236
**Ⅸ. ** Any Events in 2018 and as of the Date of this Annual Report that Had Significant Impacts
on Shareholders’ Right or Security Prices as Stated in Item3 Paragraph 2 of Article 36
of Securities and Exchange Law of Taiwan......................................... 236

I. Letter to Shareholders

Dear all shareholders:

First of all, thank you for your valuable time for reading the 2018 business report of Chuwa Wool Industry Co., (Taiwan) Ltd.

Chuwa Wool Industry Co., (Taiwan) Ltd. and its subsidiaries' 2018 consolidated operating income was NT$ 264.022 million and increase of 0.3% from 2017 NT$ 263.220 million.

With our vision to 2019, the company will continue to focus on the development of existing wool sales customers and be committed to the development of new customers and the expansion of real estate leasing business.

The company's 2018 annual business results and 2019 annual outlook report are as follows: 1. 2018 annual business results

  • (1) Business plan implementation results

The Company's 2018 consolidated operating income was NT$264.022 million, and the consolidated net loss for the period was NT$68.815 million (attributable to the parent company owner). The total consolidated loss for the current period is NT$68.862 million (vesting in the owner of the parent company). After-tax earnings per share was NT$0.75.

  • (2) Budget execution situation

The company did not disclose financial forecasts for the year 2018, so no budget was reached.

  • (3) Financial revenue and expenditure and profitability
Items 2018
Financial
structure (%)		 Debts ratio 7.76
Long term funds to fixed assets 67,951.55
Solvency (%) Current ratio 1,294.23
Working capital Ratio 1,188.41
Multiple of interest coverage (809.61)
Profitability Return on asset (%) (3.38)
Return on equity (%) (3.67)
Profit before tax to capital stock (%) (7.75)
Net profit rate (%) (27.69)
Earnings per share ($NT) (0.75)
  • (4) Status of research and development

The company has no research and development activities and related expenses in 2018.

1

  1. Business plan and summary for 2019

  2. (1) Policy of management

    • a. Strengthen the maintenance and operation between existing suppliers and customers.

    • b. Continue to expand potential markets and customers.

    • c. Realize the governance of the company.

  3. (2) Important production, sales and policy

    • Australian wool prices are still at relatively high prices, so that sales of wool-related products will remain conservative.

  4. The company's development and strategy

In the future, the company will continue to focus on the maintenance of existing wool sales customers and the development of new customers, while focusing on the expansion of real estate leasing business. In addition, the company will also actively develop businesses other than wool products and seek for the development direction of the company.

  1. Impact of external competitive environment, regulatory environment and overall business environment In recent years, due to the continuous development of man-made chemical fibers, natural fibers such as wool have been gradually compressed and marketed. Meanwhile, the cost of wool is easily affected by factors such as overall wages, environmental factors and weather factors, which is not conducive to the long-term development of the wool industry. However, in the face of fierce competition in the external environment, the company will continue to maintain its triangle trading business model and control sales and orders.

Sincerely,

Health and Happiness for all shareholders

Chuwa Wool Industry Co., (Taiwan) Ltd. Director CHEN, SHIH-HSIU Manager SUN, YANG

Accounting Supervisor CHIANG, CHUNG-WEI

2

II. Company Profile

  1. Date of incorporation October 1, 1964

  2. Company History

1964, October Founding of Chuwa Wool Industry Co., (Taiwan) Ltd
Acquired land in Lioudu Industrial Zone to build a manufacturing plant for wool tops
and carbonized wool.
Registered capiyal of NT$ 15,000,000.
1965, April Manufacuring started.
1968, April Cash offering for a total of NT$ 7,500,000, making paid-up capital to become
NT$22,500,000 after the capital increase.
1971, April Export of products to Japan starts.
1971, May A total of NT$4,500,000 of retained earnings transferred to capital, making paid-up
capital to become NT$27,000,000 after the capital increase.
1972, April A total of NT$2,700,000 of retained earnings transferred to capital, making paid-up
capital to become NT$29,700,000 after the capital increase.
Acquired additional manufacturing equipment to produce wool yolk from recovered
wool scouring wase water.
1973, April A total of NT$11,880,000 of retained earnings transferred to capital, making paid-up
capital to become NT$41,580,000 after the capital increase.
1974, December A total of NT$16,632,000 of retained earnings transferred to capital, making paid-up
capital to become NT$58,212,000 after the capital increase.
1978, September A total of NT$18,500,000 of retained earnings transferred to capital, making paid-up
capital to become NT$76,712,000 after the capital increase.
1980, October A total of NT$7,671,000 of retained earnings transferred to capital, making paid-up
capital to become NT$84,383,000 after the capital increase.
1981
 Built a wastewater treatment plant to improve quality of drainage water.
1983, December A total of NT$30,617,000 of retained earnings transferred to capital, making paid-up
capital to become NT$115,000,000 after the capital increase.
1984
 Introduction of antishrinking treatment and related machinery equipment to start
manufacturing unshrinkable wool tops.
1986, June A total of NT$65,000,000 of capital surplus transferred to capital, making paid-up
capital to become NT$180,000,000 after the capital increase.
1987, June Built a new plant and introduced the second set of machinery equipment for sulfuric
acid process.
1988, May A total of NT$153,000,000 of retained earnings transferred to capital, making paid-
up capital to become NT$333,000,000 after the capital increase.
1988, June A total of NT$72,000,000 of capital surplus transferred to capital, making paid-up
capital to become NT$405,000,000 after the capital increase.
1989, March Completed an automated manufacturing plant for antishrinking treatment.
1989, May Stock listed in TWSE.
1989, August A total of NT$64,800,000 of retained earnings transferred to capital, making paid-up
capital to become NT$469,800,000 after the capital increase.

3

1990, December Cash offering for a total of NT$49,956,000 together with a total of NT$14,094,000
of retained earnings, making paid-up capital to become NT$533,850,000 after the
capital increase.
Installed and launched the second-stage wastewater treatment facility to ensure
compliance with wastewater discharge sandards.
Completed construction and started using of Chuwa Wool Building.
1991, October Cash offering for a total of NT$ 100,000,000, making paid-up capital to become
NT$633,850,000 after the capital increase.
1992, October A total of NT$63,385,000 of capital surplus transferred to capital, making paid-up
capital to become NT$697,235,000 after the capital increase.
1993, July A total of NT$139,447,000 of retained earnings transferred to capital plus a total of
NT$ 3,836,000 employees’ bonus transferred to capital and a total of NT$ 34,862,000
of capital surplus transferred to capital, making paid-up capital to become
NT$875,380,000 after the capital increase.
1994, July A total of NT$61,277,000 of retained earnings transferred to capital plus a total of
NT$ 3,374,000 employees’ bonus transferred to capital and a total of NT$ 43,769,000
of capital surplus transferred to capital, making paid-up capital to become
NT$983,800,000 after the capital increase.
1995, June A total of NT$59,028,000 of retained earnings transferred to capital plus a total of
NT$ 3,220,000 employees’ bonus transferred to capital and a total of NT$ 39,352,000
of capital surplus transferred to capital, making paid-up capital to become
NT$1,085,400,000 after the capital increase.
Completed in succession replacement old manufacturing equipment with new sets.
2003, July Carried out capital reduction in a total of NT$ 60,000,000, making paid-up capital to
become NT$1,025,400,000 after the capital increase.
2003, October Carried out capital reduction in a total of NT$ 8,270,000, making paid-up capital to
become NT$1,017,130,000 after the capital increase.
2003, December Carried out capital reduction in a total of NT$ 47,130,000, making paid-up capital to
become NT$970,000,000 after the capital increase.
2004, November Carried out capital reduction in a total of NT$ 30,000,000, making paid-up capital to
become NT$940,000,000 after the capital increase.
2005, July Carried out capital reduction in a total of NT$ 20,000,000, making paid-up capital to
become NT$920,000,000 after the capital increase.
2006, April Shut down all production lines in Lioudu factory. Company’s operation transformed
to triangular trade and real estate leasing.
2010, January Sold Chuwa Wool Building.
2010, September Head Office relocated to 6F., No. 293, Sec. 2, Tiding Blvd., Neihu Dist., Taipei City.
2018, February Main shareholder Roo Hsing Co., Ltd. indirectly acquired 53.41% outstanding
common shares of Chuwa Wool by acquiring 100% shares of Keen Power
Investments Limited (Samoa) and Sparkling Asia Limited (Belize).
2018, July Head Office relocated to 9F-7, No. 57, Fuxing N. Rd., Songshan Dist., Taipei City.
Reinvested in a subsidiary company, CW Investment One Limited, with 100% share
holding.
2018, August Reinvested in a subsidiary company, Hsing Chuwa Investment Limited, with 100%
share holding.
2018, December Disposal transaction of land and factory located at No. 7, Gongjian W. Rd., Qidu
Dist., Keelung City.

4

III. Corporate Governance Report

1. Organization

  • (1) Organization Chart

==> picture [423 x 343] intentionally omitted <==

(2) Departments and Functions

Department Functions
Chairman’s Office Strengthen corporate governance planning, implement corporate
governance plans and corporate conduct and ethics policy, review
proposals prepared for board of directors’ meetings and other tasks
assigned bythe Chairman.
President’s Office Assist President in daily administrative matters and other tasks assigned
bythe President.
Investment Department Conduct industrial investment appraisal, and study and development of
cooperation opportunities.
Administration
Department		 In charge of general affairs, personnel afairs, asset management and
employee benefits.
Sales Department Procurement of raw materials and finished goods, sales of products to
domestic and foreign markets and other affairs related to import/export.
Finance and Accounting
Department		 In charge of finance, accounting, tax and stock affairs.
Information Technology
Center		 In charge of management and maintenance of computer equipment and
informationprocessing.

5

2. Directors, Supervisors and Management Team

(1) Directors and Supervisors

(1) Directors and Supervisors (1) Directors and Supervisors (1) Directors and Supervisors (1) Directors and Supervisors (1) Directors and Supervisors (1) Directors and Supervisors (1) Directors and Supervisors
As of 2019.04.26
Unit：Shares；%
Title Nationality/ Country of Origin Name Gende Date of
Election
(Inauguration)		 Tenure Date First
Elected		 Shareholding when Elected Current Shareholding Spouse & Minor
Shareholding		 Shareholding by Nominee
Arrangement		 Experience(Eeducation) Other Position Executives, Directors or
Supervisors who are spouses
Shares % Shares % Shares % Shares % Title Name Relationship
Chairman Taiwan
(R.O.C.)		 Chen, Shih-Hsiu M 2018.03.06 3 Years 2018.03.06 0 - 0 - 0 - 0 - University of Rochester,
Simon Graduate School of
Business
Chairman of Prosperity
Investment Limited		 Chairman of Roo Hsing Co., Ltd.
Chief Strategy Officer for Roo Hsing Co., Ltd.
Chief Strategy Officer for Chuwa Wool Industry Co.,
(Taiwan) Ltd.
Chairman of Wei Hao Investment Limited
Chairman of Prosperity Investment Limited
Chairman of Roo Hsing Global Co., Ltd.
Chairman of TCN Investment Co., Ltd.
Chairman of HNY Investment Co., Ltd.
Chairman of Roo Hsing Garment (Cambodia) Co. Ltd.
Chairman of Roo Hsing Co. Nicaragua, S.A.
Chairman of Roo Hsing Garment Co., El Salvador, S.A. de
C.V.
Chairman of Operadora Internacional de Zonas Francas
Managua, S.A.
Chairman of FAIN TEI ENTERPRISE COMPANY
LTD.(BVI)
Director of JD United (BVI) Limited
Director of Tooku Holdings Limited
Director of J.D. United Manufacturing Corporation Limited
Director of Tooku Trading Corporation Limited
Director of Sparkling Asia Limited
Director of Keen Power Investments Limited
Director of Ho Jen Investment Ltd.
Director of Foowa Investment Limited




None		 None None

6

Title Nationality/ Country of Origin Name Gende Date of
Election
(Inauguration)
Tenure		 Date First Elected Shareholding when Elected Shareholding when Elected Current Shareholding Current Shareholding Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding by Nominee
Arrangement		 Shareholding by Nominee
Arrangement		 Experience(Eeducation) Other Position Executives, Directors or
Supervisors who are spouses		 Executives, Directors or
Supervisors who are spouses		 Executives, Directors or
Supervisors who are spouses
Shares % Shares % Shares % Shares % Title Name Relationship
Director of Chugen Investment Co., Ltd.
Director of Chuwa Japan Investment Ltd.
Director of Yancien Investments Limited
Director of J.D. United Trading Corporation Limited
Director of OCT Holding Company Limited
Director of Nishiku Manufacturing Corporation Limited
Director of J.M. Bag & Case Manufacturing Corporation
Limited
Director of Gowin Success Limited
Director of GDM Trading Company Limited
Director of Suntex Textile Trading Corporation Limited
Director of Gowin Garments Corporation Limited
Juristic Chairman of HCW Investment Co., Ltd.
Director of CW INVESTMENT ONE LTD.
Director and President Saint Kitts and Nevis Federation Sun, Yang M 2018.03.06 3 Years 2018.03.06 0 - 0 - 0 - 0 - California State
Polytechnic University
Pomona, Bachelor of
Science
Shanghai Office
Representative of the Jilin
Province Textile Import
and Export Corp.		 Director of Roo Hsing Co., Ltd.
President of Roo Hsing Co., Ltd.
Director of Roo Hsing Global Co., Ltd.
Director of JD United (BVI) Limited
Director of Tooku Holdings Limited
Director of J.D. United Manufacturing Corporation
Limited
Director of Tooku Trading Corporation Limited
Director of J.D. United Trading Corporation Limited
Director of OCT Holding Company Limited
Director of Nishiku Manufacturing Corporation Limited
Director of J.M. Bag & Case Manufacturing Corporation
Limited
Director of Chongqing Municipality Youyang Country
Tooku Dec Manufacturing Co., Ltd.
Director of Tooku Jan Garments Co., Ltd.
Director of Gowin Success Limited
Director of GDM TradingCompanyLimited		 None None None

7

Title Nationality/ Country of Origin Name Gende Date of
Election
(Inauguration)		 Tenure Date First Elected Shareholding when Elected Shareholding when Elected Current Shareholding Current Shareholding Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding by Nominee
Arrangement		 Shareholding by Nominee
Arrangement		 Experience(Eeducation) Other Position Executives, Directors or
Supervisors who are spouses		 Executives, Directors or
Supervisors who are spouses		 Executives, Directors or
Supervisors who are spouses
Shares % Shares % Shares % Shares % Title Name Relationship
Director of South bay Manufacturing Company Limited
Director of JD United Manufacturing Pte. Limited
Director of Suntex Textile Trading Corporation Limited
Director of Gowin Garments Corporation Limited
Chairman and Representative of ChangZhou Tooku
Garments Co., Ltd.
Director of Jiansu Xiu Jia Yu Yang Real Estate
Development Limited
Director Taiwan
(R.O.C.)		 Roo Hsing Global
Co., Ltd.
(Note 1)		 - 2018.03.06 3 Years 2018.03.06 16,558,750 18.00% 49,139,065 53.41% 0 - 0 - - - None None None
Taiwan
(R.O.C.)		 Chang, Ryh-Yan M 2018.03.06 3 Years 2018.03.06 0 - 0 - 0 - 0 - National Taiwan
University School of
Management, Master in
Finance
CEO at Deloitte CPAs
(Taiwan)		 Legal representative director of Roo Hsing Co., Ltd.
CPA-in-charge of Chang Ryh-Yan CPA Firm
Independent Director of Savior Lifetec Corp. Ltd
Independent Director of Joinsoon Electronics MFG Co.,
Ltd.
Independent Director of CTCI Advanced Systems Inc.
Independent Director of Panion & BF Biotech Inc.
Director of Sysgration Ltd.
Independent Director of E.SUN Bank (China) Ltd.
Chairman ofQinzhengFinancial ConsultingCo.,Ltd.		 None None None
Independent Director Taiwan
(R.O.C.)		 Tien, Hung-Mao M 2018.06.08 3 Years 2018.06.08 0 - 0 - 0 - 0 - Ph.D., Politics, University
of Wisconsin, USA
Minister of Foreign Affairs
ROC Representative to UK
Chairman of Straits
Exchange Foundation		 Senior Advisors to the Office of the President of the
Republic of China
Chairman and Director of Institute of National Policy
Research Foundation		 None None None

8

Title Nationality/ Country of Origin Name Gende Date of
Election
(Inauguration)		 Tenure Date First Elected Shareholding when Elected Shareholding when Elected Current Shareholding Current Shareholding Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding by Nominee
Arrangement		 Shareholding by Nominee
Arrangement		 Experience(Eeducation) Other Position Executives, Directors or
Supervisors who are spouses		 Executives, Directors or
Supervisors who are spouses		 Executives, Directors or
Supervisors who are spouses
Shares % Shares % Shares % Shares % Title Name Relationship
Independent Director Taiwan
(R.O.C.)		 Lee, Hung-Ching M 2018.06.08 3 Years 2018.06.08 0 - 0 - 0 - 0 - M.S., Dept. of Financial &
Economic Law, Chung
Yuan Christian University
Deputy Section Chief,
Corporate Governance
Department, TWSE
Senior V.P., Corporate
Finance, Capital Securities
V.P., Capital Market Dept.,
Taichung Bank Securities
Corp.

None		 None None None
Supervisor Taiwan
(R.O.C.)		 Hsu, Chung-Jung M 2018.03.06 3 Years 2018.03.06 0 - 0 - 0 - 0 - Dept. of Accounting,
Tamkang University
Senior Manager, KPMG
Assistant V.P., Finance
Dept., Song Shang
Electronics Co., Ltd.		 V.P., Finance and Accounting, Roo Hsing Co., Ltd.
Director of Hung Hsing Garment (Cambodia) Co., Ltd.
Legal representative Supervisor of HCW Investment Co.,
Ltd.
Legal representative director of Ten Win Business
International Co., Ltd.		 None None None
Supervisor Taiwan
(R.O.C.)		 Lin, Hsiu-Yuan M 2018.03.06 3 Years 2018.03.06 0 - 0 - 0 - 0 - NTUST Dept. of Business
Administration
Senior Manager,
Accounting Dept., Cando
Corp.
Manager of Deloitte &
Touche Taiwan Ltd.		 Accounting Division Assistant VP of Roo Hsing Co., Ltd.
Supervisor of Roo Hsing Global Co., Ltd.		 None None None

Note 1 ： To simplify the group investment structure, the Roo Hsing Co., Ltd.’s board of directors approved to transfer the equity of the five subsidiaries originally held by Sparkling Asia Limited and Keen Power Investments Limited, including Ho Jen Investment Ltd., Foowa Investment Limited, Chugen Investment Co. Ltd., Chuwa Japan Investment Ltd. and Yancien Investment Limited to Roo Hsing Global Co., Ltd. (with Jan/31/2019 as consolidation reference date) and the change of Juristic Person Director has been approved by a letter Ref. JingShouShangZi No.10801016340, dated Feb/2/2019 from Department of Commerce, MOEA,

9

As of 2019.04.26

Table 1: Major shareholders of institutional shareholders

Name of Institutional Shareholders Major Shareholder of the Institutional Shareholder Shareholding
Ratio
Roo Hsing Global Co., Ltd. Roo Hsing Co., Ltd. 100%

Table 2: Major shareholders of the Company’s major institutional shareholders

As of 2019.04.26 As of 2019.04.26
Name of Institutional Shareholders Major Shareholder of the Institutional Shareholder Shareholding
Ratio
Roo Hsing Co., Ltd. National Development Fund, Executive Yuan 8.86%
Prosperity Investment Limited 8.75%
Farglory Life Insurace Corporation Ltd. 8.39%
HNY Investment Co., Ltd. 7.36%
TCN Investment Co., Ltd. 6.64%
JDU Opportunities Limited 6.23%
Lamode Opportunities Limited 3.14%
Wei Hao Investment Limited 2.66%
JIA, Wen Zhong 2.19%
JP Morgan Chase Bank N.A. Taipei Branch in
Custody for Vanguard Total International Stock
Index Fund, a series of Vanguard Star Funds		 0.88%

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10

As of 2019.04.26

Professional qualifications and independence analysis of directors and supervisors

Criteria
Name		 Meet One of the Following Professional Qualification
Requirements, Together with at Least Five Years Work
Experience		 Meet One of the Following Professional Qualification
Requirements, Together with at Least Five Years Work
Experience		 Meet One of the Following Professional Qualification
Requirements, Together with at Least Five Years Work
Experience		 Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Independence Criteria(Note) Number of
Other Public
Companies
in Which the
Individual is
Concurrently
Serving as
an
Independent
Director
An Instructor or
Higher Position
in a Department
of Commerce,
Law, Finance,
Accounting, or
Other Academic
Department
Related to the
Business Needs
of the Company
in a Public or
Private Junior
College, College
or University		 A Judge, Public
Prosecutor,
Attorney,
Certified Public
Accountant, or
Other
Professional or
Technical
Specialist Who
has Passed a
National
Examination and
been Awarded a
Certificate in a
Profession
Necessary for the
Business of the
Company		 Have Work
Experience in the
Areas of
Commerce, Law,
Finance, or
Accounting, or
Otherwise
Necessary for the
Business of the
Company		 1 2 3 4 5 6 7 8 9 10
Chen, Shih-Hsiu Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ －
Sun, Yang Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ －
Roo Hsing Global Co., Ltd
Representative:
Chang, Ryh-Yan		 Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ 4
Tien, Hung-Mao Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ 1
Lee, Hung-Ching Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ －
Hsu, Chung-Jung Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ －
Lin, Hsiu-Yuan Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ －

Note: When any of the following conditions is met for each director or supervisor during the two years prior to and during their tenure, please check "V" in the box underneath each conditional code.

(1) Not an employee of the company or its associated enterprise.

(2) Not a director or supervisor of the company or its associated enterprise (this, however, does not include an independent director at the company or its parent company or the subsidiary where the company holds more than 50% of voting shares directly and indirectly.

(3) Not a natural person shareholder that holds by himself/herself or by his/her spouse or minor child in someone else's name more than 1% of all circulating shares of the company or is on the Top 10 shareholding list.

(4) Not the spouse, a relative within the second degree of kinship, or a direct blood relative within the fifth degree of kinship of the said people indicated in the foregoing three sub-paragraphs.

(5) Not a director, supervisor or employee of an institutional shareholder directly holding more than 5%of all circulating shares of the company or a director, supervisor, or employee of an institutional shareholder on the Top 5 shareholding list.

(6) Not a director, supervisor, manager or a shareholder holding more than 5% of shares of a specific company or institution with financial or business activities with the company.

(7) Not a professional providing services or consultations on business, legal affairs, financial affairs, and accounting at the company or its associated enterprise or the owner, partner, director, supervisor, manager, and his/her spouse of a sole proprietorship or collaborative company or institution. This does not include members of compensation committees who exercise power in accordance with Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Compensation committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.

(8) Not the spouse or a relative within the second degree of kinship to any other director of the Company.

(9) None of the conditions indicated under Article 30 of the Company Act.

(10) Not a government agency, juristic person or its representative set forth in Article 27 of the Company Act.

11

(2) Information of the Presidents, VPs, AVPs, and the Head of Various Departments or Branches

As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%		 As of 2019.04.26
Unit：Shares；%
Title Nationality/ Country of Origin Name Tenure Date Effective Shareholding Spouse & Minor
Shareholding		 Shareholding
by Nominee
Arrangement		 Experience (Education) Other Position Managers who are Spouses or
Within Two Degrees of
Kinship
Shares % Shares % Shares % Title Name Relation
President Saint Kitts and Nevis Federation Sun, Yang M 2018.03.15 0 - 0 - 0 - California State Polytechnic
University Pomona, Bachelor of
Science
Shanghai Office Representative of
the Jilin Province Textile Import and
Export Corp.

Director of Roo Hsing Co., Ltd.
President of Roo Hsing Co., Ltd.
Director of Roo Hsing Global Co., Ltd.
Director of JD United (BVI) Limited
Director of Tooku Holdings Limited
Director of J.D. United Manufacturing Corporation
Limited
Director of Tooku Trading Corporation Limited
Director of J.D. United Trading Corporation Limited
Director of OCT Holding Company Limited
Director of Nishiku Manufacturing Corporation
Limited
Director of J.M. Bag & Case Manufacturing
Corporation Limited
Director of Chongqing Municipality Youyang Country
Tooku Dec Manufacturing Co., Ltd.
Director of Tooku Jan Garments Co., Ltd.
Director of Gowin Success Limited
Director of GDM Trading Company Limited
Director of South bay Manufacturing Company
Limited
Director of JD United Manufacturing Pte. Limited
Director of Suntex Textile Trading Corporation Limited
Director of Gowin Garments Corporation Limited
Chairman and Representative of ChangZhou Tooku
Garments Co., Ltd.
Director of Jiansu Xiu Jia Yu Yang Real Estate
Development Limited		 None None None

12

Title Nationality/ Country of Origin Name Tenure Date Effective Shareholding Shareholding Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding
by Nominee
Arrangement		 Shareholding
by Nominee
Arrangement		 Experience (Education) Other Position Managers who are Spouses or
Within Two Degrees of
Kinship		 Managers who are Spouses or
Within Two Degrees of
Kinship		 Managers who are Spouses or
Within Two Degrees of
Kinship
Shares % Shares % Shares % Title Name Relation
Chief Strategy
Officer		 Taiwan
(R.O.C.)		 Chen,
Shih-Hsiu		 M 2019.01.25 0 - 0 - 0 - University of Rochester, Simon
Graduate School of Business
Chairman of Prosperity Investment
Limited		 Chairman of Roo Hsing Co., Ltd.
Chief Strategy Officer for Roo Hsing Co., Ltd.
Chief Strategy Officer for Chuwa Wool Industry Co.,
(Taiwan) Ltd.
Chairman of Wei Hao Investment Limited
Chairman of Prosperity Investment Limited
Chairman of Roo Hsing Global Co., Ltd.
Chairman of TCN Investment Co., Ltd.
Chairman of HNY Investment Co., Ltd.
Chairman of Roo Hsing Garment (Cambodia) Co. Ltd.
Chairman of Roo Hsing Co. Nicaragua, S.A.
Chairman of Roo Hsing Garment Co., El Salvador, S.A.
de C.V.
Chairman of Operadora Internacional de Zonas Francas
Managua, S.A.
Chairman of FAIN TEI ENTERPRISE COMPANY
LTD.(BVI)
Director of JD United (BVI) Limited
Director of Tooku Holdings Limited
Director of J.D. United Manufacturing Corporation
Limited
Director of Tooku Trading Corporation Limited
Director of Sparkling Asia Limited
Director of Keen Power Investments Limited
Director of Ho Jen Investment Ltd.
Director of Foowa Investment Limited
Director of Chugen Investment Co., Ltd.
Director of Chuwa Japan Investment Ltd.
Director of Yancien Investments Limited
Director of J.D. United Trading Corporation Limited
Director of OCT Holding Company Limited
Director of Nishiku Manufacturing Corporation
Limited
Director of J.M. Bag & Case Manufacturing
Corporation Limited
Director of Gowin Success Limited
Director of GDM Trading Company Limited
Director of Suntex Textile Trading Corporation Limited
Director of Gowin Garments Corporation Limited
Juristic Chairman of HCW Investment Co., Ltd.
Director of CW INVESTMENT ONE LTD.







None		 None None

13

==> picture [32 x 36] intentionally omitted <==

Title Nationality/ Country of Origin Name Tenure Date Effective Shareholding Shareholding Spouse & Minor
Shareholding		 Spouse & Minor
Shareholding		 Shareholding
by Nominee
Arrangement		 Shareholding
by Nominee
Arrangement		 Experience (Education) Other Position Managers who are Spouses or
Within Two Degrees of
Kinship		 Managers who are Spouses or
Within Two Degrees of
Kinship		 Managers who are Spouses or
Within Two Degrees of
Kinship
Shares % Shares % Shares % Title Name Relation
AVP,
Administration &
Sales Department		 Taiwan
(R.O.C.)		 Cai,
Shao-Hua		 M 2018.03.15 0 - 0 - 0 - Dept. of Economics, Chinese
Culture University
CFO, Top Want Electronic Co., Ltd.
Special Assistant to Chairman,
Chuwa		 None None None None
AVP, Investment
Department		 Taiwan
(R.O.C.)		 Zhong,
Jia-Hao		 M 2018.03.15 0 - 0 - 0 - Dept. of Banking and Finance,
Takming University of Science and
Technology
Manager, Sun Capital Investment
Co., Ltd.
Special Assistant to Chairman,
Chuwa		 Chairman of Ten Win Business International Co., Ltd.
Legal representative director of HCW Investment Co.,
Ltd.		 None None None
AVP, Finance and
Accounting
Department		 Taiwan
(R.O.C.)		 Chiang,
Chung-Wei		 M 2018.04.26 0 - 0 - 0 - M.S., Department of Accountancy,
National Taipei University
Finance Manager, Ya Tung Ready
Mixed Concrete Co., Ltd.
Supervisor, Ya Hsing Cement
Products Co., Ltd.
Yani Cement China Sichuan Ya
Tung Cement Co., Ltd.
Finance Manager, Axiomtek Co.,
Ltd.
Special Assistant to Chairman,
Chuwa		 Legal representative director of HCW Investment Co.,
Ltd.		 None None None

==> picture [32 x 36] intentionally omitted <==

14

3. Remuneration of Directors, Supervisors, President, and Vice President ：

(1) Remuneration of Directors

(1) Remuneration of Directors (1) Remuneration of Directors
As of 2018
Unit：NT$ thousand；%
Title Name Remuneration Ratio of Total
Remuneration
(A+B+C+D)
to Net Income (%)
 Relevant Remuneration Received by Directors
Who are Also Employees		 Ratio of Total
Compensation
(A+B+C+D+E+F+G)
to Net Income (%)		 Other remuneration from investment
business except subsidiary
Base
Compensation
(A)
 Severance Pay
(B)
 Bonus to
Directors(C)
 Allowances
(D)
 Salary,
Bonuses,
and
Allowances
(E)
 Pensions (F)
 Employees Compensation (G)
The company All companies in the
consolidated
financial statements		 The company All companies in the
consolidated
financial statements		 The company All companies in the
consolidated
financial statements		 The company All companies in the
consolidated
financial statements		 The company All companies in the
consolidated
financial statements		 The company All companies in the
consolidated
financial statements		 The company All companies in the
consolidated
financial statements		 The company All companies in
the consolidated
financial
statements		 The company All companies in
the consolidated
financial
Cash Stock Cash Stock
Chairman Chugen Investment Co. Ltd.
Representative：
Chen, Jhih-Ying (Note 1)		 - - - - - - - - - - 995 995 - - - - - - 995 995 None
Chairman Chugen Investment Co. Ltd.
Representative：
Chen, Shih-Hsiu (Note 2)		 - - - - - - 395 395 395 395 - - - - - - - - 395 395 None
Director and
President		 Chugen Investment Co. Ltd.
Representative：
Huang, Jin-Cai (Note 1)		 - - - - - - - - - - 364 364 18 18 - - - - 382 382 None
Director and
President		 Chugen Investment Co. Ltd.
Representative：
Sun, Yang (Note 2)		 - - - - - - 395 395 395 395 - - - - - - - - 395 395 None
Director Chugen Investment Co. Ltd.
Representative：
Ye, Mou-Sheng (Note 1)		 - - - - - - 45 45 45 45 - - - - - - - - 45 45 None
Director Chugen Investment Co. Ltd.
Representative：
Chang, Ryh-Yan (Note 3)		 - - - - - - 395 395 395 395 - - - - - - - - 395 395 None

15

Title Name Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Remuneration Ratio of Total
Remuneration
(A+B+C+D)
to Net Income (%)		 Ratio of Total
Remuneration
(A+B+C+D)
to Net Income (%)		 Relevant Remuneration Received by Directors
Who are Also Employees		 Relevant Remuneration Received by Directors
Who are Also Employees		 Relevant Remuneration Received by Directors
Who are Also Employees		 Relevant Remuneration Received by Directors
Who are Also Employees		 Relevant Remuneration Received by Directors
Who are Also Employees		 Relevant Remuneration Received by Directors
Who are Also Employees		 Relevant Remuneration Received by Directors
Who are Also Employees		 Relevant Remuneration Received by Directors
Who are Also Employees		 Ratio of Total
Compensation
(A+B+C+D+E+F+G)
to Net Income (%)		 Ratio of Total
Compensation
(A+B+C+D+E+F+G)
to Net Income (%)		 Other remuneration from investment
business except subsidiary
Base
Compensation
(A)		 Severance Pay
(B)		 Bonus to
Directors(C)		 Allowances
(D)		 Salary,
Bonuses,
and
Allowances
(E)		 Pensions (F) Employees Compensation (G)
The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in
the consolidated
financial
statements		 The company All companies in the
consolidated financial
statements
Cash Stock Cash Stock
Independent
Director		 Liang, Jhih-Chang (Note 1) - - - - - - 45 45 45 45 - - - - - - - - 45 45 None
Independent
Director		 Lin, Heng-Jhih (Note 4) - - - - - - 90 90 90 90 - - - - - - - - 90 90 None
Independent
Director		 Tien, Hung-Mao (Note 5) - - - - - - 525 525 525 525 - - - - - - - - 525 525 None
Independent
Director		 Lee, Hung-Ching (Note 5) - - - - - - 525 525 525 525 - - - - - - - - 525 525 None

Note 1 ： Resigned on 2018/03/06.

Note 2 ： Reassign on 2018/03/06, and newly-elected on 2018/06/08 be natural person director.

Note 3 ： Reassign on 2018/03/06, and resigned on 2019/01/31.

Note 4 ： Resigned on 2018/06/08.

Note 5 ： Appointed on 2018/06/08.

16

Remuneration bracket table

Remuneration bracket table Remuneration bracket table Remuneration bracket table Remuneration bracket table
Range of Remuneration Name of Directors
Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)
The Company All companies in
the consolidated
financial statements
(H)
The Company		 All companies in
the consolidated
financial statements
(I)
Under NT$ 2,000,000 Chugen Investment Co. Ltd. Representative: Chen, Jhih-Ying
Chugen Investment Co. Ltd. Representative: Chen, Shih-Hsiu
Chugen Investment Co. Ltd. Representative: Huang, Jin-Cai
Chugen Investment Co. Ltd. Representative: Sun, Yang
Chugen Investment Co. Ltd. Representative: Ye, Mou-Sheng
Chugen Investment Co. Ltd. Representative: Chang, Ryh-Yan
Liang, Jhih-Chang
Lin, Heng-Jhih
Tien, Hung-Mao
Lee, Hung-Ching
NT$2,000,000 ~ NT$4,999,999 － － － －
NT$5,000,000 ~ NT$9,999,999 － － － －
NT$10,000,000 ~ NT$14,999,999 － － － －
NT$15,000,000 ~ NT$29,999,999 － － － －
NT$30,000,000 ~ NT$49,999,999 － － － －
NT$50,000,000 ~ NT$99,999,999 － － － －
Over NT$100,000,000 － － － －
Total 10 10 10 10

17

(2) Remuneration of Supervisors

(2) Remuneration of Supervisors (2) Remuneration of Supervisors
As of 2018
Unit：NT$ thousand；%
Title Name Remuneration Ratio of Total
Remuneration (A+B+C)
to Net Income (%)		 Other remuneration from
investment business except
subsidiary
Base Compensation
(A)		 Bonus to Supervisors
(B)		 Allowances
(C)
The
company		 All
companies in
the
consolidated
financial
statements		 The
company		 All
companies in
the
consolidated
financial
statements		 The
company		 All
companies in
the
consolidated
financial
statements		 The
company		 All
companies in
the
consolidated
financial
statements
Supervisor Foowa Investment Limited
Representative:
Ciou,Guo-Ying (Note)		 － － － － 45 45 － － None
Supervisor Foowa Investment Limited
Representative:
Lee,Yao-Huei(Note)		 － － － － 45 45 － － None
Supervisor Foowa Investment Limited
Representative:
Hsu,Chung-Jung (Note)		 － － － － 395 395 － － None
Supervisor Foowa Investment Limited
Representative:
Lin, Hsin-Yuan (Note)		 － － － － 395 395 － － None

Note ： Legal supervisor representative of Foowa Investment Limited had been reassigned two representatives on 2018/03/06 ： Original representatives － Ciou, Guo-Ying

and Lee, Yao-Huei ﹔ New representatives － Hsu, Chung-Jung and Lin, Hsin-Yuan ， and newly-elected on 2018/06/08 be natural person supervisor.

18

Remuneration bracket table

Range of Remuneration Name of Supervisors Name of Supervisors
Total of (A+B+C)
The company All companies in the consolidated financial
statements(D)
Under NT$ 2,000,000 Foowa Investment Limited Representative: Ciou, Guo-Ying
Foowa Investment Limited Representative: Lee, Yao-Huei
Foowa Investment Limited Representative: Hsu, Chung-Jung
Foowa Investment Limited Representative: Lin, Hsin-Yuan
NT$2,000,000 ~ NT$4,999,999 － －
NT$5,000,000 ~ NT$9,999,999 － －
NT$10,000,000 ~ NT$14,999,999 － －
NT$15,000,000 ~ NT$29,999,999 － －
NT$30,000,000 ~ NT$49,999,999 － －
NT$50,000,000 ~ NT$99,999,999 － －
Over NT$100,000,000 － －
Total 4 4

19

(3) Remuneration of the President and Vice President

As of 2018
Unit：Shares；%		 As of 2018
Unit：Shares；%		 As of 2018
Unit：Shares；%		 As of 2018
Unit：Shares；%		 As of 2018
Unit：Shares；%		 As of 2018
Unit：Shares；%		 As of 2018
Unit：Shares；%
Title Name Salary (A) Pensions (B) Reward and
Allowance etc. (C)		 Employees bonus from
Distributable Earnings (D)		 Total Amount(A+B+C+D)
/ NetIncome		 Other remuneration from
investment business except
subsidiary
The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in the
consolidated financial
statements		 The company All companies in
the consolidated
financial
statements		 The
company		 All
companies
in the
consolidated
financial
statements
Cash Stock Cash Stock
Director
and
President		 Chugen Investment Co. Ltd.
Representative：
Huang, Jin-Cai (Note 1)		 364 364 18 18 － － － － － － 382 382 None
Director
and
President		 Chugen Investment Co. Ltd.
Representative：
Sun, Yang (Note 2)		 － － － － － － － － － － － － None

Note 1 ： Resigned on 2018/03/06.

Note 2 ： Reassign on 2018/03/06, and newly-elected on 2018/06/08 be natural person director.

20

Remuneration bracket table

Range of Remuneration Name of President and Vice President Name of President and Vice President
The company All companies in the consolidated
financial statements
E
Under NT$ 2,000,000 Chugen Investment Co. Ltd.
Chugen Investment Co. Ltd.		 Representative：Huang, Jin-Cai
Representative：Sun, Yang
NT$2,000,000 ~ NT$4,999,999 － －
NT$5,000,000 ~ NT$9,999,999 － －
NT$10,000,000 ~ NT$14,999,999 － －
NT$15,000,000 ~ NT$29,999,999 － －
NT$30,000,000 ~ NT$49,999,999 － －
NT$50,000,000 ~ NT$99,999,999 － －
Over NT$100,000,000 － －
Total 2 2

21

  • (4) Employees’ profit sharing bonus paid to the management team: None.

  • (5) Compare and analyze the total amount of compensation to Directors, Supervisors, President and Vice Presidents of the Company and all the companies in the consolidated statements in the past two years as a percentage of the net income after tax of the individual financial report, and explain compensation policies, standards/packages, determination procedures, the linkage to operating performance and future risk exposure.

Unit: NT$ thousands

Unit: NT$ thousands
2018 2017
Net income Note Note
% of Compensation Paid to Directors － －
% of Compensation Paid to Supervisors － －
% of Compensation Paid to President and VPs － －

Note ： Chuwa Wool Industry Co., (Taiwan) Ltd. Group suffered a net loss in the year 2017 and 2018. Therefore, the total amount of remuneration of directors, supervisors, general managers, and deputy general managers accounts for the post-tax net profit ratio of individual financial reports will not be analyzed.

Described as follows ：

  • A. Compensation policies of the Company is based on Article 15 of the Company's Articles of Incorporation, which provides that Directors and Supervisors may claim compensation and the amount of which is to be determined by the board of directors. Hence the board of directors is authorized to determine the compensation of Chairman, Directors and Supervisors based on respective participation in the operation and value of contribution to the Company plus consideration of average level in the industry. Article 16 provides that the Company shall have one President and one or more managerial personnel, and the appointment, discharge and compensation of which shall be decided by a resolution to be adopted by a majority vote of the directors at a board of directors’ meeting attended by a majority of the entire directors of the company. In addition, in accordance with Article 18 of the Company’s Articles of Incorporation, for pre-tax profits in a given year the Company shall first reserve a sufficient amount to offset its accumulated losses and then set aside 4% to 5% as profit sharing bonuses to its employees and not more than 2% as compensation to its directors and supervisors.

  • B. The Company has set up a Compensation Committee to annually and periodically conduct performance evaluation of Directors, Supervisors and managerial personnel, review compensation policies, systems, standards and structure and submit its decisions to the board of directors to adopt a resolution.

  • C. Compensation policies of the Company are mainly in the light of competitive environment of the industry, participation in the operation, value of contribution and management performance, and have nothing to do with future risk exposure.

22

4. Corporate Governance Implementation

(1) Board of Directors Meeting Status

In the most recent year (year 2018) up to the date publishing this annual report, there have been 15 meetings of board of directors (5 in the 23[rd] term and 10 in the 24[th] term) and the directors ’ attendance status is as follows ：

Title Name
(Note 1)		 Attendance
in Person
(B)		 By Proxy Attendance Rate
(%)
【Ｂ/Ａ】
(Note 2)		 Remarks
Chairman Chugen Investment Co. Ltd.
Representative:
Chen, Jhih-Ying		 1 0 100.00% Newly-elected in the 23rdterm
2018.03.06 Resignation
Director Chugen Investment Co. Ltd.
Representative:
Huang, Jin-Cai		 1 0 100.00%
Director Chugen Investment Co. Ltd.
Representative:
Ye, Mou-Sheng		 1 0 100.00%
Independent
Director		 Lin, Heng-Jhih 4 0 100.00% Newly-elected in the 23rdterm
2017.06.06 Re-elected
Independent
Director		 Liang, Jhih-Chang 1 0 100.00% Newly-elected in the 23rdterm
2017.06.06 Re-elected
2018.03.06 Resignation
Chairman Chugen Investment Co. Ltd.
Representative:
Chen, Shih-Hsiu		 4 0 100.00% Re-elected in the 23rdterm
2018.03.06 Reassign
Director Chugen Investment Co. Ltd.
Representative:
Sun, Yang		 4 0 100.00%
Director Chugen Investment Co. Ltd.
Representative:
Chang, Ryh-Yan		 4 0 100.00%
Chairman Chen, Shih-Hsiu 10 0 100.00% Newly-elected in the 24thterm
2018.06.08 Re-elected
Director Sun, Yang 7 3 70.00%
Director Chugen Investment Co. Ltd.
Representative:
Chang, Ryh-Yan		 10 0 100.00% Re-elected in the 24thterm
2018.06.08 Re-elected
Independent
Director		 Tien, Hung-Mao 10 0 100.00% Newly-elected in the 24thterm
2018.06.08 Re-elected
Independent
Director		 Lee, Hung-Ching 10 0 100.00%

23

Annotations:

  • A. Matters as required by Article 14-3 of Securities and Exchange Act and resolutions of the board meetings with independent directors having dissenting opinion or qualified opinion which have been recorded in meeting minutes or otherwise with written statements shall be specified in details of meeting dates, terms, proposals, opinions of all independent directors and response of the Company ： Non.

  • B. For recusals of Directors due to conflicts of interests shall be specified in details of Directors' names, proposals, reasons of recusals and voting status ：

Meeting date Directors to
recuse		 Proposal Recusal reasons Voting status
2018.03.15 Sun, Yang Managerial personnel’s
appointment and
removing covenant not to
compete.		 The director recused is
the person concerned
in the appointment and
proposal of removing
covenant not to
compete.
The director is excused from
the discussion and voting of
the proposal.
2018.06.26 Tien,
Hung-Mao
Lee,
Hung-Ching
Appointment of members
of 4thCompensation
Committee.		 Directors recused are
the persons concerned
in the appointment.		 Both directors are excused
from the discussion and
voting of the proposal.
2018.08.06 All directors Proposal for adjusting
compensation to directors
in the 1stmeeting of the
4thCompensation
Committee.		 Directors recused are
the persons to whom
compensation will be
paid.		 Directors are excused from
the discussion and voting.
(Compensation to
independent directors:
discussed and approved by
ordinary directors)
(Compensation to ordinary
directors: discussed and
approved by independent
directors)

  • C. Measures are taken to strengthen the functionality of the Board in the very year or recent years (e.g. set up Audit Committee, enhance operational transparency) and implementation status ： (a) To strengthen corporate governance, the Audit Committee is to be set up on June 24, 2019.

  • (b) In accordance with the Company’s Articles of Incorporation, the Company has purchased liability insurance for directors and supervisors to lower the risks of material damage incurred to the company and shareholders thereof.

  • Note 1: If a director or a supervisor is a juristic person, the name of the juristic person and the representative thereof shall be disclosed.

  • Note 2: (1) If a director or a supervisor leaves office prior to the end of the year, the date leaving office shall be specified in Notes, while the attendance (presence) rate in person shall be calculated based on the attendance at meetings during the on-service time period.

    • (2) Whenever there is the re-election of directors or supervisors, information of both the incumbents and the predecessors shall be listed with predecessor/newly elected/re-elected/re-election date specified in Notes, while the attendance (presence) rate in person shall be calculated based on the attendance at meetings during the on-service time period.

24

  • (2) Audit Committee Meeting Status or Supervisor participating in Board Meetings

  • A. The Audit Committee Meeting Status: Not applicable because the Audit Committee has not been established.

  • B. The number of Board Meetings in 2018 and as of the Date of this Annual Report is 15 (A) (5 in the 23rd term and 10 in the 24th term), on which Supervisors’ sitting-in are as follows ：

Title Name Attendance in
Person (Ｂ)		 Attendance Rate
(%)
【Ｂ/Ａ】(Note)		 Remarks
Supervisor
Foowa Investment
Limited Representative：
Ciou,Guo-Ying		 1 100.00% Re-elected in the 23rdterm
2018.03.06 Resignation
Supervisor
Foowa Investment
Limited Representative：
Lee,Yao-Huei		 0 －
Supervisor
Foowa Investment
Limited Representative：
Hsu,Chung-Jung		 3 75.00% Re-elected in the 23rdterm
2018.03.06 Reassign
Supervisor
Foowa Investment
Limited Representative：
Lin,Hsin-Yuan		 3 75.00%
Supervisor Hsu, Chung-Jung 8 80.00% Newly-elected in the 24th
term
2018.06.08 Re-elected
Supervisor Lin, Hsiu-Yuan 8 80.00%
Annotations：
A. Composition and Responsibilities of Supervisors：
(a) Communication between employees and shareholders of the Company (channels and modes of
communication): Good and unimpeded communication channels. Be able to reach other parties at
any time.
(b) Communication between Supervisors and Internal Audit Chief and CPA (e.g. matters, means and
results of communication on finance and business of the Company): Good and unimpeded
communication channels. Be able to reach other parties at any time.
B. If there statements of opinions made by Supervisors when attending board meetings, board meeting
dates, terms, proposals, board resolutions shall be specified in details of and response of the Company:
None.

  • Note ： If a supervisor leaves office prior to the end of the year, the date leaving office shall be specified in Notes, while the presence rate in person shall be calculated based on the presence at meetings during the on-service time period.

  • Whenever there is re-election of supervisors, information of both the incumbents and the predecessors shall be listed with predecessor/newly elected/re-elected/re-election date specified in Notes, while the presence rate in person shall be calculated based on the presence at meetings during the on-service time period.

25

(3) Taiwan Corporate Governance Implementation as Required by Taiwan Financial Supervisory Commission.

Assessment Item Implementation Status Differences from Corporate
Governance Best Practice
Principles for TWSE/TPEx
Listed Companies
Yes No Explanation
1、 Does Company follow “Corporate Governance Best
Practice Principles for TWSE/TPEx Listed Companies” to
establish and disclose its corporate governance practices？		 V The Company has established Corporate Governance Best Practice Guidelines
based on “Corporate Governance Best Practice Principles for TWSE/TPEx
Listed Companies” and disclosed in the corporate governance section of
Company’s website。		 None
2、 Shareholding Structure & Shareholders’ Rights
(1) Does Company have Internal Operation Procedures for
handling shareholders’ suggestions, concerns, disputes
and litigation matters? If yes, have these procedures
been implemented accordingl？
(2) Does Company possess a list of major shareholders
and beneficial owners of these major shareholders？
(3) Has the Company built and executed a risk
management system and a firewall between the
Company and its affiliates？
(4) Has the Company established internal rules prohibiting
insider trading on undisclosed information？		 Ｖ
Ｖ
Ｖ
Ｖ		 (1) The Company has set up Spokesman, Acting Spokesman and dedicated
stock affairs personnel to be in charge of relevant duties and a secion of
stakeholders with investor service windows is also included on Company’s
website to handle issues of shareholders’ suggestions and questions.
(2) The Company periodically discloses the list of major shareholders and
ultimate controllers thereof in accordance with relevant laws and
regulations, and declares changes in shareholdings pursuant to regulations.
(3) Commercial and financial activities between the Company and affiliated
companies are operated independently, and “Rules Governing Financial and
Business Matters Among Affiliated Companies” are in place for relevant
operational risk control.
(4) To uphold trading fairness in the stock market, the Company has formulated
“Management for Preventing Insider Transactions” and “Procedures for
Handling Material Inside Information” and required Company staff to abide
by provisions in Securities and Exchange Act and not to use known
information yet disclosed to the public for insider trading and shall not
disclose such to others.		 None
None
None
None
3、 Composition and Responsibilities of the Board of
Directors
(1) Has the Company established a diversification policy
for the composition of its Board of Directors and has it
been implemented accordingly？		 V (1) The Company has prescribed the competence required for board members in
its “Corporate Governance Best Practice Guidelines” to implement
diversification of board members.		 None

26

Assessment Item Implementation Status Differences from Corporate
Governance Best Practice
Principles for TWSE/TPEx
Listed Companies
Yes No Explanation
(2) Other than the Compensation Committee and the Audit
Committee which are required by law, does the
Company plan to set up other Board committees？
(3) Has the Company established a methodology for
evaluating the performance of its Board of Directors on
an annual basis？
(4) Does the Company regularly evaluate its external
auditors’ independence？		 Ｖ
Ｖ
Ｖ		 (2) Other than the Compensation Committee established pursuant to law, the
Company has yet set up other functional committees.
(3) The Company has established a methodology for evaluating the
performance of the Board (as disclosed on Company website) to conduct
evaluations on an annual basis and the relevant report was submitted to the
6thMeeting of 24rdBoard on December/21/2018.
Evaluation indicators are as follows: A. Compliance with relevant laws and
regulations – (a). Observance of submitting matters to the Board for
discussion as required by law (b). Whether board meetings have been
convened more than six times a year (c). Observance of recusal of conflicts
of interests (d). Fulfillment of a number of hours of annual training and
education (e). Board meetings attendance rated. Shareholders’ meetings
attendance rate B. Participation in the Company's operations – (a). Review
of the accounting system, financial status, financial reports and audit reports
of the Company and follow up (b). Communicate and exchange views with
the Company’s CPA (c). Evaluate and supervise existing or potential risks
of the company (d). Communication and interactions with the management.
(4) The Finance and Accounting Department annually evaluates CPA’s
independence and reports the same to the Board of Directors, which was
approved at 8thmeeting of 24thBoard on March 5, 2019. Assessment of
CPA’s independence and suitability is on page 30 of the annual report and
CPA’s independence declaration is onpage 31 of the annual report.


















None
None
None
4、 Does the Company established a full- (or part-) time
corporate governance unit or personnel to be in charge of
corporate governance affairs (including but not limited to
furnish information required for business execution by
directors, handle matters related to board meetings and
shareholders’ meetings according to laws, handle corporate
registration and amendment registration, record minutes of
board meetings and shareholders meetings, etc.)？






Ｖ		 Administration Department is the part-time corporate governance unit in charge
of corporate governance affairs and Stock Affairs Section of Finance and
Accounting Department has been assigned to handle matters related to board
meetings.


None

27

Assessment Item Implementation Status Differences from Corporate
Governance Best Practice
Principles for TWSE/TPEx
Listed Companies
Yes No Explanation
5、 Has the Company established a means of communicating
with its Stakeholders (including but not limited to
shareholders, employees, customers, suppliers, etc.) or
created a Stakeholders Section on its Company website?
Does the Company respond to stakeholders’ questions on
corporate responsibilities？		 Ｖ The Company has a stakeholder section on company’s website with contact
person to communicate with stakeholders and website visitors may choose
dialogue windows as they wish.		 None
6、 Has the Company appointed a professional registrar for its
Shareholders’ Meetings？		 Ｖ The Company has appointed CTBC Bank Co., Ltd. Transfer Agency
Department as the registrar for Shareholders’ Meeting。		 None
7、 Information Disclosure
(1) Has the Company established a corporate website to
disclose information regarding its financials, business
and corporate governance status？
(2) Does the Company use other information disclosure
channels (e.g. maintaining an English-language
website, designating staff to handle information
collection and disclosure, appointing spokespersons,
webcasting investors conference etc.）？		 Ｖ
Ｖ		 (1) The Company has set up an investor section on Company’s website
(www.chuwa.com.tw)to disclose information regarding financials,
business and corporate governance status.
(2) The Company has set up a website to disclose other information and a
dedicated unit has been charged with website maintenance and dedicated
personnel have been charged with the job of disclosing material
information in the Market Observation Post System while Spokesman
system has also been implemented.		 None
None
8、 Has the Company disclosed other information to facilitate
a better understanding of its corporate governance
practices (including but not limited to employee benefits,
employee wellness, investor relations, supplier relations,
stakeholders’ interests, training records of directors and
supervisors, implementation of risk management policies
and risk measurement measures, implementation of
customer relations policies, and purchasing liability
insurance for directors and supervisors）？		 Ｖ (1) The Company has purchased liability insurance for directors and
supervisors: with each claim and cumulative compensation limit of US$10
million during the policy term.
(2) Employee benefits:The Company protects employee benefits pursuant to
Labor Standard Law and employees are protected by Group Insurance.
(3) Investor relations: Service Window on Company’s website and dedicated
Stock Affairs Section are in place to handle shareholders’ suggestions.
(4) Stakeholders’ interests: All stakeholders will have access to the Company
for communication and suggestions to protect their legal rights。
(5) Training records of directors and supervisors: As detailed in page 40 of the
Annual Report.
(6) Implementation of risk management policies and risk measurement
measures: The Company conducts risk management and measurement
through internal control and internal audit.		 None

28

Assessment Item Implementation Status Implementation Status Implementation Status Differences from Corporate
Governance Best Practice
Principles for TWSE/TPEx
Listed Companies
Yes No Explanation
9、 The improvement status in response to the result of Corporate Governance Evaluation announced by the Taiwan Stock Exchange.
(1) Already improved:
The Company has made improvement on annual report and information disclosure on the corporate website.
(2) To be improved with priority:
Attendance of directors and supervisors to Board meetings and fulfillment of required training.

29

Chuwa Wool Industry Co., (Taiwan) Ltd.

2018 CPA Independence and Suitability Evaluation Report

Date: February 19, 2019

Names of CPA: Xu Ronghuang, Huang Jianze

Name of CPA firm: Ernst & Young Accounting Firm

1 、 Evaluation ：

No. Item Results
A. As of the most recent attestation,is is ensured that CPAs rotate every7years. Yes☐No
B. CPAs are not involved in significant financial interest with the client. Yes☐No
C. Avoid anyinappropriate relationshipwith the client. Yes☐No
D. CPAs shall ensure that their assistants are honest,impartial and independent. Yes☐No
E. A CPA shall not audit financial statements of the organization he/she used to serve
within twoyears afer he/she bagnpracticingin the CPA firm.		 Yes☐No
F. The official capacityof CPAs shall not be falselyassumed byothers. Yes☐No
G. CPAs do not own shares of the Companyor its affiliates. Yes☐No
H. There is no monetary borrowing/lending between CPAs and the Company or its
affiliates.		 Yes☐No
I. There is no joint investment or gain sharing relationship between CPAs and the
Companyor its affiliates.		 Yes☐No
J. CPAs do not hold concurrent jobs in or receive regular remuneration from the
Companyor its affiliates.		 Yes☐No
K. CPAs are not involved in decision-making management functions of the
Companyor its affiliates.		 Yes☐No
L. CPAs do not concurrentlyoperate other businesses detrimental to independence. Yes☐No
M. Any CPA is not the spouse of or related within second degree of kinship to any
managementpersonnel of the Company.		 Yes☐No
N. CPAs do not receive anycommission related to the business. Yes☐No
O. Up to the present, there has been no disciplinary action taken against CPAs and
no matters thought to bear on the independence.		 Yes☐No

2 、 Performance ：

  • (1) Completion of attestation of financial satements of the Company as scheduled.

  • (2) Completion of attestation of financial satements of subsidiaries and affiliates as scheduled.

  • (3) Providing nonscheduled financial and tax consultation services.

3 、 Evaluation results ：

CPAs Xu Ronghuang and Huang Jianze are with independence and provide in a prompt and appropriate manner.

Head of Finance and Accounting Department ： CHIANG, CHUNG-WEI

30

==> picture [511 x 96] intentionally omitted <==

The CPA’s independence declaration

March 5, 2019

To the perusal of Board of Directors and Supervisors of Chuwa Wool Co., Ltd.

In accordance with prescriptions in the Statements on Auditing Standards generally accepted in the Republic of China, this declaration is an annual communication on CPA’s independence for the audit of 2018 financial statements.

According to prescriptions in the Statements on Auditing Standards generally accepted in the Republic of China, the CPA shall provide those charged with governance with a statement that in its CPA firm personnel subject to independence requirements, its CPA firm and associated firms have complied with relevant ethical requirements regarding independence and have communicated with them all relationships and other matters that may reasonably be thought to bear on the CPA’s independence, and where applicable, related safeguards.

Based on professional judgement of the CPA, no relationships and other matters that may reasonably be thought to bear on the CPA’s independence have been identified during the term of the said financial statements.

Still, as per prescriptions in the Statements on Auditing Standards generally accepted in the Republic of China, the CPA shall provide those charged with governance with service fees of all audit and non-audit services conducted by the CPA to your company in order to assist those charged with governance to evaluate whether such service fees may influence CPA’s independence.

This declaration is only for the reference of Board of Directors, Supervisors, the management team and other related personnel of your company and shall not serve for other purposes.

With best wishes to your business,

Ernst & Young Acco nting Firm CPA Hsu, Jung-Huang CPA Huang, Chien-Che

31

(4) Composition, Responsibilities and Operations of the Remuneration Committee

A. Professional Qualifications and Independence Analysis of Remuneration Committee Members

==> picture [527 x 410] intentionally omitted <==

----- Start of picture text -----

Meets One of the Following Professional
Qualification Requirements, Together with at Independence Criteria （ Note 2 ）
Number
Least Five Years’ Work Experience of other
An instructor A judge, Has work Public
or higher public experience in Compani
Criteria
position in a prosecutor, the areas of es in
Remark
department of attorney, commerce, which
commerce, Certified law, finance, 1 2 3 4 5 6 7 8 the
law, finance, Public or accounting, Individua
accounting, or Accountant, or or otherwise l is
other academic other necessary for Concurre
Title
department professional or the business of ntly
（ Note 1 ） related to the technical the Company Serving
business needs specialist who as an
of the has passed a Remuner
Company in a national ation
public or examination Committ
Name private junior and been ee
college, awarded a Membe
college or certificate in a
university profession
necessary for
the business of
the Company
Independent Lee,
Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ 0
Director Hung-Ching
Independent Tien,
Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ 0
Director Hung-Mao
Wang,
Others Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ Ｖ 0
Cheng-Hsin
----- End of picture text -----

Note 1: Provide "director, independent director, or other" for the "status.”

Note 2: When any of the following conditions is met for each member during the two years prior to and during their tenure, please check "V" in the box underneath each conditional code.

  • (1) Not an employee of the company or its associated enterprise.

  • (2) Not a director or supervisor of the Company or its associated enterprise. The same does not apply, however, if the independent director is set up by the Company, its parent company or any subsidiary according to the Act or the local laws and regulations.

  • (3) Not a natural person shareholder that holds by himself/herself or by his/her spouse or minor child in someone else's name more than 1% of all circulating shares of the Company or is on the Top 10 shareholding list.

  • (4) Not the spouse, a relative within the second degree of kinship, or a direct blood relative within the third degree of kinship of the said people indicated in the foregoing three subparagraphs

  • (5) Not a director, supervisor or employee of an institutional shareholder directly holding more than 5% of all circulating shares of the company or a director, supervisor, or employee of an institutional shareholder on the Top 5 shareholding list.

  • (6) Not a director, supervisor, manager or a shareholder holding more than 5% of shares of a specific company or institution with financial or business activities with the company

  • (7) Not a professional providing services or consultations on business, legal affairs, financial affairs, and accounting at the Company or its associated enterprise or the owner, partner, director, supervisor, manager, and his/her spouse of a sole proprietorship or collaborative company or institution.

  • (8) None of the conditions indicated under Article 30 of the Company Act.

32

  • B. Duties: The Compensation Committee shall exercise the care of a good administrator in faithfully performing the official powers listed below, and shall submit its recommendations for deliberation by the board of directors. However, recommendations in connection with remuneration for supervisors may be submitted for deliberation by the board of directors only to the extent that the board of directors is authorized expressly by the company's articles of

  • incorporation or by a resolution of the shareholders meeting to handle supervisor remuneration:

  • (a) Regularly review organization rules of the Company’s compensation committee and propose suggestions.

  • (b) Prescribe and periodically review the performance evaluation rules and remuneration policy, system, standards, and structure for directors, supervisors and managerial officers.

  • (c) Regularly assess performance goal attainment of directors, supervisors and managerial officers of the Company, and determine the content and amount of their individual remuneration.

  • C. Compensation Committee Meeting Status.

  • (a) Compensation Committee of the Company is composed of three members.

  • (b) The term of Compensation Committee: June 26, 2018 to June 7, 2021. In the most recent year (year 2018) as of the date of this annual report, there have been 4 (A) meetings of Compensation

Committee and member qualifications and attendance status are as follows:

Title
Name
Attendance in
Person(B)
By Proxy
Attendance Rate (%)
【Ｂ/Ａ】(Note)
Remarks
Convener
Lee,
Hung-Ching
4
0
100.00%
Committee
Member
Tien,
Hung-Mao
4
0
100.00%
Committee
Member
Wang,
Cheng-Hsin
4
0
100.00%
Other mentionable items:
A. In the event of nonacceptance or modification of Compensation Committee’s recommendation
by the Board of Directors, board meeting dates, terms, proposals, board resolutions shall be
specified in details together with response of the Company (e.g. if the compensation approved
by the board is better than that suggested by the Compensation Committee, difference and
reasons shall be specified): None.
B. Resoulution of the Compensation Committee with any member having a dissenting opinion or
qualified opinion which have been recorded in meeting minutes or otherwise with written
statements, for which meeting dates, No. of the term, proposals, opinions of all members and
response of the Company shall be specified in details: None.

  • Note (1): In the event that members of the Compensation Committee resign before a year is completed, the date of resignation should be indicated in the remark column. The actual attendance rate (%), on the other hand, shall be calculated by the number of Compensation Committee meetings held during service and the frequency number of attendances in the meetings.

  • Note (2): Before a year is completed, upon any re-election of Compensation Committee members, new and old, shall be listed and it shall be specified in the remark column that a specific member is old, new, or re-elected, and the date of re-election. The actual attendance rate (%), on the other hand, is to be calculated by the number of Compensation Committee meetings held during service and the frequency number of attendances in the meetings.

33

(5) Social Responsibility Implementation Status as Required by the Taiwan Financial Supervisory Commission

Assessment Item Implementation Status Deviations from “the Corporate
Social Responsibility Best-
Practice Principles for
TWSE/TPEx Listed Companies”
and Reasons
Yes No Explanation
1、 Corporate Governance Implementation
(1) Does the company declare its corporate social
responsibility policy and examine the results of the
implementation？
(2) Does the company provide educational training on
corporate social responsibility on a regular basis？
(3) Does
the
company
establish
exclusively
(or
concurrently) dedicated first-line managers authorized
by the board to be in charge of proposing the corporate
social responsibility policies and reporting to the
board？
(4) Does the company declare a reasonable salary
remuneration policy, and integrate the employee
performance appraisal system with its corporate social
responsibility policy, as well as establish an effective
reward and disciplinary system？		 Ｖ
Ｖ
Ｖ
Ｖ		 (1) There have been no corporate social responsibility policies or systems.
(2) Regular social responsibility education and training have not been
organized.
(3) Dedicated
departments
for
implementing
corporate
social
responsibility have not been set up.
(4) Employee performance evaluation systems have not been linked with
CSR policies, while explicit rules for compensation, performance,
evaluation, bonus, and remuneration are already in place.		 There have been no
corporate social
responsibility policies or
systems, and further
consideration will be made
in the future depending on
situations.
2、 Sustainable Environment
(1) Does the company endeavor to utilize all resources
more efficiently and use renewable materials which
have a low impact on the environment？
(2) Does the company establish proper environmental
management systems based on the characteristics of
their industries？
(3) Does the company monitor the impact of climate
change on its operations and conduct greenhouse gas
inspections, as well as establish company strategies for
energy conservation and carbon reduction？





Ｖ
Ｖ
Ｖ		 The Company currently has no production lines. Not applicable

34

Assessment Item Implementation Status Deviations from “the Corporate
Social Responsibility Best-
Practice Principles for
TWSE/TPEx Listed Companies”
and Reasons
Yes No Explanation
3、 Preserving Public Welfare
(1) Does the company formulate appropriate management
policies and procedures according to relevant
regulations and the International Bill of Human
Rights？
(2) Does the company formulate appropriate management
policies and procedures according to relevant
regulations and the International Bill of Human
Rights？
(3) Does the company provide a healthy and safe working
environment and organize training on health and safety
for its employees on a regular basis？
(4) Does the company setup a communication channel
with employees on a regular basis, as well as
reasonably inform employees of any significant
changes in operations that may have an impact on
them？
(5) Does the company provide its employees with career
development and training sessions？
(6) Does the company establish any consumer protection
mechanisms and appealing procedures regarding
research
development,
purchasing,
producing,
operating and service？
(7) Does the company advertise and label its goods and
services according to relevant regulations and
international standards？

















Ｖ
Ｖ
Ｖ
Ｖ
Ｖ
Ｖ
Ｖ		 (1) Employee service rules and personnel regulations have been
prescribed pursuant to applicable labor laws to protect legal rights of
employees。
(2) ”Procedures of reporting illegal and unethical conducts” and
“Guidelines for prevention, complaint and punishment of sexual
harassment in the workplace” have been in place to provide a sound
system of reporting.
(3) Access control to office and periodic inspection and cleaning of fire
fighting equipment, air conditioners and drinking fountains have been
conducted to lower risk factors of employee safety and health to
minimum.
(4) To convene labor-management meeting every season providing
communication channels for employees to understand operational
chages that may cause major influence.
(5) To organize on-the-job professional training sessions by job functions
to enhance employee competence.
(6) A Spokesman is in place to act as a communication channel while
dialogue windows are also on the website to serve visitors.
(7) Marketing and labeling of products and services are conducted
pursuant to applicable laws.		 No major difference.

35

Assessment Item Implementation Status Implementation Status Implementation Status Deviations from “the Corporate
Social Responsibility Best-
Practice Principles for
TWSE/TPEx Listed Companies”
and Reasons
Yes No Explanation
(8) Does the company evaluate the records of suppliers’
impact on the environment and society before taking
on business partnerships？
(9) Do the contracts between the company and its major
suppliers include termination clauses which come into
force once the suppliers breach the corporate social
responsibility policy and cause appreciable impact on
the environment and society？		 Ｖ Ｖ (8) New supplier qualification has been conducted baed on basic credit
checking and past records, including environmental and social impact
factors.
(9) Transactions between the Company and major suppliers are baed on
international trade. In the event of likelihood of unfulfillment of
corporate social responsibility by any suppliers, once confirmed, the
Company may disqualify those suppliers if they fail to improve.		 No major difference.
4、 Enhancing Information Disclosure
(1) Does the company disclose relevant and reliable
information
regarding
its
corporate
social
responsibility on its website and the Market
Observation Post System (MOPS)？		 Ｖ No relevant information has been disclosed. No relevant information has
been disclosed and further
consideration will be made
in the future depending
upon situations.
5、 If the Company has established the corporate social responsibility principles based on “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed
Companies”, please describe any discrepancy between the Principles and their implementation：Chuwa Wool Industry Co., (Taiwan) Ltd. has not established "Code of Practice
for Corporate Social Responsibility". Therefore it is not applicable.
6、 Other important information to facilitate better understanding of the company’s corporate social responsibility practices: None.
7、 A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions: None.

36

(6) Taiwan Corporate Conduct and Ethics Implementation and measures adopted as Required by the Taiwan Financial Supervisory Commission

Assessment Item Implementation Status Deviationsfrom “the Ethical
Corporate Management Best-
Practice Principles for
TWSE/TPEx Listed Companies”
and Reasons
Yes No Explanation
1、 Establishment of ethical corporate managemen
(1) Does the company declare its ethical corporate
management policies and procedures in its guidelines
and external documents, as well as the commitment
from its board to implement the policies？
(2) Does the company establish policies to prevent
unethical conduct with clear statements regarding
relevant
procedures,
guidelines
of
conduct,
punishment for violation, rules of appeal, and the
commitment to implement the policies？
(3) Does the company establish appropriate precautions
against high-potential unethical conducts or listed
activities stated in Article 2, Paragraph 7 of the Ethical
Corporate Management Best-Practice Principles for
TWSE/TPEx Listed Companies？		 Ｖ
Ｖ
Ｖ		 (1) “Ethical Corporate Management Best Practice Principles” have been
formulated and disclosed in Corporate Governance Section on
company website to state explicitly policies, measures and
commitment of the Board and the Management to implement ethical
corporate management.
(2) “Ethical Corporate Management Best Practice Principles, “Board
Member Code of Conduct” and “Employee Code of Conduct” have
been formulated and disclosed on company website to actively prevent
unethical conduct。
(3) “Ethical Corporate Management Best Practice Principles, “Board
Member Code of Conduct” and “Employee Code of Conduct” have
been formulated to prevent unethical conduct and avoid profiteering
personal gains at the expense of the Company’s interest.		 None
2、 Fulfill operations integrity policy
(1) Does the company evaluate business partners’ ethical
records and include ethics-related clauses in business
contracts？
(2) Does the company establish an exclusively (or
concurrently) dedicated unit supervised by the Board
to be in charge of corporate integrity？		 V V (1) Business conduct and ethics related clauses have not been included in
business contracts and further consideration will be made in the
future depending upon situations.
(2) Administration Department of the Company has been tasked with
promoting ethical standards of the Company and report annually to
Board of Directors with periodic updates on relevant matters. The
report for 2018 has been submitted to the 5thMeeting of the 23rdBoard
on Nov/8/2017 and there is no inconformity during the year.



None

37

Assessment Item Implementation Status Deviationsfrom “the Ethical
Corporate Management Best-
Practice Principles for
TWSE/TPEx Listed Companies”
and Reasons
Yes No Explanation
(3) Does the company establish policies to prevent
conflicts
of
interest
and
provide
appropriate
communication channels, and implement it？
(4) Has the company established effective systems for
both accounting and internal control to facilitate
ethical corporate management, and are they audited by
either internal auditors or CPAs on a regular basis？
(5) Does the company regularly hold an internal and
external
educational
training
on
operational
integrity？		 V
V
V		 (3) The“Ethical Corporate Management Best Practice Principles” have
been formulated as the basis of identification, monitoring and
managing the risk of unethical conduct resulted from conflicts of
interest snd the Company has provided appropriate channels for
directors, supervisors, managerial officers and other stakeholders
attending or sitting in board meetings to take the initiative in
explaining whether potential risks of conflicts of interest between
themselves and the Company exist.
(4) Effective accounting systems and internal control system have been
in place, with which the audit department conducts periodic audits.
(5) Education and training sessions for preventing insider trading and
handling material inside information have been organized periodically.

None
3、 Operation of the integrity channel
(1) Does the company establish both a reward/punishment
system and an integrity hotline? Can the accused be
reached by an appropriate person for follow-up？
(2) Does the company establish standard operating
procedures for confidential reporting on investigating
accusation cases？
(3) Does the company provide proper whistleblower
protection？




V
V
V		 (1) The Company has formulated “Procedures of reporting illegal and
unethical conducts” to regulate reporting channels and encourage
reporting.
(2) As prescribed in“Employee Code of Conduct,” complaints are
ensured to be handled in a confidential manner.
(3) The company adopts proper measures to prevent a complainant from
retaliation for his/her filing a complaint.



None

38

Assessment Item Implementation Status Implementation Status Implementation Status Deviationsfrom “the Ethical
Corporate Management Best-
Practice Principles for
TWSE/TPEx Listed
Companies” and Reasons
Yes No Explanation
4、 Strengthening information disclosure
(1) Does the company disclose its ethical corporate
management
policies
and
the
results
of
its
implementation on the company’s website and
MOPS？		 V “Ethical Corporate Management Best Practice Principles,” “Director Code
of Conduct” and “Employee Code of Conduct” have been disclosed on the
company website.		 None
5、 If the company has established the ethical corporate management policies based on the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed
Companies, please describe any discrepancy between the policies and their implementation：None.
6、 Other important information to facilitate a better understanding of the company’s ethical corporate management policies (e.g., review and amend its policies)：None。

(7) Corporate Governance Guidelines and Regulations:

Website of the Chuwa Wool Industry Co., (Taiwan) Ltd.: https://www.chuwa.com.tw/download/procedure/procedure13.pdf

39

(8) Other Important Information Regarding Corporate Governance

Continuing Education for Directors and Supervisor in 2018

Title Name Date Organizer TrainingSessions Hours Notes
Chairman Chen,
Shih-Hsiu		 2018.11.20 Taiwan Corporate Governance
Association		 Corporate Governance of Group Companies and
Management of Performance		 3
2018.12.11 Taiwan Corporate Governance
Association		 Defining Major Fraud and the Legal Risks 3
Director Sun, Yang 2018.11.20 Taiwan Corporate Governance
Association		 Corporate Governance of Group Companies and
Management of Performance		 3
2018.12.11 Taiwan Corporate Governance
Association		 Defining Major Fraud and the Legal Risks 3
Representative
of legal person
director		 Chang,
Ryh-Yan		 2018.08.03 Taiwan Corporate Governance
Association		 Anti-corruption and Information Security based on
Bitcoin Evolution		 3
2018.08.14 Taiwan Corporate Governance
Association		 Securities Acts – Fraud Prevention Within a
Corporation and Establishment of Whistle Blower
Mechanism		 3
Independent
Director		 Tien,
Hung-Mao		 2018.06.28 Taiwan Securities Association Unknowable relationshiptransaction 3
2018.07.24 Securities and Futures Institute Compliance Promotion Seminars for the Insider
EquityTradingfor Listed Companies		 3
Independent
Director		 Lee,
Hung-Ching		 2018.07.10 Securities and Futures Institute Compliance Promotion Seminars for the Insider
EquityTradingfor Listed Companies		 3
2018.09.25~
2018.09.26		 Securities and Futures Institute A Practical Guide for New Company Directors
and Supervisors(includingIndependent)– 12H		 12
Supervisor Hsu,
Chung-Jung		 2018.12.06~
2018.12.07		 Accounting Research and
Development Foundation		 Issuer's Securities Dealer Stock Exchange
AccountingSupervisor Continuingtrainingclass		 12
Supervisor Lin,
Hsiu-Yuan		 2018.12.18~
2018.12.19		 Securities and Futures Institute A Practical Guide for New Company Directors
and Supervisors(includingIndependent)– 12H		 12

40

(9) Internal Control Systems

A. Internal Control Statement

Chuwa Wool Industry Co., (Taiwan) Ltd. (Stock Code ： 1439)

Statement of Internal Control System

March 5, 2019

Based on the results of the control self-assessment, Taiwan Secom Co., Ltd. makes the following declarations with regard to its internal control system for 2018 ：

  • 1、 The Company‘s board of directors and management are responsible for establishing, implementing, and maintaining an adequate internal control system, that have provided reasonable assurance regarding the effectiveness and efficiency of operations (including profitability, performance and safeguarding of assets). The reliability, timeliness, and transparency of the report, as well as its compliance with applicable rulings, laws and regulations.

  • 2、 An internal control system has inherent limitations. No matter how it is perfectly designed, an effective internal control system can only provide reasonable assurance that the three above mentioned objectives would be accomplished. Moreover, the effectiveness of an internal control system may be subject to changes due to extenuating circumstances beyond the Company‘s control. Nevertheless, the Company‘s internal control system contains self-monitoring mechanisms, and immediate remedial actions have been taken in response to any identified deficiencies.

  • 3、 The Company evaluates the design and operating effectiveness of its internal control system based on the criteria provided in the Regulations Governing the Establishment of Internal Control Systems by Public Companies (herein below, the Regulations). The criteria adopted by the Regulations identify five key components of managerial internal control: 1. control environment, 2. risk assessment, 3. control activities, 4. information and communication, and 5. monitoring activities.

  • 4、 The Company has evaluated the design and operating effectiveness of its internal control system according to the aforesaid Regulations.

  • 5、 Based on the evaluation, the Company believes that, on December 31, 2018, it has maintained, in all material respects, an effective internal control system (that includes the supervision and management of our subsidiaries), to provide reasonable assurance regarding our operational effectiveness and efficiency, reliability, timeliness, transparency of reporting, and compliance with applicable rulings, laws and regulations.

  • 6、 This Statement will be an integral part of the Company‘s annual report and prospectus, and will be made public. Any falsehood, concealment, or other illegality in the content made public will entail legal liability under Articles 20, 32, 171, and 174 of the Securities and Exchange Act.

  • 7、 This statement was passed during the board of directors meeting held on March 3, 2019, with none of the 5 attending directors expressing dissenting opinions, and the remainder all affirming the content of this Statement.

Chuwa Wool Industry Co., (Taiwan) Ltd.

Director CHEN, SHIH-HSIU

Manager SUN, YANG

41

  • B. When a CPA is authorized to review the internal control system, the Review Report prepared by the CPA shall be disclosed: None.

  • (10) Any legal sanctions against the Company or its internal personnel, or any disciplinary action taken by the Company against its own personnel for violating internal control requirements, n the latest year or during the current fiscal year up to the printing of the Annual Report; and a description of the main shortcomings in the company's internal control system as well as an indication of measures for improvement: None.

  • (11) In the most recent year and as of the date of this annual report, Major Resolutions of Shareholders’ Meetings and Board Meetings

  • A. Major Resolution of 2018 Shareholders' Meeting and Implementation Status

Meeting
type/Date		 Summary of major proposals Resolution Implementation
June 8, 2018
Regular
meeting of
shareholders		 Ratification
1. The 2017 Business Report
and Financial Statements.		 Ratification
1. The proposal was ratified by
98.36% affirmative vote.		 Ratification
1. Ratified as proposed.
2. 2017 loss make-up
proposal.		 2. The proposal was ratified by
98.36% affirmative vote.		 2. Ratified as proposed and
no dividend to be
distributed.
Discussion
1. Formulation of Operation
Procedures for Lending of
Capital.		 Discussion
1. The proposal was ratified by
98.36% affirmative vote.		 Discussion
1. Announcement has been
made in the Market
Observation Post System
and the Company’s
website and the amended
procedures will be
followed.
2. Formulation of Operation
Procedures for
Endorcement and
Guarantees.		 2. The proposal was ratified by
98.36% affirmative vote.		 2. Announcement has been
made in the Market
Observation Post System
and the Company’s
website and the amended
procedures will be
followed.
3. Amendment to Articles of
Incorporation.		 3. The proposal was ratified by
98.36% affirmative vote.		 3. Registration of changes
was approved by MOEA
on June 26, 2018 and
announcement has been
made in the Website of
company.
4. Amendment to “Procedures
for Acquisition or Disposal
of Assets”.		 4. The proposal was ratified by
98.36% affirmative vote.		 4. The announcement has
been made in the Market
Observation Post System
and the Company’s
website and the amended
procedures will be
followed.

42

Meeting
type/Date		 Summary of major
proposals		 Resolution Implementation
June 8, 2018
Regular
meeting of
shareholders		 Election
Election of five directors
(including two independent
directors) and two supervisors
for the 24thterm.		 Election results
(1) Directors︰
CHEN, SHIH-HSIU
SUN, YANG
Chugen Investment Co. Ltd.
Representative：
CHANG, RYH-YAN
(2) Independent directors︰
TIEN, HUNG-MAO
LEE, HUNG-CHING
(3) Supervisors︰
HSU, CHUNG-JUNG
LIN,HSIU-YUAN		 Registration of changes was
approved by MOEA on June
26, 2018 and announcement
has been made in the Market
Observation Post System.
Other proposal
Removing covenant not to
compete for newly elected
directors.		 The proposal was ratified by
98.36% affirmative vote.		 The announcement has been
made in the Market
Observation Post System as
required.
November 28,
2018
The 1stspecial
meeting of
shareholders		 Discussion
1. The proposal of
amendment to some clauses
of “Procedures for
Acquisition or Disposal of
Assets” and abrogation of
“Procedures for Financial
Derivatives Transactions.”		 Discussion
1. The proposal was ratified by
98.51% affirmative vote.		 Discussion
1. The announcement has
been made in the Market
Observation Post System
and the Company’s
website and the amended
procedures will be
followed.
2. Proposal of disposal
transaction of land and
factory located at No. 7,
Gongjian W. Rd., Qidu
Dist., Keelung City.		 2. The proposal was ratified by
95.55% affirmative vote.		 2. The announcement has
been made in the Market
Observation Post System
and the amended
procedures will be
followed.

B. Major Resolutions of Board Meetings

No. of term/Date Resolutions Matters as
prescribed in
Article 14-3 of
Securities and
Exchange Act
6thmeeting of 23rd
term
March 5, 2018		 1. Approved the 2017 Business Report and Financial Statements. Ｖ
2. Approved the 2017 loss make-up proposal.
3. Approved the proposal of 2017 “Statement of Internal Control System.” Ｖ
7thmeeting of 23rd
term
March 6, /2018		 1. Election of the new Chairman of the Board.

43

No. of term/Date Resolutions Matters as
prescribed in
Article 14-3 of
Securities and
Exchange Act
The 8thof the 23rd
term
March 15, 2018		 1. Approved the proposal of reelections of all directors and supervisors.
2. Approved the proposal of removing covenant not to compete for newly
elected directors.
3. Approved all proposals made by the 2ndmeeting of the 3rdCompensation
Committee.
4. Approved the proposal of appointment of managerial officers of the
Company.
5. Approved the proposal of removing covenant not to compete for managerial
officers.
6. Approved the proposal of formulation of Operation Procedures for Lending
of Capital.		 Ｖ
7. Approved the proposal of formulation of “Operation Procedures for
Endorsement and Guarantees.”		 Ｖ
8. Approved the proposal of change of custodian of Endorsement and guarantee
seal registered with MOEA.
9. Approved the proposal of amendment to “Statement of Internal Control
System.”		 Ｖ
10. Approved the proposal of convening 2018 Shareholders’ Meeting and time,
date andplace thereof and acceptance of nominations from shareholders.
11. Approved the proposal of periodic review of CPA independence.
12. Approved the proposal of a short term line of credit with correspondent
financial institutions.
13. Approved theproposal of change of spokesman and actingspokesman.
The 9thof the 23rd
term
April 26, 2018		 1. Approved the proposal of independent directors reviewed by the board.
2. Approved the proposal of the organization structure change.
3. Approved all proposals made by the 3rdmeeting of the 3rdCompensation
Committee.
4. Approved the proposal of appointment of managerial officers and change of
titles.		 Ｖ
5. Approved the proposal of amendment to “Statement of Internal Control
System.”		 Ｖ
6. Approved the proposal of amendment to the “Authorization Chart” of the
Company.
7. Approved the proposal of amendment to “Internal Audit Implementation
Rules.”

44

No. of term/Date Resolutions Matters as
prescribed in
Article 14-3 of
Securities and
Exchange Act
The 9thof the 23rd
term
April 26, 2018		 8. Approved the proposal of hiring attesting CPAs and the compensation given
thereto.		 Ｖ
9. Approved theproposal of amendment to “Articles of Incorporation.”
10. Approved the proposal of amendment to “Procedures for Acquisition or
Disposal of Assets.”		 Ｖ
11. Approved the proposal of amendment to “Operation Procedures for
Endorsement and Guarantees.”		 Ｖ
12. Approved the proposal of convening 2018 Shareholders’ Meeting and time,
date andplace thereof and acceptance of nominations from shareholders.
The 10thof the 23rd
term
May8, 2018		 1. Approved Financial Statements of 1stSeason, 2018.
The 1st(special) of the
24thterm
June 8, 2018
1. Election of new Chairman of the Board.
The 1stof the 24th
term
June 26, 2018		 1. Approved the proposal of appointment by invitation members of the 4th
Compensation Committee.
2. Approved the proposal of purchasing liability insurance for directors,
supervisors and managerial officers.
3. Approved theproposal of changes in departmentjob functions.
4. Approved the proposal of amendment to “Statement of Internal Control
System.”
5. Approved theproposal of spokesman change.
6. Approved theproposal of change of financial head. Ｖ
7. Approved theproposal of change of companyregistration address.
The 2ndof the 24th
term
August 6, 2018		 1. Approved the proposals made by the 1stmeeting of the 4thCompensation
Committee.
2. Approved theproposal of the organization structure change.
3. Approved theproposal ofpersonnel changes.
4. Approved the proposal of amendment to “Statement of Internal Control
System”.		 Ｖ
5. Approved theproposal of amendment to “Authorization Chart.”
6. Approved the proposal of amendment to “Internal Audit Implementation
Rules.”
7. Approved the proposal of “Management Procedures for Insider Trading
Prevention,” “Procedures of reporting illegal and unethical conducts” and
“Ethical Corporate Management Best Practice Principles.”		 Ｖ

45

No. of term/Date Resolutions Matters as
prescribed in
Article 14-3 of
Securities and
Exchange Act
The 2ndof the 24th
term
August 6, 2018		 8. Approved the proposal of amendment to “Board Meeting Procedure Rules,”
“Administration Regulations of Board Meeting Affairs,” “Procedures for
Handling Material Inside Information,” “Procedures for professional
accounting judgments, accounting policies, and estimates,” and revision and
augmentation of “Accounting System” and “Budget management
regulations.”。		 Ｖ
9. Approved the proposal of appointment of directors and supervisors of the
subsidiary company.
10. Approved 2018 Business Plan.
The 3rdof the 24th
term
October 11, 2018		 1. Approved the proposal of appointment of directors of subsidiary company.
2. Approved the proposal of formulation of “Procedures for Acquisition or
Disposal of Assets”for subsidiarycompanies.		 Ｖ
3. Approved the proposal of “Procedures for the halt and resumption
applications,” “Administrative regulations of stock affairs,” and revision and
augmentation of “Rules governing financial and business matters among
affiliated companies.”
4. Approved the proposal of amendment to some clauses of “Procedures for
Acquisition or Disposal of Assets” and abrogation of “Procedures for
Financial Derivatives Transactions.”		 Ｖ
5. Approved the proposal of changing the title of account of Neihu Office from
fixed assets (property, factory, and equipment) to investment property.
6. Approved the proposal of planning the disposal transaction of land and
factory located at No. 7, Gongjian W. Rd., Qidu Dist., Keelung City.		 Ｖ
7. Approved the proposal of convening the 1stSpecial Shareholders’ Meeting in
2018 and time, date, place and related matters thereof.
The 4thof the 24th
term
November 6, 2018		 1. Approved the proposal of “Administrative regulations of supervision and
management of subsidiary companies” and the amendment to some clauses
in Chapter 7,Investment Cycle,of “Internal Control System.”
2. Approved the proposal of amendment to “Internal Audit Implementation
Rules.”
3. Approved the proposal of 2018 Audit Plan.
The 5thof the 24th
term
December 10, 2018		 1. Approved the proposal of “Related-party transactions rules.”
2. Approved the proposal of 2019 Business Plan.
3. Approved the proposal of disposal transaction of land and factory located at
No. 7,Gongjian W. Rd., Qidu Dist.,KeelungCity.		 Ｖ

46

No. of term/Date Resolutions Matters as
prescribed in
Article 14-3 of
Securities and
Exchange Act
The 6thof the 24th
term
December 21, 2018		 1. Approved the proposal of the 2ndmeeting of the 4thCompensation
Committee.
2. Approved the proposal of amendment to “Internal Control System.”
3. Approved the proposal of disposal transaction of land and factory located at
No. 7,Gongjian W. Rd., Qidu Dist.,KeelungCity.		 Ｖ
The 7thof the 24th
term
January 25, 2019		 1. Approved the proposal of organization structure change and amendment to
Chapter 1,General Description,of “Internal Control System.”
2. Approved the proposal of amendment to “Internal Control System.”
3. Approved the proposal of amendment to “Internal Audit Implementation
Rules.”
4. Approved the proposal of the 3rdmeeting of the 4thCompensation
Committee.
5. Approved the proposal of change of Audit Officer of the Company. Ｖ
The 8thof the 24th
term
March 5, 2019		 1. Approved the proposal of the 4thmeeting of the 4thCompensation
Committee.
2. Approved the proposal of “Standard Operating Procedure for handling
requests of directors.”
3. Approved the proposal of periodic review of CPA independence. Ｖ
4. Approved the 2018 Business Report and Financial Statements. Ｖ
5. Approved the 2018 loss make-up proposal.
6. Approved the proposal of 2018 compensation for directors, supervisors and
employees.
7. Approved the proposal of 2018 “Statement of Internal Control System.” Ｖ
8. Approved the proposal of the election of additional directors.
9. Approved the proposal of removing covenant not to compete for newly
elected directors and representatives thereof.
10. Approved the proposal of convening the 2018 Shareholders’ Meeting and
time,date, place and related matters thereof.
The 9thof the 24th
term
April 18, 2019		 1. Approved the proposal of amendment to Articles of Incorporation.
2. Approved the proposal of the amendment to “Ethical Corporate Management
Best Practice Principles.”
3. Approved the proposal of amendment to “Board Member Code of Conduct.”
4. Approved the proposal of amendment to “Procedures for Acquisition or
Disposal of Assets.”		 Ｖ

47

Resolutions Matters as
prescribed in
Article 14-3 of
Securities and
Exchange Act
5. Approved the proposal of amendment to “Operation Procedures for Lending
of Capital” and “Operation Procedures for Endorsement and Guarantees.”		 Ｖ
6. Approved the proposal of reformulation of “Procedure rules of shareholders’
meeting” and “Election rules of board directors.”
Ｖ
7. Approved theproposal of “Organization Rules of Audit Committee.”
8. Approved the proposal of endorsement and guarantees for the parent
companyRoo HsingCo.,Ltd.		 Ｖ
9. Approved the proposal of convening the 2018 Shareholders’ Meeting and
time,date, place and related matters thereof.

  • (12) Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None.

  • (13) Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D:

Title Name Date of
Appointment		 Date of
Termination		 Reasons for
Resignation or Dismissal
Chairman Chugen Investment Co. Ltd.
Representative：
Chen, Jhih-Ying
2017.06.06		 2018.03.06 Change of representative
by Juristic Person Director
President Huang, Jin-Cai 2012.01.01 2018.03.07 Resignation
Chief Financial Officer Cheng, Shu-Ying 2011.10.01 2018.03.15 Internal job transfer
Chief Accounting Officer Huang, Zi-Qiang 2008.10.24 2018.04.26 Internal job transfer
Chief Financial Officer Zhong, Jia-Hao 2018.03.15 2018.06.26 Internal job transfer
Audit supervisor Han, Yuan-Tai 2016.11.04 2019.01.25 Internal job transfer

5. Information of CPAs Service Fee

  • (1) Non-Audit Fees Paid to CPAs, Accounting Firms and Related Entities Accounted to 25% or More of the Total External Audit Fees: None.

  • (2) Change of Accounting Firm and the Fee Paid was Less than the Previous Accounting Firm: None.

  • (3) External Audit Fees Less than 15% or more than the Prior Year: None.

  • (4) Professional Fees:

(4) Professional Fees:
Accounting Firm Public Accountants Auditing Period Remark
Ernst & Young, Taiwan Hsu, Jung-Huang Huang, Chien-Che 2018/01/01~2018/12/31

48

Unit ： NT$ thousands

Fees Items
Fee Range		 Fees Items
Fee Range		 Audit fee Non-audit
fee		 Total
1 Under NT$2,000,000 1,130 6 1,136
2 NT$2,000,000～$4,000,000 - - -
3 NT$4,000,000～$6,000,000 - - -
4 NT$6,000,000～$8,000,000 - - -
5 NT$8,000,000～ $10,000,000 - - -
6 Over NT$10,000,000 - - -

  1. Information on the Replacement of CPAs ： No CPAs were replaced in the past two years and thereafter for the Company.

  2. Disclosure of Name, Position, and Duration of Service at Firms or Their Associated Enterprises within Past Year of Chairman, General Manager, and Managers in Charge of Financial or Accounting Affairs ： None.

  3. Changes in the stock options of directors, supervisors, managers, and heavyweight shareholders

  4. (1) Changes in the stock options of directors, supervisors, managers, and heavyweight shareholders

Title Name 2018 2018 2019/01/01/ ~ 2019/04/26 2019/01/01/ ~ 2019/04/26
Holding
Increase
(Decrease)		 Pledged
Holding
Increase
(Decrease)		 Holding
Increase
(Decrease)		 Pledged
Holding
Increase
(Decrease)
Chairman and Chief
Strategy Officer		 Chen, Shih-Hsiu (Note 1) - - - -
Director and President Sun, Yang (Note 1) - - - -
Director Roo Hsing Global Co., Ltd.
Representative:
Chang, Ryh-Yan (Note 2)		 - - 49,139,065
49,139,065
Independent Director Tien, Hung-Mao (Note 3) - - - -
Independent Director Lee, Hung-Ching (Note 3) - - - -
Supervisor Hsu, Chung-Jung (Note 1) - - - -
Supervisor Lin, Hsin-Yuan (Note 1) - - - -
AVP, Administration &
Sales Department		 Cai, Shao-Hua (Note 4) - - - -
AVP, Investment
Department		 Zhong, Jia-Hao (Note 4) - - - -
AVP, Finance and
Accounting Department		 Chiang, Chung-Wei (Note 5) - - - -

49

Title Name 2018 2018 2019/01/01/ ~ 2019/04/26
Holding
Increase
(Decrease)		 Pledged
Holding
Increase
(Decrease)		 Holding
Increase
(Decrease)		 Pledged
Holding
Increase
(Decrease)
Major Shareholder Roo Hsing Co., Ltd .( Note 1) - - - -
Chairman Chugen Investment Co. Ltd.
Representative:
Chen, Shih-Hsiu (Note 8)		 - - (16,558,750) -
Director and President Chugen Investment Co. Ltd.
Representative:
Sun, Yang (Note 8)		 - -
-
Director Chugen Investment Co. Ltd.
Representative:
Chang, Ryh-Yan (Note 7)		 - - -
Independent Director Liang, Zhi-Chang (Note 6) - - - -
Independent Director Lin Heng-Zhi (Note 8) - - - -
Supervisor Foowa Investment Limited
Representative:
Hsu, Chung-Jung (Note 8)		 - - - -
Supervisor Foowa Investment Limited
Representative:
Lin, Hsiu-Yuan (Note 8)		 - - - -
President Huang Jin-Cai (Note 9) - - - -
Manager, Finance
Department		 Cheng Shu-Ying (Note 10) - - - -
Manager, Accounting
Department		 Huang Zi-Qiang (Note 11) - - - -

Note 1: Appointed on 2018/03/06. Note 2: Appointed on 2019/01/31. Note 3: Appointed on 2018/06/08. Note 4: Appointed on 2018/03/15. Note 5: Appointed on 2018/04/26. Note 6: Resigned on 2018/03/06. Note 7: Resigned on 2019/01/31. Note 8: Resigned on 2018/06/08. Note 9: Resigned on 2018/03/07. Note 10: Resigned on 2018/03/15. Note 11: Resigned on 2018/04/26.

(2) The counterparty for the transfer of stock options is a related party: None.

(3) The counterparty for the pledge of stock options is a related party: None.

50

9. The Top-10 shareholders who are the spouses or relatives within second-degree to each other

Unit ： Shares

Name Current Shareholding Current Shareholding Spouse’s/minor’s
Shareholding		 Spouse’s/minor’s
Shareholding		 Shareholding by
Nominee
Arrangement		 Shareholding by
Nominee
Arrangement		 Name and Relationship Between
the Company’s Top Ten
Shareholders, or Spouses or
Relatives Within Two Degrees		 Name and Relationship Between
the Company’s Top Ten
Shareholders, or Spouses or
Relatives Within Two Degrees		 Remark
Shares (%) Shares (%) Shares (%) Title or Name Relations
Roo Hsing Global
Co., Ltd.
Representative:
Chen,Shih-Hsiu		 49,139,065
53.41%
-		 - - - - - -
0 0 - - - -
Song Haur
Investment Limited		 4,565,000
4.96%
-		 - - - - - -
Li, Li-Sheng 1,832,000
1.99%
-		 - - - - - -
Brighten
Management
Limited		 1,122,000
1.22%
-		 - - - - - -
Lin, Jia-Qing 800,000
0.87%
-		 - - - - - -
Sun, Yu-Ting 788,000
0.86%
-		 - - - - - -
Ji, Ya-Ying 664,018
0.72%
-		 - - - - - -
Huang, Yu-Ting 467,000
0.51%
-		 - - - - - -
Shao, Ji-Yang 429,000
0.47%
-		 - - - - - -
Zhou, Hong-Zhang 398,000
0.43%
-		 - - - - - -
  1. The shares of the invested company held by the Company, the Company’s directors, supervisors, managers, and companies controlled directly or indirectly, and the aggregated overall shareholding ratio:
ratio:
Affiliated Enterprises Ownership by the
Company		 Direct or Indirect Ownership by
Directors/Supervisors/Managers		 Total Ownership
Shares % Shares % Shares %
HCW Investment Co., Ltd. 10,000,000 100% - - 10,000,000 100%
CW Investment One Limited 100 100% - - 100 100%

51

、 Ⅳ Capital raising

1. Capital and shares

(1) Capitalization

==> picture [510 x 712] intentionally omitted <==

----- Start of picture text -----

Authorized Share Capital Capital Stock Remark
Issue Capital
Year Increase
Price Amount Amount
/Month Sources of Capital by Assets
(NT$) Shares (thousand Shares (thousand (thousand NT$) Other Others
NT$) NT$) Than
Cash
1964/10 100 150,000 15,000 150,000 15,000 [Authorized capital at incorporation ] None
NT$ 15,000
1968/04 100 225,000 22,500 225,000 22,500 Cash offering of NT$ 7,500 None
1972/05 100 270,000 27,000 270,000 27,000 [Retained earnings transferred to ] None
capital NT$ 4,500
1972/04 100 297,000 29,700 297,000 29,700 [Retained earnings transferred to ] None
capital NT$ 2,700
1973/04 100 415,800 41,580 415,800 41,580 [Retained earnings transferred to ] None
capital NT$ 11,880
1974/12 100 582,120 58,212 582,120 58,212 [Retained earnings transferred to ] None
capital NT$ 16,632
1978/09 100 767,120 76,712 767,120 76,712 [Retained earnings transferred to ] None
capital NT$ 18,500
1980/10 100 843,832 84,383 843,832 84,383 [Retained earnings transferred to ] None
capital NT$ 7,671
1983/12 100 1,150,000 115,000 1,150,000 115,000 [Retained earnings transferred to ] None
capital NT$ 30,617
1986/06 100 1,800,000 180,000 1,800,000 180,000 [Capital surplus transferred to ] None
capital NT$ 65,000
1988/05 10 33,300,000 333,000 33,300,000 333,000 [Retained earnings transferred to ] None
capital NT$ 153,000
1988/06 10 40,500,000 405,000 40,500,000 405,000 [Capital surplus transferred to ] None
capital NT$72,000
1989/08 10 46,980,000 469,800 46,980,000 469,800 [Retained earnings transferred to ] None Note 1
capital NT$ 64,800
Cash offering of NT$ 49,956
1990/12 10 53,385,000 533,850 53,385,000 533,850 Capital surplus transferred to None Note 2
capital NT$ 14,094
1991/10 10 80,000,000 800,000 63,385,000 633,850 Cash offering of NT$ 100,000 None Note 3
1992/10 10 80,000,000 800,000 69,723,500 697,235 [Capital surplus transferred to ] None Note 4
capital NT$ 63,385
Retained earnings transferred to
capital NT$ 139,447
Employees’ bonus transferred to
1993/07 10 110,000,000 1,100,000 87,538,000 875,380 None Note 5
capital NT$ 3,836
Capital surplus transferred to
capital NT$ 34,862
Retained earnings transferred to
capital NT$ 61,277
1994/07 10 110,000,000 1,100,000 98,380,000 983,800 Employees’ bonus transferred to None Note 6
capital NT$ 3,374
Capital surplus transferred to
capital NT$ 43,769
Retained earnings transferred to
capital NT$ 59,028
1995/06 10 110,000,000 1,100,000 108,540,000 1,085,400 Employees’ bonus transferred to None Note 7
capital NT$ 3,220
Capital surplus transferred to
capital NT$ 39,352
2003/07 10 110,000,000 1,100,000 102,540,000 1,025,400 [Capital reduction NT$ 60,000 ] None Note 8
2003/10 10 110,000,000 1,100,000 101,713,000 1,017,130 [Capital reduction NT$ 8,270 ] None Note 9
2003/12 10 110,000,000 1,100,000 97,000,000 970,000 [Capital reduction NT$ 47,130 ] None Note 10
----- End of picture text -----

52

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----- Start of picture text -----

Authorized Share Capital Capital Stock Remark
Issue Capital
Year Increase
Price Amount Amount
/Month Sources of Capital by Assets
(NT$) Shares (thousand Shares (thousand (thousand NT$) Other Others
NT$) NT$) Than
Cash
2004/11 10 110,000,000 1,100,000 94,000,000 940,000 Capital reduction NT$ 30,000 None Note 11
2005/07 10 110,000,000 1,100,000 92,000,000 920,000 Capital reduction NT$ 20,000 None Note 12
----- End of picture text -----

Note 1 ： Approved by Official Letter Ref. Tai Cai Zeng No. 01489, dated July 25, 1989. Note 2 ： Approved by Official Letter Ref. Tai Cai Zeng No. 03166, dated November 15, 1990. Note 3 ： Approved by Official Letter Ref. Tai Cai Zeng No. 02811, dated September 27, 1991. Note 4 ： Approved by Official Letter Ref. Tai Cai Zeng No. 02413, dated September 17, 1992. Note 5 ： Approved by Official Letter Ref. Tai Cai Zeng No. 01477, dated June 19, 1993. Note 6 ： Approved by Official Letter Ref. Tai Cai Zeng No. 29971, dated June 30, 1994. Note 7 ： Approved by Official Letter Ref. Tai Cai Zeng No. 29800, dated May 23, 1995. Note 8 ： Approved by Official Letter Ref. Tai Cai Zeng No. 0920134563, dated July 28, 2003. Note 9 ： Approved by Official Letter Ref. Tai Cai Zeng No. 0920146354, dated October 3, 2003. Note 10 ： Approved by Official Letter Ref. Tai Cai Zeng No. 0920161935, dated December 31, 2003. Note 11 ： Approved by Official Letter Ref. Tai Cai Zeng No. 0930150220, dated November 3, 2004. Note 12 ： Approved by Official Letter Ref. Tai Cai Zeng No. 0940131151, dated July 26, 2005.

Unit ： Shares

Unit：Shares Unit：Shares Unit：Shares Unit：Shares
Authorized Capital
Remark
Share Type Issued Shares
Un-issued Shares
Total Shares
Common Shares 92,000,000 18,000,000 110,000,000

(2) Status of shareholders

As of 2019.04.26

As of 2019.04.26 As of 2019.04.26 As of 2019.04.26 As of 2019.04.26 As of 2019.04.26 As of 2019.04.26 As of 2019.04.26
Structure
Amount
Government
Agencies
Government
Agencies
Other
Juridical
Persons
Domestic
Natural
Persons
Foreign
Institutions &
Natural
Persons
Total
Number of
Shareholders
0
0
18
9,767
21
9,806
Shareholding
(shares)
0
0
53,770,788
36,404,036
1,825,176
92,000,000
Percentage 0.00% 0.00% 58.45% 39.57% 1.98% 100.00%

(3) Shareholding distribution status

As of 2019.04.26

==> picture [351 x 243] intentionally omitted <==

----- Start of picture text -----

Class of Shareholding Number of Shareholding
Percentage (%)
(Unit: Share) Shareholders (Shares)
1 ~ 999 6,096 948,983 1.03%
1,000 ~ 5,000 2,769 5,665,223 6.16%
5,001 ~ 10,000 442 3,524,303 3.83%
10,001 ~ 15,000 127 1,649,038 1.79%
15,001 ~ 20,000 102 1,884,404 2.05%
20,001 ~ 30,000 90 2,377,371 2.58%
30,001 ~ 50,000 71 2,709,655 2.94%
50,001 ~ 100,000 50 3,617,300 3.93%
100,001 ~ 200,000 31 4,227,640 4.60%
200,001 ~ 400,000 19 5,590,000 6.08%
400,001 ~ 600,000 2 896,000 0.97%
600,001 ~ 800,000 3 2,252,018 2.45%
800,001 ~ 1,000,000 0 0 0.00%
1,000,001 or over 4 56,658,065 61.59%
Total 9,806 92,000,000 100.00%
----- End of picture text -----

53

(4) List of major shareholders

major shareholders
Shares
Major Shareholder		 Shares Percentage

Roo HsingGlobal Co., Ltd		 49,139,065 53.41%
SongHaur Investment Limited 4,565,000 4.96%
Li, Li-Sheng 1,832,000 1.99%
Brighten Management Limited 1,122,000 1.22%
Lin, Jia-Qing 800,000 0.87%
Sun, Yu-Ting 788,000 0.86%
Ji, Ya-Ying 664,018 0.72%
Huang, Yu-Ting 467,000 0.51%
Shao, Ji-Yang 429,000 0.47%
Zhou, Hong-Zhang 398,000 0.43%

(5) Market Price, Net Worth, Earnings, and Dividends per Share

Unit: NT$

Unit: NT$

Item		 Year 2017 2018 01/01/2019 ~
04/26/2019
Market
Price per
Share		 Highest Market Price 27.40 54.50 36.00
Lowest Market Price 15.25 19.85 27.30
Average Market Price 20.94 32.18 32.38
Net Worth
per Share		 Before Distribution 20.77 20.02 -
After Distribution 20.77 Note -
Earnings
per Share		 Weighted Average Shares
(thousand shares)		 92,000 92,000 -
Earnings Per Share (0.07) (0.75) -
Dividends
per Share		 Cash Dividends - - -
Stock
Dividends		 Dividends from
Retained Earnings		 - - -
Dividends from
Capital Surplus		 - - -
Accumulated
Undistributed Dividends		 - - -
Return on
Investment		 Price / Earnings Ratio - - -
Price / Dividend Ratio - - -
Cash Dividend Yield Rate - - -

Note ： The number after the distribution is referred to as the resolution of the annual shareholders' meeting.The 2018 surplus distribution has not yet been approved by the shareholders' meeting.

  • (6) Dividend policies and implementation

  • A. Dividend policies as prescribed in articles of incorporation:

Article 18-1: If there is surplus in year-end final accounts of the Company, income tax shall first be paid pursuant to law, followed by make-up of previous losses, and then 10% of left over shall be appropriated as legal capital reserve, while special capital reserve shall also be appropriated in accordance with relevant laws or regulations or as requested by the authorities in charge, and a 54

certain amount shall also be set aside according to needs or circumstances. Based on the balance left over plus undistributed surplus from the previous year, a distribution proposal shall be made by the Board of Directors and submitted to the shareholders' meeting for approval.

Article 18-2: To cope with current changing and competitive business environment and continuous expansion of the scale of the Company, dividend shall be distributed by way of stock dividend and cash dividend depending upon various factors of future capital needs, financial structure and shareholder equity, and the ratio of cash dividend shall not be lower than 20% of the total distribution.

  • B. Proposal of dividend distribution submitted to the shareholders’ meeting: There are deficits in the year 2018 and a recommendation of no dividend distribution has been made and will be submitted to 2019 shareholders’ meeting for approval.

  • (7) Impact to 2019 business performance and eps resulting from stock dividend distribution: Not applicable.

  • (8) Compensation to employees, directors and supervisors

  • A. Percentage or scope of compensation to employees, directors and supervisors prescribed in Articles of Incorporation:

    • Article 18: For pre-tax profits in a given year, the Company shall first reserve a sufficient amount to offset its accumulated losses and then set aside 4% to 5% as profit sharing bonuses to its employees and not more than 2% as compensation to its directors and supervisors.

    • The distribution percentage of employee bonuses and compensation to directors and supervisors and whether it shall be distributed by way of stock dividend or cash dividend shall be decided by a resolution to be adopted by a majority vote of the directors at a board of directors’ meeting attended by two thirds of the entire directors of the company, and the resolution shall be submitted to the shareholders’ meeting.

    • Employees entitled to receive stock dividend or cash dividend shall include employees of subsidiary companies who meet certain conditions.

  • B. The basis to accrue amounts of compensation to employees, directors and supervisors; the basis of calculating number of shares to be distributed as employee compensation; and the accounting treatment in the event of differences between amounts accrued and amounts actually distributed.

    • (a) The basis to accrue amounts of compensation to employees, directors and supervisors: Please refer to descriptions in the above (8) Compensation to employees, directors and supervisors.

    • (b) The basis of calculating number of shares to be distributed as employee compensation: No employee compensation to be distributed this year.

    • (c) In the event of differences between amounts accrued and amounts actually distributed: Not applicable.

  • C. Compensation distribution approved by the Board:

    • (a) In the event that differences exist between the amounts of compensation distributed by way of cash or stock to employees, directors and supervisors and the amounts accrued and recognized as expenses in that year, the differences, reasons and treatment shall be disclosed:

      • i. There is no surplus of final accounts of the Company in the year 2018 and there will be no compensation distributed to employees, directors and supervisors according to Articles of Incorporation, which has been in records and submitted to the Board of Directors on March 5, 2019.

      • ii. Differences, reasons and treatment: Not applicable.

    • (b) The amount of employee compensation distributed by way of stock as a percentage of net income and total employee compensation: Not applicable.

55 

  - D. Actual compensation distribution to employees, directors and supervisors in previous year (2017), including number of shares distributed, amount and stock price; if differences exist when compared with recognized compensation to employees, directors and supervisors, the differences, reasons and treatment shall be specified: The Company suffered losses in 2017 and did not distribute compensation to employees, directors and supervisors, and there is no difference when compared with recognized amount in 2017 financial statements.

  • (9) Buyback of Common Stock: None.

  • Corporate bonds: None.

  • Special Shares: None.

  • Global Depositary Receipt: None.

  • Employee Stock Option Certificate: None.

  • Restricted Employee Shares: None.

  • M&A or acceptance of transferred shares of another company for issuance of new shares: None.

  • Implementation of capital utilization plan: None.

56

、 Ⅴ Operational Highlights

1. Business Activities

  • (1) Business Scope

  • A. Main areas of business operations

    • (A) C306010 Outerwear Knitting Mills.

    • (B) C307010 Apparel, Clothing Accessories and Other Textile Product Manufacturing.

    • (C) C399990 Other Textile Products Manufacturing.

    • (D) F101990 Wholesale of Other Agricultural, Husbandry and Aquatic Products.

    • (E) F104110 Wholesale of Cloths, Clothes, Shoes, Hat, Umbrella and Apparel, Clothing Accessories and Other Textile Products.

    • ( F ) F104110 Wholesale of Cloths, Clothes, Shoes, Hat, Umbrella and Apparel, Clothing Accessories and Other Textile Products.

    • (G) F401010 International Trade.

    • (H) F601010 Intellectual Property.

    • ( I ) H703100 Real Estate Rental and Leasing.

    • ( J ) I101110 Textile Industry Consultancy.

    • (K) I501010 Product Designing.

    • (L) I502010 Costume Designing.

    • (M) ZZ99999 All business items that are not prohibited or restricted by law, except those are subject to special approval.

B. Revenue distribution:

Revenue distribution:
Item Amount
(NT$ thousands)		 Proportion
(%)
Sales of Wool tops 150,794 57.11
Sales of Chlorinated wool tops 72,467 27.45
Sales of Chlorinated wool 25,222 9.55
Rental receipts 15,481 5.89
Other operatingrevenues 58 0.00

  • C. Current products carried by the Company: Wool tops, Chlorinated wool tops, Chlorinated wool, Rental receipts.

  • D. New products development: None.

  • (2) Industry trend

  • A. Current industrial situation and development:

    • (a) Wool: Wool tops and chlorinated wool tops have encountered fierce competition from organic fibers with special functions of dryness, wind-resistance and water-resistance. The overall environment is unfavorable for extensive business development.

    • (b) Rental receipts: Apart from space used by ourselves, the manufacturing plant in Lioudu Industrial Zone has no more space for rent. All investment property has been rented out.

  • B. The upstream, midstream and downstream of the industry:

    • Taking an upstrteam role in the wool industry, Australia, a major wool yielding country in the world, is estimated to produce 0.385 million tons of wool in 2018/19, a decrease by 8.9% when compared with the 0.422 million tons in 2017/18. Located mainly in China mainland, midstream manufacturers have been suffering from ever-increasing manufacturing costs because of rising 57

wages and implementation of strict environmental protection regulations, while the price competition of products derived from various raw materials of cotton and chemical fibers leaves the downstream consumption side almost no room for profit.

  • C. Product development trends and competition:

    • (a) Wool tops: Suffering high cost of wool raw materials, difficult to be converted to other multifunctional fibers. With limited market share and fierce competition from other suppliers.

    • (b) Chlorinated wool tops and chlorinated wool: With high added value, products with high fine counts have been under strong promotion to satisfy the needs of high-end customers.

  • (3) Research and Development

  • A. R&D expenses in 2018: None.

  • B. Technology or producs developed in 2018: None.

  • C. R&D plans in 2019: None.

  • (4) Long-term and Short-term business development plan

Short-term development: The consumption percentage of wool products in the overall textile

market has been stable without noticeable growth. Based on existing customers, the Company will 。 develop new markets with enhanced marketing strategy

Long-term development: Look forward to continued business growth through transformation anddiversification.

2. Market and Sales Overview

  • (1) Market Analysis

A. Major sales regions and percentage:

Region Quantity (Kg) Proportion(%)
Domestic 135,003 23.50
Japan 352,526 61.35
Korea 51,615 8.98
Malaysia 35,425 6.17
Total 574,569 100.00

B. Market prospect:

The drought in Australia has brought down the quantity of wool yields causing prices to reach alltime highs repeatedly. Wool products, with increasing costs, become more and more vulnerable to price competition with other chemical fibers. Unless global economic growth picks up, pricey wool producs are not likely to win customers’ favor.

  • C. Competitive niche:

The Company enjoys flexibility in adjusting sales strategy to lower the risk of losses, thanks to the business model of triangular trade.

  • D. Favorable and unfavorable factors in prospects of development and countermeasures:

  • (a) Favorable factors: The focus on triangular trade allows us to evade meeting face to face with competitors in red sea markets.

  • (b) Unfavorable factors: Susceptible to climate changes, wool yields are instable and the fluctuating price caused brings uncertainty to cost control.

  • (c)Countermeasures: To seek for new market niche through transformation of company operation and reinvestment.

58

  • (2) Applications of Company’s main products and manufacturing processes

  • A. Wool tops: Supply to wool spinning factories for manufacturing yarns and fabrics; wool tops are made through various processes of wool scouring, carding and combing.

  • B.Chlorinated wool tops: Supply to wool spinning factories for manufacturing yarns and shrinkproof fabrics; with chlorination and resin treatment undergone wool tops become shrink-proof (chlorinated) wool tops.

  • C.Chlorinated wool: Supply to wool spinning factories for manufacturing yarns, shrink-proof ready-to-wears and shrink-proof wool quilts; carbonized wool or scoured wool undergo chlorination and resin treatment to become shrink-proof (chlorinated) wool.

  • (3) Supply Status of Main Materials

  • Wool yields in 2018/19 are estimated to be 0.385 million tons, a decrease by 8.9% when compared 。

  • with the 0.422 million tons in 2017/18, which could be a all-time low after 1997

  • Sydney wool was quoted at Australian cent 1.76/Kg in the beginning of 2018 and became 1.862 at the end of the same year, an annual increase of 5.80%, while Sydney wool hit the all-time high at 2.089 in mid-year of 2018.

  • (4)Names of suppliers/customers accounted for 10% or more of total amounts of purchases/sales in any year during the past two years and the amount and percentage of purchases/sales thereof, with reasons of increase/decrease specified.

List of Major Suppliers with over 10% of the total purchase in one of the last two years

Unit ： NT$ thousands

Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands
2017 2018
Item Name Amount Percentage
of the annual
net purchase
(%)
Relationship
with the
issuer		 Name Amount Percentage
of the annual
net purchase
(%)		 Relationship
with the
issuer
1 Supplier A 207,360 85 None Supplier A 220,969 97 None
2 Others 36,929 15 None Others 7,437 3 None
Net
Purchases		 244,289 100 Net
Purchases
228,406		 100

Reasons of increase/decrease ： There is no significant change in volumes of main suppliers.

List of Major Customers with over 10% of the total purchase in one of the last two years

Unit ： NT$ thousands

Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands
2017 2018
Item Name Amount Percentage
of the annual
net sales
(%)		 Relationship
with the
issuer		 Name Amount Percentage
of the annual
net sales
(%)		 Relationship
with the
issuer
1 Customer A 129,051 52 None Customer A
136,909		 55 None
2 Customer B 39,117 16 None Customer B
64,552		 26 None
3 Customer C 36,220 15 None Others 47,080 19 None
4 Others 42,192 17 None
Net Sales 246,580 100 Net Sales 248,541 100

Reasons of increase/decrease ： There is no significant change in volumes of main customers.

59

(5) Production Volume and Value of the last two years

Unit ： KG ； NT$ thousands

Production Year
Quantity
Main Products		 2017 2017 2017 2018 2018 2018
Production
capacity		 Production
quantity		 Production
Value		 Production
capacity		 Production
quantity		 Production
Value
Wool tops 0 0 0 0 0 0
Chlorinated wool tops 0 0 0 0 0 0
Chlorinated wool 0 0 0 0 0 0
Total 0 0 0 0 0 0
  • (6) Sales Volume and Value of the last two years

Unit ： KG ； NT$ thousands

Unit：KG；NT$ thousands Unit：KG；NT$ thousands Unit：KG；NT$ thousands Unit：KG；NT$ thousands
Sales
Year
Quantity
Main Products		 2017 2018
Domestic Sales Export Sales Domestic Sales Export Sales
Volume Value Volume Value Volume Value Volume Value
Wool tops 7,308 3,656 363,887 152,524 0 0 283,459 150,794
Chlorinated wool tops 2,133 1,280 120,688
56,779		 339 204 138,932
72,264
Chlorinated wool 143,295 30,009 26,393
5,896		 133,664 22,437 15,644
2,784
Other operating revenues 2,488 1,351 2,099
85		 0 0 1,531
58
Total 155,224 36,296 513,067
210,284		 135,003 22,641 439,566 225,900

3. Human Resources

Year 2017 2018 2019.01.01 ~
2019.04.30
Number of
Employees		 Staff 8 20 19
Operators 0 0 0
Total 8 20 19
Average Age 52.13 43.05 43.47
Average Seniority 18.52 0.54 0.88
Level of
Education		 Ph.D 0.00 0.00 0.00
Master 12.50 15.00 15.79
College 62.50 80.00 78.95
Senior High School 25.00 5.00 5.26
Below Senior High School 0.00 0.00 0.00

4. Environmental-protection-related expenses

  • (1) In the most recent year and as of the date of this annual report, the total amount of losses (including damages), fines and penalties: None.

  • (2) Countermeasures and possible expenditures: None.

  • Labor-management relations

  • (1) Description and implementation of various employee beefits, education, training and retirement plans, labor-management agreements and measures protecting employees’ rights and interests:

    • A. Employees are covered by labor insurance, employment insurance and national health insurance.

    • B. Employees are entitled birthday cash gift, festival cash gif, meal allowance, travel allowance and

      • health checkup subsidies.

60 

  - C. Participation in on-the-job training and relevant seminars.

  - D. Cash gifts on special occasions, birth allowance, and inpatient consolation cash gift.

  - E. Labor-management meeting to be convened every season regularly, providing communication channels to understand operational chages that may cause major influence.

  - F. Description and implementation of retirement system:

     - (a) All current employees are subject to the 2[nd] -tier new labor pension plan and the Company set aside 6% of the wages of every employee and deposit it in individual employee retirement account.

     - (b) An employee may may apply for voluntary retirement under any of the following conditions:

        - i. Where an employee attains the age of fifty-five and has worked for fifteen years.

        - ii. Where an employee has worked for more than twenty-five years.

        - ii. Where an employee attains the age of sixty and has worked for ten years.

  - H. Employee service rules and personnel regulations have been prescribed pursuant to applicable labor laws to protect legal rights of employees.

  - I. “Procedures of reporting illegal and unethical conducts” and “Guidelines for prevention, complaint and punishment of sexual harassment in the workplace” have been in place to provide a sound system of reporting.

  - J. Access control to office and periodic inspection and cleaning of fire fighting equipment, air conditioners and drinking fountains have been conducted to lower risk factors of employee safety and health to minimum. An officer in charge of employee safety and health is in place to provide safety and health education in a timely manner and arrange periodic health checkup to prevent occupational accidents.

  - K. Explicit rules for compensation, performance, evaluation, bonus and remurernation are already in place and on-the-job professional training sessions are organized to enhance employee competence.

  • (2) In the most recent year and as of the date of this annual report, losses resulting from labor disputes and disclose estimated amounts at present and in the future and countermeasures. If reasonable estimate can not be made, facts result in such impossibility shall be specified: None.

  • Material contracts: None.

61

、 Ⅵ Financial Information

1. Five-Year Financial Summary

(1) Condensed Balance Sheet

Condensed Balance Sheet (Consolidated) – Based on Taiwan-IFRSs

Unit ： NT$ thousands

Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands
Year
Item		 Financial Summary for The Last Five Years（Note 1）
2014 2015 2016 2017 2018
Current Assets 1,428,976 1,382,137 1,388,010 1,336,739 1,960,085
Property, Plant and Equipment 85,137
83,965
79,041
78,033
2,716
Intangible Assets 244
139
82
49
35
Other Assets 681,301
683,255
666,801
658,900
34,176
Total Assets 2,195,658 2,149,496 2,133,934 2,073,721 1,997,012
Current Liabilities Before
Distribution		 16,162
15,475
20,220
12,635
151,448
After
Distribution		 62,162
61,475
66,220
12,635		 Note 2
Non-current Liabilities 149,749
149,636
149,857
150,101
3,441
Total Liabilities Before
Distribution		 165,911
165,111
170,077
162,736
154,889
After
Distribution		 211,911
21,111
216,077
162,736		 Note 2
Equity Attributable to Shareholders of
the Parent Company		 2,029,747 1,984,385 1,963,857 1,910,985 1,842,123
Capital Stock 920,000
920,000
920,000
920,000
920,000
Capital Surplus 8,686
8,686
8,686
8,686
8,686
Retained Earnings Before
Distribution		 1,101,061 1,055,699 1,035,171
982,299
913,484
After
Distribution		 1,055,061 1,009,699
989,171
982,288		 Note 2
Other Equity Interest 0
0
0
0
(47)
Treasury Stock 0
0
0
0
0
Non-controlling Interest 0
0
0
0
0
Total Equity Before
Distribution		 2,029,747 1,984,385 1,963,857 1,910,985 1,842,123
After
Distribution		 1,983,747 1,938,385 1,917,857 1,910,985 Note 2

Note 1 ： Financial Statements in the last five years have been audited and attested by CPA.

Note 2 ： The figures after distribution are subject to approval by shareholders’ meeting.

Note 3 ： 2018 financial statement is a consolidated one while others are of parent company only.

62

Condensed balance sheet (Standalone) – Based on ROC GAAP

Unit ： NT$ thousands

Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands
Year
Item		 Financial Summary for The Last Five Years（Note 1）
2014 2015 2016 2017 2018
Current Assets 1,428,976 1,382,137 1,388,010 1,336,739 1,848,276
Property, Plant and Equipment 85,137
83,965
79,041
78,033
2,716
Intangible Assets 244
139
82
49
35
Other Assets 681,301
683,255
666,801
658,900
145,835
Total Assets 2,195,658 2,149,496 2,133,934 2,073,721 1,996,862
Current Liabilities Before
Distribution		 16,162
15,475
20,220
12,635
151,286
After
Distribution		 62,162
61,475
66,220
12,635		 Note 2
Non-current liabilities 149,749
149,636
149,857
150,101
3,453
Total liabilities Before
Distribution		 165,911
165,111
170,077
162,736
154,739
After
Distribution		 211,911
21,111
216,077
162,736		 Note 2
Equity Attributable to Shareholders
of the Parent Company		 2,029,747 1,984,385 1,963,857 1,910,985 1,842,123
Capital Stock 920,000
920,000
920,000
920,000
920,000
Capital Surplus 8,686
8,686
8,686
8,686
8,686
Retained Earnings Before
Distribution		 1,101,061 1,055,699 1,035,171
982,299
913,484
After
Distribution		 1,055,061 1,009,699
989,171
982,288		 Note 2
Other Equity Interest 0
0
0
0
(47)
Treasury Stock 0
0
0
0
0
Non-controlling Interest 0
0
0
0
0
Total Equity Before
Distribution		 2,029,747 1,984,385 1,963,857 1,910,985 1,842,862
After
Distribution		 1,983,747 1,938,385 1,917,857 1,910,985 Note 2

Note 1 ： Financial Statements in the last five years have been audited and attested by CPA.

Note 2 ： The figures after distribution are subject to approval by shareholders’ meeting.

63

(2) Condensed Statement of Comprehensive Income/Condensed Statement of Income

Condensed Statement of Comprehensive Income (Consolidated) – Based on Taiwan-IFRSs

Condensed Statement of Comprehensive Income (Consolidated) – Based on Taiwan-IFRSs Condensed Statement of Comprehensive Income (Consolidated) – Based on Taiwan-IFRSs Condensed Statement of Comprehensive Income (Consolidated) – Based on Taiwan-IFRSs Condensed Statement of Comprehensive Income (Consolidated) – Based on Taiwan-IFRSs Condensed Statement of Comprehensive Income (Consolidated) – Based on Taiwan-IFRSs Condensed Statement of Comprehensive Income (Consolidated) – Based on Taiwan-IFRSs
Unit：NT$ thousands
Year
Item		 Financial Summaryfor The Last Five Years（Note 1）
2014 2015 2016 2017 2018
Operating Revenue 423,790
358,381
359,364
263,220
264,022
Gross Profit 15,759
15,846
15,018
13,862
8,464
Income from Operations (14,636)
(14,190)
(17,838)
(15,164)
(69,452)
Non-operating Income/Expenses 15,565
14,661
48,278
8,304
(1,882)
Income before Tax 929
471
30,440
(6,860)
(71,334)
Income from Operations of
Continued Segments - after tax		 769
638
25,472
(6,872)
(68,815)
Income from Discontinued
Operations		 0
0
0
0
0
Net Income / (Loss) 769
638
25,472
(6,872)
(68,815)
Other Comprehensive Income
(income after tax)		 0
0
0
0
(47)
Total Comprehensive Income 769
638
25,472
(6,872)
(68,862)
Net Income Attributable to
Shareholders of the Parent Company		 769
638
25,472
(6,872)
(68,815)
Net Income Attributable to
Non-controllingInterest		 0
0
0
0
0
Comprehensive Income Attributable
to Shareholders of the Parent		 769
638
25,472
(6,872)
(68,862)
Comprehensive Income Attributable
to
Non-controlling Interest		 0
0
0
0
0
Earnings Per Share 0.01
0.01
0.28
(0.07)
(0.75)

Note 1 ： Financial Statements in the last five years have been audited and attested by CPA.

Note 2 ： 2018 financial statement is a consolidated one while others are of parent company only.

64

Condensed Statement of Income (Standalone) – Based on ROC GAAP

Unit ： NT$ thousands

Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands Unit：NT$ thousands
Year
Item		 Financial Summaryfor The Last Five Years（Note 1）
2014 2015 2016 2017 2018
OperatingRevenue 423,790
358,381
359,364
263,220
264,049
Gross Profit 15,759
15,846
15,018
13,862
8,491
Income from Operations (14,636)
(14,190)
(17,838)
(15,164)
(50,696)
Non-operating Income/Eexpenses 15,565
14,661
48,278
8,304
(20,534)
Income before Tax 929
471
30,440
(6,860)
(71,230)
Income from Operations of Continued
Segments-after Tax		 769
638
25,472
(6,872)
(68,815)
Income from Discontinued
Operations		 0
0
0
0
0
Net Income /(Loss) 769
638
25,472
(6,872)
(68,815)
Other Comprehensive Income
(Income after Tax)		 0
0
0
0
(47)
Total Comprehensive Income 769
638
25,472
(6,872)
(68,862)
Net Income Attributable to
Shareholders of the Parent Company		 769
638
25,472
(6,872)
(68,815)
Net Income Attributable to
Non-controllingInterest		 0
0
0
0
0
Comprehensive Income Attributable to
Shareholders of the Parent Company		 769
638
25,472
(6,872)
(68,862)
Comprehensive Income Attributable to
Non-controllingInterest		 0
0
0
0
0
Earnings Per Share 0.01
0.01
0.28
(0.07)
(0.75)

Note 1 ： The 2014 ~ 2018 financial data were audited by the CPA.

(3) Auditors’ Opinions from 2014 to 2018.

A. The name and opinion of the independent auditor within the last 5 year.

Year Public Accountants Independent Auditors’ Opinion Reasons for replacing
Accountants
2014 Fu, Wen-Fang
Hsu,Jung-Huang		 Unqualified opinion
2015 Hsu, Jung-Huang
Huang,Chien-Che		 Unqualified opinion Note
2016 Hsu, Jung-Huang
Huang,Chien-Che		 Unqualified opinion
2017 Hsu, Jung-Huang
Huang,Chien-Che		 Unqualified opinion
2018 Hsu, Jung-Huang
Huang,Chien-Che		 Unqualified opinion with explanatory
paragraph

B. Explanation of reasons for replacing accountants in the past five years:

Change in public accountants in 2015 was due to internal adjustments within the accounting firm.

65

2. Five-Year Financial Analysis

Financial Analysis (Consolidated) – Based on Taiwan-IFRSs

Year
Item		 Year
Item		 Consolidated Financial Analysis – Based on IFRS（Note 1） Consolidated Financial Analysis – Based on IFRS（Note 1） Consolidated Financial Analysis – Based on IFRS（Note 1） Consolidated Financial Analysis – Based on IFRS（Note 1） Consolidated Financial Analysis – Based on IFRS（Note 1）
2014 2015 2016 2017 2018
Financial
structure		 Debt Ratio (%) 7.56
7.68
7.97
7.85
7.76
Ratio of Long-term Capital
to Property, Plant and
Equipment(%)		 2,559.99
2,541.56
2,674.20
2,641.30		 67,951.55
Solvency Current Ratio (%) 8,841.58
8,931.42
6,864.54		 10,579.65
1,294.23
Quick Ratio (%) 8,763.83
8,723.13
6,783.20		 10,447.55
1,188.41
Interest Earned Ratio 6.96
4.71
238.81
(49.44)
(809.61)
Operating performance Accounts Receivable
Turnover (times)		 23.59
33.78
54.91
31.29
34.82
Average Receivable
Collection Days		 15.47
10.81
6.65
11.67
10.48
Inventory Turnover
(times)		 52.10
17.03
15.11
16.14
30.67
Accounts Payable Turnover
(times)		 897.80
1,010.30
1,099.39
588.08
913.42
Average Inventory Turnover
Days
7.01
21.44
24.16
22.61
11.90
Property, Plant and
Equipment Turnover (times)		 4.78
4.05
4.21
3.14
6.15
Total Assets Turnover
(times)		 0.18
0.16
0.16
0.12
0.12
Profitability Return on Total Assets (%) 0.04
0.03
0.19
(0.32)
(3.38)
Return on Stockholders'
Equity (%)		 0.04
0.03
1.29
(0.35)
(3.67)
Pre-tax Income / (Loss) to
Paid-in Capital (%)		 0.10
0.05
3.31
(0.75)
(7.75)
Net Income / (Loss) to Sales
(%)		 0.19
0.19
7.43
(2.79)
(27.69)
Earnings per Share (NT$) 0.01
0.01
0.28
(0.07)
(0.75)
Cash flow Cash Flow Ratio (%) -
-
-
-
-
Cash Flow Adequacy Ratio
(%)		 -
-
-
-
-
Cash Reinvestment Ratio
(%)		 -
-
-
-
-
Leverage Operating Leverage -
-
-
-
-
Financial Leverage -
-
-
-
-

66

  • Analysis of deviation of 2018 vs. 2017 over 20%: A. Financial structure analysis: The change of account title of property used by ourselves from fixed assets to investment property in 2018 caused a decrease in balance of property, factory and equipment and an increase in long-term fund to property, plant and equipment.

  • B. Solvency analysis: The change of account title of investment property and relevant liabilities to noncurrent assets held for sale and liabilities directly related to noncurrent assets held for sale caused increase in both current assets and current liabilities and decrease in current ratio and quick ratio, while the loss before tax in 2018 is higher than that in 2017 causing an increase in times interest earned (times).

  • C. Operating performance analysis: There was no inventory at the end of 2018 causing an increase in average inventory turnover (times) and a decrease in average inventory turnover days. There was no payables at the end of 2018 causing an increase in payables turnover. The change of account title of property used by ourselves from fixed assets to investment property in 2018 caused a decrease in balance of property, factory and equipment and an increase in property, plant and equipment turnover (times).

  • D. Profitability analysis: The loss before tax in 2018 is higher than that in 2017 causing decreases in all profitability ratios.

67

Note 1 ： Financial Statements in the last five years have been audited and attested by CPA.

Note 2 ： 2018 financial statement is a consolidated one while others are of parent company only.

Note 3 ： If the current year is a net cash outflow from operating activities or a negative operating profit, cash flow and leverage are not analyzed.

Note 4 ： Calculation formula ：

  1. Financial structure

    • (1) Debt Ratio ＝ Total liabilities ／ Total assets.

    • (2) Ratio of long-term capital to property, plant and equipment ＝（ Shareholders' equity net value ＋ Non-current liabilities ）／ Property, plant and equipment net value.

  2. Solvency

    • (1) Current ratio ＝ Current assets ／ Current liabilities.

    • (2) Quick ratio ＝（ Current assets － Inventory － Pre-paid costs ）／ Current liabilities.

    • ＝

    • (3) Interest earned ratio (times) Pre-income tax and interest profits ／ Interest expenditure of the term.

  3. Operating performance

    • (1) Accounts receivable turnover (including accounts receivable and bills receivable that are incurred as a result of business operation) ＝ Net sales ／ Balance from average receivables of each term (including accounts receivable and bills receivable).

    • (2) Average collection period ＝ 365 ／ Accounts receivables turnover.

    • (3) Inventory turnover (times) ＝ Sales cost ／ Average inventory value.

    • (4) Accounts payable turnover (including accounts payable and bills payable that are incurred as a result of business operation) ＝ Sales cost ／ Balance from average payables of each term (including accounts payable and bills payable).

    • (5) Average days in sales ＝ 365 ／ Inventory turnover.

    • (6) Property, plant and equipment turnover (times) ＝ Net sales ／ Net average Property, plant and equipment value.

    • (7) Total assets turnover (times) ＝ Net sales ／ Gross assets on average.

  4. Profitability

    • (1) Return on total assets (%) ＝〔 After-tax gains and losses ＋ Interest × （１－ tax rate ）〕／ Gross assets on average.

    • ＝

    • (2) Return on stockholders' equity (%) After-tax gains and losses ／ Net shareholders’ equity on average,

    • (3) Pre-tax income to paid-in capital (%) ＝ After-tax gains and losses ／ Net sales.

    • (4) Earnings per share (NT$) ＝（ Net Income － Special stock dividends ）／ weighted average of issued shares. （ Note 4 ）

  5. Cash flow

    • (1) Cash flow ratio (%) ＝ Net cash flow from business activities ／ Current liabilities.

    • ＝

    • (2) Cash flow adequacy ratio (%) Net cash flow from business activities of the past five years ／ Past five years (capital expenditure + increased inventory + cash dividends).

    • ＝ －

    • (3) Cash reinvestment ratio (%) (Net cash flow from business activities Cash dividends) ／ (net value of property, plant and equipment ＋ Long-term investment ＋ Other assets ＋ Working capital), （ Note 5 ）

  6. Leverage

    • (1) Operating leverage ＝ (Net business income － Variable business costs and expenses) ／ Business profits. （ Note 6 ）

    • ＝ －

    • (2) Financial leverage Business profits ／ (Business profits Cost of interest).

  7. Note 5 ： The formula for calculating the earnings per share is to pay special attention to the following matters when measuring:

  8. Based on the weighted average number of common shares, not based on the number of shares outstanding at the end of the year.

  9. For those who have cash increase or treasury stock transactions, they should consider the circulation period and calculate the weighted average number of shares.

  10. Anyone who has transferred surplus or capital increase to capital increase will be retrospectively adjusted according to the proportion of capital increase when calculating the earnings per share of the previous year and the semiannual, and there is no need to consider the issue period of the capital increase.

  11. If the special stock is a non-convertible accumulative special stock, its annual dividend (whether or not it is paid) shall be net of the net profit after tax, or increase the net loss after tax. If the special stock is non-cumulative, in the case of net profit after tax, the special stock dividend shall be deducted from the net profit after tax; if it is a loss, it is not necessary to adjust,

Note 6 ： Cash flow analysis should pay special attention to the following matters when measuring:

  1. Net cash flow from operating activities refers to the net cash inflows from operating activities in the cash flow statement.

  2. Capital expenditure refers to the number of cash outflows per year of capital investment.

  3. The increase in inventory is only included when the ending balance is greater than the opening balance. If the inventory is reduced at the end of the year, it is calculated as zero.

  4. Cash dividends include cash dividends for common and special shares.

  5. Gross property, plant and equipment are the total amount of real estate, plant and equipment before deducting accumulated depreciation.

68

Financial Analysis (Standalone) – Based on ROC GAAP

Year
Item		 Year
Item		 Consolidated Financial Analysis – Based on ROC GAAP
(Note 1）		 Consolidated Financial Analysis – Based on ROC GAAP
(Note 1）		 Consolidated Financial Analysis – Based on ROC GAAP
(Note 1）		 Consolidated Financial Analysis – Based on ROC GAAP
(Note 1）		 Consolidated Financial Analysis – Based on ROC GAAP
(Note 1）
2014 2015 2016 2017 2018
Financial
structure		 Debt Ratio (%) 7.56
7.68
7.97
7.85
7.75
Ratio of Long-term Capital
to Property, Plant and
Equipment(%)		 2,559.99
2,541.56
2,674.20
2,641.30		 67,951.99
Solvency Current Ratio (%) 8,841.58
8,931.42
6,864.54		 10,579.65
1,221.71
Quick Ratio (%) 8,763.83
8,723.13
6,783.20		 10,447.55
1,115.77
Interest Earned Ratio 6.96
4.71
238.81
(49.44)
(808.43)
Operating performance Accounts Receivable
Turnover (times)		 23.59
33.78
54.91
31.29
34.82
Average Receivable
Collection Days		 15.47
10.81
6.73
11.67
10.48
Inventory Turnover
(times)		 52.10
17.03
15.11
16.14
30.67
Accounts Payable Turnover
(times)		 897.80
1,010.30
1,099.39
588.08
913.42
Average Inventory Turnover
Day		 7.01
21.44
24.16
22.61
11.90
Property, Plant and
Equipment Turnover (times)		 4.78
4.05
4.21
3.14
6.15
Total Assets Turnover
(times)		 0.18
0.16
0.16
0.12
0.12
Profitability Return on Total Assets (%) 0.04
0.03
0.19
(0.32)
(3.38)
Return on Stockholders'
Equity (%)		 0.04
0.03
1.29
(0.35)
(3.67)
Pre-tax income / (Loss) to
Paid-in Capital (%)		 0.10
0.05
3.31
(0.75)
(7.74)
Net Income / (Loss) to sales
(%)		 0.19
0.19
7.43
(2.79)
(27.69)
Earnings per Share (NT$) 0.01
0.01
0.28
(0.07)		 (0.75)
Cash flow Cash Flow Ratio (%) -
-
-
-
-
Cash Flow Adequacy Ratio
(%)		 -
-
-
-
-
Cash Reinvestment Ratio (%)
-
-
-
-
-
Leverage Operating Leverage -
-
-
-
-
Financial Leverage -
-
-
-
-

69

Analysis of deviation of 2018 vs. 2017 over 20% ： A. Financial structure analysis ： The change of account title of property used by ourselves from fixed assets to investment property in 2018 caused a decrease in balance of property, factory and equipment and an increase in long-term fund to property, plant and equipment. B. Solvency analysis ： The change of account title of investment property and relevant liabilities to noncurrent assets held for sale and liabilities directly related to noncurrent assets held for sale caused increase in both current assets and current liabilities and decrease in current ratio and quick ratio, while the loss before tax in 2018 is higher than that in 2017 causing an increase in times interest earned (times). C. Operating performance analysis ： There was no inventory at the end of 2018 causing an increase in average inventory turnover (times) and a decrease in average inventory turnover days. There was no payables at the end of 2018 causing an increase in payables turnover. The change of account title of property used by ourselves from fixed assets to investment property in 2018 caused a decrease in balance of property, factory and equipment and an increase in property, plant and equipment turnover (times). D. Profitability analysis ： The loss before tax in 2018 is higher than that in 2017 causing decreases in all profitability ratios.

70

Note 1 ： Financial Statements in the last five years have been audited and attested by CPA.

Note 2 ： 2018 financial statement is a consolidated one while others are of parent company only.

Note 3 ： If the current year is a net cash outflow from operating activities or a negative operating profit, cash flow and leverage are not analyzed.

Note 4 ： Calculation formula ：

  1. Financial structure

    • (1) Debt Ratio ＝ Total liabilities ／ Total assets.

    • (2) Ratio of long-term capital to property, plant and equipment ＝（ Shareholders' equity net value ＋ Non-current liabilities ）／ Property, plant and equipment net value.

  2. Solvency

    • (1) Current ratio ＝ Current assets ／ Current liabilities.

    • (2) Quick ratio ＝（ Current assets － Inventory － Pre-paid costs ）／ Current liabilities.

    • ＝

    • (3) Interest earned ratio (times) Pre-income tax and interest profits ／ Interest expenditure of the term.

  3. Operating performance

    • (1) Accounts receivable turnover (including accounts receivable and bills receivable that are incurred as a result of business operation) ＝ Net sales ／ Balance from average receivables of each term (including accounts receivable and bills receivable).

    • (2) Average collection period ＝ 365 ／ Accounts receivables turnover.

    • (3) Inventory turnover (times) ＝ Sales cost ／ Average inventory value.

    • (4) Accounts payable turnover (including accounts payable and bills payable that are incurred as a result of business operation) ＝ Sales cost ／ Balance from average payables of each term (including accounts payable and bills payable).

    • (5) Average days in sales ＝ 365 ／ Inventory turnover.

    • (6) Property, plant and equipment turnover (times) ＝ Net sales ／ Net average Property, plant and equipment value.

    • (7) Total assets turnover (times) ＝ Net sales ／ Gross assets on average.

  4. Profitability

    • (1) Return on total assets (%) ＝〔 After-tax gains and losses ＋ Interest × （１－ tax rate ）〕／ Gross assets on average.

    • ＝

    • (2) Return on stockholders' equity (%) After-tax gains and losses ／ Net shareholders’ equity on average,

    • (3) Pre-tax income to paid-in capital (%) ＝ After-tax gains and losses ／ Net sales.

    • (4) Earnings per share (NT$) ＝（ Net Income － Special stock dividends ）／ weighted average of issued shares. （ Note 4 ）

  5. Cash flow

    • (1) Cash flow ratio (%) ＝ Net cash flow from business activities ／ Current liabilities.

    • ＝

    • (2) Cash flow adequacy ratio (%) Net cash flow from business activities of the past five years ／ Past five years (capital expenditure + increased inventory + cash dividends).

    • ＝ －

    • (3) Cash reinvestment ratio (%) (Net cash flow from business activities Cash dividends) ／ (net value of property, plant and equipment ＋ Long-term investment ＋ Other assets ＋ Working capital), （ Note 5 ）

  6. Leverage

    • (1) Operating leverage ＝ (Net business income － Variable business costs and expenses) ／ Business profits. （ Note 6 ）

    • ＝ －

    • (2) Financial leverage Business profits ／ (Business profits Cost of interest).

  7. Note 5 ： The formula for calculating the earnings per share is to pay special attention to the following matters when measuring:

  8. Based on the weighted average number of common shares, not based on the number of shares outstanding at the end of the year.

  9. For those who have cash increase or treasury stock transactions, they should consider the circulation period and calculate the weighted average number of shares.

  10. Anyone who has transferred surplus or capital increase to capital increase will be retrospectively adjusted according to the proportion of capital increase when calculating the earnings per share of the previous year and the semiannual, and there is no need to consider the issue period of the capital increase.

  11. If the special stock is a non-convertible accumulative special stock, its annual dividend (whether or not it is paid) shall be net of the net profit after tax, or increase the net loss after tax. If the special stock is non-cumulative, in the case of net profit after tax, the special stock dividend shall be deducted from the net profit after tax; if it is a loss, it is not necessary to adjust,

Note 6 ： Cash flow analysis should pay special attention to the following matters when measuring:

  1. Net cash flow from operating activities refers to the net cash inflows from operating activities in the cash flow statement.

  2. Capital expenditure refers to the number of cash outflows per year of capital investment.

  3. The increase in inventory is only included when the ending balance is greater than the opening balance. If the inventory is reduced at the end of the year, it is calculated as zero.

  4. Cash dividends include cash dividends for common and special shares.

71

3. Supervisor's Review Report for the Most Recent Year

Chuwa Wool Industry Co., (Taiwan) Ltd.

Supervisor's Review Report

Hereby

The board of directors attaches the 2018 consolidated financial statements of the company and its subsidiaries, as well as the individual financial statements of the company for 2018. This information has been verified by Ernst & Young accountant Hsu, Jung-Huang and accountant Huang, Chien-Che, and a verification report has been issued. And, together with the business report and Statements of deficit compensated, after reviewing by the supervisor, etc., it is considered that there is no discrepancy. Therefore, this report has been prepared in accordance with Section 219 of the Company Act. Please read the review.

Sincerely for

The company 2019 general shareholders' meeting

Chuwa Wool Industry Co., (Taiwan) Ltd.

Supervisor HSU, CHUNG-JUNG Supervisor LIN, HSIU-YUAN

March 5, 2019

72

  1. Financial statements for the years ended December 31, 2018 and 2017, and Independent Auditors’ Report

REPRESENTATION LETTER

The entities included in the consolidated financial statements as of December 31, 2018 and for the year then ended prepared under the International Financial Reporting Standards, No.10 are the same as the entities to be included in the combined financial statements of the Company, if any to be prepared, pursuant to the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises (referred to as "Combined Financial Statements"). Also, the fo tnotes disclosed in the Consolidated Financial Statements have fully covered the required information in such Combined Financial Statements. Accordingly, the Company did not prepare any other set of combined financial statements than the Consolidated Financial Statements.

Very truly yours,

Chuwa Wool Industry Co., (Taiwan) Ltd.

Chairman: Chen, Shih-Hsiu

March 5, 2019

73

Inde endent Auditors'Re ort Translated from Chinese

To Chuwa Wool Industry Co., (Taiwan) Ltd.

Opinion

We have audited the accompanying consolidated balance sheets of Chuwa Wool Industry Co., (Taiwan) Ltd. and its subsidiaries (the "Group") as of December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2018 and 2017, and notes to the consolidated financial statements, including the summary of significant accounting policies (together "the consolidated financial statements").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated fmancial position of the Group as of December 31, 2018 and 2017, and their consolidated financial performance and cash flows for the years ended December 31, 2018 and 2017, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed and became effective by Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors'Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the "Norm"), and we have fulfilled our other ethical responsibilities in accordance with the Norm. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 2018 consolidated financial statements. These matters were addressed in the context of our audit of the consolidated fmancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

74

Disclosure on Fair Value oflnvestment Properties

The Group's investment property are measured initially at cost method. The fair value of investment property is largely dependent on valuation method and accounting assumption. Therefore, the disclosure of investment property's fair value is a key matter when conducting the audit of the consolidated financial statements.

The audit procedures we performed regarding disclosure of investment property's fair value included but not limited to: evaluating the external appraiser's independence and the appropriateness of the investment property accounting policies, enlisting the assistance from our internal specialists to review the evaluation reports provided by external appraiser and assessing the reasonability of evaluation methodology elected and key assumptions.

We also considered the appropriateness of the relevant disclosure included in Notes 6(8) to the consolidated financial statements.

Emphasis of Matter - Applying for New Accounting Standards

As described in Note 3 to the consolidated financial statements, the Group adopted the International Financial Reporting Standards 9 "Financial Instruments" and 15 "Revenue from Contracts with Customers" on January 1, 2018 and elected not to restate the consolidated financial statements for prior periods. Our conclusion is not modified in respect of this matter.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by Financial Supervisory Commission of the Republic of China and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated fmancial statements, management is responsible for assessing the ability to continue as a going concern of the Group, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

75

Those charged with governance, including audit committee or supervisors, are responsible for overseeing the fmancial reporting process of the Group.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated fmancial statements as a whole are free from n 珥 terial misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated fmancial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated fmancial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit 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 internal control of the Group.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

76

4. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability to continue as a going concern of the Group. Ifwe conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated fmancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the accompanying notes, and whether the consolidated financial statements represent the under lying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of 2018 consolidated financial statements and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

77

Other

We have audited and expressed an unqualified opinion including an Other Matter Paragraph on the consolidated financial statements of Chuwa Wool Industry Co., (Taiwan) Ltd. as of and for the years ended December 31, 2018 and 2017.

Hsu, Jung-Huang

Huang, Chien-Che

Ernst & Young, Taiwan

March 5, 2019

Notice to Readers

The accompanying consolidated financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, Ernst & Young cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

78

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS December 31, 2018 and 2017 (Note)

(Expressed in Thousands of New Taiwan Dollars)

Assets Notes As of December 31, As of December 31, As of December 31,
2018 2017(Note)
$1,304,769
11,172
2,960
519
528
15,933
758
100
Current assets
Cash and cash equivalents
Financial assets at fair value through proft or loss-current
Financial assets at amortized cost-current
Accounts receivable, net
Other receivables
Current tax assets
Inventories
Prepayments
Non-current assets classified as held fr sale, net
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Investment property, net
Intangible asssets
Defrred tax assets
Refundable deposits
Total non-current assets		 4, 6(1), 12
4, 12
4, 6(2), 12
4, 6(3), 12
4, 12
4, 6(17)
4, 6(4)
6(5)
4, 6(6)
4, 6(7)
4, 6(8)
4
4, 6(17)		 $28,479
10,355
1,098,080
11,171
411
684
160,268
650,537
100
1,960,085 1,336,739
2,716
28,769
35
4,286
1,121		 78,033
658,317
49
506
77
36,927 736,982

Total assets

$1,997,012 $2,073,721

The accompanying notes are an integral part of the consolidated financial statements.

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3).

79

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS December 31, 2018 and 2017 (Note)

(Expressed in Thousands of New Taiwan Dollars)

CONSOLIDATED BALANCE SHEETS
December 31, 2018 and 2017 (Note)
(Expressed in Thousands of New Taiwan Dollars)
Liabilities and Equity
Notes
Current liabilities
Notes payable
Other payables
Current tax liabilities
Liabilities related to non-current assets classifed as held fr sale
Other current liabilities
Total current liabilities
Non-current liabilities
Defrred tax liabilities
Guarantee deposits
Total non-current liabilities
Total liabilities
Equity attributable to the parent company
Capital
Common stock
Capital surplus
Retained earings
Legal reserve
Special reserve
Unappropriated earings
Total retained earings
Other equity
Total equity
Total liabilities and equity
4, 12
4, 12
4, 6(17)
4, 6(6)
4, 6(17)
6(10)
6(10)
6(10)		 As of December 31,
2018
＄－
5,381
42
145,900
125
151,448		 **2017(Note) **
$535
11,394
706
12,635
898
2,543
3 ， 441
154,889		 146,431
3,670
150,101
162,736
920,000
8,686
225,134
212,275
476,075		 920,000
8,686
225,134
212,275
544,890
913， 484 982,299
1,910,985
~~旦~~
1,842,123
$1,997,012 $2,073,721

The accompanying notes are an integral part of the consolidated financial statements.

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3).

80

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

CONSOLIDATED ST A TEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2018 and 2017 (Note)

(Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share)

Operatmg revenues
Operating costs
Gross profit
Operating expenses
Selling expenses
Administrative expenses
Expected credit losses
Total operating expenses
Operating loss
Non-operating income and expenses
Othermcome
Other gains and losses
Finance costs
Total non-operating income and expenses
Loss before income tax
Income tax benefit (expense)
Net loss
Other comprehensive income (loss)
Items that may be reclassified subsequently to profit or loss
Exchange diferences on translation of foreign financial statements
Income tax related to items may be reclassifed subsequently
Total other comprehensive income, net of tax
Total comprehensive income
Net loss attributable to:
。wners of parent
Comprehensive income attributable to:
。wners of parent
Eaing per share (NTD)
Basic eaings per share
Loss fom continuing operations		 Notes Notes
2018

The accompanying notes are an integral part of the consolidated financial statements.

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3)

81

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2018 and 2017 (Note)

(Expressed in Thousands of New Taiwan Dollars)

Items Capital
Common Stock
$920 000		 Capital Suplus
$8,686		 Equity Attributable to Owners of Parant
Retained Earings
Unappropriated
Legal Reserve
Special Reserve
Earings
$222 587
2,547
$225,134
$225,134
$225,34
$212,275
$600,309
(2,547)
(46,000)
(6,872)
色
$212,275
$544,890
$212,275
$544,890
(68,815)
(68,815)
$212275
$476,075
Other Equit
Exchange
Diference on
Translation of
Foreig Financial
Total
Statements
$1,035,171
$-
(46,000)
(6,872)
(6,872)
$982,299
＄－
$982,299
＄－
(68,815)
四
(68,815)
{47}
$913,484
$(47)
Total
孚
$1,963,857
(46,000)
(6,872)
(6,872)
$1題0_285
$1,910,985
(68,815)
(47)
(68,862)
$1,842,123
Balance as of Januaiy I, 2017
Appropriations of2016 eammgs
Legal reserve
Cash dividends
Net loss for the year ended December 31, 2017
Other comprehensive income for the year ended December 31, 2017
Total comprehensive income (loss)
Balance as of December 31, 2017
Balance as of Janual)'I, 2018
Net loss for the year ended December 31, 2018
Other comprehensive income (loss) fr the year ended December 31, 2018
Total comprehensive income (loss)
Balance as of December 31, 2018
$920,000
$920,000		 $8_86
$8,686		 $225,134
$225,134
$920,000 $8,686 $225,34

The accompanying notes are an integral part of the consolidated financial statements

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3)

82

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2018 and 2017 (Note)

(Expressed in Thousands of New Taiwan Dollars)

Cash flows fom operating activities·
Net loss before income tax:
Adjustents·
Adjustment items of income and expenses:
Depreciation expense
Amortization expense
Bad debt reversal
Expected credit loss
Net loss (gain) of financial assets and liabilities at fair value through profit or loss
Interest expense
Interest income
Dividend income
Loss on disposal of property, plant and equipment
Loss on disposal of investment property
Impairment loss of investment property
Changes in operating assets and liabilities:
Accounts receivable
Other receivables
Inventories
Prepayments
。ther current assets
Notes payable
。ther payables
。ther current liabilities
Cash outflow from operating activities
Interest paid
Income tax (paid) refnd
Net cash used in operating activities
Cash flows from investing activities:
Acquisition of financial assets at amortized cost
Acquisition of financial assets at fair value through profit or loss
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds fom disposal of investment property
Decrease (increase) in refundable deposits
Interest received
Dividend received
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Increase (decrease) in guarantee deposits
Cash dividends paid
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year		 2018 2017(Note)
$(71,334)
5,551
14
83
1,341
88
(4,696)
(522)
86
5,070
(8,294)
118
15,933
(159,510)
(535)
(6,013)
�
(223,201)
(88)
醞
(224,285)
(1,098,080)
(524)
(2,153)
1,019
44,755
(1,044)
4,686
522
(1,050,819)
(1,127)		 $(6,860)
5,968
33
(98)
(1,106)
136
(8,258)
(417)
3,100
9,774
(122)
(2,322)
2,077
21
259
(8,093)
249
譬
863
(4,9321
17
8,172
417
8,606
56
(46,000)
(45,944)
(1,127)
血
(1,276,290)
1,304,769
$28,479
(42,270)
1,347,039
$1,304,769

The accompanying notes are an integral part of the consolidated financial statements

NOTE: It's the parant company only financial statement. Refer to the accompanying Note 4(3)

83

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

1. History and organization

Chuwa Wool Industry Co., (Taiwan) Ltd. (the "Company") was incorporated in the Republic of China (R.O.C.) on August 1964. The major business of the Company are manufacturing and sales of wool tops, superwash wool tops, superwash loose wool and real estate for lease. The Company's common shares were publicly listed on the Taiwan Stock Exchange ("TWSE") in May 1989. The Company's registered office and main operations base are located in at 9F-7, No. 57, Fuxing N. Rd., Songshan Dist., Taipei City, Taiwan (R.O.C.). Roo Hsing Co., Ltd. is the ultimate controlling entity of the company and its subsidiaries.

2. Date and rocedures of authorization offmancial statements for issue

The consolidated financial statements of the Company and its subsidiaries (''the Group") for the years ended December 31, 2018 and 2017 were authorized for issue in accordance with a resolution of the Board of Directors on March 5, 2019.

3. Newl issued or revised standards and inter retations

  • A. Changes in accounting policies resulting from applying for the fr st time certain standards and amendments

The Group applied for the fr st time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission ("FSC") and become effective for an ual periods beginning on or after January 1, 2018. The nature and the impact of each new standard and amendment that has a material effect on the Group is described below:

  • (1) IFRS 15"Revenue from Contracts with Customers" (including Amendments to IFRS 15 ,'Clarifications to IFRS 15 Revenue from Contracts with Customers")

IFRS 15 replaces IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations. In accordance with the transition provision in IFRS 15, the Group elected to recognize the cumulative effect of initially applying IFRS 15 at the date of initial application (January 1, 2018). The Group also elected to apply this standard retrospectively only to contracts that are not completed contracts at the date of initial application.

84

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The Group's principal activities consist of the sale of goods. The impacts arising from the adoption ofIFRS 15 on the Group are summarized as follows:

  • (a) Please refer to Note 4 for the accounting policies before or after January 1, 2018.

  • (b) Before January 1, 2018, revenue from sale of goods was recognized when goods have been delivered to the buyer. Starting from January 1, 2018, in accordance with IFRS 15, the Group recognized revenue when (or as) the Group satisfies a performance obligation by transferring a promised good to a customer. IFRS 15 has no impact on the Group's revenue recognition from sale of goods. However, for some contracts, if the Group has the right to transfer the goods to customers but does not has a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets, which is different from the accounting treatment of recognizing account receivables before the date of initial application. Besides, loss allowance for contract assets was assessed in accordance with IFRS 9. Part of the consideration was received from customers upon signing the contract, then the Group has the obligation to provide the services subsequently. Before 1 January 2018, the Group recognized the consideration received in advance from customers under other current liabilities. Starting from 1 January 2018, in accordance with IFRS 15, it should be recognized as contract liabilities. The amount reclassified from other current liabilities to contracts liabilities of the Group as at the date of initial application was NT$173 thousand.

  • (c) Please refer to Note 4, Note 5 and Note 6 for additional disclosure note required by IFRS 15.

(2) IFRS 9 "Financial Instruments"

IFRS 9 "Financial Instruments" replaces IAS 39 "Financial Instruments: Recognition and Measurement". In accordance with the transition provision in IFRS 9, the Group elected not to restate prior periods at the date of initial application (January 1, 2018). The adoption ofIFRS 9 has the following impacts on the Group:

  • (a) The Group adopted IFRS 9 since January 1, 2018 and it adopted IAS 39 before January 1, 2018. Please refer to Note 4 for more details on accounting policies.

85

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • (b) In accordance with the transition provision in IFRS 9, the assessment of the business model and classification of financial assets into the appropriate categories are based on the facts and circumstances that existed as at January 1, 2018. The classifications of financial assets and its carrying amounts as at January 1, 2018 are as follow:
!AS 39 IFRS 9
Measurement categories
Fair value through proft or loss
At amortized cost
Loans and receivables (including
cash and cash equivalents but
excluding cash on hand, account
receivables and other receivables)
Total		 Carring amounts
Measurement categories
Carrying amounts
$11,172 Fair value through proft or loss
$11,172
At amortized cost (including cash
1,308,237
1,308,237
and cash equivalents but excludmg
cash on hand, account receivables
and other receivables)
$1,319,409 Total
$1,319,409
  • (c) The transition adjustments from IAS 39 to IFRS 9 for the classifications of fmancial assets and financial liabilities as at January 1, 2018 are as follow:
IAS 39
IFRS 9
Carrymg
Carrying
Class of fnancial instruments
amounts
Class of fnancial instruments
amounts
Diference
Financial assets at fair value
through proft or loss (Note 1)
Held-fr-trading
Subtotal
Loans and receivables (Note 2)
Cash and cash equivalents
(excluding cash on hand)
Account receivables
Other receivables
Subtotal
Total
$11,172 Measured at fair value
through proft or loss
11,172
1,304,758 Cash and cash equivalents
(excluding cash on hand)
2,960 Account receivables
5 I 9 Other receivables
1,308,237
$1,319,409 Total
$11,172
1,304,758
2,960
519
$1,319,409
＄－		 Retained
Other components
earings
Adjustment
$-
of equity
Adjustment
＄－
＄－
＄－

86

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Notes:

1. In accordance with IAS 39, financial assets classified as held for trading which measured at fair value through profit or loss include investments in stocks of listed companies. In accordance with IFRS 9, as the cash flow characteristics for investments in stocks of listed companies are not solely payments of principal and interest on the principal amounts outstanding, they are classified as financial assets mandatorily measured at fair value through profit or loss, the change of classifications did not change the carrying amounts of these investments.

2. In accordance with IAS 39, the cash flow characteristics for held-to-maturity investments and loans and receivables are solely payments of principal and interest on the principal amount outstanding. The assessment of the business model is based on the facts and circumstances that existed as at January 1, 2018. These fmancial assets were measured at amortized cost as they were held within a business model whose objective was to hold fmancial assets in order to collect contractual cash flows. Besides, in accordance with IFRS 9, there was no adjustment arisen from the assessment of impairment losses for the aforementioned assets as at January 1, 2018. Therefore, there is no impact on the carrying amount as at January 1, 2018.

  • (d) Please refer to Note 4, Note 5, Note 6 and Note 12 for the related disclosures required by IFRS 7 and IFRS 9.

(3) IFRIC 22 "Foreign Currency Transactions and Advance Consideration"

The interpretation clarifies that when applying paragraphs 21 and 22 of IAS 21 "The Effects of Changes in Foreign Exchange Rates", in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. lfthere are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration.

The Group originally recorded their foreign currency sales transactions based on the exchange rate on the date of revenue recognition and converted into its functional currency. The exchange difference was recognized when the foreign currency advance payment was written off. The Group elected to postpond the application of this interpretation prospectively on January 1, 2018. This change in accounting principle did not impact the Group's recognition and measurement.

87

En lish Translation of Consolidated Financial Statement Ori'nall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

B. Standards or interpretations issued, revised or amended, by International Accounting Standards Board ("IASB") which are endorsed by FSC, but not yet adopted by the Group as at the end of the reporting period are listed below.

Items Newly issued/amendments/revised standads and
interretations		 Efective fr annual
periods beginning on
or afer
1 IFRS 16 "Leases" January 1, 2019
2 IFRIC 23 "Uncertainty Over Income Tax Treatments" January 1, 2019
3 IAS 28 "Investment in Associates and Joint Ventures" -
Amendments to IAS 28		 January 1, 2019
4 Prepayment
Features
with
Negative
Compensation
(Amendments to IFRS 9)		 January 1, 2019
5 Improvements to International Financial Reporting Standads
(2015-2017 cycle)		 Januay 1, 2019
6 Plan Amendment, Curtailment or Settlement (Amendments to
IAS 19)
January 1, 2019

(1) IFRS l 6"Leases"

The new standard requires lessees to account for all leases under one single accounting model (except for short-term or low-value asset lease exemptions), which is for lessees to recognize right-of-use assets and lease liabilities on the balance sheet and the depreciation expense and interest expense associated with those leases in the consolidated statements of comprehensive income. Besides, lessors'classification remains unchanged as operating or fmance leases, but additional disclosure information is required.

(2) IFRIC 23 "Uncertainty Over Income Tax Treatments"

The Interpretation clarifies application of recognition and measurement requirements in IAS 12 "Income Taxes" when there is uncertainty over income tax treatments.

(3) IAS 28"Investment in Associates and Joint Ventures" -Amendments to IAS 28

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture before it applies IAS 28, and in applying IFRS 9, does not take account of any adjustments that arise from applying IAS 28.

88

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • (4) Prepayment Features with Negative Compensation (Amendments to IFRS 9)

The amendment allows financial assets with prepayment features that permit or require a party to a contract either to pay or receive reasonable compensation for the early termination of the contract, to be measured at amortized cost or at fair value through other comprehensive income.

  • (5) Improvements to International Financial Reporting Standards (2015-2017 cycle):

IFRS 3 "Business Combinations"

The amendments clarify that an entity that has joint control of a joint operation shall remeasure its previously held interest in a joint operation when it obtains control of the business.

IFRS 11 "Joint Arrangements"

The amendments clarify that an entity that participates in, but does not have joint control of, a joint operation does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

/AS 12 "Income Taxes"

The amendments clarify that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

/AS 23 "Borrowing Costs"

The amendments clarify that an entity should treats as part of general borrowings any borrowing made specifically to obtain an asset when the asset is ready for its intended use or sale.

  • (6) Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)

The amendments clarify that when a change in a defmed benefit plan is made (such as amendment, curtailment or settlement, etc.), the entity should use the updated assumptions to remeasure its net defined benefit liability or asset.

89

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The abovementioned standards and interpretations were issued by IASB and endorsed by FSC so that they are applicable for annual periods beginning on or after 1 January 2019. Apart from item (1) explained below, the remaining standards and interpretations have no material impact on the Group.

(1) IFRS 16 "Leases"

IFRS 16 "Leases" replaces IAS 17 "Leases", IFRIC 4 "Determining whether an Arrangement contains a Lease", SIC-15 "Operating Leases - Incentives" and SIC-27 ,'Evaluating the Substance of Transactions Involving the Legal Form of a Lease". The impact arising from the adoption ofIFRS 16 on the Group are summarized as follows:

  • (a) For the definition of a lease, the Group elects not to reassess whether a contract is, or contains, a lease at the date of initial application (January 1, 2019) in accordance with the transition provision in IFRS 16. Instead, the Group is permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4.

The Group is a lessee and elects not to restate comparative information in accordance with the transition provision in IFRS 16. Instead, the Group recognizes the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application.

I. Leases classified as operating leases

For leases that were classified as operating leases applying IAS 17, the Group expects to measure and recognize those leases as lease liability on January 1, 2019 at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate on January 1, 2019 and; the Group chooses, on a lease­ by-lease basis, to measure the right-of-use asset at either:

1. its carrying amount as if IFRS 16 had been applied since the commencement date, but discounted using the lessee's incremental borrowing rate on January 1, 2019; or

11. an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before January 1, 2019.

90

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The Group expects the right-of-use asset will increase by NT$7,459 thousands and the lease liability will increase by NT$7,459 thousands on January 1, 2019.

  • (b) The additional disclosures of lessee and lessor required by IFRS 16 will be disclosed in the relevant notes.

C. Standards or interpretations issued, revised or amended, by IASB but not yet endorsed by FSC at the date of issuance of the Group's financial statements are listed below.

Items New, Revised or Amended Standards and
Interpretations		 Efective Date issued by
IASB
a IFRS 10 "Consolidated Finacial Statements" and IAS 28
"Investments in Associates ad Joint Ventues" - Sale or
Contibution of Assets between an Investor and its
Associate or Joint Ventures		 To be determined by
IASB
b IFRS 17 "Insurance Contracts" January 1, 2021
C Definition of a Business(Amendments to IFRS 3) January 1, 2020
d Defnition of Material
(Amendments to IAS 1 and 8)		 January 1, 2020
  • (1) IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures" - Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defmed in IFRS 3 between an investor and its associate or joint venture is recognized in full. IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defmed in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors' interests in the associate or joint venture.

91

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(2) IFRS 17 "Insurance Contracts"

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core of IFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The fulfilment cash flows comprise of the following:

(a) estimates of future cash flows;

  • (b) Discount rate: an adjustment to reflect the time value of money and the frnancial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows; and

  • (c) a risk adjustment for non-financial risk.

The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

(3) Defrnition of a Business (Amendments to IFRS 3)

The amendments clarify the definition of a business in IFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

IFRS 3 continues to adopt a market participant's perspective to determine whether an acquired set of activities and assets is a business. The amendments clarify the minimum requirements for a business; add guidance to help entities assess whether an acquired process is substantive; and nar ow the defrnitions of a business and of outputs; etc.

(4) Defmition of a Material (Amendments to IAS 1 and 8)

The main amendment is to clarify new defmition of material. It states that "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose fmancial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the fmancial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users.

92

En lish Translation of Consolidated Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Group's financial statements were authorized for issue, the local effective dates are to be determined by FSC. The abovementioned standards and interpretations have no material impact on the Group.

4. Summary of significant accounting policies

(1) Statement of compliance

The consolidated fmancial statements of the Group for the years ended 31 December 2018 and 2017 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (''the Regulations") and International Financial Reporting Standards, International Accounting Standards, and Interpretations developed by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee as endorsed by the FSC.

(2) Basis of preparation

The consolidated financial statements have been prepared on a historical cost basis, except for fmancial instruments that have been measured at fair value. The consolidated fmancial statements are expressed in thousands of New Taiwan Dollars ("NT$") unless otherwise stated.

(3) Basis of consolidation

Pre aration rinci le of consolidated financial statement

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

  • A. power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

  • B. exposure, or rights, to variable returns from its involvement with the investee, and

  • C. the ability to use its power over the investee to affect its returns

93

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

  • A. the contractual arrangement with the other vote holders of the investee

  • B. rights arising from other contractual arrangements

  • C. the Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.

Subsidiaries are fully consolidated from the acquisition date, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using uniform accounting policies. All intra-group balances, income and expenses, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.

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

Total comprehensive income of the subsidiaries is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

If the Group loses control of a subsidiary, it:

  • A. derecognizes the assets (including goodwill) and liabilities of the subsidiary;

  • B. derecognizes the carrying amount of any non-controlling interest;

  • C. recognizes the fair value of the consideration received;

  • D. recognizes the fair value of any investment retained;

  • E. recognizes any surplus or deficit in profit or loss; and

  • F. reclassifies the parent's share of components previously recognized in other comprehensive income to profit or loss.

94

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The consolidated entities are listed as follows:

Investor
Subsidiary
Main businesses
The Company
HCW Investment Co., Ltd.
CW Investment One Limited
Investment
Investment holding		 Percentage ofownership(%)
Dec. 3 I, 2018
100%
100%
Dec.31,2017
Note
2

Note:

  • I. The Company established and acquired 100% share of HCW Investment Co., Ltd. in August 2018.

2. The Company established and acquired 100% share of CW Investment One Limited in July 2018.

(4) Foreign currency transactions

The Group's consolidated fmancial statements are presented in NT$, which is also the Company's functional currency. Each entity in the Group determines its own functional currency and items included in the fmancial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

  • A. Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

  • B. Foreign currency items within the scope ofIFRS 9 Financial Instruments (Before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are accounted for based on the accounting policy for fmancial instruments.

  • C. Exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

95

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

(5) Translation of financial statements in foreign currency

While preparing the Group consolidated fmancial statements, the assets and liabilities of foreign operations are translated into NT$ at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. The partial disposals are accounted for as disposals when the partial disposal involves the loss of control of a subsidiary that includes a foreign operation and when the retained interest after the partial disposal of an interest in a joint arrangement or a partial disposal of an interest in an associate that includes a foreign operation is a fmancial asset that includes a foreign operation.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or jointly controlled entity that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

96

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

(6) C urrent and non-current distmctlon

An asset is classified as current when:

  • A. The Group expects to realize the asset, or intends to sell or consume it, in its normal operating cycle

  • B. The Group holds the asset primarily for the purpose of trading

  • C. The Group expects to realize the asset within 12 months after the reporting period

  • D. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

  • A. The Group expects to settle the liability in its normal operating cycle

  • B. The Group holds the liability primarily for the purpose of trading

  • C. The liability is due to be settled within twelve months after the reporting period

  • D. The Group does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

(7) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly liquid time deposits (including ones that have maturity within 3 months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(8) Financial instruments

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument.

97

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Financial assets and fmancial liabilities within the scope of IFRS 9 Financial Instruments (Before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

A. Financial instruments: Recognition and Measurement

The accountin olic from Janua 1 2018 as follow:

The Group accounts for regular way purchase or sales of financial assets on the trade date.

The Group classified financial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

  • (a) the Group's business model for managing the fmancial assets and

  • (b) the contractual cash flow characteristics of the fmancial asset.

Financial assets at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, accounts receivable financial assets at amortized cost and other receivables etc., on balance sheet as at the reporting date:

  • (a) the fmancial asset is held within a business model whose objective is to hold fmancial assets in order to collect contractual cash flows and

  • (b) the contractual terms of the fmancial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Such financial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or m血s the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance) and is not part of a hedging relationship. A gain or loss is recognized in profit or loss when the financial asset is derecognized, through the amortization process or in order to recognize the impairment gains or losses.

98

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

  • (a) purchased or originated credit-impaired financial assets. For those financial assets, the Group applies the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.

  • (b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the Group applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods.

Financial assets at fair value through profit or loss

Financial assets were classified as measured at amortized cost or measured at fair value through other comprehensive income based on aforementioned criteria. All other financial assets were measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss.

Such financial assets are measured at fair value, the gains or losses resulting from remeasurement is recognized in profit or loss which includes any dividend or interest received on such financial assets.

The accountin olic before Janua 1 2018 as follow:

The Group accounts for regular way purchase or sales of financial assets on the trade date.

Financial assets of the Group are classified as fmancial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale fmancial assets and loans and receivables. The Group determines the classification of its fmancial assets at initial recognition.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include fmancial assets held for trading and fmancial assets designated as at fair value through profit or loss.

99

En lish Translation of Consolidated Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

A financial asset is classified as held for trading if:

  • (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

  • (b) on initial recognition it is part of a portfolio of identified fmancial instruments that are managed together and for which there is evidence of a recent actual pattern of short­ term profit-taking; or

  • (c) it is a derivative (except for a derivative that is a fmancial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a financial asset at fair value through profit or loss; or a financial asset may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

  • (a) it eliminates or significantly reduces a measurement or.recognition inconsistency; or

  • (b) a group of fmancial assets, fmancial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on fmancial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment).

If financial assets do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as financial assets measured at cost on balance sheet and car ied at cost net of accumulated impairment losses, if any, as at the reporting date.

Loans and receivables

Loans and receivables are non-derivative fmancial assets with fixed or determinable payments that are not quoted in an active market other than those that the Group upon initial recognition designates as available for sale, classified as at fair value through profit or loss, or those for which the holder may not recover substantially all of its initial investment.

100

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Loans and receivables are separately presented on the balance sheet as receivables or debt instrument investments for which no active market exists. After initial measurement, such fmancial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fe or transaction costs. The effective interest method amortization is recognized in profit or loss.

B. Impairment of financial assets

The accountin olic from Janua 1 2018 as follow:

The Group recognizes a loss allowance for expected credit losses on financial asset measured at amortized cost.

The Group measures expected credit losses of a financial instrument in a way that reflects:

  • (a) an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes;

  • (b) the time value of money; and

  • (c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

The loss allowance is measures as follow:

  • (a) At an amount equal to 12-month expected credit losses: the credit risk on a fmancial asset has not increased significantly since initial recognition or the fmancial asset is determined to have low credit risk at the reporting date. In addition, the Group measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current reporting date that the credit risk on a fmancial asset has increased significantly since initial recognition is no longer met.

  • (b) At an amount equal to the lifetime expected credit losses: the credit risk on a financial asset has increased significantly since initial recognition or fmancial asset that is purchased or originated credit-impaired fmancial asset.

  • (c) For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Group measures the loss allowance at an amount equal to lifetime expected credit losses.

101

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

At each reporting date, the Group needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk.

The accountin olic before Janua 1 2018 as follow:

The Group assesses at each reporting date whether there is any objective evidence that a fmancial asset other than the financial assets at fair value through profit or loss is impaired. A fmancial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the fmancial asset. The carrying amount of the fmancial asset impaired, other than receivables impaired which are reduced through the use of an allowance account, is reduced directly and the amount of the loss is recognized in profit or loss.

Other loss events include:

  • (a) significant financial difficulty of the issuer or obligor; or

  • (b) a breach of contract, such as a default or delinquency in interest or principal payments; or

  • (c) it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or

  • (d) the disappearance of an active market for that financial asset because of financial difficulties.

For loans and receivables measured at amortized cost, the Group first assesses individually whether objective evidence of impairment exists individually for fmancial asset that are individually significant, or collectively for fmancial assets that are not individually significant. If the Group determines that no objective evidence of impairment exits for an individually assessed fmancial asset, whether significant or not, it includes the asset in a group of fmancial assets with similar credit risk characteristics and collectively assesses them for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the fmancial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. Interest income is accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

102

En lish Translation of Consolidated Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss.

C. Derecognition of financial assets

A fmancial asset is derecognized when:

  • (a) The rights to receive cash flows from the asset have expired

  • (b) The Group has transferred the asset and substantially all the risks and rewards of the asset have been transferred

  • (c) The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

D. Financial liabilities and equity

Classification between liabilities or equity

The Group classifies the instrument issued as a fmancial liability or an equity instrument in accordance with the substance of the contractual arrangement and the defmitions of a fmancial liability, and an equity instrument.

Equitv instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

103

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othe而se Stated)

Financial liabilities

Financial liabilities within the scope ofIFRS 9 Financial Instruments (before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fe s or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the fmancial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

104

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

E. Offsetting of fmancial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(9) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

  • A. In the principal market for the asset or liability, or

  • B. In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that n 血 ket participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-fmancial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

105

En lish Translation of Consolidated Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • (10) Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Starting from」anuary 1, 2018, rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

  • (11) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction that is highly probable within one year from the date of classification and the asset or disposal group is available for immediate sale in its present condition. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.

  • (12) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property, plant and equipment. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

106

En lish Translation of Consolidated Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings g,49 yeas
Machinery and equipment 15,20 years
Transportation equipment 5 years
Offce equipment 3,23 yeas
Leased assets 5years
Leasehold improvements The shorter of lease terms or economic usefl lives

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

The assets'residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

(13) Investment property

Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured using the cost model in accordance with the requirements of IAS 16 for that model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

8,..,._,60 years

Buildings

107

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition.

The Group transfers to or from investment properties depending on their actual use.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

(14) Leases

Group as a lessee

Finance leases which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, iflower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in profit or loss.

A leased asset is depreciated over the useful life of the asset. However, ifthere is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

Group as a lessor

Leases in which the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Rental revenue generated from operating lease is recognized over the lease term using the straight line method. Contingent rents are recognized as revenue in the period in which they are earned.

108

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(15) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either fmite or indefmite. All of the Group's intangible assets are intangible assets with fmite lives.

Intangible assets with fmite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a fmite useful life is reviewed at least at the end of each fmancial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Gains or losses arising from derecognition of an intangible asset are recognized in profit or loss.

Computer software

The cost of computer software is amortized on a straight-line basis over the estimated useful life (4 years).

(16) Impairment ofnon-fmancial assets

The Group assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash­ generating unit's ("CGU") fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets .. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal and its value in use.

109

En lish Translation of Consolidated Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognized impairment loss is reversed only ifthere has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years.

An impairment loss ofcontinuing operations or a reversal of such impairment loss is recognized in profit or loss.

(17) Revenue recognition

The accountin olic from Janua 1 2018 as follow:

The Group's revenue arising from contracts with customers are primarily related to sale of goods and rendering of services. The accounting policies are explained as follow:

Sale of goods

Revenue from the sale of goods is recognized when the goods is transferred and delivered to the customers.(When the significant risks and rewards of ownership of the goods have passed to the customers.) The main goods of Group sold are wool tops, superwash wool tops, and superwash loose wool. Revenue from the sale of goods is recognized on contractual considerations basis.

The credit period of the Group's sale of goods is from 30 to 90 days. For the contracts, when the Group transfers the goods to customers and has a right to an amount of consideration that is unconditional, the contracts are recognized as accounts receivables. The Group usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant fmancing component to the contract.

110

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The accountin olic after Janua 1 2018 as follow:

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognized:

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions have been satisfied:

  • A. the significant risks and rewards of ownership of the goods have passed to the buyer;

  • B. neither continuing managerial involvement nor effective control over the goods sold have been retained;

  • C. the amount of revenue can be measured reliably;

  • D. it is probable that the economic benefits associated with the transaction will flow to the entity; and

  • E. the costs incurred in respect of the transaction can be measured reliably.

Rental income

Rental income from operating leases is recognized on a straight-line basis over the lease period.

Interest income

For all fmancial assets measured at amortized cost (including loans and receivables), interest income is recorded using the effective interest rate method and recognized in profit or loss.

Dividends income

Revenue is recognized when the Group's right to receive the payment is established.

111

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., {TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(18) Post-employment benefits

For the defmed contribution plan, the Company and its domestic subsidiaries will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Group recognizes expenses for the defmed contribution plan in the period in which the contribution becomes due. In addition, foreign subsidiaries make the contribution and recognizes as expenses according to the local specific rates.

(19) Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders'meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

112

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • A. Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

  • B. In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilized, except:

  • A. Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

  • B. In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the car ying amount of its assets and liabilities.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

113

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

5. Si nificant accountin ·ud ements estimates and assum tions

The preparation of the Group's consolidated financial statements require 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 end of the reporting period. However, uncertainty about these assumption and estimate could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

(1) Judgement

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated fmancial statements:

A. Operating lease commitment- Group as the lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

B. Inventories

Inventories are valued at the lower of cost and net realizable value item by item. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The judgement of net realizable value based on historical experience and exchange rate.

(2) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

114

En lish Translation of Consolidated Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

A. Impairment of non-financial assets

An impairment exists when the carrying value of an asset or CGU 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 the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date less incremental costs that would be directly attributable to the disposal of the asset or CGU. The value in use calculation is based on a discounted cash flow model. The cash flows projections are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash generating units, including a sensitivity analysis, are further explained in Note 6.

B. Revenue recognition- sales returns and allowance

Starting from January 1, 2018:

The Group estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue. In assessing the aforementioned sales returns and allowance, revenue is recognized to the extent it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.

Before January 1, 2018:

The Group estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue.

115

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

C. Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense a1ready recorded. The Group establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective counties in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective Group company's domicile.

Deferred tax assets are recognized for all carry-forward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies.

D. Accounts receivables-estimation of impairment loss

Starting from January 1, 2018:

The Group estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit losses. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that expects to receive (evaluate forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

116

En lish Translation of Consolidated Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Before January 1, 2018:

The Group considers the estimation of future cash flows when there is objective evidence showed indications of impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the fmancial asset's original effective interest rate. However, as the impact from the discounting of short-term receivables is not n 珥 terial, the impairment of short-term receivables is measured as the difference between the asset's carrying amount and the estimated undiscounted future cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

E. Inventories

Estimates of net realisable value of inventories take into consideration that inventories may be damaged, become wholly or partially obsolete, or their selling prices have declined. The estimates are based on the most reliable evidence available at the time the estimates are made.

6. Contents of significant accounts

(1) Cash and cash equivalents

As ofDecember 31, As ofDecember 31,
2018 2017
Cash on hand $30 $11
Demand deposits 28,449 114,240
Time deposits 1,190,518
Total $28,479 $1,304,769

117

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(2) Fmancial assets at amort12ed cost -. current

As ofDecember 31, As ofDecember 31,
2018 2017 (Note)
Time deposits $1,000,000
Foreign debt instrument 98,080
Total $1,098,080

Note: The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.

(3) Accounts receivable, net

Accounts receivable
Less: loss allowance
Total		 As of December 31,
2018
$11,284
虫
$11,171
2017
$2,990
(30)
$2,960

Accounts receivable were not pledged.

Accounts receivable are generally on 30~90 days terms. The Group adopted IFRS 9 for impairment assessment since January 1, 2018. Please refer to Note 6(12) for more details on impairment of accounts receivable. The Group adopted IAS 39 for impairment assessment before January 1, 2018. The movements in the provision for impairment of accounts receivable and information of aging analysis for 2017 are as follows:

As of Jan 1, 2017
Chage/(reversal) fr the current period
As ofDec 31, 2017		 Individually
impaired		 Collectively
impaired		 Total
＄－ $128
(98)		 $128
(98)
＄－ $30 $30

118

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othe可se Stated)

Aging analysis of accounts receivable that are past due as at the end of the reporting period but not impaired is as follows:

Past due but not irp_Qaired

Neither
past due
nor <=30 31~60 61~90 91~120 >=121
As of impaired days days days days days Total
De 31, 2017 $2,960 $- $- $- $- $- $2,960

(4) Inventories

As ofDecember 31,
2018
2017
Finished goods
＄－
$9,312
Raw materials
6,621
Total
＄－
$15,933		 As ofDecember 31,
2018
2017
Finished goods
＄－
$9,312
Raw materials
6,621
Total
＄－
$15,933		 As ofDecember 31,
2018
2017
Finished goods
＄－
$9,312
Raw materials
6,621
Total
＄－
$15,933
$9,312
6,621
$15,933

For the years ended December 31, 2018 and 2017, the Group recognized cost of inventories ofNT$244,339 thousand and NT$238,465 thousand, respectively.

No inventories were pledged.

(5) Prepayments

As ofDecember 31,

Prepaid expenses
Prepayment fr purchases
Other prepayments
Total
2018
$268
160,000
$160,268		 2017
$190
568
$758

119

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Other prepayments are the refundable downpayment for purchasing property, plant and equipment.

(6) Non-current assets classified as held for sale, net

Cost:
As of Jan 1, 2018
Transfrred fom investment property
As of Dec 31, 2018
Liabilities related to non-current assets
classifed as held fr sale
Defrred tax liabilities - Provision of
land value increment tax		 Land **Buildings ** Total
＄－
530,745
$530,745		 ＄－
119,792
$119,792		 ＄－
650,537
$650,537
107.12.31
$145,900

  • (a) No non-current assets held for sale were pledged.

  • (b) To integrate resource and make better use of assets, the Group planned to dispose of the land and building in Gongjian W. Rd., Qidu Dist., Keelung City, resolved at the special shareholder's meeting held on November 28, 2018 and at the board meeting held on December 21, 2018. A buyer is confr med and the disposal is anticipated to be completed within a year, so the Group reclassified the investment property at carrying amount of NT$574,927 thousand to non-current assets classified as available for sale. In addition, deferred tax liabilities from provision for land value increment tax in the amount of NT$145,900 thousand were reclassified as liabilities related to non-current assets classified as available for sale.

  • (c) The Group intended to dispose of the land and building located on Sec. 2, Tiding Blvd., Neihu Dist., Taipei City within three months. The Group was searching for buyers and anticipated to complete the sale within a year, so the Group reclassified the investment property at carrying amount of NT$75,600 thousand to non-current assets classified as available for sale.

120

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(7) Property,[plant and equipment]

Machinery 。fice Transportation Leasehold
Land Buildings and equipment equipment equipment Leased assets improvements Total
Cost:
As ofJan I, 2018 $60,952 $18,102 $10,968 $4,394 $5,720 $222 ＄－ $100,358
Additions 255 1,898 2,153
Disposals (4,394) (1,443) (222) (6,059)
Transferred to
investment property (60,891) (17,792) - - - - - (78,683)
As ofDec31, 2018 $61 $310 $10,968 $- $4,532 $- $1,898 $17,769
As atJan 1, 2017 $60,952 $18,102 $10,968 $4,394 $5,720 $222 ＄－ $100,358
Additions
Disposals
As ofDec31, 2018 $60,952 $18,102 $10,968 $4,394 $5,720 $222 $- $100,358
Depreciation and
impairment:
As of Jan I, 2018 ＄－ $3,024 $10,949 $3,931 $4,269 $152 ＄－ $22,325
Depreciation 267 3 82 254 18 53 677
Disposals (4,013) (771) (170) (4,954)
Transferred to
investment property - (2,995) - - - - - (2,995)
As ofDec31, 2018 $- $296 $10,952 $- $3,752 $- $53 $15,053
As of Jan 1, 2017 ＄－ $2,668 $10,939 $3,605 $3,990 $115 $- $21,317
Depreciation 356 10 326 279 37 1,008
Disposals
As ofDec31, 2017 $- $3,024 $10,949 $3,931 $4,269 $152 $- $22,325
Net carrying amount
as of:
Dec31, 2018 $61 $14 $16 $- $780 $- $1,845 $2,716
Dec 31, 2017 $60,952 $15,078 $19 $463 $1,451 $70 $- $78,033

121

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othe可se Stated)

Components of buildings of the Group are mainly buildings and improvements, which are depreciated over 49 years, 8, and 20 years, respectively, depending on their useful lives.

None of aforementioned property, plant and equipment were pledged.

(8) Investment property

Investment property
Cost:
As of Jan 1, 2018
Additions fom acquisitions
Disposals
Transfrs fom property, plant and equipment
Transfrs to non-current assets held fr sale
As ofDec 31, 2018
As of Jan 1, 2017
Additions fom acquisitions
Disposals
Transfrs fom property, plant ad equipment
Transfrs to non-current assets held fr sale
As ofDec 31, 2017
Depreciation and impairment:
As of Jan 1, 2018
Depreciation
Impairment losses
Disposals
Transfrs fom property, plant and equipment
Transfrs to non-current assets held fr sale
As of Dec 31, 2018
As of Jan 1, 2017
Depreciation
Impairment losses
Disposals
Transfrs fom property, plant and equipment
Transfrs to non-current assets held fr sale
As ofDec 31, 2017
Net carrying amount as of:
Dec 31, 2018
Dec 31, 2017		 Land **Buildings ** Total
$813,167
(56,164)
78,683
(797,814)
$541,506
(45,350)
60,891
530,745		 $271,661
(10,814)
17,792
(267,069)
$26,302
$541,506		 $11,570
$271,661		 $37,872
$813,167
$813,167
$154,850
4,874
(6,339)
2,995
(147,277)
$9,103
$146,790
4,960
3,100
$154,850
$28,769
$658,317
$�4L506
$6,679
(5,269)		 $271,661
$148,171
4,874
(1,070)
2,995
(147,277)
$1,410
$5,269
1,410
$6,679
$24,892
$534,827		 $7,693
$141,521
4,960
1,690
$148,171
$3,877
$123,490

122

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

For the years ended
December 31,
2018 2017
Rental income fom investment property $15,481 $16,641
Less:
Direct operating expenses fom investment property
generating rental income (3,687) (4,027)
Direct operating expenses fom investment property not
generating rental income (2,636) (1,859)
Total $9,158 $10,755

No investment property was pledged.

Investment properties held by the Group are not measured at fair value but for which the fair value is disclosed. The fair value measurements of the investment properties are categorized within Level 3. The fair value of investment properties is NT$103,081 thousand and NT$1,464,349 thousand, as of December 31, 2018 and 2017, respectively. The fair value of investment properties valued by an independent external appraiser on basis of direct capitalization method and comparison approach, and the inputs are listed:

As of December 31, As of December 31,
2018 2017
Discount rate 4.78~5.18% 3.845~4.345%
Capitalisation rate 1.67~2.64% 1.02~1.59%
  • (9) Post-employment benefits

Defined contribution plan

The employee pension plan under the Labor Pension Act of the R.O.C. ("the Act") is a defmed contribution plan. Under the Act, the Group makes a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Group has made a monthly contribution of 6% of the monthly wages of the employees to the employees'personal pension accounts at Bureau of Labor Insurance in accordance with the Act.

Expenses under the defmed contribution plan for the years ended December 31, 2018 and 2017 are NT$777 thousand and NT$447 thousand, respectively.

123

En lish Translation of Consolidated Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

(10) Equities

(a) Common stock

The Company's authorized capital was both NT$1,100,000 thousand as of December 2018 and 2017. The Company's issued capital was both NT$920,000 thousand as of December 2018 and 2017, each at a par value of NT$10. The company has issued both 100,000 thousand common stock as of December 2018 and 2017 in installments.

(b) Capital surplus

As of December 31, As of December 31,
2018 2017
Treasury share transactions $8,516 $8,516
Other 170 170
Total $8,686 $8,686

According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

(c) Retained earnings and dividend policies

According to the Company's Articles of Incorporation, current year's earnings, if any, shall be distributed in the following order:

I. Payment of all taxes and dues;

  • II. Offset prior years' operation losses;

  • III. Set aside 10% of the remaining amount after deducting items I and II as legal reserve;

  • IV. Set aside or reverse special reserve in accordance with law and regulations; and

  • V. The distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders' meeting.

124

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The policy of dividend distribution should reflect factors such as the current and future investment environment, fund requirements, domestic and international competition and capital budgets; as well as the interest of the shareholders, share bonus equilibrium and long-term fmancial planning etc. The Board of Directors shall make the distribution proposal annually and present it at the shareholders'meeting.

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total authorized capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion oflegal serve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Following the adoption ofTIFRS, the FSC on 6 April 2012 issued Order No. Financial­ Supervisory-Securities-Corporate-1010012865, which sets out the following provisions for compliance:

On a public company's fr st-time adoption of the TIFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders'equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside an equal amount of special reserve. Following a company's adoption of the TIFRS for the preparation of its financial reports, when distributing distributable earnings, it shall set aside to special reserve, from the profit/loss of the current period and the undistributed earnings from the previous period, an amount equal to "other net deductions from shareholders' equity for the current fiscal year, provided that if the company has already set aside special reserve according to the requirements in the preceding point, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders' equity. For any subsequent reversal of other net deductions from shareholders'equity, the amount reversed may be distributed.

Details of the 2018 and 2017 earnings distribution and dividends per share as approved and resolved by the board of directors'meeting and shareholders'meeting on March 5, 2019 and June 8, 2018, respectively, are as follows:

125

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Appropriation of eanings Dividend per share (NT$)
2018 2017 2018 2017
Legal reserve ＄－ ＄－ $- $-
Common stock-cash dividend

Please refer to Note 6(14) for details on employees'compensation and remuneration to directors and supervisors.

(11) Operating revenue

Revenue fom contracts with customers
Sale of goods
Other operating revenues
Subtotal
Rental revenue
Total		 For the years ended
December 31,
2018
2017
$248,483
$246,495
58
85
248,541
15,481
$264,022
246,580
16,640
$263,220		 For the years ended
December 31,
2018
2017
$248,483
$246,495
58
85
248,541
15,481
$264,022
246,580
16,640
$263,220
248,541
15,481
$264,022		 246,580
16,640
$263,220

Note: The Group has adopted IFRS 15 from January 1, 2018. The Group elected to apply the standard retrospectively by recognizing the cumulative effect of initially applying the standard at the date of initial application (January 1, 2018).

The Group has adopted IFRS 15 from January 1, 2018. Analysis ofrevenue from contracts with customers during the year is as follows:

(a) Disaggregation of revenue

Sale of goods
Lease
Total
Tig of revenue
recognition:
At a point in time
Over time
Total		 Sales Dept.
$248,541
$248,541
Sales Dept.
$248,541
$248,541
Lease Dept.
＄－
15,481
$15,481
Lease Dept.
＄－
15,481
$15,481
Other Dept.
＄－
＄－
Other Dept.
＄－
＄－
Total
$248,541
15,481
$264,022
Total
$248,541
15,481
$264,022

126

En lish Translation of Consolidated Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(b) Contract balances

I. Contract liabilities - current

Sales of goods Beginning
balance		 Ending
balance
＄－
Diference
$(173)
$173

During the year, contract liabilities decreased as performance obligations are partially satisfied and NT$173 thousand included in the contract liability balance at the beginning of the period was recognized as revenue during the year.

(c) Assets recognized from costs to acquire or fulfill a contract

None

(12) Expected credit losses

Operating expenses - Expected credit losses
Accounts Receivable		 For the years ended
December 31,
2018
2017(Note)
$83		 For the years ended
December 31,
2018
2017(Note)
$83
$83

Note: The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.

Please refer to Note 12 for more details on credit risk.

The Group measures the loss allowance of its accounts receivable at an amount equal to lifetime expected credit losses. The assessment of the Group's loss allowance as at December 31, 2018 is as follow:

127

En lish Translation of Consolidated Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • (a) the Group considers the grouping of accounts receivable by counterparties'credit rating, by geographical region and by industry sector and its loss allowance is measured by using a provision matrix, details are as follow:
Group I
Gross carrying amount
Loss ratio
Not yet due
$11,284
1%
Liftime expected credit
losses
113
Subtotal
Caning amount
$11,171		 Overdue
61-90 days
91-120 days
>=121 days
<=30 days
$-
31-60 days
＄－
＄－
＄－
＄－
Total
$11,284
113
$-
$-
$-
$-
$-
11,171
$11,171

The movement in the provision for impairment of accounts receivable during the year ended December 31, 2018 is as follows:

Beginning balance (in accordance with IAS 39)
Transition adjustment to retained earnings
Beginning balance (in accordance with IFRS 9)
Addition(reversal) fr the current period
Write of
Ending balance		 Accounts
receivable
$30
30
83
$113

(13) Operating leases

(a) Operating lease commitments - Group as lessee

The Group has entered into commercial leases on certain motor vehicles and items of machinery. These leases have an average life of 3 to 5 years with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into these leases.

128

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Future minimum rentals payable under non-cancellable operating leases as of December 31, 2018 and 2017 are as follows:

Not later than one year
Later than one year and not later than fve yeas
Total		 As ofDecember 31, As ofDecember 31,
2018
$2,410
5 397
，
$7,807		 2017
＄－
＄－

Operating lease expenses recognized are as follows:

Minimum lease payments For the years ended
December 31,		 For the years ended
December 31,
2018
$1,387		 2017
＄－

(b) Operating lease commitments - Group as lessor

The Group has entered into commercial leases on office. The remaining life is between 1 and 2 years. All leases include a clause to enable upward revision of the rental charge on an an ual basis according to prevailing market conditions.

Based on non-cancellable lease contracts, future m血mum rentals receivable under non-cancellable operating leases as of December 31, 2018 and 2017 are as follows:

Not later than one year
Later than one year and not later than fve years
Total		 As ofDecember 31,
2018
$8,679
4,437
$13,116
2017
$12,477
10,850
$23,327

129

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • (14) Summary statement of employee benefits, depreciation and amortization expenses by function during the three-month periods ended 31 March 2018 and 2017:
fnction during the three-m onth periods ended 31 March 2018 and 2017: onth periods ended 31 March 2018 and 2017: onth periods ended 31 March 2018 and 2017: onth periods ended 31 March 2018 and 2017: onth periods ended 31 March 2018 and 2017: onth periods ended 31 March 2018 and 2017:
As ofDecember 31,
2018 2017
Operating
costs		 Operating
expenses
Total
amount		 Operating
costs		 Operating
expenses		 Total
amount
Employee benefits expense
Salaries ＄－ $22,314 $22,314 ＄－ $20,269 $20,269
Labor and health insurance 1,488 1,488 986 986
Pension 777 777 447 447
Director's emoluments 2,415 2,415 540 540
Other employee benefts
expense
Depreciation 4,895 656 5,551 5,007 961 5,968
Amortization 14 14 33 33
  • Note: The number of the Group's employees were 25 and 14, and the number of non­ employee directors were 4 and 5 as of December 31, 2018 and 2017, respectively.

According to the Articles oflncorporation, 4~5% of profit of the current year is distributable as employees' compensation and no higher than 2% of profit of the current year is distributable as remuneration to directors and supervisors. However, the company's accumulated losses shall have been covered. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees'compensation in the form of shares or in cash; and in addition to a report of such distribution is submitted to the shareholders' meeting. Information on the Board of Directors' resolution regarding the employees' compensation and remuneration to directors and supervisors can be obtained from the ,'Market Observation Post System" on the website of the TWSE.

The Company incurred net loss for the year ended December 31, 2018, so the Company did not need to estimate employees'compensation and remuneration to directors and supervisors.

The Company incurred net loss for the year ended December 31, 2017, so the Company did not need to estimate employees'compensation and remuneration to directors and supervisors.

130

En lish Translation of Consolidated Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(15) Non-operating income and expenses

(a) Other income

For the years ended
December 31,
2018 2017
Interest income (Note) $8,258
Ban savings $1,987 (Note)
Financial assets at amortized cost 2,704 (Note)
Other interest income 5
Gain on reversal of bad debts (Note) 98
Dividend income 522 417
Others 61 竺
Total $5,279 $11,728

Note: The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.

(b) Other gains and losses

For the years ended
December 31,
2018 2017
Losses on disposal of property, plant ad equipment $(86) $-
Losses on disposal of investment property (5,070)
Foreign exchange losses, net
Gains (losses) on fnancial assets at fir value through
proft or loss (Note)		 (564)
(1,341)		 (1,287)
1,106
Impairment losses (3,100)
Others
Total		 鬨
$(7,073)		 Q
$(3,288)

Note: Balance in the year of2018 was arising from fmancial assets mandatorily measured at fair value through profit or loss, and balance in year of 2017 was arising from held for trading investment.

(c) Finance costs

For the years ended
December 31,
2018 2017
Interest expenses ＄四_ _$(136)

131

En lish Translation of Consolidated Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(16) Components of other comprehensive income

Components of other comprehensive income from January 1 to December 31, 2018 is as below:

To be reclassified to profit or loss in
subsequent periods:
Exchange diferences resulting
fom translating the fnancial
statements of freign operations		 Arising during
theperiod		 Reclassification
adjustments
during theperiod		 Other
comprehensive
income(loss),
before ta		 Income tax
relating to
components of
other
comprehensive
income		 Other
comprehensive
income(loss),
net of tax

$(59)		 **＄－ ** $(59) $12 $(47)

(1 7) Income tax

Based on the amendments to the Income Tax Act announced on February 7, 2018, the Company's applicable corporate income tax rate for the year ended 31 December 2018 has changed from 17% to 20%. The corporate income surtax on undistributed retained earnings has changed from 10% to 5%.

The major components of income tax expense (income) are as follows:

Income tax expense (income) recognized in profit or loss

For the years ended
December 31,
2018 2017
Current income tax expense:
Current income tax charge $42 ＄－
Land value increment tax paid in current period $840
Defrred tax expense (income):
Defrred tax expense (income) relating to origination and
reversal of temporary diferences
Defrred tax expense (income) relating to chages in tax		 ）
6
O
4
'
3
（		 12
rate or the imposition of new taxes
Total income tax expense (income)		 ）＿

5-
9
1
5
，
2
（一＄
 $12
132

En lish Translation of Consolidated Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Income tax relatin to com onents of other com rehensive income

Defrred tax expense (income):
Exchange diferences resulting fom translating the
fmancial statements of freign operations
Income tax relating to components of other comprehensive
mcome		 For the years ended
December 31,		 For the years ended
December 31,
2018 2017
$(12) ＄－
$(12) ＄－
Reconciliation between tax expense and the product of accounting proft muliplied by
applicable tax rates is as fllows:
Accounting proft (loss) befre tax fom continuing
operations
Tax at the domestic rates applicable to profts in the
country concerned
Tax efect ofrevenues exempt fom taxation
Tax efect of defrred tax assets/liabilities
Adjustments in respect of current income tax of prior periods
Land value increment tax paid in the current period
Total income tax expense (income) recognized in proft or
loss
For the years ended
December 31,
2018
2017
$(71,334)
$(6,860)
$(14,350)
$(1,166)
(954)
(322)
11,940
1,500
5
840
$(2,519)
$12		 Reconciliation between tax expense and the product of accounting proft muliplied by
applicable tax rates is as fllows:
Accounting proft (loss) befre tax fom continuing
operations
Tax at the domestic rates applicable to profts in the
country concerned
Tax efect ofrevenues exempt fom taxation
Tax efect of defrred tax assets/liabilities
Adjustments in respect of current income tax of prior periods
Land value increment tax paid in the current period
Total income tax expense (income) recognized in proft or
loss
For the years ended
December 31,
2018
2017
$(71,334)
$(6,860)
$(14,350)
$(1,166)
(954)
(322)
11,940
1,500
5
840
$(2,519)
$12		 Reconciliation between tax expense and the product of accounting proft muliplied by
applicable tax rates is as fllows:
Accounting proft (loss) befre tax fom continuing
operations
Tax at the domestic rates applicable to profts in the
country concerned
Tax efect ofrevenues exempt fom taxation
Tax efect of defrred tax assets/liabilities
Adjustments in respect of current income tax of prior periods
Land value increment tax paid in the current period
Total income tax expense (income) recognized in proft or
loss
For the years ended
December 31,
2018
2017
$(71,334)
$(6,860)
$(14,350)
$(1,166)
(954)
(322)
11,940
1,500
5
840
$(2,519)
$12
$(71,334)
$(14,350)
(954)
11,940
5
840
$(2,519)		 $(6,860)
$(1,166)
(322)
1,500
$12

133

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Deferred tax assets (liabilities) relate to the following:

For the year ended December 31, 2018

Temporary diferences
Provision fr land value
increment tax (Note)
Fair value adjustment of
fnancial assets at fir value
Unrealized freign exchange
gam
．s
Unrealized freign exchange
losses
Impairment on investment
property
Investments accounted for
using the equity method
Translation of the fmacial
statements of freign
operation
Defrred tax income
Net defrred tax assets/(liabilities)
Refected in balance sheet as
fllows:
Defrred tax assets
Defrred tax liabilities
Liabilities related to non-current
assets classifed as held fr
sale		 Begining
balance		 Recognized in
other
Recognized comprehensive
竺oft or loss
mcome
＄－
＄－
174
(760)
146
51
3,790
12
Endig
balance
$(145,900)
(357)
(541)
146
338
3,790
12
$(145,900)
(531)
219
287

$(145,925)
$506
$(146,431)
＄－		 $3,401
$12		 $3,388
$4,286
$(898)
$(145,900)

Note: Provision of land value increment tax amounted $145,900 thousand is transferred to liabilities related to non-current assets classified as held for sale.

134

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

For the year ended 31 December 2017

Temporary diferences
Provision fr land value
increment tax (Note)
Fair value adjustment of
fnancial assets at fir value
Unrealized freign exchange
gains (losses)
Impairment on investment
property
Defrred tax income/ (exense)
Net defred tax assets/(liabilities)
Refected in balance sheet as
fllows:
Defrred tax assets
Defrred tax liabilities		 Beginning
Recognized in
balance
proft or loss
$(145,900)
＄－
(343)
(188)
330
(111)
287		 Recognized in
other
comprehensive
Ending
m
．come
balance
＄－
$(145,900)
(531)
219
287
＄－
$(145,925)
$506
$(146,431)
$(12)

$(145,913)
$330
$(146,243)

The following table contains information of the unused tax loss carry-forward of the Company:

Year Tax losses fr the
period		 Unused tax losses as of Unused tax losses as of Expirationyear
Dec 31, 2018 Dec 31, 2017
2014
2015
2016
2017
2018		 $6,576,975
80,944,019
4,395,671
8,403,800
59,178,700		 $6,576,975
80,944,019
4,395,671
8,403,800
59,178,700		 $6,576,975
80,944,019
4,395,671
8,403,800		 2024
2025
2026
2027
2028
$159,499,165 $100,320,465

135

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Unrecognized deferred tax assets

As of December 31, 2018 and 2017, deferred tax assets that have not been recognized as they may not be used to offset taxable profits amounted to NT$32,850 thousand and NT$17,773 thousand, respectively.

The assessment of income tax returs

As of December 31, 2018, the income tax return of the Company is assessed and approved up to 2016.

(18) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year.

Basic earnings per share:
Net loss of current period (in thousand NT$)
Weighted average number of ordinary shaes outstanding
fr basic earnings per share (in thousands)
Basic earnings per shae (NT$)		 For the years ended
December 31,
2018
2017
$(68,815)
92,000
$(0.75)
$(6,872)
92,000
$(0.07)

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of the fmancial statements.

7. Related party transactions

Information of the related parties that had transactions with the Group during the financial reporting period is as follows:

136

En lish Translation of Consolidated Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Name and nature ofrelationshi of the related arties

Name of the related parties Nature ofrelationship of the related parties
Roo Hsing Co., Ltd. Parent company and ultimate controlling entity
Mr. Chen, Shih-Hsiu President of the Company
Mr. Sun, Yang Director of the Company
Mr. Chen, Chih-Ying President of the Company (Note 1)
Mr. Huang, Chin-Tsai Director of the Company (Note 2)

Note:

1. The president was discharged because a legal entity director of the company replaced its representative on March 6, 2018.

2. The former director resigned at March 6, 2018

Significant transactions with the related parties

  • (1) Asset transactions

  • (a) Assets sold to related parties are as below:

From January 1 to December 31, 2018

Carrying value
at the selling Profit or loss
Related parties name Asset name time Sales price of the sale
Mr. Chen, Chih-Ying Company vehicle $381 $1,000 $619

From January 1 to December 31, 2017

None of such transactions.

  • (b) Assets bought from related parties are as below:
Related parties name
Asset name
Roohsing Co., Ltd.
Of ice eqmpments		 Total amount of the
transaction
Unpaid amount
＄－
$148

137

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

From January 1 to December 31, 2017

None of such transactions.

([2] ) Key management personnel compensation

Short-term employee benefs
Post-employment benefts
Total		 For the years ended
December 31,		 For the years ended
December 31,
2018 2017
$980
19
$999		 $10,402
99
$10,501

8. Assets pledged as security

None.

9. Commitments and contingencies

None.

10. Losses due to major disasters

None.

11. Significant subsequent events

On 8 January 2019, the Group signed a contract to sell investment properties located on 6F., No. 293, Sec. 2, Tiding Blvd., Neihu Dist., Taipei City at NT$81,680 thousand to three unrelated person.

138

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

12. Others

(1) Categories of financial instruments

Financial assets
As of December 31,
2018 2017
Financial assets at fir value through proft or loss:
Held fr trading (Notel) $11,172
Mandatorily measured at Fair value through proft or loss $10,355 (Note 1)
Financial assets at amortized cost (Note 2) 1,138,111 (Notel)
Loans and receivables (Note 3) (Note 1) 1,308,237
Total $1,148,466 $1,319,409
Financial liabilities
As ofDecember 31,
2018 2017
Financial liabilities at amortized cost:
Notes payable $- $535
Other payables 5,381 11,394
Total $5,381 $11,929

Note:

1. The Group adopted IFRS 9 since January 1, 2018. The Group elected not to restate prior periods in accordance with the transition provision in IFRS 9.

2. Including cash and cash equivalents (exclude cash on hand), financial assets measured at amortized cost, accounts receivable, net and other receivables.

3. Including cash and cash equivalents (exclude cash on hand), accounts receivable, net and other receivables.

(2) Financial risk management objectives and policies

The Group's principal fmancial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activates. The Group identifies measures and manages the aforementioned risks based on the Group's policy and risk appetite.

139

En lish Translation of Consolidated Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The Group has established appropriate policies, procedures and internal controls for fmancial risk management. Before entering into significant transactions, due approval process by the Board of Directors must be car ied out based on related protocols and internal control procedures. The Group complies with its fmancial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market prices comprise currency risk, interest rate risk and other price risk (such as equity instruments).

In practice, it is rarely the case that a single risk variable will change independently from other risk variable, there is usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

Foreign currency risk

The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when revenue or expense are denominated in a different currency from the Group's functional currency).

The Group has certain foreign currency receivables to be denominated in the same foreign currency with certain foreign currency payables, therefore natural hedge is received. The Group also uses forward contracts to hedge the foreign currency risk on certain items denominated in foreign currencies. Hedge accounting is not applied as they did not qualify for hedge accounting criteria.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Group's profit is performed on significant monetary items denominated in foreign currencies as at the end of the reporting period. The Group's foreign currency risk is mainly related to the volatility in the exchange rates for USD and CNY. The information of the sensitivity analysis is as follows:

When NTD strengthens/weakens against USD by 1 %, the profit or loss for the years ended December 31, 2018 and 2017 is increased/decreased by NT$1,263 thousand and NT$226 thousand, respectively.

140

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

When NTD strengthens/weakens against CNY by 1 %, the profit or loss for the years ended December 31, 2018 and 2017 is increased/decreased by NT$0 thousand and NT$257 thousand, respectively.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's investments with floating rates categorized to financial assets at amortized cost.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as of the end of the reporting period, including investments with郎ating rates. At the reporting date, a change of 10 basis points of interest rate in a reporting period could cause the profit or loss for the years ended December 31, 2018 and 2017 to increase/decrease by NT$29 thousand and NT$114 thousand, respectively.

Equity price risk

The fair value of the Group's domestic listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Group's listed securities are classified under held for trading financial assets. The Group manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Group's senior management on a regular basis. The Group's Board of Directors reviews and approves all equity investment decisions.

At the reporting date, a change of 1 % in the price of the listed equity securities, mandatorily measured at fair value through profit or loss (2017: held for trading) could increase/decrease the Group's profit or loss for the year ended December 31, 2018 and 2017 by NT$103 thousand and NT$112 thousand, respectively.

(4) Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading to a fmancial loss. The Group is exposed to credit risk from operating activities (primarily for accounts receivables and notes receivables) and from its financing activities, including bank deposits and other fmancial instruments.

141

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Credit risk is managed by each business unit subject to the Group's established policy, procedures and control relating to credit risk management. Credit limits are established for all counter parties based on their financial position, rating from credit rating agencies, historical experience, prevailing economic condition and the Group's internal rating criteria etc. Certain counter parties' credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment or insurance.

As of December 31 2018 and 2017, amounts receivables from top ten customers represent 100% and 96% of the total accounts receivables of the Group, respectively. The credit concentration risk of other accounts receivables is insignificant.

Credit risk from balances with banks, fixed income securities and other fmancial instruments is managed by the Group's treasury in accordance with the Group's policy. The Group only transacts with counterparties approved by the internal control procedures, which are banks and fmancial institutions, companies and government entities with good credit rating. Consequently, there is no significant credit risk for these counter parties.

The Group adopted IFRS 9 to assess the expected credit losses since January 1, 2018. The loss allowance of accounts receivable is measured at lifetime expected credit losses.

Financial assets are written off when there is no realistic prospect of future recovery (the issuer or the debtor is in financial difficulties or bankruptcy).

When the credit risk on debt instrument investment has increased, the Group will dispose that investment in order to minimize the credit losses. When assessing the expected credit losses in accordance with IFRS 9, the evaluation of the forward-looking information (available without undue cost and effort) is mainly based on the macroeconomic information and the credit loss ratio is further adjusted if there is significant impact from forward-looking information.

(5) Liquidity risk management

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments. The table below summarizes the maturity profile of the Group's financial liabilities based on the contractual undiscounted payments and earliest contractual maturity.

142

En lish Translation of Consolidated Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Non-derivative fnancial liabilities

As of Dec 31, 2018
Other payables
As of Dec 31, 2017
Notes payable
Other payables		 Less than 1 year
2 to 3 years
$5,381
$535
11,394
4 to 5 years
> 5 years
＄－
＄－
$-
$-
＄－
＄－
Total
$5,381
$535
11,394

(6) Fair values of fmancial mstruments

  • (a) The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Group to measure or disclose the fair values of financial assets and financial liabilities:

  • I. The car ying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.

  • II. For frnancial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities, beneficiary certificates, bonds and futures etc.) at the reporting date.

  • (b) F [air value of financial mstruments measured at amortized cost]

The carrying amount of financial assets and liabilities measured at amortized cost approximate their fair value.

143

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

  • (c) Fair value measurement hierarchy for fmancial instruments

I. Defmition of fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the fmancial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 - Unobservable inputs for the asset or liability

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

II. Fair value measurement hierarchy of the Group's assets and liabilities

The Group does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Group's assets and liabilities measured at fair value on a recurring basis is as follows:

As ofDecember 31, 2018
Level 1 Level 2 Level 3 Total
Financial assets at fir value:
Financial assets at fir value
through proft or loss
Stocks $10,355 $- $- $10,355
As of December 31, 2017
Level 1 Level 2 Level 3 Total
Financial assets at fir value:
Financial assets at fir value
through proft or loss
Stocks $11,172 $- $- $11,172

144

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

There's no transfer between level 1 and level 2 for the years ended December 31, 2018 and 2017.

  • III. Fair value measurement hierarchy of the Group's assets and liabilities not measured at fair value but for which the fair value is disclosed
As of December 31 2018
Level 1 Level 2 Level 3 Total
Investment property (refr to
Note 6(8)) $- $- $103,081 $103,081
As of December 31 2017
Level 1 Level 2 Level 3 Total
Investment property (refr to
Note 6(8)) ＄－ $- $1,464,349 $1,464,349

(7) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Financial assets
Monetary items:
USD
Financial assets
Monetary items:
USD
CNY		 As ofDecember 31, 2018
Foreign
Foreign currencies
exchange rate
$4,120,132.73
30.650
As ofDecember 31, 2017
Foreign
NTD
$126,282
Foreign currencies
exchange rate
NTD
$761,130.40
5,652,547.36
29.750
4.547
$22,644
25,702		 As ofDecember 31, 2018
Foreign
Foreign currencies
exchange rate
$4,120,132.73
30.650
As ofDecember 31, 2017
Foreign
NTD
$126,282
Foreign currencies
exchange rate
NTD
$761,130.40
5,652,547.36
29.750
4.547
$22,644
25,702		 As ofDecember 31, 2018
Foreign
Foreign currencies
exchange rate
$4,120,132.73
30.650
As ofDecember 31, 2017
Foreign
NTD
$126,282
Foreign currencies
exchange rate
NTD
$761,130.40
5,652,547.36
29.750
4.547
$22,644
25,702
$761,130.40
5,652,547.36

29.750
4.547		 $22,644
25,702

145

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The above information is disclosed based on the carrying amount of foreign currency (after conversion to functional currency).

(8) Capital management

The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

13. Other disclosure

(1) Information at significant transactions

  • (a) Financing provided to others: None.

  • (b) Endorsement/Guarantee provided to others: None.

  • (c) Securities held as of December 31, 2018: Please refer to Attachment 1.

  • (d) Individual securities acquired or disposed of with accumulated amount exceeding the lower ofNT$300 million or 20 percent of the capital stock: None.

  • (e) Acquisition of individual real estate with amount exceeding the lower ofNT$300 million or 20 percent of the capital stock: None.

  • (f) Disposal of individual real estate with amount exceeding the lower ofNT$300 million or 20 percent of the capital stock: Please refer to Attachment 2.

  • (g) Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of the capital stock: None.

  • (h) Receivables from related parties with amounts exceeding the lower ofNT$100 million or 20 percent of capital stock: None.

  • C) 1 Denvatlve mstrument transactions: None. . .

(2) Information on investees: Please refer to Attachment 3.

  • (3) Information on investments in Mainland China: None.

146

En lish Translation of Consolidated Financial Statement Ori· all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

14. Segment information

For management purposes, the Group is organized into business units based on their products and services and has two reportable operating segments as follows:

  • (1) Sales department: the department trades wool related products.

  • (2) Lease department: the department leases real estate.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured based on accounting policies consistent with those in the consolidated financial statements. However, income taxes are managed on a group basis and are not allocated to operating segments.

  • ([1] ) The following table presents segment profit and loss of the Group'operating segments:

For the years ended December 31, 2018

Revenue
External customer
Inter-segment
Total revenue
Segment proft		 Sales department Other operating
Adjustment and
Lease department
department
elimination
Consolidated
$15,481
＄－
＄－
$264,022
$15 481
，
$4,263
＆＿＿
＄

$-
$264 022－
$(79,128)
(NOTE 1)
$(71,334)
$248,541
$248,541
$3,531

For the years ended December 31, 201 7

Revenue
Exernal customer
Inter-segment
Total revenue
Segment profit		 Sales department
Lease department		 Other operating
Adjustment and
department
elimination
＄－
＄－
＄－
Consolidated
$-
$263 220
'
$-
$263 220
，
$(19,727)
(NOTE 2)
$(6,860)
$246,580
$16,640
$246,580
$16,640
$7,120
$5,747

147

En lish Translation of Consolidated Financial Statement Ori·all Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) For the years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Note:

1. Each department excluding non-operating income and expenses $(1,882) thousand and operating expenses excluding depreciation and amortization $77,246 thousand.

2. Each department excluding non-operating income and expenses $8,304 thousand and operating expenses excluding depreciation and amortization $28,031 thousand.

  • (2) Decision makers of the Group do not make decisions based on segment assets, so segment assets are not disclosed.

  • ([3] ) Geographical information

Revenue from external customers:

Revenue fom external customers:
For the yeas ended 31 December
2018 2017
Taiwan $38,121 $52,937
Japan 180,946 162,778
Korea 24,383 33,949
Malaysia 20,572 2,492
Others 11,064
Total $264,022 $263,220

The revenue information above is based on the location of the customer.

Non-current assets:

Non-current assets:
Taiwan As of 31 December
2018
$36,923
2017
$736,982

(4) Information about major customers

nfrmation about major customers
For the years ended 31 December
2018 2017
Customer A fom sales depatment $136,967 $129,051
Customer B fom sales department 64,552 39,117

148

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures):

ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures): ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures): ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures): ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures):
**In Thousands of New Taiwan Dollars **
Names of
companies held		 Type and nameof securities Relationship
with the Company		 Financial statement account December 31, 2018 Note
Shares Carrying amount
$9,815
540		 Percentage of
。wnership (%)
Fair value
Chuwa Wool Industry
Co., (Taiwan) Ltd.		 Cathay Financial Holdings Co., Ltd. - Common Stock
Cathay Financial Holdings Co., Ltd. - Preferred stock B		 None
None		 Financial assets at fir value through profit or loss - Current
Financial assets at fir value through profit or loss - Current		 208,831
8,729		 $9,815
540

149

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 2: Disposal of individual real estate with amount exceeding the lower ofNT$300 million and 20 percent of the capital stock for the year ended December 31, 2018

In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars
Company
Chuwa Wool Industry
Co , (Taiwan) Ltd		 Name of properties
Land and bmlding
located at Gongjian
W Rd., Qidu Dist.,
Keelung City		 Transaction date
December 21, 2018		 Date of original
acquisition
September I, 1965
March 28, I 984
July 2, 1992
」une 8, 1995
March I, 2015		 Carrymg
amount
$574,937		 Transaction
amount
$1,718,889		 Status of
proceeds
collection
$171,889		 Gam (Loss)
from disposal
$843,694		 Counterparty
L1 Wan Asset
Management
Consultant
Co., Ltd.		 Relationship
Third Part		 Reason of disposal
Resource mtegrat10n
and better usage of
asset		 Pnce reference
Took valuation by Colhers
International and Cushman
& Wakefield as reference
and then negotiated by both
parties Valuation 1s hsted
below
I. Valuation of
NT$1,669 ,694 by Col hers
International
2. Valuation of
NTl,636,810 by Cushman
& Wakefield		 Other
comnntments
None

Note I: Valuation is listed in the "Price reference" column而aluation is required when assets are disposed

Note 2: Transaction date refers to the contract date, payment date, closing date, resolution date, or earlier dates when counterparty and transaction amount can be determined

150

En lish Translation of Consolidated Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands ofNew Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 3: Names, locations and related information of investee companies (Not including investment in Mainland China):

In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars
Investor Company Investee Company Location Main business Original investment amount Investent as of December 31, 2018 Net income
(loss) of
investee		 Investment
income (loss)
recognized		 Note
Ending
balance		 Beginning
balance		 Shares Percentage of
ownership (%)		 Book value
Chuwa Wool Industry
Co., (Taiwan) Ltd.		 HCW Investment Co., Ltd.
CW Investment One Limited		 Taiwan
British Virgin Islands		 Investment
Investment holding		 $100,000

30,815		 ＄－ 10,000,000
100		 100%
100%
$99,583

12,222		 $(417)
(18,534)
$(417)

(18,534)		 Subsidiary
Subsidiary

151

  1. Entity financial statement of the latest year inspected and authenticated by CPAs.

Inde endent Auditors'Re ort Translated from Chinese

To Chuwa Wool Industry Co., (Taiwan) Ltd.

Opinion

We have audited the accompanying parent company only balance sheets of Chuwa Wool Industry Co., (Taiwan) Ltd. (the "Company") as of December 31, 2018 and 2017, and the related parent company only statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2018 and 2017, and notes to the parent company only fmancial statements, including the summary of significant accounting policies (together "the parent company only fmancial statements").

In our opinion, the parent company only financial statements referred to above present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2018 and 2017, and the parent company only financial performance and cash flows for the years ended December 31, 2018 and 2017, in conformity with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors'Responsibilities for the Audit司the the Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Norm of Professional Ethics for Certified Public Accountant of the Republic of China (the "Norm"), and we have fulfilled our other ethical responsibilities in accordance with the Norm. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of 2018 parent company only financial statements. These matters were addressed in the context of our audit of the consolidated financial statements as a_whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

152

Disclosure on Fair Value of Investment Properties

The Company's investment property are measured initially at cost method. The fair value of investment property is largely dependent on valuation method and accounting assumption. Therefore, the disclosure of investment property's fair value is a key matter when conducting the audit of the parent company only financial statements.

The audit procedures we performed regarding disclosure of investment property's fair value included but not limited to: evaluating the external appraiser's independence and the appropriateness of the investment property accounting policies, enlisting the assistance from our internal specialists to review the evaluation reports provided by external appraiser and assessing the reasonability of evaluation methodology elected and key assumptions.

We also considered the appropriateness of the relevant disclosure included in Notes 6(9) to the parent company only fmancial statements.

Emphasis of Matter - Applying for New Accounting Standards

As described in Note 3 to the parent company only financial statements, the Company adopted the International Financial Reporting Standards 9 "Financial Instruments" and 15 "Revenue from Contracts with Customers" on January 1, 2018 and elected not to restate the parent company only financial statements for prior periods. Our conclusion is not modified in respect of this matter.

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the requirements of the Regulations Governing the Preparation of Financial Reports by Securities Issuers and for such internal control as management determines is necessary to enable the preparation of the parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the ability to continue as a going concern of the Company, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

153

Those charged with governance, including audit committee or supervisors, are responsible for overseeing the financial reporting process of the Company.

Auditor's Responsibilities for the Audit of the Parent Company Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. Identify and assess the risks of material misstatement of the parent company only financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit 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 internal control of the Company.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

154

4. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability to continue as a going concern of the Company. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the parent company only fmancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the parent company only fmancial statements, including the accompanying notes, and whether the parent company only fmancial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the fmancial information of the entities or business activities within the Company to express an opinion on the parent company only fmancial statements. We are responsible for the direction, supervision and performance of the company audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit fmdings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of2018 parent company only fmancial statements and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

155

Hsu, Jung-Huang

Huang, Chien-Che

Ernst & Young, Taiwan

March 5, 2018

Notice to Readers

The accompanying parent company only financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such parent company only financial statements are those generally accepted and applied in the Republic of China.

Accordingly, the accompanying parent company only financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, Ernst & Young cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

156

En lish Translation of Financial Statements Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. PARENT COMPANY ONLY STATEMENTS OF BALANCE SHEETS December 31, 2018 and 2017

([Expressed in Thousands of New Taiwan Dollars] )

Assets Notes As of December 3 I, As of December 3 I,
2018 2017
Current assets
Cash and cash equivalents
Financial assets at fair value through proft or loss-current
Financial assets at amortized cost-current
Accounts receivable, net
Other receivables
Current tax assets
Inventories
Prepayments
Non-current assets classified as held fr sale, net
Other current assets
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Investment property, net
Intangible asssets
Deferred tax assets
Refundable deposits
Total non-current assets		 4, 6(1), 12
4, 12
4, 6(2), 12
4, 6(3), 12
4, 12
4, 6(18)
4, 6(4)
6(5)
4, 6(6)
4, 6(7)
4, 6(8)
4, 6(9)
4
4, 6(18)		 $14,791
10,355
1,000,000
11,171
370
684
160,268
650,537
100
1,848,276		 $1,304,769
11,172
2,960
519
528
15,933
758
100
1,336,739
111,805
2,716
28,769
35
4,140
1,121
148,586		 78,033
658,317
49
506
77
736,982

Total assets

$1,996,862 $2,073,721

==> picture [262 x 4] intentionally omitted <==

The accompanying notes are an integral part of the financial statements.

157

En Iish Translation of Financial Statements Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD.

PARENT COMPANY ONLY STATEMENTS OF BALANCE SHEETS December 31, 2018 and 2017

(Expressed in Thousands ofNew Taiwan Dollars)

Liabilities and Equity
Current liabilities
Notes payable
Other payables
Liabilities related to non-current assets classified as held fr sale
Other current liabilities
Total current liabilities
Non-current liabilities
Defrred tax liabilities
Guarantee deposits
Total non-current liabilities
Total liabilities
Equity
Capital
Common stock
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Total equity
Total liabilities and equity		 Notes As of December 31, As of December 31, As of December 31,
2018 2017
4, 12
4, 12
4, 6(6)
4, 6(18)
6(11)
6(11)
6(11)		 ＄－
5,261
145,900
125
151,286		 $535
11,394
706
12,635
898
2 555
，
3 453
，
154,739		 146,431
3 670
，
150,101
162,736
920,000
8,686
225,134
212,275
476,075
913,484
(47)		 920,000
8,686
225,134
212,275
544,890
982,299
1,910,985
$2,073,721
1,842,123
$1,996,862

The accompanying notes are an integral part of the financial statements.

158

En lish Translation of Financial Statements Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 20 I 8 and 2017 ([Expressed in Thousands of New Taiwan Dollars, Except for Earnings per Share] )

Notes
Operating revenues
4, 6(12)
Operating costs
6(15), 7
Gross profit
Operating expenses
Selling expenses
Administrative expenses
4, 6(10,14,15), 7
Expected credit losses
6(13)
Total operating expenses
Operating loss
Non-operating income and expenses
Other income
6(16)
Other gains and losses
6(16)
Finance costs
6(16)
Share of profit or loss of subsidiaries, associates and joint ventures
accounted fr using equity method
6(16)
Total non-operating income and expenses
Loss before income tax
Income tax benefit (expense)
6(18)
Net loss
Other comprehensive income (loss)
4, 6(17,18)
Items that may be reclassified subsequently to profit or loss
Exchange diferences on translation of foreign financial statements
Income tax related to items may be reclassifed subsequently
Total other comprehensive income, net of tax
Total comprehensive income
Earnings per share (NTD)
Basic earings per share
Loss from continuing operat10ns
6(19)		 Notes For the Years Ended December 31
2018
2017
$264,049
255,558
8,491
2,456
56,648
83
59,187
(50,696)
5,125
(6,620)
(88)
(18,951)
(20,534)
(71,230)
2 415
，
(68,815)
(59)
12
(47)
$(68,862)
�
$263,220
249,358
13,862
1,856
27,170
29 026
，
(15,164)
11,728
(3,288)
(136)
8,304
(6,860)
(12)
(6,872)
$(6,872)
${0.07}		 For the Years Ended December 31
2018
2017
$264,049
255,558
8,491
2,456
56,648
83
59,187
(50,696)
5,125
(6,620)
(88)
(18,951)
(20,534)
(71,230)
2 415
，
(68,815)
(59)
12
(47)
$(68,862)
�
$263,220
249,358
13,862
1,856
27,170
29 026
，
(15,164)
11,728
(3,288)
(136)
8,304
(6,860)
(12)
(6,872)
$(6,872)
${0.07}		 For the Years Ended December 31
2018
2017
$264,049
255,558
8,491
2,456
56,648
83
59,187
(50,696)
5,125
(6,620)
(88)
(18,951)
(20,534)
(71,230)
2 415
，
(68,815)
(59)
12
(47)
$(68,862)
�
$263,220
249,358
13,862
1,856
27,170
29 026
，
(15,164)
11,728
(3,288)
(136)
8,304
(6,860)
(12)
(6,872)
$(6,872)
${0.07}		 For the Years Ended December 31
2018
2017
$264,049
255,558
8,491
2,456
56,648
83
59,187
(50,696)
5,125
(6,620)
(88)
(18,951)
(20,534)
(71,230)
2 415
，
(68,815)
(59)
12
(47)
$(68,862)
�
$263,220
249,358
13,862
1,856
27,170
29 026
，
(15,164)
11,728
(3,288)
(136)
8,304
(6,860)
(12)
(6,872)
$(6,872)
${0.07}
$264,049
255,558
8,491		 $263,220
249,358
13,862
2,456
56,648
83
59,187
**(50,696) **		 1,856
27,170
29 026
，
**(15,164) **
5,125
(6,620)
(88)
(18,951)
(20,534)
(71,230)
2 415
，
**(68,815) **		 11,728
(3,288)
(136)
8,304
(6,860)
(12)
(6,872)
(59)
12
(47)
$(68,862)
�		 $(6,872)
${0.07}

The accompanying notes are an integral part of the financial statements.

159

En lish Translation of Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD.

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2018 and 2017

(Expressed in New Taiwan Thousand Dollars)

Capital Retained Earnings Other Equity
Exchange
Unappropriated Differences on
Translation of		 Total
Items Common Stock Capital Surplus Legal Reserve Special Reserve Earmngs Total Foreign Financial
Statements		 Equity
Balance as of January 1, 20 17 $920 000
，		 $8,686 $222 587
，		 $212,275 $600,309 $1 035 171
,
,		 $- $1,963,857
Appropriations of2016 earnings
Legal reserve 2,547 (2,547)
Cash dividends (46,000) (46,000) (46,000)
Net loss for the year ended December 31, 2017 (6,872) {6,872) (6,872)
Other comprehensive income for the year ended December 31, 2017
Total comprehensive income (loss) (6,872) (6,872) (6,872)
Balance as of December 31, 2017 $920,000 $8,686 $225,134 $212,275 $544,890 $982,299 ＄－ $1,910,985
Balance as of January I, 2018 $920,000 $8,686 $225,134 $212,275 $544,890 $982,299 ＄－ $1,910,985
Net loss for the year ended December 31, 20 I 8 (68,815) (68,815) (68,815)
Other comprehensive income (loss) for the year ended December 31, 2018 (47) (47)
Total comprehensive income (loss) (68,815) (68,815) (47) (68,862)
Balance as of December 31, 2018 $920,000 $8,686 $225,134 $212,275 $476,075 $913,484 $(47) $1,842,123

The accompanying notes are an integral part of the financial statements

160

En lish Translation of Financial Statements Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

For the Years Ended December 3 I, 2018 and 20 I 7

(Expressed in New Taiwan Thousand Dollars)

Cash flows fom operating activities:
Net loss before income tax:
Adjustments:
Adjustment items of income and expenses:
Depreciation expense
Amortization expense
Bad debt reversal
Expected credit loss
Net loss (gain) of financial assets and liabilities at fair value through profit or loss
Interest expense
Interest income
Dividend income
Loss on disposal of property, plant and equipment
Loss on disposal of investment property
Impairment loss of investment property
Share of loss of subsidiaries, associates and joint ventures accounted fr using equity method
Changes in operating assets and liabilities:
Accounts receivable
Other receivables
Inventories
Prepayments
Other current assets
Notes payable
Other payables
Other current liabilities
Cash outflow from operating activities
Interest paid
Income tax (paid) refund
Net cash used in operating activities
Cash flows from investing activities:
Acquisition of financial assets at amortized cost
Acquisition of financial assets at fir value through profit or loss
Acquisition of investments accounted for using the equity method
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investment property
Decrease (increase) in refundable deposits
Interest received
Dividend received
Net cash (used in) provided by investing activities
Cash fows from financing activities:
Increase (decrease) in guarantee deposits
Cash dividends paid
Net cash (used in) financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year		 2018
$(71,230)
5,551
14
83
1,341
88
(4,542)
(522)
86
5,070
18,951
(8,294)
118
15,933
(159,510)
(535)
(6,133)
(581)		 2017
$(6,860)
5,968
33
(98)
(1,106)
136
(8,258)
(417)
3,100
9,774
(122)
(2,322)
2,077
21
259
(8,093)
249
(5,659)
(204,112)
(88)
(996)
(136)
863
(4,932)
(205,196)
(1,000,000)
(524)
(130,815)
(2,153)
1,019
44,755
(1,044)
4,573
522
(1,083,667)		 17
8,172
417
8,606
(1,115) 56
(46,000)
(45,944)
(42,270)
1,347,039
$1,304,769
(1,115)
(1,289,978)
1,304,769
$14,791

The accompanying notes are an integral part of the financial statements.

161

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

1. Historv and organization

Chuwa Wool Industry Co., (Taiwan) Ltd. (the "Company") was incorporated in the Republic of China (R.O.C.) on August 19, 1964. The major business of the Company are manufacturing and sales of wool tops, superwash wool tops, superwash loose wool and real estate for lease. The Company's common shares were publicly listed on the Taiwan Stock Exchange ("TWSE") in May 1989. The Company's registered office and main operations base are located in 9F-7, No.57, Fuxing N. Rd., Songshan Dist., Taipei City, Taiwan (R.O.C.). Roo Hsing Co., Ltd. is the ultimate controlling entity of the Company.

2. Date and rocedures of authorization of fmancial statements for issue

The parent company only financial statements of the Company for the years ended December 31, 2018 and 2017 were authorized for issue in accordance with a resolution of the Board of Director's meeting on March 5, 2019.

3. Newl issued or revised standards and inte retations

  • A. Changes in accounting policies resulting from applying for the first time certain standards and amendments

The Company applied for the fr st time International Financial Reporting Standards, International Accounting Standards, and Interpretations issued, revised or amended which are recognized by Financial Supervisory Commission ("FSC") and become effective for annual periods beginning on or after January 1, 2018. The nature and the impact of each new standard and amendment that has a material effect on the Company is described below:

  • (1) IFRS 15"Revenue from Contracts with Customers" (including Amendments to IFRS 15 "Clarifications to IFRS 15 Revenue from Contracts with Customers")

IFRS 15 replaces IAS 11 Construction Contracts, IAS 18 Revenue and related Interpretations. In accordance with the transition provision in IFRS 15, the Company elected to recognize the cumulative effect of initially applying IFRS 15 at the date of initial application (January 1, 2018). The Company also elected to apply this standard retrospectively only to contracts that are not completed contracts at the date of initial application.

162

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The Company's principal activities consist of the sale of goods. The impacts arising from the adoption ofIFRS 15 on the Company are summarized as follows:

  • (a) Please refer to Note 4 for the accounting policies before or after January 1, 2018.

  • (b) Before January 1, 2018, revenue from sale of goods was recognized when goods have been delivered to the buyer. Starting from January 1, 2018, in accordance with IFRS 15, the Company recognized revenue when (or as) the Company satisfies a performance obligation by transferring a promised good to a customer. IFRS 15 has no impact on the Company's revenue recognition from sale of goods. However, for some contracts, if the Company has the right to transfer the goods to customers but does not has a right to an amount of consideration that is unconditional, these contacts should be presented as contract assets, which is different from the accounting treatment of recognizing account receivables before the date of initial application. Besides, loss allowance for contract assets was assessed in accordance with IFRS 9. Part of the consideration was received from customers upon signing the contract, then the Company has the obligation to provide the services subsequently. Before 1 January 2018, the Company recognized the consideration received in advance from customers under other current liabilities. Starting from 1 January 2018, in accordance with IFRS 15, it should be recognized as contract liabilities. The amount reclassified from other current liabilities to contracts liabilities of the Company as at the date of initial application was NT$1 73 thousand.

  • (c) Please refer to Note 4, Note 5 and Note 6 for additional disclosure note required by IFRS 15.

  • (2) IFRS 9 "Financial Instruments"

IFRS 9 "Financial Instruments" replaces IAS 39 "Financial Instruments: Recognition and Measurement". In accordance with the transition provision in IFRS 9, the Company elected not to restate prior periods at the date of initial application (January 1, 2018). The adoption ofIFRS 9 has the following impacts on the Company:

  • (a) The Company adopted IFRS 9 since January 1, 2018 and it adopted IAS 39 before January 1, 2018. Please refer to Note 4 for more details on accounting policies.

163

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • (b) In accordance with the transition provision in IFRS 9, the assessment of the business model and classification of fmancial assets into the appropriate categories are based on the facts and circumstances that existed as at January 1, 2018. The classifications of fmancial assets and its carrying amounts as at January 1, 2018 are as follow:

IAS 39

IFRS 9

Measurement categories
Carring amounts
Measurement categories
Fair value through profit or loss
At amortized cost
Loans and receivables (including cash
and cash equivalents but excluding
cash on hand, account receivables and
other receivables)
Total
$11,172
Fair value through proft or loss
At amortized cost (including cash and cash
1,308,237
equivalents but excluding cash on hand,
account receivables and other receivables)
$1,319,409
Total		 Carrying amounts
Fair value through profit or loss
At amortized cost
Loans and receivables (including cash
and cash equivalents but excluding
cash on hand, account receivables and
other receivables)
Total		 $11,172
1,308,237
$1,319,409
  • (c) The transition adjustments from IAS 39 to IFRS 9 for the classifications of financial assets and financial liabilities as at January 1, 2018 are as follow:
IAS 39 IFRS 9
Class of fnancial instuments
Carrying amounts
Diference
Measured at fir value
through profit or loss
Cash and cash equivalents
(excluding cash on hand)
Account receivables
Other receivables
Total
$11,172
1,304,758
2,960
519
$1,319,409
＄－
Retained earings
Adjustment
＄－
＄－		 Oter components
of equity
Adjustment
Class of fnancial instuments Carrying amounts
Financial assets at fir value
thrugh proft or loss (Note 1)
Held-for-tading
Subtotl
Loans and receivables (Note 2)
Cash and cash equivalents
(excluding cash on hand)
Account receivables
Other receivables
Subtotl
Totl		 $ I I, 172
11,172		 ＄－
1,304,758
2,960
519
1,308,237
$1,319,409 ＄－

164

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Notes:

  **1. In accordance with IAS 39, fmancial assets classified as held for trading which measured at fair value through profit or loss include investments in stocks of listed companies. In accordance with IFRS 9, as the cash flow characteristics for investments in stocks of listed companies are not solely payments of principal and interest on the principal amounts outstanding, they are classified as fmancial assets mandatorily measured at fair value through profit or loss, the change of classifications did not change the carrying amounts of these investments.**

  **2. In accordance with IAS 39, the cash flow characteristics for held-to-maturity investments and loans and receivables are solely payments of principal and interest on the principal amount outstanding. The assessment of the business model is based on the facts and circumstances that existed as at January 1, 2018. These financial assets were measured at amortized cost as they were held within a business model whose objective was to hold fmancial assets in order to collect contractual cash flows. Besides, in accordance with IFRS 9, there was no adjustment arisen from the assessment of impairment losses for the aforementioned assets as at January 1, 2018. Therefore, there is no impact on the carrying amount as at January 1, 2018.**

  • (d) Please refer to Note 4, Note 5, Note 6 and Note 12 for the related disclosures required by IFRS 7 and IFRS 9.

  • (3) IFRIC 22 "Foreign Currency Transactions and Advance Consideration"

The interpretation clarifies that when applying paragraphs 21 and 22 of IAS 21 "The Effects of Changes in Foreign Exchange Rates", in determining the spot exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability relating to advance consideration, the date of the transaction is the date on which the entity initially recognizes the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, then the entity must determine a date of the transactions for each payment or receipt of advance consideration.

165

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The Company originally recorded their foreign currency sales transactions based on the exchange rate on the date of revenue recognition and converted into its functional currency. The exchange difference was recognized when the foreign currency advance payment was written off. The Company elected to apply this interpretation prospectively on 1 January 2018. This change in accounting principle did not significantly impact the Company's recognition and measurement.

B. Standards or interpretations issued, revised or amended by International Accounting Standards Board "IASB" which are endorsed by FSC, but not yet adopted by the Company are listed below:

Items Newly issued/amendments/revised standards and
interpretations		 Efective fr annual
periods begiing on
or afer
1 IFRS 16 "Leases" January 1, 2019
2 IFRIC 23 "Uncertainty Over Income Ta Treatments" January 1, 2019
3 IAS 28 "Investment in Associates and Joint Ventures"—
Amendments to IAS 28
January 1, 2019
4 Prepayment
Features
with
Negative
Compensation
(Amendments to IFRS 9)
January 1, 2019
5 Improvements to International Financial Reporting Standards
(2015-2017 cycle)
January 1, 2019
6 Plan Amendment, Curtailment or Settlement (Amendments to
IAS 19)		 January 1, 2019

(1) IFRS 16"Leases"

The new standard requires lessees to account for all leases under one single accounting model (except for short-term or low-value asset lease exemptions), which is for lessees to recognize right-of-use assets and lease liabilities on the balance sheet and the depreciation expense and interest expense associated with those leases in the consolidated statements of comprehensive income. Besides, lessors'classification remains unchanged as operating or fmance leases, but additional disclosure information is required.

166

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

([2] ) IFRIC 23 "Uncertainty Over Income Tax Treatments"

The Interpretation clarifies application of recognition and measurement requirements in IAS 12 "Income Taxes" when there is uncertainty over income tax treatments.

(3) IAS 28"Investment in Associates and Joint Ventures" -Amendments to IAS 28

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture before it applies IAS 28, and in applying IFRS 9, does not take account of any adjustments that arise from applying IAS 28.

(4) Prepayment Features with Negative Compensation (Amendments to IFRS 9)

The amendment allows financial assets with prepayment features that permit or require a party to a contract either to pay or receive reasonable compensation for the early termination of the contract, to be measured at amortized cost or at fair value through other comprehensive income.

(5) Improvements to International Financial Reporting Standards (2015-2017 cycle):

IFRS 3 "Business Combinations"

The amendments clarify that an entity that has joint control of a joint operation shall remeasure its previously held interest in a joint operation when it obtains control of the business.

IFRS 11 "Joint Arrangements"

The amendments clarify that an entity that participates in, but does not have joint control of, a joint operation does not remeasure its previously held interest in a joint operation when it obtains joint control of the business.

/AS 12 "Income Taxes"

The amendments clarify that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.

167

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

!AS 23 "Borrowing Costs"

The amendments clarify that an entity should treats as part of general borrowings any borrowing made specifically to obtain an asset when the asset is ready for its intended use or sale.

  • (6) Plan Amendment, Curtailment or Settlement (Amendments to IAS 19)

The amendments clarify that when a change in a defmed benefit plan is made (such as amendment, curtailment or settlement, etc.), the entity should use the updated assumptions to remeasure its net defmed benefit liability or asset.

The abovementioned standards and interpretations were issued by IASB and endorsed by FSC so that they are applicable for annual periods beginning on or after January 1, 2019. Apart from item (1) explained below, the remaining standards and interpretations have no material impact on the Company.

  • (1) IFRS 16 "Leases"

IFRS 16 "Leases" replaces IAS 17 "Leases", IFRIC 4 "Determining whether an Arrangement contains a Lease", SIC-15 "Operating Leases - Incentives" and SIC-27 "Evaluating the Substance of Transactions Involving the Legal Form of a Lease". The impact arising from the adoption of IFRS 16 on the Company are summarized as follows:

  • (a) For the definition of a lease, the Company elects not to reassess whether a contract is, or contains, a lease at the date of initial application (January 1, 2019) in accordance with the transition provision in IFRS 16. Instead, the Company is permitted to apply IFRS 16 to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 but not to apply IFRS 16 to contracts that were not previously identified as containing a lease applying IAS 17 and IFRIC 4.

The Company is a lessee and elects not to restate comparative information in accordance with the transition provision in IFRS 16. Instead, the Company recognizes the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the date of initial application.

168

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

I. Leases classified as operating leases

For leases that were classified as operating leases applying IAS 17, the Company expects to measure and recognize those leases as lease liability on January 1, 2019 at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate on January 1, 2019 and; the Company chooses, on a lease-by-lease basis, to measure the right-of-use asset at either:

  • (a) its carrying amount as ifIFRS 16 had been applied since the commencement date, but discounted using the lessee's incremental borrowing rate on January 1, 2019; or

  • (b) an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognized in the balance sheet immediately before January 1, 2019.

The Company expects the right-of-use asset will increase by NT$7,459 thousand and the lease liability will increase by NT$7,459 thousand on January 1, 2019.

  • (b) The additional disclosures oflessee and lessor required by IFRS 16 will be disclosed in the relevant notes.

  • C. Standards or interpretations issued, revised or amended, by IASB but not yet endorsed by FSC at the date of issuance of the Company's financial statements are listed below.

Items New, Revised or Amended Standards and
Interpretations		 Efective Date issued by
IASB
1 IFRS 10 "Consolidated Financial Statements" and IAS 28
"Investments in Associates and Joint Ventures"—Sale or
Contribution of Assets between an Investor and its
Associate or Joint Ventures		 To be determined by
IASB
2 IFRS 17 "Insurance Contracts" January 1, 2021
3 Definition of a Business(Amendments to IFRS 3) January 1, 2020
4 Definition of Material(Amendments to IAS 1 and 8) January 1, 2020

(1) IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures"—Sale or Contribution of Assets between an Investor and its Associate or Joint Ventures

169

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The amendments address the inconsistency between the requirements in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures, in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. IAS 28 restricts gains and losses arising from contributions of non-monetary assets to an associate or a joint venture to the extent of the interest attributable to the other equity holders in the associate or joint ventures. IFRS 10 requires full profit or loss recognition on the loss of control of the subsidiary. IAS 28 was amended so that the gain or loss resulting from the sale or contribution of assets that constitute a business as defmed in IFRS 3 between an investor and its associate or joint venture is recognized in full. IFRS 10 was also amended so that the gains or loss resulting from the sale or contribution of a subsidiary that does not constitute a business as defined in IFRS 3 between an investor and its associate or joint venture is recognized only to the extent of the unrelated investors'interests in the associate or joint venture.

(2) IFRS 17 "Insurance Contracts"

IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects (including recognition, measurement, presentation and disclosure requirements). The core ofIFRS 17 is the General (building block) Model, under this model, on initial recognition, an entity shall measure a group of insurance contracts at the total of the fulfilment cash flows and the contractual service margin. The fulfilment cash flows comprise of the following:

  • (a) estimates of future cash flows;

  • (b) Discount rate: an adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows; and

  • (c) a risk adjustment for non-financial risk.

The carrying amount of a group of insurance contracts at the end of each reporting period shall be the sum of the liability for remaining coverage and the liability for incurred claims. Other than the General Model, the standard also provides a specific adaptation for contracts with direct participation features (the Variable Fee Approach) and a simplified approach (Premium Allocation Approach) mainly for short-duration contracts.

170

En lish Translation of Parent Com an Onl Financial Statement Ori'nall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

(3) Defmition of a Business (Amendments to IFRS 3)

The amendments clarify the defmition of a business in IFRS 3 Business Combinations. The amendments are intended to assist entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

IFRS 3 continues to adopt a market participant's perspective to determine whether an acquired set of activities and assets is a business. The amendments clarify the minimum requirements for a business; add guidance to help entities assess whether an acquired process is substantive; and narrow the definitions of a business and of outputs; etc.

(4) Definition of a Material (細endments to IAS 1 and 8)

The main amendment is to clarify new definition of material. It states that "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information. An entity will need to assess whether the information, either individually or in combination with other information, is material in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users.

The abovementioned standards and interpretations issued by IASB have not yet endorsed by FSC at the date when the Company's financial statements were authorized for issue, the local effective dates are to be determined by FSC. The abovementioned standards and interpretations have no material impact on the Company.

4. Summary of significant accounting policies

(1) Statement of compliance

The parent company only financial statements of the Company for the years ended December 31, 2018 and 2017 have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers ("the Regulations").

171

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(2) Basis of preparation

According to article 21 of the Regulations, the profit or loss and other comprehensive income presented in the parent company only fmancial reports will be the same as the allocations of profit or loss and of other comprehensive income attributable to owners of the parent presented in the financial reports prepared on a consolidated basis, and the owners'equity presented in the parent company only fmancial reports will be the same as the equity attributable to owners of the parent presented in the fmancial reports prepared on a consolidated basis. Therefore, the investments in subsidiaries will be disclosed under "Investments accounted for using the equity method" in the parent company only financial report and change in value will be adjusted.

The parent company only financial statements have been prepared on a historical cost basis, except for fmancial instruments that have been measured at fair value. The parent company only fmancial statements are expressed in thousands of New Taiwan Dollars ("NT$") unless otherwise stated.

(3) Foreign currency transactions

The Company's parent company only financial statements are presented in NT$, which is also the Company's functional currency.

Transactions in foreign currencies are initially recorded by the Company at functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency closing rate of exchange ruling at the reporting date. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

All exchange differences arising on the settlement of monetary items or on translating monetary items are taken to profit or loss in the period in which they arise except for the following:

  • A. Exchange differences arising from foreign currency borrowings for an acquisition of a qualifying asset to the extent that they are regarded as an adjustment to interest costs are included in the borrowing costs that are eligible for capitalization.

172

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • B. Foreign currency items within the scope ofIFRS 9 Financial Instruments (Before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are accounted for based on the accounting policy for fmancial instruments.

  • C. Exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation is recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

When a gain or loss on a non-monetary item is recognized in other comprehensive income, any exchange component of that gain or loss is recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss is recognized in profit or loss.

  • (4) Translation offmancial statements in foreign currency

While preparing the parent company only fmancial statements, the assets and liabilities of foreign operations are translated into NT$ at the closing rate of exchange prevailing at the reporting date and their income and expenses are translated at an average rate for the period. The exchange differences arising on the translation are recognized in other comprehensive income. On the disposal of a foreign operation, the cumulative amount of the exchange differences relating to that foreign operation, recognized in other comprehensive income and accumulated in the separate component of equity, is reclassified from equity to profit or loss when the gain or loss on disposal is recognized. The partial disposals are accounted for as disposals when the partial disposal involves the loss of control of a subsidiary that includes a foreign operation and when the retained interest after the partial disposal of an interest in a joint arrangement or a partial disposal of an interest in an associate that includes a foreign operation is a financial asset that includes a foreign operation.

On the partial disposal of a subsidiary that includes a foreign operation that does not result in a loss of control, the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is re-attributed to the non-controlling interests in that foreign operation. In partial disposal of an associate or joint arrangement that includes a foreign operation that does not result in a loss of significant influence or joint control, only the proportionate share of the cumulative amount of the exchange differences recognized in other comprehensive income is reclassified to profit or loss.

173

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Any goodwill and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and expressed in its functional currency.

(5) Current and non-current distinction

An asset is classified as current when:

  • A. The Company expects to realize the asset, or intends to sell or consume it, in its normal operating cycle

  • B. The Company holds the asset primarily for the purpose of trading

  • C. The Company expects to realize the asset within twelve months after the reporting period

  • D. The asset is cash or cash equivalent unless the asset is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period.

All other assets are classified as non-current.

A liability is classified as current when:

  • A. The Company expects to settle the liability in its normal operating cycle

  • B. The Company holds the liability primarily for the purpose of trading

  • C. The liability is due to be settled within 12 months after the reporting period

  • D. The Company does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

All other liabilities are classified as non-current.

(6) Cash and cash equivalents

Cash and cash equivalents comprises cash on hand, demand deposits and short-term, highly liquid time deposits (including ones that have maturity within 3 months) or investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

174

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(7) Financial instruments

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities within the scope of IFRS 9 Financial Instruments (Before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are recognized initially at fair value plus or minus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

  • A. Financial instruments: Recognition and Measurement

The accountin olic from Janna 1 2018 as follow:

The Company accounts for regular way purchase or sales of financial assets on the trade date.

The Company classified fmancial assets as subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss considering both factors below:

  • (a) the Company's business model for managing the fmancial assets and

  • (b) the contractual cash flow characteristics of the fmancial asset.

Financial assets at amortized cost

A financial asset is measured at amortized cost if both of the following conditions are met and presented as note receivables, accounts receivable financial assets at amortized cost and other receivables etc., on balance sheet as at the reporting date:

  • (a) the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and

  • (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

175

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Such fmancial assets are subsequently measured at amortized cost (the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount and the maturity amount and adjusted for any loss allowance) and is not part of a hedging relationship. A gain or loss is recognized in profit or loss when the fmancial asset is derecognized, through the amortization process or in order to recognize the impairment gains or losses.

Interest revenue is calculated by using the effective interest method. This is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

  • (a) purchased or originated credit-impaired fmancial assets. For those fmancial assets, the Company applies the credit-adjusted effective interest rate to the amortized cost of the fmancial asset from initial recognition.

  • (b) financial assets that are not purchased or originated credit-impaired fmancial assets but subsequently have become credit-impaired fmancial assets. For those fmancial assets, the Company applies the effective interest rate to the amortized cost of the fmancial asset in subsequent reporting periods.

Financial assets at fair value through profit or loss

Financial assets were classified as measured at amortized cost or measured at fair value through other comprehensive income based on aforementioned criteria. All other financial assets were measured at fair value through profit or loss and presented on the balance sheet as financial assets measured at fair value through profit or loss.

Such financial assets are measured at fair value, the gains or losses resulting from remeasurement is recognized in profit or loss which includes any dividend or interest received on such financial assets.

The accountin olic before Janua 1 2018 as follow:

The Company accounts for regular way purchase or sales of fmancial assets on the trade date.

176

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Financial assets of the Company are classified as financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. The Company determines the classification of its financial assets at initial recognition.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated as at fair value through profit or loss.

A financial asset is classified as held for trading if:

  • (a) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

  • (b) on initial recognition it is part of a portfolio of identified fmancial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or

  • (c) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument).

If a contract contains one or more embedded derivatives, the entire hybrid (combined) contract may be designated as a fmancial asset at fair value through profit or loss; or a financial asset may be designated as at fair value through profit or loss when doing so results in more relevant information, because either:

  • (a) it eliminates or significantly reduces a measurement or recognition inconsistency; or

  • (b) a group of fmancial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the key management personnel.

Financial assets at fair value through profit or loss are measured at fair value with changes in fair value recognized in profit or loss. Dividends or interests on financial assets at fair value through profit or loss are recognized in profit or loss (including those received during the period of initial investment).

177

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

If financial assets do not have quoted prices in an active market and their far value cannot be reliably measured, then they are classified as fmancial assets measured at cost on balance sheet and carried at cost net of accumulated impairment losses, if any, as at the reporting date.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market other than those that the Company upon initial recognition designates as available for sale, classified as at fair value through profit or loss, or those for which the holder may not recover substantially all of its initial investment.

Loans and receivables are separately presented on the balance sheet as receivables or debt instrument investments for which no active market exists. After initial measurement, such fmancial assets are subsequently measured at amortized cost using the effective interest rate method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fe or transaction costs. The effective interest method amortization is recognized in profit or loss.

B. Impairment of financial assets

The accountin olic from Janua 1 2018 as follow:

The Company recognizes a loss allowance for expected credit losses on fmancial asset measured at amortized cost.

The Company measures expected credit losses of a financial instrument in a way that reflects:

  • (a) an unbiased and probability-weighted amount that is determined by evaluating a 「ange of possible outcomes;

  • (b) the time value of money; and

  • (c) reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

178

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The loss allowance is measures as follow:

  • (a) At an amount equal to 12-month expected credit losses: the credit risk on a financial asset has not increased significantly since initial recognition or the fmancial asset is determined to have low credit risk at the reporting date. In addition, the Company measures the loss allowance at an amount equal to lifetime expected credit losses in the previous reporting period, but determines at the current reporting date that the credit risk on a fmancial asset has increased significantly since initial recognition is no longer met.

  • (b) At an amount equal to the lifetime expected credit losses: the credit risk on a fmancial asset has increased significantly since initial recognition or fmancial asset that is purchased or originated credit-impaired fmancial asset.

  • (c) For trade receivables or contract assets arising from transactions within the scope of IFRS 15, the Company measures the loss allowance at an amount equal to lifetime expected credit losses.

At each reporting date, the Company needs to assess whether the credit risk on a financial asset has increased significantly since initial recognition by comparing the risk of a default occurring at the reporting date and the risk of default occurring at initial recognition. Please refer to Note 12 for further details on credit risk. The accountin olic before Janna 1 2018 as follow:

The Company assesses at each reporting date whether there is any objective evidence that a financial asset other than the financial assets at fair value through profit or loss is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset. The carrying amount of the financial asset impaired, other than receivables impaired which are reduced through the use of an allowance account, is reduced directly and the amount of the loss is recognized in profit or loss.

Other loss events include:

179

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

  • (a) significant fmancial difficulty of the issuer or obligor; or

  • (b) a breach of contract, such as a default or delinquency in interest or principal payments; or

  • (c) it becoming probable that the borrower will enter bankruptcy or other fmancial reorganisation; or

  • (d) the disappearance of an active market for that fmancial asset because of fmancial difficulties.

For loans and receivables measured at amortized cost, the Company first assesses individually whether objective evidence of impairment exists individually for financial asset that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exits for an individually assessed financial asset, whether significant or not, it includes the asset in a group of fmancial assets with similar credit risk characteristics and collectively assesses them for impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the fmancial assets original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. Interest income is accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

Receivables together with the associated allowance are written off when there is no realistic prospect of future recovery. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to profit or loss.

C. Derecognition of financial assets

A financial asset is derecognized when:

  • (a) The rights to receive cash flows from the asset have expired

  • (b) The Company has transferred the asset and substantially all the risks and rewards of the asset have been transferred

  • (c) The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

180

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable including any cumulative gain or loss that had been recognized in other comprehensive income, is recognized in profit or loss.

D. Financial liabilities and equity

Classification between liabilities or equitv

The Company classifies the instrument issued as a fmancial liability or an equity instrument in accordance with the substance of the contractual arrangement and the defmitions of a fmancial liability, and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The transaction costs of an equity transaction are accounted for as a deduction from equity (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

Financial liabilities

Financial liabilities within the scope ofIFRS 9 Financial Instruments (before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement) are classified as financial liabilities at fair value through profit or loss or financial liabilities measured at amortized cost upon initial recognition.

Financial liabilities at amortized cost

Financial liabilities measured at amortized cost include interest bearing loans and borrowings that are subsequently measured using the effective interest rate method after initial recognition. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process.

181

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Amortized cost is calculated by taking into account any discount or premium on acquisition and fe s or transaction costs.

Derecognition of financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified (whether or not attributable to the fmancial difficulty of the debtor), such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

E. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

(8) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

  • A. In the principal market for the asset or liability, or

  • B. In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Company.

182

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants in their economic best interest.

A fair value measurement of a non-fmancial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

(9) Inventories

Inventories are valued at lower of cost and net realizable value item by item.

Costs incurred in bringing each inventory to its present location and condition are accounted for as follows:

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Starting from January 1, 2018, rendering of services is accounted in accordance with IFRS 15 and not within the scope of inventories.

  • (10) Non-current assets held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction that is highly probable within one year from the date of classification and the asset or disposal group is available for immediate sale in its present condition. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell.

Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortized.

183

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(11) Investments accounted for using the equity method

According to Art. 21 of Regulation Governing the Preparation of Financial Reports by Securities Issuers, the Company's investments in its subsidiaries are presented as Investments accounted for using equity method with necessary adjustments so that the net income and other comprehensive income of individual fmancial report equal the net income and other comprehensive income attributed to the parent of consolidated financial report, and that the shareholder's equity of individual fmancial report equals the shareholder's equity attributed to the parent of consolidated fmancial report. Considering the accounting treatment for investment in subsidiaries specified in IFRS IO "Consolidated Financial Reports", and the different accounting treatments for different level of investees, necessary adjustments are made by debiting or crediting "Investments accounted for using equity method", "Share of profit or loss of subsidiaries, associates and joint ventures accounted for using equity method", and "Share of other comprehensive income of subsidiaries, associates and joint ventures accounted for using equity method".

The Company's investment in its associate is accounted for using the equity method other than those that meet the criteria to be classified as held for sale. An associate is an entity over which the Company has significant influence. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of arrangement.

Under the equity method, the investment in the associate or joint venture is carried in the balance sheet at cost and adjusted thereafter for the post-acquisition change in the Company's share of net assets of the associate or joint venture. After the interest in the associate or joint venture is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Unrealized gains and losses resulting from transactions between the Company and the associate or joint venture are eliminated to the extent of the Company's related interest in the associate or joint venture.

When changes in the net assets of an associate or a joint venture occur and not those that are recognized in profit or loss or other comprehensive income and do not affects the Company's percentage of ownership interests in the associate or joint venture, the Company recognizes such changes in equity based on its percentage of ownership interests. The resulting capital surplus recognized will be reclassified to profit or loss at the time of disposing the associate or joint venture on a prorata basis.

184

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

When the associate or joint venture issues new stock, and the Company's interest in an associate or joint venture is reduced or increased as the Company fails to acquire shares newly issued in the associate or joint venture proportionately to its original ownership interest, the increase or decrease in the interest in the associate or joint venture is recognized in Additional Paid in Capital and Investment accounted for using the equity method. When the interest in the associate or joint venture is reduced, the cumulative amounts previously recognized in other comprehensive income are reclassified to profit or loss or other appropriate items. The aforementioned capital surplus recognized is reclassified to profit or loss on a pro rata basis when the Company disposes the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Company.

The Company determines at each reporting date whether there is any objective evidence that the investment in the associate or an investment in a joint venture is impaired in accordance with IAS 28 Investments in Associates and Joint Ventures (before January 1, 2018: IAS 39 Financial Instruments: Recognition and Measurement). If this is the case the Company calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value and recognizes the amount in the'share of profit or loss of an associate'in the statement of comprehensive income in accordance with IAS 36 Impairment of Assets. In determining the value in use of the investment, the Company estimates:

  • A. Its share of the present value of the estimated future cash flows expected to be generated by the associate or joint venture, including the cash flows from the operations of the associate and the proceeds on the ultimate disposal of the investment; or

  • B. The present value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate disposal.

Because goodwill that forms part of the carrying amount of an investment in an associate or joint venture is not separately recognized, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in IAS 36 Impairment of Assets.

185

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Upon loss of significant influence over the associate or joint venture, the Company measures and recognizes any retaining investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss. Furthermore, if an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate, the Company continues to apply the equity method and does not remeasure the retained interest.

(12) Property, plant and equipment

Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of dismantling and removing the item and restoring the site on which it is located and borrowing costs for construction in progress if the recognition criteria are met. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. When significant parts of property, plant and equipment are required to be replaced in intervals, the Company recognized such parts as individual assets with specific useful lives and depreciation, respectively. The carrying amount of those parts that are replaced is derecognized in accordance with the derecognition provisions of IAS 16 Property, plant and equipment. When a major inspection is performed, its cost is recognized in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognized in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings g,49 years
Machinery and equipment 15,20 years
Transportation equipment 5 years
Office equipment 3,23 years
Leased assets 5years
Leasehold improvements The shorter of lease terms or economic usefl lives

An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

186

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

The assets'residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

(13) Investment property

Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are measured using the cost model in accordance with the requirements of IAS 16 for that model, other than those that meet the criteria to be classified as held for sale (or are included in a disposal group that is classified as held for sale) in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Depreciation is calculated on a straight-line basis over the estimated economic lives of the following assets:

Buildings

8,..._,60 years

Investment properties are derecognized when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss in the period of derecognition.

The company transfers to or from investment properties depending on their actual use.

Properties are transferred to or from investment properties when the properties meet, or cease to meet, the definition of investment property and there is evidence of the change in use.

(14) Leases

Company as a lessee

Finance leases which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at the fair value of the leased property or, iflower, at the present value of the minimum lease payments. Lease payments are apportioned between fmance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in profit or loss.

187

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

Company as a lessor

Leases in which the Company does not transfer substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Rental revenue generated from operating lease is recognized over the lease term using the straight line method. Contingent rents are recognized as revenue in the period in which they are earned.

(15) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalized development costs, are not capitalized and expenditure is reflected in profit or loss for the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. All of the Company's intangible assets are intangible assets with finite lives.

Intangible assets with fmite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortization period and the amortization method for an intangible asset with a fmite useful life is reviewed at least at the end of each financial year. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

188

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Gains or losses arising from derecognition of an intangible asset are recognized in profit or loss.

Computer software

The cost of computer software is amortized on a straight-line basis over the estimated useful life (4 years).

(16) Impairment of non-fmancial assets

The Company assesses at the end of each reporting period whether there is any indication that an asset in the scope of IAS 36 Impairment of Assets may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal and its value in use.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset's or CGU's recoverable amount. A previously recognized impairment loss is reversed only if there has been an increase in the estimated service potential of an asset which in turn increases the recoverable amount. However, the reversal is limited so that the car ying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortization, had no impairment loss been recognized for the asset in prior years.

An impairment loss of continuing operations or a reversal of such impairment loss is recognized in profit or loss.

189

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

(17) Revenue recognition

The accountin olic from Janua 1 2018 as follow:

The Company's revenue arising from contracts with customers are primarily related to sale of goods. The accounting policies are explained as follow:

Sale of goods

Revenue from the sale of goods is recognized when the goods is transferred and delivered to the customers.(When the significant risks and rewards of ownership of the goods have passed to the customers.) The main goods of the Company sold are wool tops, superwash wool tops, and superwash loose wool. Revenue from the sale of goods is recognized on contractual considerations basis.

The credit period of the Company's sale of goods is from 30 to 90 days. For the contracts, when the Company transfers the goods to customers and has a right to an amount of consideration that is unconditional, the contracts are recognized as accounts receivables. The Company usually collects the payments shortly after transfer of goods to customers; therefore, there is no significant financing component to the contract.

The accountin olic after Janna 1 2018 as follow:

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable. The following specific recognition criteria must also be met before revenue is recognized:

Sale of goods

Revenue from the sale of goods is recognized when all the following conditions have been satisfied:

190

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othe而se Stated)

  • A. the significant risks and rewards of ownership of the goods have passed to the buyer;

  • B. neither continuing managerial involvement nor effective control over the goods sold have been retained;

  • C. the amount of revenue can be measured reliably;

  • D. it is probable that the economic benefits associated with the transaction will flow to the entity; and

  • E. the costs incurred in respect of the transaction can be measured reliably.

Rental income

Rental income from operating leases is recognized on a straight-line basis over the lease period.

Interest income

For all financial assets measured at amortized cost (including loans and receivables), interest income is recorded using the effective interest rate method and recognized in profit or loss.

Dividends income

Revenue is recognized when the Company's right to receive the payment is established.

(18) Post-employment benefits

For the defined contribution plan, the Company will make a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company recognizes expenses for the defmed contribution plan in the period in which the contribution becomes due.

  • (19) Income taxes

Income tax expense (income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.

191

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otheiwise Stated)

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. Current income tax relating to items recognized in other comprehensive income or directly in equity is recognized in other comprehensive income or equity and not in profit or loss.

The income tax for undistributed earnings is recognized as income tax expense in the subsequent year when the distribution proposal is approved by the Shareholders'meeting.

Deferred tax

Deferred tax is provided on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences, except:

  • A. Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

  • B. In respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, the carryforward of unused tax losses and unused tax credits, to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and the carryforward of unused tax losses and unused tax credits can be utilized, except:

  • A. Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;

  • B. In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

192

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date. The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

5. Si nificant accountin ·ud ements estimates and assum tions

The preparation of the Company's parent company only fmancial statements require 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 end of the reporting period. However, uncertainty about these assumption and estimate could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

(1) Judgement

In the process of applying the Company's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the parent company only financial statements:

A. Operating lease commitment - Company as the lessor

The Company has entered into commercial property leases on its investment property portfolio. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of 。 wnership of these properties and accounts for the contracts as operating leases.

193

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

B. Inventories

Inventories are valued at the lower of cost and net realizable value item by item. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The judgement of net realizable value based on historical experience and exchange rate.

(2) Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

A. Impairment of non-financial assets

An impairment exists when the carrying value of an asset or CGU 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 the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date less incremental costs that would be directly attributable to the disposal of the asset or CGU. The value in use calculation is based on a discounted cash flow model. The cash flows projections are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The key assumptions used to determine the recoverable amount for the different cash generating units, including a sensitivity analysis, are further explained in Note 6.

B. Revenue recognition- sales returns and allowance

Starting from January 1, 2018:

The Company estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue. In assessing the aforementioned sales returns and allowance, revenue is recognized to the extent it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.

194

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Before January 1, 2018:

The Company estimates sales returns and allowance based on historical experience and other known factors at the time of sale, which reduces the operating revenue.

C. Income tax

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.

Deferred tax assets are recognized for all car yforward of unused tax losses and unused tax credits and deductible temporary differences to the extent that it is probable that taxable profit will be available or there are sufficient taxable temporary differences against which the unused tax losses, unused tax credits or deductible temporary differences can be utilized. The amount of deferred tax assets determined to be recognized is based upon the likely timing and the level of future taxable profits and taxable temporary differences together with future tax planning strategies.

D. Accounts receivables-estimation of impairment loss

Starting from January 1, 2018:

The Company estimates the impairment loss of accounts receivables at an amount equal to lifetime expected credit losses. The credit loss is the present value of the difference between the contractual cash flows that are due under the contract (carrying amount) and the cash flows that expects to receive (evaluate forward looking information). However, as the impact from the discounting of short-term receivables is not material, the credit loss is measured by the undiscounted cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

195

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Before January 1, 2018:

The Company considers the estimation of future cash flows when there is objective evidence showed indications of impairment. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. However, as the impact from the discounting of short-term receivables is not material, the impairment of short-term receivables is measured as the difference between the asset's carrying amount and the estimated undiscounted future cash flows. Where the actual future cash flows are lower than expected, a material impairment loss may arise. Please refer to Note 6 for more details.

E. Inventories

Estimates of net realisable value of inventories take into consideration that inventories may be damaged, become wholly or partially obsolete, or their selling prices have declined. The estimates are based on the most reliable evidence available at the time the estimates are made.

6. Contents of significant accounts

(1) Cash and cash equivalents

Cash on hand
Demand deposits
Time deposits
Total		 As ofDecember 31,
2018
2017
$30
$11
14,761
$14,791
114,240
1,190,518
$1,304,769

(2) Fmancial assets at amort12ed cost -. current

Time deposits

As of December 31, As of December 31,
2018 2017 (Note)
$1,000,000

196

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Note: The Company adopted IFRS 9 since January 1, 2018. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 9.

(3) Accounts receivable, net

Accounts receivable
Less: loss allowance
Total		 As ofDecember 31,
2018
2017
$11,284
$2,990
(113)
(30)
$11,171
$2,960
$11,171

Accounts receivable were not pledged.

Accounts receivable are generally on 30~90 days terms. The Company adopted IFRS 9 for impairment assessment since January 1, 2018. Please refer to Note 6(13) for more details on impairment of accounts receivable. The Company adopted IAS 39 for impairment assessment before January 1, 2018. The movements in the provision for impairment of accounts receivable and information of aging analysis for 2017 are as follows:

As of Jan 1, 2017
Charge/(reversal) fr the current period
As of Dec 31, 2017		 Individually
impaired		 Collectively
impaired
$128
(98)
$30		 Total
$128
(98)
$30
＄－
＄－

Ageing analysis of accounts receivable that are past due as at the end of the reporting period but not impaired is as follows:

Past due but not impaired

Neither
past due
nor <=30 31~60 61~90 91~120 >=121
As of impaired days days days days days Total
Dec 31, 2017 $2,960 $- ＄－ ＄－ $- $- $2,960

197

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(4) Inventories

Finished goods
Raw materials
Total		 As ofDecember 31,
2018
2017
$-
$9,312
6 621
，
$-
$15,933

For the years ended December 31, 2018 and 2017, the Company recognized cost of inventories ofNT$244,339 thousand and NT$238,465 thousand, respectively.

No inventories were pledged.

(5) Prepayments

As ofDecember 31, As ofDecember 31,
2018 2017
Prepaid expenses $268 $190
Prepayment fr purchases 568
Other prepayments 160,000
Total $160,268 $758

Other prepayments are the refundable downpayment for purchasing property, plant and equipment.

(6) Non-current assets classified as held for sale, net

Cost:
As of Jan 1, 2018
Transfrred fom investment property
As ofDec 31, 2018		 Land **Buildings ** Total
＄－
530,745
$530,745		 ＄－
119,792
$119,792		 ＄－
650,537
$650,537
107.12.31

Liabilities related to non-current assets classified as held for sale Deferred tax liabilities - Provision of land value increment tax

$145,900

198

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

  • ([a] ) None of non-current assets held for sale were pledged.

  • ([b] ) To integrate resource and make better use of assets, the Company planned to dispose of the land and building in Gongjian W. Rd., Qidu Dist., Keelung City, resolved at the special shareholder's meeting held on November 28, 2018 and at the board meeting held on December 21, 2018. A buyer is confirmed and the disposal is anticipated to be completed within a year, so the Company reclassified the investment property at carrying amount ofNT$574,927 thousand to non-current assets classified as available for sale. In addition, deferred tax liabilities from provision for land value increment tax in the amount of NT$145,900 thousand were reclassified as liabilities related to non­ current assets classified as available for sale.

  • ([c] ) The Company intended to dispose of the land and building located on Sec. 2, Tiding Blvd., Neihu Dist., Taipei City within three months. The Company was searching for buyers and anticipated to complete the sale within a year, so the Company reclassified the investment property at carrying amount of NT$75,600 thousand to non-current assets classified as available for sale.

  • ([7] )[Investments accounted for using the equity method]

The following table lists the investments accounted for using the equity method of the Company:

Investees
Investments in subsidiaries:
HCW Investment Co., Ltd.
(Note 1)
CW Investment One Limited
(Note 2)
Total		 As of December 31, As of December 31, As of December 31,
2018
2017
Percentage
Carrying
of ownership
amount
(%)
＄－
Carrying
amount
Percentage
of ownership
**(%) **
$99,583
12,222
$111,805
100%
100%		 ＄－
  • Note 1: The Company established and acquired 100% share ofHCW Investment Co., Ltd. in August 2018.

Note 2: The Company established and acquired 100% share of CW Investment One Limited in July 2018.

199

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Investments in subsidiaries

Investments in subsidiaries are presented as "Investments accounted for using the equity method" on the parent only financial statement and valuation adjustments are made if necessary.

None of investments accounted for using the equity method were pledged.

(8) Property, plant and equipment

(8) Property, plant and equipment
Cost:
As ofJan 1, 2018
Additions
Dispsals
Transf
ed to
investment property
Asoie31,2018
Machinery and
Ofce
Tansprttion
Land
Build" mgs
equipment
eqmpment
euipment
Lesed assets
$60,952
$18,102
$10,968
$4,394
(4,394)
$5,720
255
(1,443)
$222
(222)
(60,891)
(17,792)
-
-
-
-
$6 I
$3 IO
$10,968
$-
$4,532
$-
$60,952
$18,102
$10,968
$4,394
$5,720
$222
-
-
-
As at Jan 1,2017
Additions
Dispsals
AsofDe31,2018
$60,952
$18,102
$10,968
$4,394
$5,720
$222
Depreciation and
impairment:
AsofJan 1, 2018
Depreciation
Dispsals
T ransferred to
＄－
$3,024
267
investment property
-
(2,995)
$10,949
3
$3,931
82
(4,013)
$4,269
254
(771)
$152
18
(170)
AsofDe31,2018
$-
$296
$10,952
$-
$3,752
$-
As of Jan I, 2017
Depreciation
Dispsals
AsofDe31,2017
Net carryi ng amount as
。f:
Dec31, 2018
Dec31, 2017
＄－
$2,668
356
$10,939
10
$3,605
326
$3,990
279
$115
37
$-
$3,024
$10,949
$3,931
$4,269
$152
$61
$14
$16
$-
$780
$-
$60,952
$15,078
$19
$463
$1,451
$70		 Lesehold
improvements

＄－
1,898
Totl
$100,358
2,153
(6,059)
(78,683)
$1,898
＄－
$17,769
$100,358
$-
$100,358

＄－
53
$53
$-
$-
$1,845
＄－
$22,325
677
(4,954)
(2,995)
$15,053
$21,317
1,008
$22,325
$2 716
＝
$78,033

200

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Components of buildings of the Company are mainly buildings and improvements, which are depreciated over 49 years, 8, and 20 years, respectively, depending on their useful lives.

None of aforementioned property, plant and equipment were pledged.

(9) Investment property

Cost:
As of Jan 1, 2018
Additions fom acquisitions
Disposals
Transfrs fom property, plant and equipment
Transfrs to non-current assets held fr sale
As ofDec 31, 2018
As of Jan 1, 2017
Additions fom acquisitions
Disposals
Transfrs fom property, plant and equipment
Transfrs to non-current assets held fr sale
As ofDec 31, 2017
Depreciation and impairment:
As of Jan 1, 2018
Depreciation
Impairment losses
Disposals
Transfrs fom property, plant and equipment
Transfrs to non-current assets held fr sale
As of Dec 31, 2018
As of Jan 1, 2017
Depreciation
Impairment losses
Disposals
Transfrs fom property, plant and equipment
Transfrs to non-current assets held fr sale
As ofDec 31, 2017
Net carrying amount as of:
Dec 31, 2018
Dec 31, 2017		 Land **Buildings ** Total
$813,167
(56,164)
78,683
(797,814)
$37,872
$813,167
$813,167
$154,850
4,874
(6,339)
2,995
(147,277)
$9,103
$146,790
4,960
3,100
$154,850
$28,769
$541,506
(45,350)
60,891
530,745		 $271,661
(10,814)
17,792
(267,069)
$26,302
$541,506
$541,506
$6,679
(5,269)		 $11,570
$271,661
$271,661
$148,171
4,874
(1,070)
2,995
(147,277)
$1,410
$5,269
1,410		 $7,693
$141,521
4,960
1,690
$6,679
$24,892
$534,827		 $148,171
$3,877
$123,490 $658,317

201

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Rental income fom investment property
Less:
Direct operating expenses fom investment property
generating rental income
Direct operating expenses fom investment property not
generating rental income
Total		 For the years ended
December 31,
2018
$15,508
(3,687)
(2,636)
$9,185
2017
$16,641
(4,027)
(1,859)
$10,755

None of investment properties were pledged.

Investment properties held by the Company are not measured at fair value but for which the fair value is disclosed. The fair value measurements of the investment properties are categorized within Level 3 of the fair value hierarchy. The fair value of investment properties is NT$103,081 thousand and NT$1,464,349 thousand as ofDecember 31, 2018 and December 31, 2017, respectively. The fair value of investment properties valued by an independent external appraiser on basis of direct capitalization method and comparison approach, and the inputs are listed:

As of December 31, As of December 31,
2018 2017
Discount rate 4.78~5.18% 3.845~4.345%
Capitalisation rate 1.67~2.64% 1.02~ 1.59%
  • (10) Post-employment benefits

Defined contribution plan

The employee pension plan under the Labor Pension Act of the R.O.C. ("the Act") is a defined contribution plan. Under the Act, the Company makes a monthly contribution of no less than 6% of the monthly wages of the employees subject to the plan. The Company has made a monthly contribution of 6% of the monthly wages of the employees to the employees' personal pension accounts at Bureau of Labor Insurance in accordance with the Act.

202

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Expenses under the defmed contribution plan for the years ended December 31, 2018 and 2017 are NT$777 thousand and NT$447 thousand, respectively.

(11) Equities

  • (a) Common stock

The Company's authorized capital was both NT$1,100,000 thousand as of December 2018 and 2017. The Company's issued capital was both NT$920,000 thousand as of December 2018 and 2017, each at a par value ofNT$10. The company has issued both 100,000 thousand common stock as of December 2018 and 2017 in installments.

(b) Capital surplus

As of December 31, As of December 31,
2018 2017
Treasury shae trasactions $8,516 $8,516
Other 170 170
Total $8,686 $8,686

According to the Company Act, the capital reserve shall not be used except for making good the deficit of the company. When a company incurs no loss, it may distribute the capital reserves related to the income derived from the issuance of new shares at a premium or income from endowments received by the company. The distribution could be made in cash or in the form of dividend shares to its shareholders in proportion to the number of shares being held by each of them.

(c) Retained earnings and dividend policies

According to the Company's Articles of Incorporation, current year's earnings, if any, shall be distributed in the following order:

  • I. Payment of all taxes and dues; II. Offset prior years' operation losses;

  • III. Set aside 10% of the remaining amount after deducting items (I) and (II) as legal reserve;

  • IV. Set aside or reverse special reserve in accordance with law and regulations; and

  • V. The distribution of the remaining portion, if any, will be recommended by the Board of Directors and resolved in the shareholders' meeting.

203

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The policy of dividend distribution should reflect factors such as the current and future investment environment, fund requirements, domestic and international competition and capital budgets; as well as the interest of the shareholders, share bonus equilibrium and long-term financial planning etc. The Board of Directors shall make the distribution proposal annually and present it at the shareholders'meeting.

According to the Company Act, the Company needs to set aside amount to legal reserve unless where such legal reserve amounts to the total authorized capital. The legal reserve can be used to make good the deficit of the Company. When the Company incurs no loss, it may distribute the portion of legal serve which exceeds 25% of the paid-in capital by issuing new shares or by cash in proportion to the number of shares being held by each of the shareholders.

Following the adoption ofTIFRS, the FSC on April 6, 2012 issued Order No. Financial­ Supervisory-Securities-Corporate-1010012865, which sets out the following provisions for compliance:

On a public company's first-time adoption of the TIFRS, for any unrealized revaluation gains and cumulative translation adjustments (gains) recorded to shareholders'equity that the company elects to transfer to retained earnings by application of the exemption under IFRS 1, the company shall set aside an equal amount of special reserve. Following a company's adoption of the TIFRS for the preparation of its financial reports, when distributing distributable earnings, it shall set aside to special reserve, from the profit/loss of the current period and the undistributed earnings from the previous period, an amount equal to "other net deductions from shareholders' equity for the current fiscal year, provided that if the company has already set aside special reserve according to the requirements in the preceding point, it shall set aside supplemental special reserve based on the difference between the amount already set aside and other net deductions from shareholders' equity. For any subsequent reversal of other net deductions from shareholders'equity, the amount reversed may be distributed.

Details of the 2017 and 2016 earnings distribution and dividends per share as approved and resolved by the board of directors'meeting and shareholders'meeting on March 5, 2019 and June 8, 2018, respectively, are as follows:

204

En lish Translation of Parent Com an Onl Financial Statement Ori·nall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Appropriation of earnings Appropriation of earnings Dividend per shae (NT$)
2018 2017 2018 2017
Legal reserve $- $- ＄－ ＄－
Common stock - cash dividend•

Please refer to Note 6(15) for details on employees'compensation and remuneration to directors and supervisors.

(12) Operating revenue

Revenue fom contracts with customers
Sale of goods
Other operating revenues
Subtotal
Rental revenue
Total		 For the years ended
December 31,
2018
2017
$248,483
$246,495
58
85
248,541
246,580
15,508
16,640
$264,049
$263,220		 For the years ended
December 31,
2018
2017
$248,483
$246,495
58
85
248,541
246,580
15,508
16,640
$264,049
$263,220
$248,483
58		 $246,495
85
248,541
15,508		 246,580
16,640
$264,049 $263,220

Note: The Company has adopted IFRS 15 from January 1, 2018. The Company elected to apply the standard retrospectively by recognizing the cumulative effect of initially applying the standard at the date of initial application (January 1, 2018).

The Company has adopted IFRS 15 from January 1, 2018. Analysis ofrevenue from contracts with customers during the year is as follows:

(a) Disaggregation of revenue

Sale of goods
Lease
Total
Timing of revenue
recognition:
At a point in time
Over time
Total		 Sales Dept.
$248,541
$248,541
Sales Dept.
$248,541
$248,541
Lease Dept.
＄－
15,508
$15,508
Lease Dept.
＄－
15,508
$15,508		 Other Dept.
＄－
＄－
Other Dept.
＄－
＄－
Total
$248,541
15,508
$264,049
Total
$248,541
15,508
$264,049

205

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

  • (b) Contract balances

I. Contract liabilities - current

Beginning Ending
balance balance Diference
Sales of goods $173 $- $(173)

During the year, contract liabilities decreased as performance obligations are partially satisfied and NT$173 thousand included in the contract liability balance at the beginning of the year was recognized as revenue during the year.

  • (c) Assets recognized from costs to acquire or fulfill a contract

None

(13) Expected credit losses

Operating expenses - Expected credit losses
Accounts receivable		 As ofDecember 31,
2018
2017(Note)
$83		 As ofDecember 31,
2018
2017(Note)
$83
$83

Note: The Company adopted IFRS 9 since January 1, 2018. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 9.

Please refer to Note 12 for more details on credit risk.

The Company measures the loss allowance of its accounts receivable at an amount equal to lifetime expected credit losses. The assessment of the Company's loss allowance as at December 31, 2018 is as follow:

  • (1) The Company considers the grouping of accounts receivable by counterparties'credit rating, by geographical region and by industry sector and its loss allowance is measured by using a provision matrix, details are as follow:

206

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Group 1 Overdue
Not yet due <=30days 31-60days 61-90days 91-120days>=121days Total
Gross carying
amout $11,284 ＄－ ＄－ ＄－ ＄－ $- $11,284
Loss ratio 1%
Liftime expected
credit losses 113 - - - - - 113
Subtotal $11,171 $- $- $- $- $- 11,171
Carying amount $11,171

The movement in the provision for impairment of accounts receivable during the year ended December 31, 2018 is as follows:

Beginning balance (in accordance with IAS 39)
Transition adjustment to retained earnings
Beginning balance (in accordance with IFRS 9)
Addition(reversal) fr the current period
Write of
Ending balance		 Accounts
receivable
$30
30
83
$113

(14) Operating leases

  • (a) Operating lease commitments - Company as lessee

The Company has entered into commercial leases on certain motor vehicles and office. These leases have an average life of 3 to 5 years with no renewal option included in the contracts. There are no restrictions placed upon the Company by entering into these leases.

Future m面mum rentals payable under non-cancellable operating leases as of December 31, 2018 and 2017 are as follows:

As ofDecember 31, As ofDecember 31,
2018 2017
Not later than one year $2,410 $-
Later than one yea and not later than fve years 5 397
，
Total $7,807 $-

207

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Operating lease expenses recognized are as follows:

For the years ended
December 31,
2018 2017
Minimum lease payments $1,387 $-
  • (b) Operating lease commitments - Company as lessor

The Company has entered into commercial leases on office. The remaining life is between 1 and 2 years. All leases include a clause to enable upward revisipn of the rental charge on an annual basis according to prevailing market conditions.

Based on non-cancellable lease contracts, future minimum rentals receivable under non-cancellable operating leases as ofDecember 31, 2018 and 2017 are as follows:

As ofDecember 31, As ofDecember 31,
2018 2017
Not later than one year $8,747 $12,477
Later than one yea and not later than fve yeas 4,437 10 850
，
Total $13,184 $23,327
  • (15) Summary statement of employee benefits, depreciation and amortization expenses by function during the years ended December 31, 2018 and 2017:
As ofDecember 31, As ofDecember 31, As ofDecember 31, As ofDecember 31, As ofDecember 31, As ofDecember 31,
2018 2017
Operating
costs		 Operating
expenses
Total
amount		 Operating
costs		 Operating
expenses
Total
amount
Employee benefits expense
Salaries		 ＄－ $22,314 $22,314 ＄－ $20,269 $20,269
Labor and health insurace 1,488 1,488 986 986

Pension		 777 777 447 447
Director's emoluments 2,415 2,415 540 540
Other employee benefts
expense
Depreciation		 4,895 656 5,551 5,007 961 5,968
Aortization 14 14 33 33

208

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Note: The number of the Company's employees were 25 and 14, and the number of non­ employee directors were 4 and 5 as of December 31, 2018 and 2017, respectively.

According to the Articles of Incorporation, 4~5% of profit of the current year is distributable as employees'compensation and no higher than 2% of profit of the current year is distributable as remuneration to directors and supervisors. However, the company's accumulated losses shall have been covered. The Company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributable as employees'compensation in the form of shares or in cash; and in addition to a report of such distribution is submitted to the shareholders'meeting. Information

on the Board of Directors' resolution regarding the employees' compensation and remuneration to directors and supervisors can be obtained from the "Market Observation Post System" on the website of the TWSE.

The Company incurred net loss for the year ended December 31, 2018, so the Company did not need to estimate employees'compensation and remuneration to directors and supervisors.

The Company incurred net loss for the year ended December 31, 2017, so the Company did not need to estimate employees'compensation and remuneration to directors and supervisors.

(16) Non-operating income and expenses

(a) Other income

Interest income
Bank savings
Financial assets at amortized cost
Other interest income
Gain on reversal of bad debts
Dividend income
Others
Total		 For the years ended
December 31,
2018
2017
(Note)
$8,258
$1,955
(Note)
2,582
(Note)
5
(Note)
98
522
417
61
2,955
$5,125
$11,728		 For the years ended
December 31,
2018
2017
(Note)
$8,258
$1,955
(Note)
2,582
(Note)
5
(Note)
98
522
417
61
2,955
$5,125
$11,728
(Note)
$1,955
2,582
5
(Note)
522
61		 $8,258
(Note)
(Note)
98
417
2,955
$5,125 $11,728

209

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Note: The Company adopted IFRS 9 since January 1, 2018. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 9.

(b) Other gains and losses

Losses on disposal of property, plant and equipment
Losses on disposal of investment property
Foreign exchange losses, net
Gains (losses) on fnancial assets at fir value through
proft or loss (Note)
Impairment losses
Others
Total		 For the years ended
December 31,		 For the years ended
December 31,
2018 2017
$(86)
(5,070)
(111)
(1,341)
(12)		 ＄－
(1,287)
1,106
(3,100)
(7)
$(6,620) $(3,288)

Note: Balance in the year of 2018 was arising from fmancial assets mandatorily measured at fair value through profit or loss, and balance in year of 2017 was arising from held for trading investment.

(c) Finance costs

For the years ended
December 31,
2018 2017
Interest expenses $(88) $(136)
  • (d) Share of profit or loss of subsidiaries, associates and joint ventures accounted for using the equity method
Shae of proft or loss of subsidiaries, associates and
joint ventures accounted fr using the equity method		 For the years ended
December 31,
2018
2017
$(18,951)
＄－		 For the years ended
December 31,
2018
2017
$(18,951)
＄－
$(18,951) ＄－

210

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

(17) Components of other comprehensive income

Components of other comprehensive income from January 1 to December 31, 2018 is as below:

To be reclassified to proft or loss in
subsequent periods:
Exchange diferences resuling
fom translating the fmancial
statements of freign operations		 Income ta
relating to
Relassification
Other
components of。ter
adjustments
comprehensive
other
comprehensive
Arising during
durig the
income(loss), comprehensive income(loss),
theperiod
period
befre tax
mcome
net of tax

$(59)
＄－
${59)
$12
${47)
  • (18) Income tax

Based on the amendments to the Income Tax Act an ounced on February 7, 2018, the Company's applicable corporate income tax rate for the year ended 31 December 2018 has changed from 17% to 20%. The corporate income surtax on undistributed retained earnings has changed from 10% to 5%.

The major components of income tax expense (income) are as follows:

Income tax expense (income) recognized in profit or loss

Current income tax expense:
Land value increment tax paid in current period
Defrred tax expense (income):
Defrred tax expense (income) relating to origination
and reversal of temporary diferences
Defrred tax expense (income) relating to chages in
tax rate or the imposition of new taxes
Total income tax expense (income)		 For the years ended
December 31,
2018
2017
$840
＄－
12
(3,260)
5
$(2,415)
$12		 For the years ended
December 31,
2018
2017
$840
＄－
12
(3,260)
5
$(2,415)
$12
$840
(3,260)
5
$(2,415)		 ＄－
12
$12

211

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Income tax relatin to com onents of other com rehensive income

Defrred tax expense (income):
Exchange diferences resulting fom translating the
fmancial statements of freign operations
Income tax relating to components of other
comprehensive income		 For the years ended
December 31,		 For the years ended
December 31,
2018 2017
$(12) ＄－
$(12) ＄－

Reconciliation between tax expense and the product of accounting profit multiplied by applicable tax rates is as follows:

Accounting proft (loss) befre tax fom continuing
operations
Tax at the domestic rates applicable to profts in the country
concered
Tax efect ofrevenues exempt fom taxation
Tax efect of defrred tax assets/liabilities
Adjustments in respect of current income tax of prior
periods
Land value increment tax paid in current period
Total income tax expense (income) recognized in proft or
loss		 For the years ended
December 31,		 For the years ended
December 31,
2018 2017
$(71,230)
$(14,246)
(954)
11,940
5
840		 $(6,860)
$(1,166)
(322)
1,500
$(2,415) $12

212

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Deferred tax assets (liabilities) relate to the following:

For the year ended December 31, 2018

Temporary diferences
Provision fr land value
increment tax (Note)
Fair value adjustment of
fmancial assets at fir
value
Unrealized freign exchage
gains (losses)
Impairment on investment
property
Investments accounted fr
using the equity method
Translation of the fnancial
statements of freign
operation
Defrred tax income/
(expense)
Net defred tax assets(liabilities)
Refected in balance sheet as
fllows:
Defrred tax assets
Defrred tax liabilities
Liabilities related to non-
current assets classifed as
held fr sale		 Recognized in
other
Beginning
Recognized comprehensive
Ending
balance三ft or loss
m come
balance
$(145,900)
＄－
＄－
$(145,900)
(531)
174
(357)
219
(760)
(541)
287
51
338
3,790
3,790
12
12
$3,255
$12
$(145,925)
$3,242
$506
$4,140
$(146,431)
$(898)
＄－
$(145,900)

Note: Provision of land value increment tax amounted $145,900 thousand is transferred to liabilities related to non-current assets classified as held for sale.

213

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

For the year ended December 31, 2017

Temporary diferences
Provision fr land value
increment tax (Note)
Fair value adjustment of
fnancial assets at fir
value
Unrealized freign exchange
gains (losses)
Impairment on investment
property
Defred tax income/ (expense)
Net defred tax assets/(liabilities)
Refected in balance sheet as
fllows:
Defrred tax assets
Defrred tax liabilities		 Beginning
balance
$(145,900)
(343)
330		 Recognized in
other
Recognized in comprehensive
Ending
proft or loss
mcome
balance

＄－
＄－
$(145,900)

(188)
(531)
(111)
219
287
287
$(12)
＄－

$(145,925)
$506
$(146,431)

$(145,913)
$330
$(146,243)

The following table contains information of the unused tax loss carry-forward of the Company:

Year Tax losses fr the
period		 Unused tax losses as of Unused tax losses as of Expirationyear
Dec 31, 2018 Dec 31, 2017
2014
2015
2016
2017
2018		 $6,576,975
80,944,019
4,395,671
8,403,800
59,178,700		 $6,576,975
80,944,019
4,395,671
8,403,800
59,178,700		 $6,576,975
80,944,019
4,395,671
8,403,800		 2024
2025
2026
2027
2028
$159,499,165 $100,320,465

214

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Unrecognized deferred tax assets

As of December 31, 2018 and 2017, deferred tax assets that have not been recognized as they may not be used to offset taxable profits amounted to NT$32,850 thousand and NT$1 7, 773 thousand, respectively.

The assessment of income tax returs

As of December 31, 2018, the income tax return of the Company is assessed and approved up to 2016.

(19) Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the year.

Basic earnings per share:
Net loss of current period (in thousand NT$)
Weighted average number of ordinary shares outstanding
fr basic earnings per share (in thousands)
Basic earnings per share (NT$)		 For the years ended
December 31,
2018
2017
$(68,815)
92 000
，
$(0.75)
$(6,872)
92,000
$(0.07)		 For the years ended
December 31,
2018
2017
$(68,815)
92 000
，
$(0.75)
$(6,872)
92,000
$(0.07)
$(68,815)
92 000
，
$(0.75)		 $(6,872)
92,000
$(0.07)

7. Related partv transactions

Information of the related parties that had transactions with the Company during the financial reporting period is as follows:

215

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Name and nature of relationshi of the related arties

Name of the related parties Nature ofrelationship of the related paties
Roo Hsing Co., Ltd. Parent company and ultimate controlling entity
HCW Investment Co., Ltd. Subsidiary
CW Investment One Limited Subsidiary
Mr. Chen, Shih-Hsiu President of the Company
Mr. Sun, Yang Director of the Company
Mr. Chen, Chih-Ying President of the Company (Note 1)
Mr. Huang, Chin-Tsai Director of the Company (Note 2)

Note:

1. The president was discharged because a legal entity director of the company replaced its representative on March 6, 2018.

2. The former director resigned at March 6, 2018

Significant transactions with the related parties

  • (1) A sset transactions

  • (a) Assets sold to related parties are as below:

From January 1 to December 31, 2018

Carrying value
at the selling Proft or loss
Relatedparties name Asset name time Sales price of the sale
Mr. Chen, Chil-Ying Company vehicle $381 $1,000 $619
From January 1 to December 31, 2017

None of such transactions.

216

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

(b) Assets bought from related parties are as below:

From. January 1 to December 31, 2018

Total amount of
Related parties name
Asset name
the transaction
Roo Hsing Co., Ltd.
Offce equipment
$148
Unpaid
amount

From January 1 to December 31, 2017

None of such transactions.

(2) Rental income

As of December 31, As of December 31,
2018 2017 (Note)
HCW Investment Co., Ltd. $27 $-
Total $27 $-

Note: The Company established and commenced operation of HCW Investment Co., Ltd., acquiring 100% of shares.

(3) Key management personnel compensation

For the years ended For the years ended
December 31,
2018 2017
Short-term employee benefts $980 $10,402
Post-employment benefits 19 99
Total $999 $10,501

8. Assets pledged as security

None.

217

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

9. Commitments and contingencies

None.

10. Losses due to major disasters

None.

11. Significant subsequent events

On 8 January 2019, the company signed a contract to sell investment properties located on 6F., No. 293, Sec. 2, Tiding Blvd., Neihu Dist., Taipei City at NT$81,680 thousand to three unrelated person.

12. Others

(1) Categories of financial instruments

Financial assets
Financial assets at fir value through proft or loss:
Held fr trading
Mandatorily measured at Fair value through proft or
loss
Financial assets at amortized cost (Note 2)
Loans and receivables (ote 3)
Total
Financial liabilities
Financial liabilities at amortized cost:
Notes payable
Other payables
Total		 As ofDecember 31,
2018
2017
(Notel )
$11,172
$10,355
(Note 1)
1,026,302
(Notel)
(Note 1)
1,308,237
$1,036,657
$1,319,409
As of December 31,
2018
2017
＄－
5,261
$5,261
$535
11,394
$11,929		 As ofDecember 31,
2018
2017
(Notel )
$11,172
$10,355
(Note 1)
1,026,302
(Notel)
(Note 1)
1,308,237
$1,036,657
$1,319,409
As of December 31,
2018
2017
＄－
5,261
$5,261
$535
11,394
$11,929
＄－
5,261
$5,261		 $535
11,394
$11,929

218

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Note:

1. The Company adopted IFRS 9 since January 1, 2018. The Company elected not to restate prior periods in accordance with the transition provision in IFRS 9.

2. Including cash and cash equivalents (exclude cash on hand), financial assets measured at amortized cost, accounts receivable, net and other receivables.

3. Including cash and cash equivalents (exclude cash on hand), accounts receivable, net and other receivables.

(2) Financial risk management objectives and policies

The Company's principal financial risk management objective is to manage the market risk, credit risk and liquidity risk related to its operating activates. The Company identifies measures and manages the aforementioned risks based on the Company's policy and risk appetite.

The Company has established appropriate policies, procedures and internal controls for financial risk management. Before entering into significant transactions, due approval process by the Board of Directors must be carried out based on related protocols and internal control procedures. The Company complies with its financial risk management policies at all times.

(3) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of the changes in market prices. Market prices comprise currency risk, interest rate risk and other price risk (such as equity instruments).

In practice, it is rarely the case that a single risk variable will change independently from other risk variable, there is usually interdependencies between risk variables. However, the sensitivity analysis disclosed below does not take into account the interdependencies between risk variables.

Foreign currency risk

The Company's exposure to the risk of changes in foreign exchange rates relates primarily to the Company's operating activities (when revenue or expense are denominated in a different currency from the Company's functional currency).

219

En lish Translation of Parent Com an Onl Financial Statement Ori'nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

The Company has certain foreign currency receivables to be denominated in the same foreign currency with certain foreign currency payables, therefore natural hedge is received. The Company also uses forward contracts to hedge the foreign currency risk on certain items denominated in foreign currencies. Hedge accounting is not applied as they did not qualify for hedge accounting criteria.

The foreign currency sensitivity analysis of the possible change in foreign exchange rates on the Company's profit is performed on significant monetary items denominated in foreign currencies as at the end of the reporting period. The Company's foreign currency risk is mainly related to the volatility in the exchange rates for USD and CNY. The information of the sensitivity analysis is as follows:

When NTD strengthens/weakens against USD by 1 %, the profit or loss for the years ended December 31, 2018 and 2017 is increased/decreased by NT$159 thousand and NT$226 thousand, respectively.

When NTD strengthens/weakens against CNY by 1 %, the profit or loss for the years ended December 31, 2018 and 2017 is increased/decreased by NT$0 thousand and NT$257 thousand, respectively.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's investments with floating rates categorized to financial assets at amortized cost.

The interest rate sensitivity analysis is performed on items exposed to interest rate risk as of the end of the reporting period, including investments with floating rates. At the reporting date, a change of 10 basis points of interest rate in a reporting period could cause the profit or loss for the years ended December 31, 2018 and 2017 to increase/decrease by NT$15 thousand and NT$114 thousand, respectively.

220

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

Equity price risk

The fair value of the Company's domestic listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Company's listed securities are classified under held for trading financial assets. The Company manages the equity price risk through diversification and placing limits on individual and total equity instruments. Reports on the equity portfolio are submitted to the Company's senior management on a regular basis. The Company's Board of Directors reviews and approves all equity investment decisions.

At the reporting date, a change of 1 % in the price of the listed equity securities, mandatorily measured at fair value through profit or loss (2017: held for trading) could increase/decrease the Company's profit or loss for the year ended December 31, 2018 and 2017 by NT$103 thousand and NT$112 thousand, respectively.

(4) Credit risk management

Credit risk is the risk that a counterparty will not meet its obligations under a contract, leading to a financial loss. The Company is exposed to credit risk from operating activities (primarily for accounts receivables and notes receivables) and from its fmancing activities, including bank deposits and other fmancial instruments.

Credit risk is managed by each business unit subject to the Company's established policy, procedures and control relating to credit risk management. Credit limits are established for all counter parties based on their fmancial position, rating from credit rating agencies, historical experience, prevailing economic condition and the Company's internal rating criteria etc. Certain counter parties' credit risk will also be managed by taking credit enhancing procedures, such as requesting for prepayment or insurance.

As of December 31 2018 and 2017, amounts receivables from top ten customers represent 100% and 96% of the total accounts receivables of the Company, respectively. The credit concentration risk of other accounts receivables is insignificant.

221

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

Credit risk from balances with banks, fixed income securities and other financial instruments is managed by the Company's treasury in accordance with the Company's policy. The Company only transacts with counterparties approved by the internal control procedures, which are banks and financial institutions, companies and goverrunent entities with good credit rating. Consequently, there is no significant credit risk for these counter parties.

The Company adopted IFRS 9 to assess the expected credit losses since January 1, 2018. The loss allowance of accounts receivable is measured at lifetime expected credit losses.

Financial assets are written off when there is no realistic prospect of future recovery (the issuer or the debtor is in financial difficulties or bankruptcy).

When the credit risk on debt instrument investment has increased, the Company will dispose that investment in order to minimize the credit losses. When assessing the expected credit losses in accordance with IFRS 9, the evaluation of the forward-looking information (available without undue cost and effort) is mainly based on the macroeconomic information and the credit loss ratio is further adjusted if there is significant impact from forward-looking information.

(5) Liquidity risk management

The Company's objective is to maintain a balance between continuity of funding and flexibility through the use of cash and cash equivalents, highly liquid equity investments. The table below summarizes the maturity profile of the Company's financial liabilities based on the contractual undiscounted payments and earliest contractual maturity.

Non-derivative fnancial liabilities

Less than 1 year 2 to 3 years 4 to 5 years
As ofDec 31, 2018
Other payables
$5,261
＄－
＄－
As of Dec 31, 2017
Notes payable
$535
＄－
＄－
Other payables
11,394
> 5years
Total
＄－
$5,261
＄－
$535
11,394

222

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

  • (6) F . arr values of financial mstruments

  • (a) The methods and assumptions applied in determining the fair value of financial instruments:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following methods and assumptions were used by the Company to measure or disclose the fair values of financial assets and financial liabilities:

  • I. The carrying amount of cash and cash equivalents, accounts receivables, accounts payable and other current liabilities approximate their fair value due to their short maturities.

  • II. For financial assets and liabilities traded in an active market with standard terms and conditions, their fair value is determined based on market quotation price (including listed equity securities, beneficiary certificates, bonds and futures etc.) at the reporting date.

  • arr value of financial mstruments measured at amortized cost

  • (b) F .

The carrying amount of fmancial assets and liabilities measured at amortized cost approximate their fair value.

  • (c) Fair value measurement hierarchy for fmancial instruments

  • I. Definition of fair value measurement hierarchy

All asset and liabilities for which fair value is measured or disclosed in the fmancial statements are categorized within the fair value hierarchy, based on the lowest level input that is significant to the fair value measurement as a whole. Level 1, 2 and 3 inputs are described as follows:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities that the entity can access at the measurement date

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3 - Unobservable inputs for the asset or liability

223

En lish Translation of Parent Com an Onl Financial Statement Ori·nall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization at the end of each reporting period.

II. Fair value measurement hierarchy of the Company's assets and liabilities

The Company does not have assets that are measured at fair value on a non-recurring basis. Fair value measurement hierarchy of the Company's assets and liabilities measured at fair value on a recurring basis is as follows:

As ofDecember 31, 2018

As ofDecember 31, 2018
Level 1 Level 2 Level 3 Total
Assets at fir value:
Financial assets at fir value
through proft or loss
Stocks $10,355 $- $- $10,355
As of December 31, 2017
Levell Level 2 Level 3 Total
Assets at fir value:
Financial assets at fir value
through proft or loss
Stocks $11, 1 72 $- $- $11, 1 72

There's no transfers between Level 1 and Level 2 for the years ended December 31, 2018 and 2017 .

  • III. Fair value measurement hierarchy of the Company's assets and liabilities not measured at fair value but for which the fair value is disclosed
As ofDecember 31 2018
Level 1 Level 2 Level3 Total
Investment property ( please refr to
Note 6(9)) $- $- $103,081 $103,081
As at December 31 201 7
Levell Level2 Level3 Total
Investment property ( please refr to
Note 6(9)) $- $- $1,464,349 $1,464,349

224

En lish Translation of Parent Com an Onl Financial Statement Ori inall Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

(7) Significant assets and liabilities denominated in foreign currencies

Information regarding the significant assets and liabilities denominated in foreign currencies is listed below:

Financial assets As ofDecember 31, 2018
Foreign
Foreign currencies
exchange rate
NTD
$518,301.45
30.650
$15,886
As of December 31, 2017
Foreign
Foreign currencies
exchange rate
NTD
$761,130.40
29.750
$22,644
5,652,547.36
4.547
25,702
Monetary items:
USD
Financial assets
Monetary items:
USD
CNY

The above information is disclosed based on the carrying amount of foreign currency (after conversion to functional currency).

(8) Capital management

The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust dividend payment to shareholders, return capital to shareholders or issue new shares.

225

En lish Translation of Parent Com an Onl Financial Statement Ori·nail Issued in Chinese CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD. NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS For the Years ended December 31, 2018 and 2017 (Expressed in Thousands of New Taiwan Dollars unless Othenvise Stated)

13. Other disclosure

(1) Information at significant transactions

  • (a) Financing provided to others: None.

  • (b) Endorsement/Guarantee provided to others: None.

  • (c) Securities held as of December 31, 2018: Please refer to Attachment 1.

  • (d) Individual securities acquired or disposed of with accumulated amount exceeding the lower ofNT$300 million or 20 percent of the capital stock: None.

  • (e) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20 percent of the capital stock: None.

  • (f) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20 percent of the capital stock: Please refer to Attachment 2.

  • (g) Related party transactions for purchases and sales amounts exceeding the lower of NT$100 million or 20 percent of the capital stock: None.

  • (h) Receivables from related parties with amounts exceeding the lower ofNT$100 million or 20 percent of capital stock: None.

  • C) 1 Denvatlve mstrument transactions: None. . .

(2) Information on investees: Please refer to Attachment 3.

(3) Information on investments in Mainland China: None.

226

En Iish Translation of Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD.

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures):

ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures): ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures): ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures): ATTACHENT 1: Securities held as of December 31, 2018 (Excluding subsidiaries, associates and joint ventures):
In Thousands of New Taiwan Dollars
Names of
companies held		 Type and name of securities Relationship
with the Company		 Financial statement account December 31, 2018 Note
Shares Carrying amount Percentage of
ownership(%)		 Fair value
Chuwa Wool Industry
Co., (Taiwan) Ltd.		 Cathay Financial Holdings Co., Ltd. - Common Stock
Cathay Financial Holdings Co., Ltd. - Prefrred stock B		 None
None		 Financial assets at fair value through profit or loss - Current
Financial assets at fair value through profit or loss - Current		 208,831
8,729		 $9,815
540		 $9,815
540

227

En lish Translation of Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD.

NOTES TO PARENT COMPANY ONLY FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands of New Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 2: Disposal of individual real estate with amount exceeding the lower of NT$300 million and 20 percent of the capital stock for the year ended December 31, 2018

ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018 ATTACHMENT 2: Disposal of individual real estate wit amount exceeding the lower of NT$300 million and 20 percent of the capital stock fr the year ended December 31, 2018
In Thousands of New Taiwan Dollars
Company Name ofproperties Transaction date Date of original
acquisition		 Carrying
amount		 Transaction
amount		 Status of
proceeds
collection		 Gain (Loss)
from disposal		 Counterarty Relationship Reason of disposal Price reference Other
commitments
Chuwa Wool Industry
Co., (Taiwan) Ltd		 Land and buildmg
located at Gongi ian
W. Rd , Qidu Dist ,
Keelung City		 December 2 I, 20 I 8 September I, 1965
March 28, 1984
July 2, 1992
」une 8, 1995
March I, 2015		 $574,937 $1,718,889 $171,889 $843,694 Li Wan Asset
Management
Consultant Co.,
Ltd		 Third Party
 Resource mtegratwn
and better usage of
asset		 Took valuat10n by Colliers
International and Cuslnnan
& Wakefield as refrence
and then negotiated by both
parties Valuatwn ts listed
below:
I. Valuat10n of
NT$1,669,694 by Colliers
International
2. Valuation of
NTl,636,810 by Cushman
& Wakefield		 None

Note I: Valuation is listed in the "Price reference" column if valuation is required when assets are disposed. Note 2: Transaction date refers to the contract date, payment date, closing date, resolution date, or earlier dates when counterparty and transaction amount can be determined

228

En lish Translation of Financial Statements Ori inall Issued in Chinese

CHUWA WOOL INDUSTRY CO., (TAIWAN) LTD.

NOTES TO P ARENT COMP ANY ONLY FINANCIAL STATEMENTS (Continued)

(Expressed in Thousands ofNew Taiwan Dollars unless Otherwise Stated)

ATTACHMENT 3: Names, locations and related information of investee companies (Not including investment in Mainland China):

In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars In Thousands of New Taiwan Dollars
Investor Company Investee Company Location Main business Original investment amount Investment as of December 31, 2018 Net income
(loss) of
investee		 Investment
income (loss)
recognized		 Note
Ending
balance		 Beginning
balance		 Shares Percentage of
ownership (%)		 Book value
Chuwa Wool Industry
Co., (Taiwan) Ltd.		 HCW Investment Co., Ltd.
CW Investment One Limited		 Taiwan
British Virgin Islands		 Investment
Investment holding		 $100,000

30,815		 ＄－ 10,000,000
100		 100%
100%
$99,583

12,222		 $(417)
(18,534)
$(417)

(18,534)		 Subsidiary
Subsidiary

229

  1. Impacts of latest financial difficulties encountered by company and its associated enterprises on company's financial standing as of date of printing of annual report: None.

230

Ⅶ 、 Review of Financial Conditions, Financial Performance, and Risk Management

1. Analysis of Financial Status

2018 vs. 2017 Financial Analysis

nalysis of Financial Status
2018 vs. 2017 Financial Analysis		 nalysis of Financial Status
2018 vs. 2017 Financial Analysis		 nalysis of Financial Status
2018 vs. 2017 Financial Analysis
Unit: NT$ thousands
Year
Item		 2018 2017 Difference
Amount %
Current Assets 1,960,085 1,336,739 623,346
46.63
Financial Assets at Amortized
Cost-current		 1,098,080
0		 1,098,080
100.00
Prepayments 160,268
758		 159,510 21,043.54
Non-current assets classified as held
for sale, net		 650,537
0		 650,537
100.00
Property、Plant and Equipment 2,716
78,033		 (75,317) (96.52)

Investment Property		 28,769
658,317		 (629,548) (96.53)
Intangible Assets 35
49		 (14) (28.57)
Other Assets 5,407
583		 4,824
827.44
Total Assets 1,997,012 2,073,721 (76,709) (3.70)
Current Liabilities 151,448
12,635		 138,813 1,098.64
Liabilities related to non-current assets
classified as held for sale		 145,900
0		 145,900
100.00
Deferred Tax Liabilities 898
146,431		 (145,533) (99.39)
Guarantee Deposits 2,543
3,670		 (1,127) (30.71)
Total Liabilities 154,889
162,736		 (7,847) (4.82)
Common Stock 920,000
920,000		 0
0.00
Capital Surplus 8,686
8,686		 0
0.00
Retained Earnings 913,484
982,299		 (68,815) (7.01)
Other Equity (47) 0 (47) (100.00)
Total Equity 1,842,123 1,910,985 (68,862) (3.60)
A. Analysis of deviation: (No analysis on differences lower than 20% and amounts less than NT$10
million)
(a) Net amounts of current assets, current liabilities and investment property: The change of
account title of investment property and relevant liabilities to noncurrent assets held for sale
and liabilities directly related to noncurrent assets held for sale caused increase in both
current assets and current liabilities and decrease in net amount of investment property and
deferred tax liabilities.
(b) Financial assets at amortized cost-current: Time deposits and investments in foreign debt
instruments are classified to this category as per International Financial Reporting Standard
9(IFRS 9).
(c) Prepayments: Prepaid for the purchase of real estate.
(d) Propery, plant and equipment: The change of account title of property used by ourselves
from fixed assets to investment property in 2018 caused a decrease in balance of property,
factory and equipment.
B. Countermeasures in the future: There is no material abnormality in overall performance of the
Companyand countermeasures will be unnecessary.

231

2. Analysis of Financial Performance

2018 vs. 2017 Operating Result Analysis

Unit: NT$thousands Unit: NT$thousands
Year Difference
Item 2018 2017 Amount %
Net Sales 264,022
263,220		 802 0.30
Cost of Sales 255,558
249,358		 6,200 2.49
Gross Profit 8,464
13,862		 (5,398) (38.94)
OperatingExpenses 77,916
29,026		 48,890 168.44
OperatingIncome(Loss) (69,452) (15,164) (54,288) 358.01
Total Non-operating Income and
Expenses		 (1,882)
8,304		 (10,186)
(122.66 )
Income (Loss) Before Income
Tax		 (71,334)
(6,860)
(64,474)
939.85
Net Income(Loss) (68,815) (6,872) (61,943) 901.38
Total Other Comprehensive Income
(Loss), Net of Tax		 (47)
0		 (47)
(100.00 )
Total Comprehensive Income (68,862) (6,872) (61,990) 902.07

  • A. Analysis of deviation: (no analysis on differences lower than 20% and amounts less than NT$10 million)

  • (a) Gross Profit: The drought in Australia has brought down the quantity of wool yields causing prices to reach all-time highs repeatedly. The increasing cost of wool products leaves almost no room for profit.

  • (b) Operating expenses: Resulted from increase in labor costs in 2018.

  • (c) Operating Income (Loss): Resulted from losses in sales of investment movable property.

  • B. Reasons of change of main business: There is no such circumstances.

  • C. Estimate of sales volume for next year and basis thereof, its impact on finance and business of the Company and countermeasures: Since the Company does not compile and announce financial forecast, estimate of sales volume is not applicable. There is no material abnormality in overall performance of the Company and countermeasures will be unnecessary.

3. Analysis of cash flow

  • (1) Cash flow analysis for the current year
low analysis for the current year low analysis for the current year low analysis for the current year low analysis for the current year
Unit: NT$thousands
Year
Item		 2018 2017 Change
percentage(%)
Operating Activities (224,285) (4,932) 4,447.55
Investment Activities (1,050,819) 8,606 (12,310.31)
Financing Activities (1,127) (45,944) (97.55)
Analysis for change item amount change more than 20%:
A. Operating activities: Resulted from an increase of losses in 2018 when compared
with that in 2017.
B. Investing activities: Resulted from categorizing time deposits and investments in
foreign debt instruments are classified as per International Financial Reporting
Standard 9(IFRS 9).
C. Financingactivities: Resulted from no distribution of cash dividend in 2018.

232

(2) Liquidity improvement plan: None.

  • (3) Cash flow analysis for the coming year

Unit ： NT$ thousands

Unit：NT$ thousands Unit：NT$ thousands
Cash Balance
(a)		 Net Cash
Provided by
Operating
Activities
(b)		 Net Cash
(Inflow)/
Outflow from
Investing and
Financing
Activities
(c)		 Cash Balance
(a)+(b)-(c)		 Plan for Cash Ending Balance
Shortage
Investment
Plan		 Financing
Plan
28,479 (308,062) (1,575,824) 1,296,241 - -
Analysis of cash liquidity for next year:
A. Operating activities: Net cash inflow from ordinary operations of the business.
B. Investing and financing activities: Cash inflow from sales of investment property.
Plan for cash ending balance shortage: Not applicable.

  1. Major capital expenditures and impact on financial and business: None.

  2. Reinvestment policy in the most recent year, reasons of profit or loss, improvement plan and investment plan for next year:

  3. (1) Reinvestment policy:

The reinvestment policyof the Company is to seek for appropriate long-term strategic investment targets in coordination with operation and development strategy, development needs in the future and diversification directions.

  • (2) Reasons of profit or loss and improvement plan of reinvestment:

Seeking for appropriate investment targets and no investment benefits generated yet.

  • (3) Investment plan for next year: None.

  • Analysis of risk management

(1) The impact of fluctuation of interest rate and exchange rate and inflation on company’s profit and loss and countermeasures: The amount of US currency needed for import is similar to that received from export. Fluctuation of exchange rate has little impact on the Company.

  • A. Interest rate fluctuation.

Risk of interest rate fluctuation of the company mainly comes from floating-rate investment of financial assets at amortized cost. An increase/decrease of 0.1% in interest rate may cause increase/decrease of NT$ 29 thousands in company’s profit. Fluctuation of interest rate has no significant impact on the Company

  • B. Exchange rate fluctuation.

The Company operates a business model of triangular trade. Procurement starts afer receipt of orders. The amount of US currency needed for import is similar to that received from export plus the short transaction time allow the Company to be less vulnerable to fluctuation of exchange rate.

  • C. Impact of inflation on company’s profit and loss.

Inflation is the change of overall economic environment and has little impact on company’s profit/loss.

233

  • (2) Policies of high-risk or high-leverage investments, lending of capital, endorcement and guarantees, and financial derivatives transactions, main reasons of profit-making or loss and counter-measures in the future:

    • A. Policies of high-risk or high-leverage investments, and financial derivatives transactions, main reasons of profit-making or loss and counter-measures in the future ： In the most recent year and as of the date of this annual report, the Company and subsidiary companies thereof did not have high-risk or high-leverage investments. The Company has included policies of financial derivatives transactions in “Procedures for Acquisition or Disposal of Assets,” while in the most recent year and as of the date of this annual report, there was no financial derivatives transactions.

    • B. Policies of lending of capital and endorcement and guarantees, main reasons of profit-making or loss and counter-measures in the future ： The Company has formulated “Operation Procedures for Lending of Capital” and “Operation Procedures for Endorcement and Guarantees” while in the most recent year and as of the date of this annual report there was no lending of capital, and endorcement and guarantees.

  • (3) Future research & development projects and corresponding budget: None.

  • (4) Effects of and response to changes in policies and regulations relating to corporate finance and sales: None.

  • (5) Effects of and response to changes in technology and the industry relating to corporate finance and sales: None.

  • (6) Impact on company’s crisis management as a result of changes in corporate reputation and countermeasure: In the event of damage to corporate reputation, the Company will immediately set up an emergent response team to take necessary actions.

  • (7) Expected benefits from, risks relating to and response to merger and acquisition plans: None.

  • (8) Expected benefits from, risks relating to and response to factory expansion plans: None.

  • (9) Risks relating to and response to excessive concentration of purchasing sources and excessive customer concentration: The Company’s business has been changed to triangular trade and customers have been deconcentrated. The concentration in purchase, with stable customer base and without inventory turnover pressure, imposes little risk on the Company.

  • (10) Effects of, risks relating to and response to large share transfers or changes in shareholdings by directors, supervisors, or shareholders with shareholdings of over 10%: To simplify the group investment structure, the Roo Hsing Co., Ltd.’s board of directors approved to transfer the equity of the five subsidiaries originally held by Sparkling Asia Limited and Keen Power Investments Limited, including Ho Jen Investment Ltd., Foowa Investment Limited, Chugen Investment Co. Ltd., Chuwa Japan Investment Ltd. and Yancien Investment Limited to Roo Hsing Global Co., Ltd. The equity transfer has no significant impact. In addition to this, the shareholdings of the Company’s directors have been stable during the last few years, and there have been no major transfers or swaps of shares.

  • (11) Effects of, risks relating to and response to the changes in management rights: None.

  • (12) Does the Company or its directors, supervisors, general manager, key managers, shareholders with more than 10% shareholding or subsidiaries have any pending lawsuits or disputes which might signifi cantly affect the shareholders’ equity or share prices? If yes, what are the facts, claims, filing date, major parties and status upon publishing of this Report: None.

  • (13) Other major risks: None.

  • Other significant matters: None.

234

、 Ⅷ Subsidiary Information and Other Special Notes

1. Subsidiaries

  • (1) Consolidated operating report

A. Subsidiaries chart

==> picture [392 x 189] intentionally omitted <==

B. Basic information of the subsidiaries

Unit ： NT$ thousands

Company Name Month of
Incorporation		 Address Paid-In
Capital		 Primary
Business
HCW Investment Co., Ltd. AUG. 2018


 9F-7 No.57 Fuxing North Rd,
Songshan District, Taipei City,
Taiwan (R.O.C.)		 100,000 Investments
CW Investment One Limited
JUL. 2018


 Intershore Chambers, Road
Town, Tortola, British Virgin
Islands		 30,815 Investment
holding
company

  • C. Shareholders in common of Chuwa Wool Industry Co., (Taiwan) Ltd. and its Subsidiaries with deemed control and subordination: None.

  • D. Scope of the subsidiaries

Scope of the subsidiaries
Relationship CompanyName Business Activities
Chuwa Wool Industry Co., (Taiwan) Ltd. Production and sales of wool related
products and leasing real estate
HCW Investment Co., Ltd. Investment activities
CW Investment One Limited Investment activities
  • E. Rosters of directors, supervisors, and presidents of Chuwa Wool Industry Co., (Taiwan) Ltd.’s subsidiaries

Unit ： Shares ﹔ %

subsidiaries Unit：Shares﹔% Unit：Shares﹔%
Company Name Title Name
(Note 2)		 Shareholding
Shares
(Investment
Amount)		 %
(Investment
Holding )
HCW Investment Co., Ltd. Chairman
Director
Director
Supervisor		 Chen, Shih-Hsiu (Note 1)
Chiang, Chung-Wei (Note 1)
Zhong, Jia-Hao (Note 1)
Hsu, Chung-Jung (Note 1)		 10,000,000
100%
CW Investment One Limited Director Chen, Shih-Hsiu (Note 1) 100 100%

Note 1: A representative of Chuwa Wool Industry Co., (Taiwan) Ltd.

Note 2: Directors and supervisors of each affiliated companies are as of the date of this annual report and appointed by the Company.

235

F. Operation overview of the subsidiaries

Unit：NT$ thousands；Shares Unit：NT$ thousands；Shares Unit：NT$ thousands；Shares Unit：NT$ thousands；Shares Unit：NT$ thousands；Shares Unit：NT$ thousands；Shares Unit：NT$ thousands；Shares Unit：NT$ thousands；Shares
Subsidiaries Primary
Business		 Initial
Investment
Cost		 Book Value Ownership Book Value
of Shares		 Market
Price		 Accounting
Method		 Most Recent Return of
the Year		 Hold the company
Share Amount
Shares Ownership
%		 Profit/
(Loss) on
Investment		 Dividend
Distribution
HCW
Investment
Co.,Ltd.		 Investments 100,000 99,583 10,000,000
100%		 99,583 - Equity
Method		 (417 ) - -
CW
Investment
One Limited		 Investment
holding
company		 30,815 12,222 100
100%		 12,222 - Equity
Method		 (18,534 ) - -

  • (2) Consolidated affiliation financial reports: Please refer to the most recent financial reports.

  • Private placement of company’s common shares: None.

  • Status of company common shares held by subsidiaries: None.

  • Other supplementary invormation: None.

Ⅸ 、 Any Events in 2018 and as of the Date of this Annual Report that Had

Significant Impacts on Shareholders’ Right or Security Prices as Stated in Item

3 Paragraph 2 of Article 36 of Securities and Exchange Law of Taiwan:

To integrate resource and make better use of assets, Chuwa Wool Industry Co., (Taiwan) Ltd. planned to dispose of the land and building in Gongjian W. Rd., Qidu Dist., Keelung City, resolved at the special shareholder’s meeting held on Noveber 28, 2018 and at the board meeting held on December 21, 2018. Signed a sale and purchase agreement with Tsuen Wan Asset Management Consultants Limited on December 21, 2018 for sale to the company at NT$1,718,889 thousands. The transfer procedure was completed on April 25, 2019.

236

Chuwa Wool Industry Co., (Taiwan) Ltd.

Director CHEN, SHIH-HSIU

237

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