CHC — Annual Report 2018

Jun 27, 2019

Stock Code: 4164

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CHC Healthcare Group

2018 Annual Report

Notice to readers

This English-version annual report is a summary translation of the Chinese version and is not an official document of the shareholders’ meeting. If there is any discrepancy between the English and Chinese versions, the Chinese version shall prevail.

Printed on May 28, 2019

Taiwan Stock Exchange Market Observation Post System: http://mops.twse.com.tw CHC Healthcare Group Annual Report is available at: http://www.chcg.com

I. Name, job title, telephone number, and email of the spokesperson and acting spokesperson:

Spokesperson Acting Spokesperson Name: Ming-Lun Lee Name: Yi-Chun Chen Title: Vice President Title: Vice President Tel.: (02)6619-9989 Tel.: (02)6619-9989 Email: ir@chcg.com Email: ir@chcg.com

II. Address and telephone number of the head office, branch office, and factory

Company Address: 6F, No. 366, Changchun Road, Jhongshan District, Taipei City Tel.: (02)6608-1999

Factory address: None

• The Group: CHC Healthcare Group (hereinafter referred to as “the Company” or “CHC Holdings”) and its invested companies, collectively referred to as “the Group,” engages in the distribution, repair and maintenance, and lease of the equipment for radiation oncology, neurology, medical imaging, ophthalmology, and surgery/surgical service, and the sale of related parts, consumables, and medicines.

III. Name, address, website, and telephone number of the stock transfer agency:

Name: Stock Transfer Department of CTBC Bank Website: https://www.ctbcbank.com Co., Ltd.

Address: 5F, No. 83, Sec. 1, Chungching S. Road, Tel.: (02)6636-5566 Chungcheng District, Taipei City

• IV. The name of the certified public accountants and the name, address, website, and telephone number of the CPA firm responsible for auditing the financial report of the most recent year:

Name of CPAs: Sheng-Wei Teng and Audrey Tseng

CPA Firm: PricewaterhouseCoopers (PwC) Website: http://www.pwc.tw

Address: 27F, No. 333, Sec. 1, Keelung Road, Tel.: (02)2729-6666 Xinyi District,Taipei City

• V. The name of overseas securities exchange and the securities inquiry methods:

None

VI. The website of the Company: http://www.chcg.com

Table of Contents

One. Letter to Shareholders ······················································································· 1 I. The 2018 business operation results ······································································· 1 II. The 2019 business plan outline ············································································ 2 III. The Company’s future development strategy ·························································· 4 IV. The impact of external competition environment, regulatory environment, and overall business environment ···················································································· 4 Two. Company Profile ······························································································ 6 I. Date of Incorporation ························································································ 6 II. Company History ···························································································· 6 Three. Corporate Governance Report ······································································· 10 I. Organization································································································· 10 II. Directors, Supervisors and Management team ························································ 12 III. Remuneration of directors, supervisors, President, and Vice President in the most recent year ······································································································· 21 IV. Implementation of Corporate Governance ···························································· 24 V. Information Regarding the Company’s Audit Fee and Independence ····························· 61 VI. Replacement of CPA ····················································································· 61 VII. If the Company’s President, General Manager, and/or executives in charge of finance and accounting worked for the CPA’s accounting firm or its affiliates in the most recent years, their names, job titles and the durations should be disclosed ····························· 62 VIII. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders ··· 62 IX. Relationship among the Top Ten Shareholders ······················································ 64 X. The number of shares of reinvested businesses concurrently held by the Company, the Company’s directors, supervisors, managers, and affiliates directly/indirectly controlled by the Company, and the consolidated shareholding ratio ········································· 65 Four. Capital Overview ··························································································· 66 I. Capital and Shares ·························································································· 66 II. Bonds ········································································································ 72 III. Preferred stock issuance ················································································· 74 IV. Global Depository Receipts ············································································· 74 V. Employee stock options and new restricted employee shares ······································· 74 VI. Status of New Shares Issuance in Connection with Mergers and Acquisitions ················· 76 VII. Financing Plans and Implementation ································································· 76 Five. Operational Highlights ···················································································· 77 I. Business Activities ························································································· 77 II. Market and Sales Overview·············································································· 98 III. Human Resources ······················································································· 112

IV. Environmental Protection Expenditure ······························································· 113 V. Labor Relations ··························································································· 113 VI. Important Contracts ····················································································· 117 Six. Financial Information ······················································································ 119 I. Five-Year Financial Summary ··········································································· 119 II. Five-Year Financial Analysis ··········································································· 123 III. Supervisors’ or Audit Committee’s Report in the Most Recent Year ···························· 126 IV. Financial Statements for the Years Ended December 31, 2018 and 2017, and Independent Auditors’ Report ························································································ 127 V. Standalone financial report of the company that has been audited by an accountant in the most recent year ······················································································ 127 VI. The impact of financial difficulty of the company and its affiliated enterprises on the financial status of the company detailed in the financial report of the most recent year and as of the annual report printing date ···························································· 127 Seven. Review of Financial Conditions, Operating Results, and Risk Management ··············· 128 I. Analysis of Financial Status ············································································· 128 II. Analysis of Operation Results ·········································································· 130 III. Analysis of Cash Flow ·················································································· 131 IV. Major Capital Expenditure Items ······································································ 132 V. Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year ····················································· 132 VI. Analysis of Risk Management ········································································ 133 VII. Other major matters ···················································································· 137 Eight. Special Disclosure ························································································ 138 I. Summary of Affiliated Companies······································································ 138 II. Private Placement Securities in the Most Recent Years ············································ 143 III. The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years ······································································································ 143 IV. Other supplementary information ····································································· 143 V. The impact of the events as stipulated in Subparagraph 2, Paragraph 3, Article 36 of the Securities Exchange Act on shareholder’s equity or security price in the most recent year and as of the annual report printing date ······················································ 143

One. Letter to Shareholders

Dear Shareholders:

Thank you for your support and guidance to CHC Healthcare Group, enabling the Group to continue growth in this highly competitive environment. With the efforts of all employees, the Group has achieved a record high performance in 2018 with a double-digit net profit, while the profitability is reported in both the domestic and overseas markets. The Group strongly believes that a solid economic foundation is the key to sustainable business operations, and will continue the growth streak by maintaining the upgoing momentum, with a view to creating the best interests for the shareholders and employees.

I. The 2018 business operation results

(1) Business plan implementation

The 2018 consolidated operating revenue was NT$ 2,507,466 thousand, higher than NT$ 2,117,116 thousand reported in 2017, mainly attributable to the growth of equipment sales; the 2018 profit for the year was NT$ 317,829 thousand, a significant increase from the previous year’s loss of NT$ 89,286 thousand, mainly due to the growth of equipment sales in 2018 and recognition of impairment loss of the available-for-sale financial assets – noncurrent in the last period, but not in current period. The consolidated operating results for the year 2018 are as follows:

Unit: NT$ thousand

the year 2018 are as follows:	Unit: NT$thousand
Item	2018
Operatingrevenue	2,507,466
Grossprofit	730,786
Operatingexpenses	270,805
Operating profit	459,981
Profit before income tax	368,169
Profit for theyear	317,829

(2) Budgeting

The Group did not disclose the 2018 financial forecast, so there is no need to disclose the budget execution.

(3) Revenue/expenditure and profitability

	Item	2018	2017
Financial structure and solvency	Debt ratio(%)	52.68%	53.61%
	Current ratio(%)	236.84%	168.65%
Profitability	Return on total assets(%)	3.72%	(0.18)%
	Return on stockholders' equity (%)	6.33%	(1.81)%
	Profit ratio(%)	12.68%	(4.22)%
	Earningsper share(NT$)	$2.32	$(0.62)

(4) R&D status

The Group is not in the manufacturing business and therefore does not have a dedicated R&D department. In the year 2018, however, the Group engaged in a technology R&D Project for industrial upgrade and innovation coaching, titled "Integrated Radiation Oncology Information Platform - IROIP ", hosted by the Industrial Development Bureau, Ministry of Economic Affairs, and accordingly the Group established an information platform in 2018 and the buildup will continue throughout 2020. With experiences in collaboration with the radiation oncology departments of major hospitals, the Group’s technical team has built an information platform that can integrate the Hospital Information System and Oncology Information System of patient treatment, to facilitate the radiotherapy for higher accuracy,

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timeliness and integrity.

II. The 2019 business plan outline

(1) Operation policy

1. Product development strategy

The Group has long been committed to introducing high-end medical equipment and technologies for improvement of the medical standards at home. In recent years, the Group has further engaged in precision medicine and successfully introduced the proton therapy system, which allows doctors to formulate treatment plans based on the physical conditions and treatment needs of individual patients, for maximized treatment effect and minimized side effects; in 2019, the Group introduced the MRI linear accelerator, a radiation therapy equipment that combines MRI with linear accelerator to provide timely and clear images for accurately identifying the cause of disease and eliminating tumors while protecting normal tissues to the maximum extent. In the future, the Group will continue the robust distributorship with international medical equipment manufacturers and actively recruit new products through visits to exhibitions, so as to enrich the product line, for which the existing sales channels will be efficiently performed to bring in further incomes for the Group, achieving a three-win situation among the Group, the patients and the hospitals.

2. Training programs

The Group strongly believes that quality service and professional staff are the Group’s greatest assets presenting the competitive niche. And for the introduction of new products as well as the expansion to new markets, the Group will replicate the existing successful business model in active recruitment of professional team members, providing training to facilitate high-speed growth while maintaining high-quality service and goodwill, to build our differentiated competitiveness. The Group has now successfully entered the China and Southeast Asia markets to provide relevant technical services and will continue to train the technical team for the overall business development.

3. Medical service guideline

In addition to a deep connection to the radiation oncology departments of major hospitals in Taiwan, the Group has also established a collaboration model with several large medical institutions in China. Based on our extensive experiences and abundant resources in the radiation oncology, we have helped improve their medical management process and increased their revenues. Meanwhile, we use the collaborative sites as exhibition points to negotiate other projects and take the opportunities to learn more about China's policy trends and market profiles in order to extend the depth and breadth of medical services and provide more comprehensive and multi-faceted integrated services in the China market.

In view of the lack of large-scale medical facilities in the Southeast Asian markets, the Group has been interested in the new territory. Currently, we have already initiated a partnership with Mayapada Hospital Group, an Indonesian local medical service institution, to assist its affiliated hospitals to establish radiation oncology departments. In the future, we will continue to provide one-stop comprehensive medical management services for cancer care, aiming to help Southeast Asian countries improve medical quality and cultivate medical talents.

4. Diversified expansion

In perception of population aging of Taiwan which makes long-term care an issue not to be ignored, the Group has planned to engage in this market sector and will take references from the standards of internationally renowned long-term care systems to create a comfortable, safe, elderly-oriented, and humanity-based environment, in hopes of creating a warm living environment that meets the needs of elders, breaking the stereotyped impression on elderly service agencies being dull and vigorless, and ultimately giving a boost to the quality and dignity of life of the elders at home.

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(2) Expected sales volume and its basis

Main Item	Growth Rate	Description
Radiation oncology and neuroscience related equipment sales	50%	Based on the estimated demands and growth in the Taiwan and China markets
Rental revenue	5%	Based on the current and estimated rentals
Service revenue	5%	Based on the estimated sales growth of equipment
Others	5%	Based on the estimated demands and growth of the Taiwan market

• (3) Key production and marketing policies

1. Distribution of full-range and diverse brands

We distribute products in a full range, with the radiation oncology treatment brands including Elekta, PTW Freiburg Gmb (PTW), GE, Ashland, C-RAD and IBA; the neuroscience brands including Elekta, Leica, Stryker, Sony, IMRIS, Crownjun, CAScination and Microtek; the medical imaging brands including Swissray and GE; the ophthalmology brands including Bausch+Lomb, Ellex, Leica, RZ Medizintechnik GmbH, Ellman, PhysIOL and Wexler; as well as the medical lead glass made by Nippon Electric Glass Co., Ltd. These are all internationally renowned brands, with high popularity and market share, which have continued R&D investment to develop new products, new functions and new technologies to initiate the market demands and maintain competitive edges.

2. Professional technical services

Our technical service department has dozens of technical engineers, medical physicists, and medical radiation professionals to help customers build medical settings faster and more accurately. From the medical site planning, design and construction, to the medical equipment installation and testing, departmental management and consulting services, medical technician training, and all the way through equipment maintenance and subsequent upgrade services, the job covers one-stop full-customization services, allowing customers to fully grasp market demands and ensure profitability and high market shares.

3. Opportunities for expansion in China and Southeast Asia

With the successful experience in Taiwan, the Group has taken the initiative to engage in the medical equipment markets in China and Southeast Asia which present great growth potential in the Asia Pacific region. Presently, subsidiaries have been set up in China, and the business model that combines sales and medical management service is taken to gain access to the local medical market. The sales side has given priority to the introduction of equipment for the radiation oncology and neuroscience treatment; while the medical management service is focused on collaboration with local major hospitals. The Group is also actively engaged in the Southeast Asian market, and currently working with Mayapada Hospital Group, an Indonesian local medical service institution, to provide more comprehensive and multi-faceted integrated services.

1. Equipment leasing and medical service establishment

With the rapid development of technologies, new medical equipment are constantly on the scene, and the demand for new ones is also on the rise. However, most of the new examination and treatment equipment is costly and, as a result, more and more medical institutions choose to partner with medical equipment leasing companies, instead of direct purchases which may require bank financing. This situation has spurred the development of the medical equipment rental market. Under a leasing program, not only can the cost of medical institutions be reduced, but also the equipment can be customized based on particular needs so that the equipment can be well integrated to achieve optimal utilization,

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plus the benefits from subsequent maintenance. In addition, the leasing program can also be combined with comprehensive services including departmental management consultation and medical technician training. The soft power of equipment leasing and medical technology collaboration provided by the Group is deeply favored by medical institutions, making a long-term collaboration with us strongly desirable, as well as more stable and comprehensive.

III. The Company’s future development strategy

• (1) Short-term business development plan

  1. Promoting precision medicine in the Taiwan market by introducing high-end equipment such as compact proton therapy system and MRI linear accelerator in a business model that combines sales and leasing, and establishing high-end cancer treatment centers to increase the Taiwan market share, ultimately leading to longer-term rental revenue.

  2. Engaging in the China market to sell equipment for radiotherapy and other related specialties, expanding the sales channels, and continuously enhancing the quality of technical services for higher China market share.

  3. Continuously expanding the medical equipment leasing business and technical collaboration services at home and abroad, by providing customers with professional consultation on medical equipment setup, medical technology training and transfer, departmental management optimization, and medical quality improvement, aiming to become the best choice for customers interested in joint ventures for medical businesses.

  4. Continuously training the professional technical team to provide installation and after-sales maintenance services for the overseas market, and through the timely technical support to ensure the best medical service quality for patients and enhance the Group’s competitiveness.

  5. 5.Continuously introducing the latest medical equipment and technology, seeking medical products demanded by other medical specialties, and extending the depth and breadth of medical channels, in order to develop diversified sales business and provide more comprehensive and multi-oriented medical technologies and services.

• (2) Long-term business development plan

  • 1.Expanding the current business to the Asia-Pacific medical markets as an overall deployment, by integrating upstream and downstream medical resources into a most complete product line and continuously improving high-value-added medical technology and services, so as to strengthen the leadership in the medical management collaborative services, and ultimately become an international medical equipment integration supplier.

  • 2.Externally, continuously introducing new competitive products to expand the service channels and increasing strategic partners to achieve economic scale, and internally, simplifying effectively the organizational structure to reduce various administrative costs, and focusing on resources integration to improve business performance and market competitiveness, ultimately becoming a healthcare service leader in the Asia Pacific region.

  • 3.Taiwan is currently in the stage of "aged society" and will gradually enter the "super-aged society". We are planning to develop the elderly welfare business with a differentiation strategy, by focusing on multi-level continuous long-term care, which takes into account the needs of the elderly at various stages. The goal is to create a living environment that can respond to different aging stages of the occupants. In the future, we will extend the institutional elderly care into a community-based and home-based care, and then further develop hardware and software for aging-minded products and information management systems through joint ventures with different industries to achieve economic scale and build our own brand for the greater healthcare market.

• IV. The impact of external competition environment, regulatory environment, and overall business environment At present, the domestic high-end or large-scale medical equipment is still mainly imported

• from Europe and the United States. Despite all the distributorship contracts signed with foreign

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suppliers, the Group’s operations can be affected if any changes to the distributorship happen. In view of this, the Group continues great efforts to create excellent sales performance and train the professional technical team for high-quality services so that the suppliers will rely on our performance and robust partnership will be maintained.

In terms of the regulatory environment, where the medical equipment is more strictly regulated and required to go through layers of reviews as well as inspection and registration required by the Ministry of Health and Welfare, the Group keeps an eye on the changes of enactment to ensure a stable business environment.

With the advent of an aging Taiwan society, as well as the spread of epidemic diseases around the globe and the increasing medical needs from emerging countries, fueled by the growing awareness of hygiene and health, the medical equipment industry is having a sound development environment as a whole. Moreover, the Taiwan government’s policy to promote the biotechnology industry, along with China’s 13th Five-Year Plan and the Indonesian government’s implementation of the local health insurance system, coupled with the basic needs of livelihood, all make the medical equipment industry less susceptible to the impact of economic volatility, bringing in a generally optimistic outlook, and therefore the potential for further growth is expected. So, in terms of the overall business environment, our attitude is very positive.

Sincerely Yours,

President: Pei-Lin, Lee

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Two. Company Profile

I. Date of Incorporation

Holding company: CHC Healthcare Group (CHC)

Registration date: November 27, 2009

II. Company History

• 1977 Establishment Chiu Ho Instruments & Reagents Co., Ltd. (the first subsidiary in the group) to engage in the sales business of professional medical equipment (such mobile X-ray machine, medical X-ray film processor), dealing with import, sales, installation and maintenance of the equipment.

• 1983 Distributorship with Tanaka X-ray, a Japanese company, for its medical equipment for the Taiwan market.

• 1984 Distributorship with IMS for its X-ray equipment and medical X-ray film processor for the Taiwan market.

• 1985 Exclusive distributorship with Nucletron, a Dutch company, for its radiotherapy equipment for the Taiwan market, entering the field of radiation oncology equipment, and later on introduction of the first-ever Nucletron remote after-loading intracavitary brachytherapy system to the Taiwan market.

• 1987 Exclusive distributorship with Villa, an Italian company, for its radiological diagnostic X-ray system for the Taiwan market. Exclusive distributorship with PTW, a German company, for its radiation quality verification system for the Taiwan market.

• 1992 Award of 1992 Asia Pacific Best Distributor from Nucletron, and the awarding streak goes on thereafter without interruption.

• 1995 Exclusive distributorship with SMV, a French company, for its nuclear medicine imaging system, starting to install and service the system for the Taiwan market.

• 1996 Award of Best Distributor from SMV. 1997 Exclusive distributorship with Elekta, a Swedish company, for its tumor treatment system for the Taiwan market, and in the same year, hiring Roger, a former senior engineer of Elekta as the chief engineer to build the Group's linear accelerator team for oncology treatment, a pioneer initiative of long-term appointing a foreign professional to train a local medical team.

• 1998 Starting to assist Taipei Municipal Wan Fang Hospital with the planning and construction of a space dedicated to radiation oncology, setting up the Elekta linear accelerator, Nucletron X-ray simulator, Nucletron remote after-loading intracavitary brachytherapy system, and 3D Treatment Planning System, as the first provider of equipment and service for the radiation oncology treatment in the Muzha and Shenkeng districts of Taipei.

• 1999 Inception of the Taichung office. Selling and installing Taiwan's first Elekta IMRT linear accelerator, and ever since sales of the product have been growing significantly year after year. Establishment of the Radiation Oncology Department with Cathay General Hospital, replacing the old cobalt 60 equipment, and installing the latest three-dimensional conformal radiation therapy and radiation oncology related equipment, to substantially expanded the cancer treatment business.

• 2000 Inception of Chiu Ho Medical System Co., Ltd, responsible for the sales business of radiotherapy equipment. Award of 2000 Asia Pacific Best Distributor from Elekta.

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Establishment of the New Life Tumor Treatment Center with Taoyuan Hospital of the Ministry of Health and Welfare, followed by installation of the latest Elekta Precise linear accelerator, Nucletron Simulix-HP X-ray simulator, and Plato 3D treatment planning system.

2003	Inception of the Kaohsiung office.
	Establishment of Chu Yan Instruments Co., Ltd. to engage in the dental products.
	Exclusive distributorship with Yoshida, a Japanese company, for its dental products for
	the Taiwan market.
2004	Exclusive distributorship with TomoTherapy, an American company, for its
	radiotherapy system for the Taiwan market.
	Exclusive distributorship with Imaging Sciences Incorporated, an American company,
	for its 3D dental X-ray tomography imaging system for the Taiwan market, and
	installing the first full-size system.
2006	Establishment of Chiu Ho Scientific Co. Ltd., as the exclusive distributor of Bausch &
	Lomb for its ophthalmic medical products for the Taiwan market, followed by the setup
	of the sales and technical teams dedicated to the ophthalmic products, along with the
	sales network covering the north, center and south of Taiwan.
	Establishment of Tomorrow Medical System Co., Ltd., dedicated to the distribution,
	installation and technical support of TomoTherapy products in the Taiwan market,
	followed by a pioneering installation of a TomoTherapy radiotherapy system in Chung
	Shan Medical University Hospital, Taichung.
2007	Exclusive distributorship with Lumenis for its ophthalmic and dental laser treatment
	products for the Taiwan market.
2008	Award of 2007 Asia Best Distributor from TomoTherapy
	Exclusive distributorship with Leica Surgical Microscope for its operating microscope
	products for the Taiwan market.
	Exclusive distributorship with Heine, a German company, for its ophthalmic equipment
	for the Taiwan market.
2009	Exclusive distributorship with Technolas, a German company, for its excimer lasers and
	femtosecond laser systems for the Taiwan market.
	Award of 2009 Best Performance Distributor from Philips.
	Award of 2008-2009 Asia Pacific Tumor System Best Performance Distributor from
	Elekta
	Establishment of Cheng Yeh Holdings Co., Ltd., with a capital of NT$ 100,000,
	followed by restructuring with other 16 subsidiaries including Chiu Ho Medical System
	Co., Ltd., to consolidate marketing efficacy for the Greater China market.
	CHC Healthcare Group’s acquisition of 99.88% of the Company's equity, becoming the
	parent company.
2010	Award of 2010 Asia Pacific Best Distributor of Medical Sales from Leica.
	Exclusive distributorship with C-RAD, a Swedish company, for the Taiwan market.
	Introduction of SAP ERP system to the Group, the first local medical equipment
	distributor using SAP R3 system.
2011	Exclusive distributorship with Carestream(Kodak) for its dental imaging system for the
	Taiwan market.
	Award of 2010 Asia Best Distributor from TomoTherapy.
	Restructuring of the CHC Healthcare Group, with the Group transferring all of its
	equity of the Company to the Group’s shareholders.
	Establishment of Guangzhou Chiuho Medical System Co., Ltd., a second-tier subsidiary
	invested through the overseas subsidiary CHC Healthcare (BVI) Limited.
	IPO in September, and listed in October as emerging stock.
2012	Exclusive distributorship with Swissray, a Swiss company, for its digital X-ray imaging
	system for the Greater China market.

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Exclusive distributorship with Yoshida, a hundred-year-old Japanese dental company, for the Greater China market.

Cheng Yeh Holdings Co., Ltd. renamed as CHC Healthcare Group.

Establishment of CHC Healthcare (HK) Limited, a second-tier subsidiary, through the overseas subsidiary CHC Healthcare (BVI) Limited. Establishment of J.AB Beauty Co., Ltd. responsible for the sales of dental products. Distributorship signed in October with Ion Beam Applications S.A. (IBA), a Belgian company, for its proton therapy systems for the Taiwan market. The subsidiary Chiu Ho Medical System Co., Ltd. signed a tripartite contract with IBA and Changhua Christian Hospital to jointly build an advanced proton therapy system, mainly for the exclusive distributorship for this newly added system to facilitate the subsidiary’s business expansion. Listed on the Taiwan Stock Exchange (TWSE) on October 24. Merger of the subsidiaries Green Medical Management Co., Ltd. and E Century Health Care Corporation, with the latter as the surviving company.

Merger of the subsidiaries Chiu Ho Instruments & Reagents Co., Ltd., St. Chien Ho Instruments Co., Ltd. and Hua Lin Instruments Co., Ltd., with the last one as the surviving company. 2013 Merger of the subsidiaries Fong-Lin Medical System Co., Ltd. and Tong-Lin Instrument Co., Ltd., with the latter as the surviving company. Merger of the subsidiaries Tung Ying Biotech Co., Ltd. and E Century Health Care Corporation, with the latter as the surviving company. Memorandum of understanding signed in February between the subsidiary Chiu Ho Medical System Co., Ltd. and Mackay Memorial Hospital to build the latest proton therapy system together. Memorandum of understanding signed in March between the subsidiary Chiu Ho Medical System Co., Ltd. and Taipei Medical University to build the latest proton therapy system together.

Exclusive distributorship signed in March with Croma Gesellschaft m.b.H., an Austrian company, for its intraocular lenses and artificial vitreous for the Taiwan market. Memorandum of understanding signed in April between the subsidiary Chiu Ho Medical System Co., Ltd. and Tri-Service General Hospital to build the latest proton therapy system together.

• Exclusive distributorship signed in April with Ellex Medical Pty. Ltd. for its ophthalmic laser products for the Taiwan market. Merger of the subsidiaries Chiu Ho Medical System Co., Ltd. and Chu Yan Instruments Co., Ltd., with the former as the surviving company. Distributorship with GE Medical Systems Taiwan Ltd. signed in September by the subsidiary Chiu Ho Medical System Co., Ltd. for the diagnostic imaging and molecular medical systems.

• 2014 Exclusive distributorship with Novadaq Technologies Inc., a Canadian company, signed in January jointly by the subsidiary Chiu Ho Medical System Co., Ltd. and the second-tier subsidiary Chiu Ho (China) Medical Technology Co., Ltd. for the intraoperative image-guided system (SPY[®] & PinPoint) for the Taiwan and China (including Hong Kong) markets.

• 2015 Medical memorandum of understanding signed in January with Lippo Group, an Indonesian company, on a joint venture to establish a medical management company as a healthcare platform between Taiwan and Indonesia for export of medical management, medicines and medical materials to Indonesia, sharing the future business opportunities from the healthcare reform. Acquisition of 100% equity of Shih-Lu Co., Ltd. by the subsidiary Medlink Healthcare Limited for the business needs to expand medical channels.

• Board resolution on split-off and assignment of the subsidiaries Shih-Lu Co., Ltd. and

-8-

	Hsing-Yeh Biotechnology Co., Ltd for internal restructuring.
2016	Sales agreement signed in May between the subsidiary Chiu Ho Medical System Co.,
	Ltd. and Changhua Christian Hospital for proton therapy systems, which will be of
	great benefit to the subsidiary for expanding its business.
	Board resolution to dissolve the subsidiary Shih-Lu Co., Ltd. for the Group’s
	investment restructuring and resource integration.
2017	Cooperation agreement signed in January between the subsidiary Tomorrow Medical
	System Co., Ltd., Taipei Medical University and Taipei Medical University Hospital for
	the proton therapy systems and related technical services, which will be of great benefit
	to facilitate the subsidiary’s business expansion.
	Liquidation of Shih-Lu Co., Ltd. completed in response to the Group’s restructuring to
	reduce the number of controlled companies.
	Co-host “2017 International Elderly Care Industry Leaders Forum” in May with
	Institute for Biotechnology and Medicine Industry
2018	Award of 2017 Asia Pacific Best Distributor from Leica, a German company.
	Award of 2017 Asia Pacific Best Distributor 4thPlace from PhysIOL, a Belgian
	company.
	Board resolution to dissolve the subsidiary J.AB Beauty Co., Ltd. in response to the
	Group’s restructuring to reduce the number of controlled companies.
	Establishment of the subsidiary Neusoft CHC Medical Service Co., Ltd added to the list
	of controlled companies for the development in the China market.
	Establishment of the subsidiary SenCare Healthcare Company added to the list of
	controlled companies for the expansion into the long-term care business.
	Certification of ISO 9001 Quality Management System and OHSAS 18001
	Occupational Health and Safety Management System.
2019	Merger of the subsidiaries Chiu Ho Scientific Co., Ltd. and Ho-Shin Instruments Co.,
	Ltd., with an application approved by the Taipei City Government on December 28,
	2018, to reduce the number of controlled companies in response to the corporate
	restructuring.

-9-

Three. Corporate Governance Report

I. Organization

• (1) Corporate structure

==> picture [451 x 595] intentionally omitted <==

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

Shareholders’
Meeting
Compensation Board of Audit Committee
Committee Directors
Corporate Social Audit Office
Responsibility
C i
President
President Office
General Back Office
Manager
Information
Dept.
Technical Service
Dept.
Overseas Strategic
Business Development
i G
Finance Dept.
Marketing
D
Administration
Radiation Dept.
Oncology Sales Business
&Medical Imaging Group I
System Dept.
HR and General
Affairs Dept.
Neuroscience
Dept. Legal Affairs
Dept.
Sales Business
Group II
Ophthalmology
Dept.
----- End of picture text -----

-10-

(2) Department operations

CHC Healthcare Group is operated in conjunction with more than ten subsidiaries at home and abroad. The Company aggregately supports the subsidiaries with logistic resources and, with the resources sharing and integration through the corporate platform, the management performance in enhanced. Meanwhile, CHC Healthcare Holding is charged to centrally controlls and supervises the subsidiaries for a higher operational efficacy. The Holding company is also responsible for the external capital market, investor relations and relevant financing matters.

Department	Main Functions
Audit Office	Planning, implementation and revision of internal control system. Formulation and implementation of annual audit plan. Formulation and implementation of unit self-inspection plan. Other matters that are enforced in accordance with the law.
President Office	Establish and maintain relations with investors and legal persons, visitor reception,and news event handlingand tracking.
Technical Service Dept.	Helping customers with equipment setup and training. Inspection and maintenance of equipment.
Finance Dept.	Planning and execution of corporate financial management and funding. Accounting work Tax work. Planning and consolidation of annual budget. Planning and execution of investment work. Customer credit checking and credit risk management. Planningof shareholders’ equity.
Administration Dept.	Administrative supports. Overseas procurement projects and purchase of important parts and consumables, and bargaining. Apply to the Ministry of Health and Welfare for GMP and product licenses for foreign medical equipment suppliers to ensure that the products are imported and installed in compliance with relevant domestic regulations.
HR & General Affairs Dept.	Planning and execution of human resources, recruitment, and training. General affairs. Domestic procurement projects and purchase of important parts and consumables, and bargaining.
Legal Affairs Dept.	Reviewing contracts, providing legal advice, handling legal proceedings, and compliance.
Strategic Development Business Group	Planning and setup of the corporate IT structure, to ensure data security control, process supervision and review, and continuous improvement of the IT hardware and software operations. Responsible for overseas operations and business development. Responsible for marketing and advertising, product catalogs, and support to sales activities.
Sales Business Group I 「Radiation Oncology & ImagingSystem」	Business promotion, market development, product sales and customer service.
Sales Business Group II 「Neuroscience & Ophthalmology」	Business promotion, market development, product sales and customer service.

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II. Directors, Supervisors and Management Team

(1) Directors and supervisors

1. Personal Profiles

II. Directors, Supervisors and Management Team (1) Directors and supervisors 1. Personal Profiles	II. Directors, Supervisors and Management Team (1) Directors and supervisors 1. Personal Profiles	II. Directors, Supervisors and Management Team (1) Directors and supervisors 1. Personal Profiles	II. Directors, Supervisors and Management Team (1) Directors and supervisors 1. Personal Profiles	II. Directors, Supervisors and Management Team (1) Directors and supervisors 1. Personal Profiles	II. Directors, Supervisors and Management Team (1) Directors and supervisors 1. Personal Profiles	II. Directors, Supervisors and Management Team (1) Directors and supervisors 1. Personal Profiles
															April 14,2019 Unit: share
Title	Nationality/ Place of Incorporation	Name	Gender	Date Elected	Term (Years)	Date First Elected	Shareholding when Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Experience（Education）	Other Position	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Director	British Virgin Islands	Princeton Healthcare Limited	－	2017. 06.13	3 years	2012. 01.06	28,257,983	20.20%	28,257,983	20.13%	0	0	0	0	N/A	N/A	N/A	N/A	N/A
Representative of a Juristic Person Director / President	ROC	Representative of Princeton Healthcare Limited: Pei-Lin, Lee	M	2017. 06.13	3 years	2009. 11.25 (note 2)	5,345,151	3.82%	5,682,151	4.05%	2,862,808	2.04%	28,257,983 (note 3)	20.13%	(1) Department of Medical Imaging and Radiological Science, Central Taiwan University of Science and Technology (originally known as Department of Radiological Technology , ChungTai Junior College) (2) MBA, Pacific Western University Department of Medical Imaging (originally known as Department of Radiology), (3) National Taiwan University Hospital (4) Sales Representative, Shimadzu Corporation	(1).Chairman / Director / Representative of juristic-person director, subsidiaries of CHC Healthcare Group (2) Chairman, Princeton Healthcare Limited / Meditron Group Limited / CHC Healthcare Group / AESolution Biomedical Co., Ltd. (3) Director, SMTH AG / Swissray Medical AG / Swissray International Inc. / HE-SHENG Limited / CHIEN-LIN Limited / Neusoft-CHC Office of Medical Intelligence & Services, Shenyang (4). Chairman / Representative of juristic-person director, Swissray Global Healthcare Holding Ltd. (5). Chairman, Central Taiwan University of Science and Technology (6).Representative of juristic-person director, Chengt-Hsin Biotechnology Co., Ltd (7)Vice President /Director, Dalian Neusoft Kangrui Jiuhe Medical Management Co., Ltd.	Director	Tien-Yi ng, Lee	Father and Son

-12-

Title	Nationality/ Place of Incorporation	Name	Gender	Date Elected	Term (Years)	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（Education）	Other Position	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Director	ROC	Tien-Ying, Lee	M	2017. 06.13	3 years	2009. 11.25	8,922,985	6.38%	8,922,985	6.36%	31,000	0.02%	0	0	(1) School of Medicine, China Medical University (2) A Pass on Exams for Doctors Held by Ministry of Examination (3) Resident, Department of Medicine, Mackay Memorial Hospital (4) Chief Resident, Division of General Medicine / Division of Infectious Diseases, Mackay Memorial Hospital	(1) Chairman / Representative of juristic-person director / Representative of juristic-person Supervisor, subsidiaries of CHC Healthcare Group (2). Chairman, Butterfield Management Group Limited / Swissray International Inc. / SMTH AG / Swissray Medical AG (3) Supervisor, AESolution Biomedical Co.,Ltd. (4) Chairman / General Manager / Representative of juristic-person director, Swissray Asia Healthcare Co., Ltd. (5) Chief Operating Officer / Representative of juristic-person director, Swissray Global Healthcare Holding Ltd. (6) Director, CHC Healthcare Group / Swissray Healthcare Holding (H.K.) Limited (7) Superintendent, YeeZen General Hospital (8) Representative of juristic-person director, CHENG-HSIN BiotechnologyCo., Ltd	Chairman	Pei-Lin Lee	Father and Son

-13-

Title	Nationality/ Place of Incorporation	Name	Gender	Date Elected	Term (Years)	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（Education）	Other Position	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Director	ROC	Chun-Shung, Huang	M	2017. 06.13	3 years	2012 .01.06	0	0	0	0	0	0	0	0	(1) School of Medicine, Kaohsiung Medical University (originally known as Kaohsiung Medical College ) (2) A Pass on Exams for Doctors Held by Ministry of Examination (3) Specialist, Department of Orthopaedics (4) President, Childhood Burn Foundation of The Republic of China (5) President, Hospice Foundation of Taiwan (6) Director, Taiwan Medical Center Association (7) Director, Taiwan Orthopaedic Association (8) Superintendent, Mackay Memorial Hospital (9) President, Mackay Memorial Hospital (10) Superintendent, Jen Ching Memorial Hospital	(1) Director, Kimma Foundation (2) Honorary Physician and Consultant, Mackay Memorial Hospital (3) Attending Physician, Department of Orthopaedics, Changhua Christian Hospital (4) Head Consultant / Physician, Department of Orthopaedics, YeeZen General Hospital	N/A	N/A	N/A
Juristic-person director	ROC	Yen-Hsin Investment Ltd.	－	2017. 06.13	3 years	2014. 06.17	177,262	0.13%	177,262	0.13%	0	0	0	0	N/A	N/A	N/A	N/A	N/A

-14-

Title	Nationality/ Place of Incorporation	Name	Gender	Date Elected	Term (Years)	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（Education）	Other Position	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Representative of a Juristic Person Director	ROC	Representative of Yen-Hsin Investment Ltd.: Yung-Shun, Chuang	M	2017. 06.13	3 years	2014. 06.17	423,108	0.30%	423,108	0.30%	0	0	0	0	(1) EMBA, National Taiwan University (2) President, AAEON Technology Inc.	(1) Representative of juristic-person director and Chairman, AAEON Technology Inc. / Onyx Healthcare Inc. / Yan-You Investment Inc. / AAEON Technology (Su Zhou) Inc. / Chang-Yang Technology Inc. (2) Chairman, AAEON Foundation / Yen-Hsin Investment Ltd. / Onyx Healthcare (Shanghai) Inc. / National Taiwan University of Science and Technology Innovation Co., Ltd. / Fu-Li Investment Inc. (3) Independent Director, Top Union Electronics Corp. / Everfocus Electronics Corp. (4) Director, Litemax Electronics Inc. / King Core Electronics Inc. / Sunengine Co., Ltd. / ATECH OEM INC. / Cirrus Data Insights Inc. / Allied Biotech Corp. / ONYX Healthcare USA, Inc. / ONYX Healthcare Europe B.V / AAEON Electronics Inc. / AAEON Development Incorporated / AAEON Technology (Europe) B.V. / AAEON Technology GMBH / Litemax Technology Inc. / Mcfees Group Inc. (5) Representative of juristic-person director, Bai-Da Wireless Inc. / Qiye Electron (Dongguan) Ltd. / Danyang Qiye Technology Co.,Ltd. / MACHVISION Inc. / Xac Automation Corp. / Top Union Electronics (Shanghai) Corp. / Taiyong Electron (Suzhou) Corp. / Swissray Global Healthcare Holding Ltd. / Asensetek Incorporation / Taipei Tech Star Venture Capital Co.,Ltd. / Kooidea Inc. / Feng-Shin Venture Capital Co.,Ltd. / MACHVISION (Dongguan) Inc Co., Ltd. / Allied Oriental International Ltd. / AAEON TechnologyCo., Ltd.	N/A	N/A	N/A

-15-

Title	Nationality/ Place of Incorporation	Name	Gender	Date Elected	Term (Years)	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（Education）	Other Position	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Independent Director	ROC	Gui-Duan, Chen	M	2017. 06.13	3 years	2012. 01.06	0	0	0	0	0	0	0	0	(1) PhD in Economic Law, Graduate School, China University of Political Science and Law (2) Master, Graduate Institute of Public Finance, National Chengchi University (3) CPA License holder (4) Chair, Department of Accounting, Feng Chia University (5) Chair, Corporate Governance Research Center (6) Legislative assistant, Budget Center, Legislative Yuan, Republic of China (Taiwan) (7) Standing Directors, Taiwan CPA Association	(1) Adjunct Professor, Department of Accounting, Feng Chia University (2) CPA, EnWise CPAs & Co. (3) Arbitrator, Chinese Arbitration Association / Taipei and Guangzhou Arbitration Commission (4) Supervisor, Swancor Holding Co., LTD (5). Independent Director, Lee Chi Enterprises Co., Ltd. / Chumpower Machinery Corporation	N/A	N/A	N/A
Independent Director	ROC	Chang-Jian, Ho	M	2017. 06.13	3 years	2012. 01.06	0	0	0	0	0	0	0	0	(1) School of Chinese Medicine, China Medical University (originally known as China Medical College) (2) A Pass on Exams for Doctors Held by Ministry of Examination (3) Certification specialist, department of radiology (4) Certification specialist, department of geriatrics and gerontology (5) Resident / Chief Resident / Attending Physician / Director, Department of Radiology, Heping Fuyou Branch, Taipei City Hospital (originally known as Taipei Municipal Hoping Hospital) (6) Adjunct Director, Engineering Affairs Office, Heping Fuyou Branch, Taipei City Hospital (originally known as Taipei Municipal Hoping Hospital) (7) Adjunct Attending Physician, Department of Medical Imaging (originally known as Department of Radiology), National Taiwan UniversityHospital	Special Physician, Heping Fuyou Branch, Taipei City Hospital	N/A	N/A	N/A

-16-

Title	Nationality/ Place of Incorporation	Name	Gender	Date Elected	Term (Years)	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（Education）	Other Position	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship	Executives, Directors or Supervisors Who are Spouses or within Two Degrees of Kinship
							Shares	％	Shares	％	Shares	％	Shares	％			Title	Name	Relation
Independent Director	ROC	Geng-Wang, Laiw	M	2017. 06.13	3 years	2014. 06.17	0	0	0	0	0	0	0	0	(1) Master, Department of Health Services Administration, China Medical University (2) School of Medicine, China Medical University (3) A Pass on Exams for Doctors Held by Ministry of Examination (4) Certification specialist, department of emergency medicine (5) Resident / Attending Physician, Department of Emergency Medicine, China Medical University Hospital (6) Resident, Department of Medicine, Taichung Hospital, Ministry of Health and Welfare (originally known as Taichung Hospital) (7) Attending Physician, Department of Emergency Medicine, Taichung Tzu Chi Hospital, Buddhist Tzu Chi Medical Foundation	The presidents, directors and juristic-person directors of the Company’s first-tier and second-tier subsidiaries An emergency room attending physician, also the Chief Secretary of the Superintendent’s Office and the Director of the Planning and Public Relations Office of the Yeezen General Hospital	N/A	N/A	N/A

Note 1: The date of appointment of the directors and supervisors as of the date of the annual report; the current directors were elected and appointed on June 13, 2017, the same date as shares held at the time of appointment. Note 2: The date Pei-Lin Lee as a natural person was first elected as the director and chairman of the Company.

Note 3: As Chairman Pei-Lin Lee held more than 50% of Princeton Healthcare Limited, the shares of the Company held by Princeton Healthcare Limited were listed as shares held by Chairman Pei-Lin Lee in the name of others.

-17-

1. Major shareholders of the institutional shareholders

April 14, 2019

Name of Institutional Major Shareholders Shareholders Pei-Lin Lee (75.2%), Su-Ching Chen (17.3%), Tien-Ying, Lee Princeton Healthcare Limited (6.4%), Tzu-Lan, Tung (1.1%) Yung-Shun Chuang (99.9%), Fu-Giun Chuang(0.04%) 、 Fu-Jie Yen-Hsin Investment Ltd. Chuang (0.04%) 、 Hui-Mei Huang (0.02%)

1. Major shareholders of the Company’s major institutional shareholders N/A

2. Professional qualifications and independence analysis of directors and supervisors

April 14, 2019

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
Princeton Healthcare Limited legal representative: Pei-Lin Lee														0
Tien-Ying,Lee														0
Yen-Hsin Investment Ltd. legal representative: Yung-Shun Chuang														2
Chun-Shung Huang														0
Gui-Duan Chen														2
Chang-Jian Ho														0
Geng-Wang Laiw														0

Note: Please tick the corresponding boxes that apply to the directors or supervisors during the two years prior to being elected or during the term of office.

1. Not an employee of the Company or any of its affiliates.

2. Not a director or supervisor of the Company or any of its affiliates. Not applicable in cases where the person is an independent director of the Company, its parent company, or any subsidiary as appointed in accordance with the Act or with the laws of the country of the parent or subsidiary.

3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of outstanding shares of the Company or ranking in the top 10 in holdings.

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in the preceding three subparagraphs.

5. Not a director, supervisor, or employee of a corporate shareholder who directly holds 5% or more of the total number of outstanding shares of the Company or who holds shares ranking in the top five holdings.

6. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares, of a specified company or institution which has a financial or business relationship with the Company.

7. Not a professional individual who is an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that provides commercial, legal, financial, accounting services or consultation to the Company or to any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the remuneration committee who exercises powers pursuant to Article 7 of the “Regulations Governing the Establishment and Exercise of Powers of Remuneration Committees of Companies whose Stock is Listed on the TWSE or Traded on the TPEx“.

8. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the Company.

9. Not been a person of any conditions defined in Article 30 of the Company Law.

10. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Law.

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(2) Management Team

(2) Management Team	(2) Management Team	(2) Management Team	(2) Management Team	(2) Management Team
												April 14,2019 Unit:Share
Title	Nationality	Name	Gender	Date Effective	Shareholding		Spouse & Minor Shareholding		Shareholding		Experience（Education）	Other Position	Managers who are Spouses or Within Two Degrees of Kinship
					Shares	％	Shares	％	Shares	％			Title	Name	Relation
GM	ROC	Pei-Lin Lee	M	2018.07.31	5,682,151	4.05%	2,862,808	2.04%	28,257,983	20.13%	(1) Department of Medical Imaging and Radiological Science, Central Taiwan University of Science and Technology (originally known as Department of Radiological Technology , ChungTai Junior College) (2) MBA, Pacific Western University (3) Department of Medical Imaging (originally known as Department of Radiology), National Taiwan University Hospital (4) Sales Representative, Shimadzu Corporation	(1) Chairman / Director / Representative of Juristic-person director, subsidiaries of CHC Healthcare Group (2) Chairman, Princeton Healthcare Limited / Meditron Group Limited / CHC Healthcare Group / AESolution Biomedical Co., Ltd. (3) Director, SMTH AG / Swissray Medical AG / Swissray International Inc. / HE-SHENG Limited / CHIEN-LIN Limited / Neusoft-CHC Office of Medical Intelligence & Services, Shenyang (4) Chairman / Representative of Juristic-person director, Swissray Global Healthcare Holding Ltd. (5) Chairman, Central Taiwan University of Science and Technology (6) Representative of Juristic-person director, CHENG-HSIN Biotechnology Co., Ltd (7) Vice President /Director, Dalian Neusoft Kangrui Jiuhe Medical Management Co.,Ltd.	N/A	N/A	N/A
GM, Greater China Region	ROC	Goung-Yu Chen (Note)	M	2012.12.06	0	0	0	0	0	0	Institute of Computer Science, Santa Clara University, California, USA Vice President,Greater China,GE Medical Group	Chairman and GM of the Company’s second-tier subsidiary.	N/A	N/A	N/A
Chief Executive Officer, Oncology Business Group	ROC	Yee-Min Jen	M	2014.05.16	29,000	0.02%	0	0	0	0	(1) M76, School of Medicine, National Defense Medical Center (2) PhD in Oncology, University of Manchester (3) Specialist in Radiation Oncology (4) Specialist, Taiwan Academy of Hospice Palliative Medicine (5) Resident / Chief Resident / Physician / Division Chief-Radiation Physics / Division Chief-Radiation Therapy / Director; Department of Radiation Oncology, Tri-Service General Hospital (6) Associate Professor / Professor; Radiation Oncology Discipline, National Defense Medical Center (7) Member of Cancer Committee and Director of Group for Quality Management , Tri-Service General Hospital (8)Director, OSCE, Tri-Service General Hospital (9) Associate Chair, School of Medicine, National Defense Medical Center (10) Department of Health and welfare Cancer Quality Certification Survey Committee (11) Director, Taiwan Society for Therapeutic Radiologyand Oncology	(1) Attending Physician, Dept. of Radiation Oncology / Vice Superintendent, YeeZen General Hospital (2) Adjunct Attending Physician, Dept. of Radiation Oncology, Tri-Service General Hospital) (3) Adjunct Professor; National Defense Medical Center (4) Director, Cardinal Tien Hospital	N/A	N/A	N/A

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Title	Nationality	Name	Gender	Date Effective	Shareholding	Shareholding	Spouse & Minor Shareholding	Spouse & Minor Shareholding	Shareholding	Shareholding	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
Deputy GM, Sales Business Group II / Strategic Development Business Group	ROC	Ming-Lun Lee	M	2011.01.01	99,750	0.07%	0	0	0	0	Department of Mechanical Engineering, National Taipei University of Technology	(1) Representative of Juristic-person director, subsidiaries of CHC Healthcare Group (2) Director, AESolution Biomedical Co.,Ltd. (3) Representative of Juristic-person director, Huede Healthtech Co., Ltd. (4).Supervisor, CHENG-HSIN Biotechnology Co., Ltd (5).Supervisor, Neusoft-CHC Office of Medical Intelligence & Services, Shenyang (6) Supervisor, Dalian Neusoft Kangrui Jiuhe Medical Management Co.,Ltd.	N/A	N/A	N/A
Deputy GM, Finance Accounting Dept. / Administration Dept.	ROC	Yi-Chun Chen	F	2011.02.01	34,000	0.02%	0	0	0	0	(1) Department of Accounting, Fu Jen Catholic University (2) Assistant Vice President, PricewaterhouseCoopers(PwC)Taiwan	(1) Representative of Juristic-person director / Representative of Juristic-person Supervisor , subsidiaries of CHC Healthcare Group (2).Director,AESolution Biomedical Co.,Ltd.	N/A	N/A	N/A

Note: Goung-Yu Chen, GM of Greater China Region, resigned on July 31, 2018.

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III. Remuneration of Directors, Supervisors, GM, and Deputy GM in the most recent year

(1) Remunerations of directors (including independent directors), 2018

Unit: NT thousands; thousand shares; %

Title	Name	Remuneration of Director	Remuneration of Director	Remuneration of Director	Remuneration of Director	Remuneration of Director	Remuneration of Director			Ratio of Total Remuneration (A+B+C+D) to Net Income(%)	Ratio of Total Remuneration (A+B+C+D) to Net Income(%)	Relevant Remuneratio	Relevant Remuneratio	n Received	byDirectors	Who are Also Employees	Who are Also Employees	Who are Also Employees	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(%)	Compensation Paid to Directors from an Invested Company Other than the Company’s Subsidiary
		Base Compensation (A)		Severance Pay (B)		Directors Compensation(C)		Allowa	nces (D)			Salary, Bonuses, and Allowances (E)		Severa	nce Pay (F)	Employee Compensation (G)
		The company	All companies in the consolidat ed financial statements	The company	Companies in the consolidat ed financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidat ed financial statements	The company	Companies in the consolidat ed financial statements	The company	Companies in the consolidate d financial statements	The company	Companies in the consolidated financial statements	The company		Companies in the consolidated financial statements		The company	Companies in the consolidate d financial statements
																Cash	Stock	Cash	Stock
Director	Princeton Healthcare Limited	0	0	0	0	800	800	0	0	0.25%	0.25%	0	0	0	0	0	0	0	0	0.25%	0.25%	N/A
Representative of juristic-person director, Chairman	Princeton Healthcare Limited Representative: Pei-Lin Lee	0	0	0	0	0	0	48	48	0.01%	0.01%	8,672	8,672	0	0	0	0	0	0	2.70%	2.70%	N/A
Director	Tien-YingLee	0	0	0	0	800	800	48	48	0.26%	0.26%	0	0	0	0	0	0	0	0	0.26%	0.26%	N/A
Director	Chun-ShungHuang	0	0	0	0	800	800	48	48	0.26%	0.26%	0	0	0	0	0	0	0	0	0.26%	0.26%	N/A
Director	Yen-Hsin Investment Ltd.	0	0	0	0	800	800	0	0	0.25%	0.25%	0	0	0	0	0	0	0	0	0.25%	0.25%	N/A
Representative of juristic-person director	Yen-Hsin Investment Ltd. Representative: Yung-Shun Chuang	0	0	0	0	0	0	48	48	0.01%	0.01%	0	0	0	0	0	0	0	0	0.01%	0.01%	N/A
Independent director	Gui-DuanChen	0	0	0	0	800	800	168	168	0.30%	0.30%	0	0	0	0	0	0	0	0	0.30%	0.30%	N/A
Independent director	Chang-Jian Ho	0	0	0	0	800	800	168	168	0.30%	0.30%	0	0	0	0	0	0	0	0	0.30%	0.30%	N/A
Independent director	Geng-WangLaiw	0	0	0	0	800	800	145	145	0.29%	0.29%	0	0	0	0	0	0	0	0	0.29%	0.29%	N/A
* Except as disclosed in the above table,remune		rations in the most recentyear received bythe directors					of the companies in the fin		ancial report for their s		ervices(such as consul		tation for non-employees): N/A

Remuneration Grading Table

	Remuneration GradingTable	Remuneration GradingTable
Range of Remuneration	Name of		Directors
	Total of (A+B+C+D)		Total of (A+B+C+D+E+F+G)
	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements
Less than 2,000,000 (TWD, same below)	Princeton Healthcare Limited, Pei-Lin Lee, Yen-Hsin Investment Ltd., Yung-Shun Chuang, Tien-Ying Lee, Chun-Shung Huang, Gui-Duan Chen, Chang-Jian Ho, Geng-Wang Laiw	Same as on the left	Princeton Healthcare Limited, Yen-Hsin Investment Ltd., Yung-Shun Chuang, Tien-Ying Lee, Chun-Shung Huang, Gui-Duan Chen, Chang-Jian Ho, Geng-Wang Laiw	Same as on the left
2,000,000 (incl)～5,000,000 (excl)	－	－	－	－
5,000,000 (incl)～10,000,000 (excl)	－	－	Pei-Lin Lee	Same as on the left
10,000,000 (incl)～15,000,000 (excl)	－	－	－	－
15,000,000 (incl)～30,000,000 (excl)	－	－	－	－
30,000,000 (incl)～50,000,000 (excl)	－	－	－	－
50,000,000 (incl)～100,000,000 (excl)	－	－	－	－
More than 100,000,000	－	－	－	－
Total	9 persons	Same as on the left	9 persons	Same as on the left

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(2) Remunerations of GM and Deputy GMs, 2018

												Unit: NT$thousands;thousand shares;%	Unit: NT$thousands;thousand shares;%	Unit: NT$thousands;thousand shares;%
Title	Name	Salary(A)		Severance Pay (B)		Bonuses and Allowances (C)		Employee Compensation (D)				Ratio of total compensation (A+B+C+D) to net income (%)		Compensation Paid to the President and Vice Presidents from an Invested Company Other than the Company’s Subsidiary
		The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company	Companies in the consolidated financial statements	The company		Companies in the consolidated financial statements		The company	Companies in the consolidated financial statements
								Cash amount	Stock amount	Cash amount	Stock amount
GM	Pei-Lin Lee (Note 1)	17,891	17,891	0	0	0	0	41	0	41	0	5.54	5.54	N/A
GM, Greater China	Goung-Yu Chen (Note 2)
CEO, Oncology Business Group	Yee-Min Jen
Deputy GM	Ming-Lun Lee
Deputy GM	Yi-Chun Chen

Note 1: President Pei-Lin Lee has been concurrently taking the GM position since July 31, 2018 Note 2: Goung-Yu Chen resigned his post as the GM of Greater China Region on July 31, 2018

Remuneration Grading Table

Gradation of remunerations paid to the Company’s GM and Deputy GMs	Name	Name
	CHC	All the companies in the financial report (E)
Less than 2,000,000 (TWD, same below)	Goung-Yu Chen	Same as on the left
2,000,000 (incl)～5,000,000 (excl)	Pei-Lin Lee, Ming-Lun Lee,Yi-Chu Chen	Same as on the left
5,000,000 (incl)～10,000,000 (excl)	Yee-Min Jen	Same as on the left
10,000,00 (incl)～15,000,000 (excl)	－	－
15,000,000 (incl)～30,000,000 (excl)	－	－
30,000,000 (incl)～50,000,000 (excl)	－	－
50,000,000 (incl)～100,000,000 (excl)	－	－
More than 100,000,000	－	－
Total	5 persons	Same as on the left

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(3) Remunerations of managers, 2018

				December 31,2018 Unit: NT$thousands;% Cash amount Total Ratio of the total to after-tax net profit (%) 41 41 0.01	December 31,2018 Unit: NT$thousands;% Cash amount Total Ratio of the total to after-tax net profit (%) 41 41 0.01	December 31,2018 Unit: NT$thousands;% Cash amount Total Ratio of the total to after-tax net profit (%) 41 41 0.01
	Title	Name	Stock amount	Cash amount	Total	Ratio of the total to after-tax net profit (%)
Manager	GM	Pei-Lin Lee(Note 1)	0	41	41	0.01
	GM, Greater China	Goung-Yu Chen (Note 2)
	CEO, Oncology Business Group	Yee-Min Jen
	Deputy GM	Ming-Lun Lee
	Deputy GM	Yi-Chun Chen

Note 1: President Pei-Lin Lee has been concurrently taking the GM position since July 31, 2018. Note 2: Goung-Yu Chen resigned his post as the GM of Greater China Region on July 31, 2018

• (4) Analysis of the ratio of the total remunerations paid to the directors, supervisors, GM and

• Deputy GMs by the Company and all the companies in the consolidated statements for the last two years to the after-tax net profit of the individuals or individual financial reports, and descriptions on the remuneration policy, standard and the procedure of combining and setting the remunerations, and their correlation with the operating performance and future risks.

• 1.Analysis of the ratio of the total remunerations paid to the directors, supervisors, GM and Deputy GMs by the Company and all the companies in the consolidated statements for the last two years to the after-tax net profit of the individuals or individual financial reports

Year Category	2017	2017	2018	2018
	CHC	Consolidated	CHC	Consolidated
Ratio of total director remunerations to after-tax netprofit	-10.51%	-10.51%	4.62%	4.62%
Ratio of total supervisor remunerations to after-tax netprofit	-0.06%	-0.06%	0.00%	0.00%
Ratio of total GM and Deputy GM remunerations to after -tax netprofit	-22.03%	-22.03%	5.54%	5.54%
1.Director remunerations: The remunerations were listed in accordance with the Corporate Charter and the results of performance evaluation by the Board of Directors (the Board), and attributable to a better 2018 after-tax net profit, the remunerations distributed are higher than the previous year, leading to higher ratios. 2.Supervisor remunerations: The Audit Committee was established after the 2017 director election to replace the supervisor role and, as a result, there was no supervisor remuneration for 2018, leading to less supervisor remunerations and lower ratios than that of 2017. 3.GM and Deputy GM remunerations: The overall remunerations were less due to resignation of managers,and also the after-tax net loss,leadingto lower ratios.

• 2.Remuneration policy, standard and the procedure of combining and setting the remunerations, and their correlation with operating performance and future risks.

• (1) Remuneration policy, standard and the procedure of combining and setting the remunerations, and their correlation with operating performance:

According to the first paragraph of Article 24.1 of the Corporate Charter, 0.05% from the balance, if any, as result of the yearly profit (i.e. pre-tax profit minus remunerations to employees and directors) minus accumulated loss, should allocated as employee remunerations and a maximum 5% as director remunerations. Since the 2018 after-tax profit is positive, the director remunerations were listed based on the said Charter provisions and performance evaluation by the Board; also based on the managers’ yearly and long-term performance goal as well as the remuneration policy,

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system, standard and structure, whereas the Company’s “Manager performance evaluation and remuneration standard” was taken as the guideline in reference to the overall corporate performance, future industrial risks and development trends, and in reference to the individual performance achievement rate and contribution to the corporate performance as a whole, so as to conclude these reasonable remunerations. The relevant performance evaluation and remuneration reasonableness were reviewed by the Compensation committee and the Board, while the remuneration system will be discussed and adapted from time to time based on the actual operational conditions and related laws and regulations, in order to balance the Company’s sustainable operations and risk control.

  - (2)Future risks: The Company has been stably running in the industry for over 40 years, with little changes of the directors, supervisors and business team. Also, The Company purchases liability insurance for its employees based on its business scope and legal requirement, so as to alleviate unknown risks.

• IV. Implementation of Corporate Governance

• (1) Board of Directors

A total of 6 (A) meetings of the Board of Directors were held in the previous period. The attendance of director and supervisor were as follows:

Title	Name	Attendance in Person (B)	By Proxy	Attendance rate (%)【B/A】	Remark
Representative of juristic-person director, President	Princeton Healthcare Limited Representative: Pei-Lin Lee	6	0	100%
Director	Tien-YingLee	6	0	100%
Director	Chun-ShungHuang	6	0	100%
Representative of juristic-person director	Yen-Hsin Investment Ltd. Representative: Yung-Shun Chuang	6	0	100%
Independent director	Gui-Duan Chen	6	0	100%
Independent director	Chang-Jian Ho	6	0	100%
Independent director	Geng-Wang Laiw	5	1	83%
Other matters documented: 1. If a Board meeting has one of the following incidents, the date, term, and agenda of the meeting as well as the comments from independent directors and handling of the comments should be explicitly stated: (1)Matters listed in Article 14.3 of the Securities and Exchange Act Date Term Agenda Comments from independent directors Handling of the comments March 21, 2018 5th meeting of 5th Board 1.CHC to recognize financial asset impairment Concurrence Case passed 2.CHC to raise fund with common stocks 3.CHC to change accountant due to the accounting firm’s internaljob rotation

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		4.CHC to make a loan to an affiliate
		5.CHC to make an endorsement for an affiliate
		6.CHC to revise the internal control document “Information System Cycle”
		7.The subsidiary Tomorrow Medical System’s joint construction project for the proton instrument
May 11, 2018	6th meeting of 5th Board	1.CHC to make a loan to an affiliate	Concurrence	Case passed
		2.CHC to make an endorsement for an affiliate
June 25, 2018	7th meeting of 5th Board	1.CHC to make a loan to an affiliate	Concurrence	Case passed
		2.CHC to make an endorsement for an affiliate
		3.CHC replacement of GM
August 13, 2018	8th meeting of 5th Board	1.CHC to make a loan to an affiliate	Concurrence	Case passed
		2.CHC to make an endorsement for an affiliate
October 24, 2018	9th meeting of 5th Board	1.CHC to make an endorsement for an affiliate	Concurrence	Case passed
		2.CHC to reinvest a subsidiary for 100% holding
November 12, 2018	10th meeting of 5th Board	1.CHC to make a loan to an affiliate	Concurrence	Case passed
		2.Proposal on the 2018 remunerations for employees and directors
		3.Supplementary statement on CHC reinvestment of the subsidiary for 100% holding

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3.The goal of enhancing the Board functions (e.g. setup of Audit Committee, improvement of information transparency) and its implementation of the current year and the most recent year.

• (1) Enhancing the Board functions

The Company has already established 3 independent directors - Mr. Gui-Duan Chen, Mr. Chang-Jian Ho, and Mr. Geng-Wang Laiw, who attended 80% of the Board meetings in 2018, and with their industrial knowledge, accounting and financial expertise, provided good suggestions concerning the internal control system as well as the business and finance related matters.

The Company has also established the Compensation Committee and Audit Committee, and purchased the liability insurance for all the directors, so as to enhance the corporate governance. In addition, the Company also arranges Board-related refresher programs for the directors so as to improve the professional capability of the Board.

(2)Improving information transparency

To fulfill the essence of corporate governance and improve the information transparency, the Company is committed to disclosing the operation and financial information on the annual report, corporate website and TSE Market Observation Post System (MOPS), and has established spokesperson mechanism, to ensure major information can be timely and appropriately disclosed, for the reference by shareholders and stakeholders.

• 4.Independent directors’ attendance of Board meeting in 2018 (personal, entrusted attendance, non-attendance)

Name	5th meeting of 5th Board	6th meeting of 5th Board	7th meeting of 5th Board	8th meeting of 5th Board	9th meeting of 5th Board	10th meeting of 5th Board
Gui-Duan Chen	Personal	Personal	Personal	Personal	Personal	Personal
Chang-Jian Ho	Personal	Personal	Personal	Personal	Personal	Personal
Geng-Wang Laiw	Personal	Personal	Entrusted	Personal	Personal	Personal

(2)Audit Committee

A total of 6 (A) Audit Committee meetings were held in the previous period. The attendance of the independent directors was as follows:

Title	Name	Attendance in Person(B)	By Proxy	Attendance rate (%) 【B/A】	Remark
Independent directors (Convener)	Gui-Duan Chen	6	0	100%
Independent directors	Chang-Jian Ho	6	0	100%
Independent directors	Geng-Wang Laiw	5	1	83%
Other matters documented: 1. Annual focus of the Audit Committee According to Article 3 of the “Audit Committee Charter”, the committee is mainly to supervise the following matters: 1. Fair presentation of the corporate financial statements. 2. Appointment(dismissal)of CPA and its independence andperformance.

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Date	Term	Agenda	Committee resolution	Handling of the Company’s opinions on the committe
March 21, 2018	5th meeting of 5th Board	1.CHC to recognize financial asset impairment	Concurrence	Case passed
		2.CHC individual and consolidated financial reports of 2017
		3.CHC to raise fund with common stocks.
		4.CHC to change accountant due to the accounting firm’s internal job rotation
		5.CHC to make a loan to an affiliate.
		6.CHC to make an endorsement for an affiliate.
		7.CHC to revise the internal control document “Information System Cycle”.
		8.The subsidiary Tomorrow Medical System’s joint construction project for the proton instrument
May 11, 2018	6th meeting of 5th Board	1.CHC to make a loan to an affiliate	Concurrence	Case passed
		2.CHC to make an endorsement for an affiliate.
June 25, 2018	7th meeting of 5th Board	1.CHC to make a loan to an affiliate.	Concurrence	Case passed
		2.CHC to make an endorsement for an affiliate.
August 13, 2018	8th meeting of 5th Board	1.CHC 2018 Q2 consolidated financial reports.	Concurrence	Case passed
		2.CHC to make a loan to an affiliate.
		3.CHC to make an endorsement for an affiliate.
b 24 21	9th meeting of	1.CHC to make an endorsement for an affiliate.		Case passed
Octoer , 08	5th Board	2.CHC to reinvest a subsidiary for 100% holding.	Concurrence

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November 12, 2018	10th meeting of 5th Board	1.CHC to make a loan to an affiliate.	Concurrence	Case passed
		2.Supplementary statement on CHC reinvestment of the subsidiaryfor 100% holding

• (2) Other matters which were not approved by the Audit Committee but were approved by two-thirds or more of all directors: N/A

• If there are independent directors’ avoidance of motions in conflict of interest, the independent directors’ names, contents of motion, causes for avoidance and voting should be specified: N/A

• Communications between the independent directors, the Company's chief internal auditor and CPAs (e.g. the material items, methods and results of audits of corporate finance or operations, etc.).

(1) Independent directors’ communication with internal audit supervisors:

Date	Approach	Issue	Result
March 21, 2018	Audit Committee	2017 Q4 internal audit report	Internal audit report approved, and presented bythe Audit Head at the Board meeting.
May 11, 2018	Audit Committee	2018 Q1 internal audit report	Internal audit report approved, and presented bythe Audit Head at the Board meeting.
August 13, 2018	Audit Committee	2018 Q2 internal audit report	Internal audit report approved, and presented bythe actingAudit Head at the Board meeting.
Novermber 12, 2018	Audit Committee	1. 2018 Q3 internal audit report 2. 2019 internal audit plan	1. Internal audit report approved, and presented by the Audit Head at the Board meeting. 2. Annual audit plan approved and submitted to the Board for resolution.

(2) Independent directors’ communication with CPA

Date	Approach	Issue	Result
March 21, 2018	Audit Committee	1. CPA presented the 2017 audit results to the independent directors and explained the interaction with the governing units. 2. CPA answered the questions raised in the meeting and discussed withthe attendees.	Concurrence with the CPA audit conclusions and the 2017 individual and consolidated financial statements, which were then submitted to the Board for review.
May 11, 2018	Audit Committee	1.CPA presentation on 2018 Q1 consolidated financial report to independent directors. 2.Issue discussionwithCPA.	CPA audit conclusion and 2018 Q1 consolidated financial report approved, and submitted to the Board.
August 13, 2018	Audit Committee	1.CPA presentation on 2018 Q2 consolidated financial report to independent directors. 2.Issue discussionwithCPA.	CPA audit conclusion and 2018 Q2 consolidated financial report approved, and submitted to the Board.
November12, 2018	Audit Committee	1. CPA presentation on 2018 Q3 consolidated financial report to independent directors. 2.CPA presentation on 2018 auditing stages to independent directors and communication with governing units. 3.Issue discussion with CPA.	1. CPA audit conclusion and 2018 Q2 consolidated financial report approved, and submitted to the Board. 2.CPA proposed key audit items in the auditing stages approved, and discussion of the audit conclusion and financial report is scheduled for March next year.

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(3) Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Companies”
Evaluation Item			ImplementationStatus	Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
1. Does the Company formulate and disclose the Corporate Governance Best-Practice Principles based on Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies?			The Company has formulated “Corporate Governance Best-Practice Principles” approved by Board resolution and disclosed on the Company’s website and the MOPS.	No major discrepancy
2.The Company’s shareholding structure and shareholders’ equity (1) Does the Company formulate internal procedure to deal with shareholders’ suggestions, doubts, disputes and litigation? (2)Does the Company have a list of the key shareholders who actually control the Company and the ultimate controllers of the key shareholders? (3)Does the Company establish and execute the risk control and firewall mechanism with affiliates? (4)Does the Company formulate internal regulations to prohibit internal staff from using unpublished information on the market for security transactions?	  		The Company convenes shareholders’ meetings to answer questions from shareholders face-to-face. At other times, there are spokespersons, acting spokespersons and President office investor relations unit to deal with shareholder issues or suggestions. The Company has dedicated stock affair specialist to deal with the issues listed on the left and has entrusted the China Trust Commercial Bank to handle share-related matters, and is able to hold on to the key shareholders who actual control the Company and the ultimate controllers of the key shareholders. The assets and finances between the Company and its affiliates are clearly defined and independent from each other, and the regulations of “Supervision and Governance of Subsidiaries”, “Regulations Governing the Financial Operations of Affiliates, Related Parties, Specific Companies and the Group”,“Procedures for Acquisition and Disposal of Assets”, “Procedures of Endorsement Guarantee”, “Procedures of Lending to Others” and “The Group Internal Transfer Pricing policy” are enacted to sufficiently implement risk control and firewall mechanism between the Company and its affiliates. In order to protect the shareholder equality and safeguard the fairness of the securities trading market, the Company has established the “Regulations Governing to Process Critical Internal Information and Prevent Internal Transactions”, which has been approved by the Board and disclosed on the Company’s website.	No major discrepancy No major discrepancy No major discrepancy No major discrepancy

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Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
3.Composition and duties of the Board (1)Does the Board formulate the policy of diversified board members and implement it? (2) In addition to the Compensation Committee and Audit Committee as required by the laws, will the Company voluntarily set up other functional committees? (3) Does the Company formulate evaluation on the Board performance and implement it on an annual basis?			The Company has formulated the “Code of Practice for Corporate Governance” which has been approved by the Board and implemented to organize a diversified Board member structure. The Board has seven seats, of which three are for independent directors. Since the Company is engaged in the medical business, there are five directors with medical background, one with financial background and one with medical IT background. The Board member structure meets the needs for corporate development and makes the Board effectively functional. Diversified Board member structure:	No major discrepancy
	Diversification Director Name Sex Operational judgment Accounting and financial analysis Management Crisis handling Industrial knowledge International vision Leadership Decision making Princeton Healthcare Limited Representative:Pei-Lin Lee M         Tien-YingLee M        Chun-ShungHuang M        Yen-Hsin Investment Ltd. Representative: Yung-Shun Chuang M         Gui-Duan Chen M        Chang-Jian Ho M        Geng-WangLaiw M        The Company has not set up other functional committees yet. The Company will set up other functional committees based on actual needs.  The March 24, 2016 Board resolution approved the “Board Performance Evaluation” for the internal evaluation annually by the Board meeting at the end of theyear;while the external evaluation byan independent No major discrepancy

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Evaluation Item			ImplementationStatus	Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
			agency or professionals should be given at least once in every three years, along with the annual evaluation of the year. The 2018 evaluation was conducted internally and externally. For the external one, the Company consigned the Taiwan Corporate Governance Association to conduct an independent evaluation of the Board functionality (including performance). The consignee reviewed relevant documents and online questionnaires prepared by the Company and, on January 17, 2019, sent three experts to the Company for on-the-spot survey and interviews with the Company's chairman, independent directors, board members, and board administration, and then concluded a report on February 12, 2019. With abundant experiences of corporate governance evaluation, the Association reviewed the Board from the perspectives of corporate planning, execution, supervision and assessment, as well as the collaboration between the Board and the managing sectors, covering the following eight major facets: 1. Board structure. 2. Board instructions 3. Board authorization. 4. Board supervision. 5. Board communication. 6. Internal control and risk management. 7. Board self-discipline. 8. Others such as Board meetings and support mechanism. External suggestions: To accommodate the Audit Committee and Compensation Committee in the regular evaluation, and submit the results to the Board, so as to enhance the committee functions. Also, all the Board members made an annual self-evaluation in January 2019, and concluded that all the members were actively participating the Board meetings,and thereforegraded as excellent.

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Evaluation Item			ImplementationStatus	Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
			The internal and external evaluation results were submitted to the Board on March 22,2019.
(4) Does the Company regularly evaluate the CPA independence?			The company evaluates the CPA independence at the end of each year by the Board based on the 11 independence indicators (including independent appointment; CPA communication with managing levels and related parties, and presenting reports). And the CPA presents a written statement of independent practice along with the questionnaire to the Board for review. On November 12, 2018, the Board approved the 2018 CPA independence evaluation. The CPA evaluation questionnaire is shown on Page 37of this document.	No major discrepancy
4. Does the Company being publicly listed establish dedicated or adjunct unit or personnel for the corporate governance (including but not limited to providing information required by the directors and supervisors, preparing legally required board meetings and shareholders’ meetings, processing corporate registration and change of registration, and producing the minutes of board meetings and shareholders’ meetings)?			The Company has the Finance/Accounting Department as an adjunct unit for the corporate governance, where Yi-Chun Chen, the Deputy GM of the department assumes the head of corporate governance, safeguarding shareholders' rights and strengthening the Board functions. She has more than three years of experiences in finance, stock affairs and relevant proceedings. The main duties of corporate governance are providing information required by the directors to conduct business, assisting the directors with legal compliance, handling corporate registration and change of registration, preparing agenda and producing minutes of Board meetings and shareholders’ meetings, and arranging refresher programs for the directors. The 2018 operations were submitted to the Board on March 22, 2019, listed as follows: 1.Regular notification to the Board members of the revision and addition of the latest statutory regulations concerning the corporate business and governance. 2. Arrangement of meetings for the independent directors, internal audit supervisors and the CPS to discuss and communicate, so that the independent directors can better understand the Company's financial, business and internal control situations. 3.Arrangement of refresher programs for all directors. 4.Report to theBoard,independent directors andAudit Committee on	No major discrepancy

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Evaluation Item			ImplementationStatus	Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
			the status of corporate governance, and making sure the shareholders’ meetings and Board meetings are convened in compliance with the laws and the corporate governance rules. 5.Compiling the resolutions of Board meetings and publishing them accordingly, to ensure the legality and correctness of key messages, for the equality of trading information that investors rely on. 6.Notification to the Board members 7 days prior to the Board meeting along with the agenda prepared, and reminding the members of any conflict of interest avoidance in advance, and producing the meeting minutes within 20 days after the meeting. 7.Execution of the annual board evaluation based on the “Board Performance Evaluation” to fulfill the corporate governance, along with the external evaluation by an independent agency or professionals at least once in every tress years. 8.Notice of the shareholders’ meeting and pre-registration within the legal deadline, preparing the agenda, producing meeting minutes, and change of corporate registration based on the amendment of Corporate Charter and new elected directors. 9.For investor relations, planning to arrange two briefings each year to communicate and exchange ideas with institutional investors or general shareholders, so that investors can obtain sufficient information to evaluate the Company's reasonable value in the capital market for the protection of the shareholders' rights. 10.Liability insurance for the directors and managers to alleviate major damages to the Company and shareholders due to business negligence.

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Evaluation Item			ImplementationStatus	Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
5. Does the Company establish a communication channel and build a designated section on its website for stakeholders (including but not limited to shareholders, employees, customers, and suppliers), as well as handle all the issues they care for in terms of corporate social responsibilities?			The Company recognizes that good relationship with the stakeholders is the foundation of corporate growth, and the CSR Committee defines the stakeholders based on the GRI Glossary and identifies the objects covered in the unit operations, and concludes the following four categories of stakeholders: customers, suppliers, investors, and employees. In 2015, the official “Stakeholders’ Section” of the corporate website was established to explicitly list the contact windows for different stakeholders, in hopes of accurately holding on to stakeholders’ expectations for the Company and properly responding to the issues of their concerns so that the stakeholder interests can be further valued and protected.	No major discrepancy
6. Does the Company consign a professional agency to handle the affairs of shareholders’ meetings?			The Company has assigned Chinatrust Commercial Bank Stock Agency to handle the affairs of shareholders’ meetings.	No major discrepancy
7. Information disclosure (1) Does the Company set up a website to disclose the financial and governance information? (2) Does the Company takes other disclosure approaches (e.g. English website, dedicated staff for information collection and disclosure, spokesperson mechanism, publishing briefings for corporate investors on the corporate website)?	 		The Company's financial and corporate governance information is published on the MOPS as required by the competent authorities, and disclosed on the corporate website as well. The Company has dedicated staff to maintain, collect and disclose the corporate information, which is announced through a single window by the corporate spokesperson, acting spokesperson or investor relations office. The information of irregular briefings for corporate investors is also published as required by the competent authorities and published on the investors section of the corporate website in Chinese and English for the reference byshareholders.	No major discrepancy No major discrepancy

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Evaluation Item	ImplementationStatus	ImplementationStatus	ImplementationStatus	Deviations from “Ethical Corporate Management Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
8. Does the Company provide other major information conducive to the understanding of the corporate governance (including but not limited to employee rights, employee care, investor relations, supplier relations, stakeholder rights, refresher programs for directors and supervisors, implementation of risk management policies and risk measurement standards, implementation of customer policies, liability insurance for the directors and supervisors)?			(1) Employee rights and care: The Company attaches great importance to the employee interests by having established an Employee Welfare Committee to promote various welfare measures and activities; implemented a pension system; encouraged employees to participate in various training; provided labor insurance, national health insurance and group insurance. (2) Investor relations: The Company publishes financial and business information as required by the statutory regulations to protect the rights of investors and fulfill the responsibility to shareholders. (3) Supplier relations: The Company maintains a good communication channel with suppliers for smooth interaction. (4) Stakeholder rights: The stakeholders have access to dialogue with us for communication and suggestions so as to protect their legal rights. (5) Refresher programs for directors (2018) are shown on Page 38. (6) Implementation of risk management policies and risk measurement standards: The Company is focused on its dedicated business, and complies with relevant laws and regulations to set up corresponding policies and standards for implementation, so as to minimize any possible risks. (7) Implementation of customer policies: The Company actively handles customer complaints and appropriately indentifies the causes and responsibility attribution, to ensure customer satisfaction. (8)Liability insurance for directors: The Company has procured liability insurance for the directors to alleviate major damages to the Company and directors due to business negligence.	No major discrepancy
9. Concerning the results of the recent corporate governance evaluations released by the TWSE Corporate Governance Center (CGC), explain improvement that has been done, and issues yet to be dealt with for improvement. Based on the results of the 4th Corporate Governance Assessment released in April, 2018, the improvements that have been done and yet to be done are shown on Page36.

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The results of the corporate governance review of the most recent year

According to the results of the fourth (2017) corporate governance evaluation released by the TWSE CGC in April, 2018, the Company was ranked the top 6% to 20% of all listed companies. Based on the evaluation indicators, the following table highlights the improvements that have been done and the measures to take for issues yet to be dealt with:

the top 6% to 20% of all listed companies. Based on the evaluation indicators, the following table highlights the improvements that have been done and the measures to take for issues yet to be dealt with:	the top 6% to 20% of all listed companies. Based on the evaluation indicators, the following table highlights the improvements that have been done and the measures to take for issues yet to be dealt with:
(1) Improvements that have been done
Indicators	Improvements
Does the Company establish a compliant Audit Committee?	The Company set up the first Audit Committee after the election of Board members in the 2017 Shareholders’ Meeting.
Does the Company convene at least 6 Board meetings in the year of evaluation?	The Company convened a total of six Board meetings in the fiscal year 2017.
Does the Company regularly (at least once a year) execute the Board performance evaluation, and publish the result on the corporate website or annual report?	The Company conducted the first Board performance evaluation in 2017, and the result was submitted to the Board in March 2017, and then disclosed on the corporate website and the annual report.
Does the Company establish an English website for investors to browse?	The Company’s English website was established and officially online in 2017.
(2) Measures to take for issues to be dealt with
Indicators	Measures to take
Does the Company adopt case-by-case voting on the proposals in regular shareholders’ meetings, and document theaffirmative, opposing and abstention votes on the meeting minutes?	The Company started the electronic voting in the 2018 Shareholders' Meeting, and documented the affirmative, opposing and abstention votes on the meeting minutes.
Does the Company publish the affirmative, opposing and abstention votes on the proposals in the regular shareholders’ meetings on the designated Internet information reporting website,on the dayof the meeting?	The Company started to adopt electronic voting in the 2018 Shareholders’ Meeting, and the affirmative, opposing and abstention votes on the proposals were published on MOPS.
Does the regular shareholders’ meeting adopt electronic voting?	The Company started electronic voting in the 2018 Shareholders’ Meeting.

According to the results of the fifth (2018) corporate governance evaluation released by the TWSE CGC in April, 2019, the Company was ranked the top 6% to 20% of all listed companies.

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CPA independence evaluation questionnaire

Professionalism & Independence	Yes	No	Description
1. Does the CPA take an absolutely independent stand when carrying out the internal control check and financial statements certification for theCompany?	
2. Is the CPA equipped with adequate and appropriate professional capability and experience to effectivelycarryout the abovejobs?	
3. Does the CPA comply with the Norm of Professional Ethics for CPA and have no direct or indirect interest in theCompany which mayaffect its independence?	
4. Does the CPA timely communicate with the Company’s directors, supervisors, managers and relatedparties?	
5. Does the CPA do due diligence to provide the Company with full and correct services and/or suggestions?	
6.Is theCPA not a director or independent director of theCompanyor its affiliates?	
7.Is theCPA not a shareholder of theCompanyor its affiliates?	
8.Is theCPA not on thepayroll list of theCompanyor its affiliates?	
9. Is the CPA doing the auditing service for the Company not for the seventh consecutive year?	
10. Does the CPA confirm that his PWC accounting firm is compliant to the norm of independence?	
11. Is the joint-practice CPA at PWC not taking any of the Company’s job positions as a director, manager or others that may significantly affect the audit operations, within a year after resigningfrom auditingthe Company?	

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Director refresher programs 2018

Title	Name	Date	Program name	Hours
Independent director	Gui-Duan Chen	02/26/2018	Understanding Consumer Protection Law from the Perspectives of Consumer Disputes	2
Representative of juristic-person director	Yung-Shun Chuang	04/11/2018	Corporate Governance Forum – Family Business Heritage	3
Director	Chun-Shung Huang	05/04/2018	Conference on Insider Trading Prevention 2018	3
Independent director	Geng-Wang Laiw	05/08/2018	Summit of Listed Companies on New Corporate Governance Blueprint	3
Independent director	Chang-Jian Ho	05/08/2018	Summit of Listed Companies on New Corporate Governance Blueprint	3
Representative of juristic-person director	Yung-Shun Chuang	05/15/2018	Corporate Sustainability & Evergreen	2
Representative of juristic-person director	Yung-Shun Chuan	06/15/2018	New Southbound Episode II: Marching to South Asia	2
Independent director	Chang-Jian Ho	07/10/2018	Conference on Equity Transaction Compliance for Internal Persons of Listed and Unlisted PublicOffering Companies	3
Independent director	Geng-Wang Laiw	07/13/2018	Conference on Equity Transaction Compliance for Internal Persons of Listed and Unlisted PublicOffering Companies	3
Representative of juristic-person director	Yung-Shun Chuan	07/16/2018	Innovative digital economic value equation and Taiwan industrial strategy and practice for Boost	2
Director	Chun-Shung Huang	07/24/2018	Conference on Equity Transaction Compliance for Internal Persons of Listed and Unlisted PublicOffering Companies	3
Director	Tien-Ying Lee	07/27/2018	Conference on Equity Transaction Compliance for Internal Persons of Listed and Unlisted PublicOffering Companies	3
Representative of juristic-person director	Pei-Lin Lee	07/27/2018	Conference on Equity Transaction Compliance for Internal Persons of Listed and Unlisted PublicOffering Companies	3
Independent director	Gui-Duan Chen	08/22/2018	Audit Bulletin No. 59~60	3
Independent director	Gui-Duan Chen	09/17/2018	How to deal with the law of moneylaundering prevention	3
Director	Tien-YingLee	09/28/2018	Corporate Governance and Corporate SustainabilityManagement Workshop	3
Representative of juristic-person director	Pei-Lin Lee	09/28/2018	Corporate Governance and Corporate Sustainability Management Workshop	3
Representative of juristic-person director	Yung-Shun Chuan	10/15/2018	The 12th Taipei Corporate Governance Forum	6

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• (4) The structure, duties and operations of Compensation Committee, if established, should be disclosed

1. Compensation Committee member profile

Identify (Note 1)	Criteria Name	With more than 5 years of work experience and following professional qualification	With more than 5 years of work experience and following professional qualification	With more than 5 years of work experience and following professional qualification	Independence compliance (Note 2)	Independence compliance (Note 2)	Independence compliance (Note 2)	Independence compliance (Note 2)	Independence compliance (Note 2)	Independence compliance (Note 2)	Independence compliance (Note 2)	Independence compliance (Note 2)	The number of Compensation Committee of other publicly listed companies that this Compensation Committee member concurrently works for	Remark
		College lecture or higher teaching positions on commerce, legal, finance, accounting, or business related courses	Judge, prosecutor, lawyer, accountant or business related professional and technician certified by national examinations	Work experience required for business, legal, finance, accounting or corporate business	1	2	3	4	5	6	7	8
Independent director	Gui-Duan Chen												2
Independent director	Chang-Jian Ho												0
Independent director	Geng-Wang Laiw												0

Note 1: Fill “Director”, “Independent director” or “Others” in the [Identity] column.

Note 2: For the committee member conformable to the following criteria two years prior to the appointment and during the term of service, tick “  ”in the correspondingly numbered fields.

(1) Not an employee of the Company and its affiliates.

(2) Not a director or supervisor of the Company or its affiliates, except for the legally established independent director position of the Company and its parent company or subsidiaries.

(3)This committee member or his/her spouse, minor child or in other’s name not holding more than 1% of the total issued shares or a top 10 shareholder as a nature person.

(4) Not a spouse, within a second-degree relative or within a third-degree direct blood relative of the persons listed above.

(5) Neither a director, supervisor or employee of a corporate shareholder with more than 5% of the Company’s total issued shares, nor a director, supervisor or employee of a top 5 corporate shareholder of the Company’s issued shares.

(6) Neither a director, supervisor, manager of a company or institution that has financial or business dealings with the Company, nor a shareholder with more than 5% of the Company’s issued shares.

(7) Not a professional or a owner, partner, director, supervisor, manager or their spouse of a sole proprietorship, partnership, or corporate institution that provides the Company and its affiliates with commercial, financial, and accounting services or consultation.

(8) No occurrence as stipulated in Article 30 of the Company Law.

2. The duties

• According to Article 7 of the Company’s “Compensation Committee Charter”, the

• committee shall exercise the due care of a good administrator in faithfully conducting the following duties:

• (1) Regular review of the organizational charter and recommendations for amendments.

• (2) Establishment of the yearly and long-term policy, mechanism, standard and structure of performance goals and remunerations for directors and managers.

• (3) Regular evaluation of the performance goal fulfillment of directors and managers, and formulation of their individual remunerations accordingly.

• The operations

• (1) There are three seats in the Compensation Committee.

• (2) The sessions: June 13, 2017 thru June 12, 2020. The committee meetings were given twice (A) in 2018, and the attendance is as follows:

Title	Name	Number of personal attendance (B)	Number of entrusted attendance	Attendance rate (%) (B/A)	Remark
Convener	Gui-Duan Chen	2	0	100%	－
Member	Chang-Jian Ho	2	0	100%	－
Member	Geng-Wang Laiw	2	0	100%	－

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Other matters documented:

1. If the Board does not accept or revise the proposals suggested by the Compensation Committee, the date of Board meeting, session number, content of proposal along with corresponding resolution and handling should be explicitly stated (if the remunerations approved by the Board are higher than the Committee suggested, the discrepancy and causes should be explicitly stated): No such occurrence. See the following table.

2. If the resolution of the Compensation Committee is opposed or with qualified opinions that are documented or in written statement, the date of Compensation Committee meeting, session number, content of proposal, opinions, and handling should be explicitly stated: No such occurrence. Please see the following table.

o such occurrence.	Please see the	following table.
Date of meeting	Session	Proposal	Resolution	Propoal handling by the Company
March 21, 2018	4thcommittee 2ndsession	1.Remunerations to employees and directors, 2017. 2. Review of managers’ performance evaluation and remuneration standard. 3.Year-end bonuses to managers, 2017. 4.List of managers receiving first stock options , 2017.	Unanimous concurrence by the Committee	Unanimous concurrence by the Board
November 12, 2018	4thcommittee 3rdsession	1.Remunerations to employees and directors, 2018 2.Yearly plan of Compensation Committee, 2019	Unanimous concurrence by the Committee	Unanimous concurrence by the Board

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(5) Corporate Social Responsibility

(5) Corporate Social Responsibility
Evaluation item			Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract 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?	  		The Company has established “Corporate Social Responsibility Principles” approved by the Board for compliance and set up the CSR Committee, chaired by the Company’s President. The Committee consists of five teams responsible respectively for corporate governance, customer service, employee welfare, environmental sustainability, and social participation, where the department heads are assigned as the team leaders. The Committee is responsible for preparing the annual CSR report, as well as planning and implementing the CSR related matters, reviewing the CSR policy, mechanism and management, and regularly report the CSR concrete promotion plans and results of implementation to the Board. Duties of CSR Committee: see Page 49 2018 CSR Results of Implementation: see Page 50. 2019 CSR Concrete Promotion Plans: see Page 53. The Company assigns staff for CSR training annually and internally announces the practice from time to time. The Company has established the CSR Committee, chaired by the President, with the relevant department heads acting as the committee team leaders. The Committee reports to the Board once a year on the CSR concrete promotion plans and results of implementation, with the activities covering employee welfare, environmental sustainability, and social participation, through which the refresher programs and training enhance the job quality and efficacy, and the energy conservation promotes environmental sustainability, while the social participation in services and caring leads to thegoal of sustainable and superior corporate operations.	No major discrepancy No major discrepancy No major discrepancy

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Evaluation item			Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(4) Does the Company set up a reasonable payroll policy and combine the performance evaluation with the SCR policy, with a clear and effective reward and disciplinary mechanism?			The payroll system is established based on the job positions and performance, and the payroll structure and salary adjustment mechanism are described as follows: 1.Payroll structure The performance evaluation guideline is linked to the overall corporate and departmental goals combining individual performance, and based on which opportunities for career development is provided for employees. Through the open and transparent promotion mechanism, outstanding employees are promoted to higher positions with better compensations and bonuses, which ultimately brings up the organizational development. In general, employees receive monthly salaries for 12 months annually, plus performance bonuses or year-end bonuses based on incentive programs. The performance/ year-end bonuses released to individual employees in 2018 were equivalent to 2.5 months of salary. In addition, compensations and stock dividends are also available, aimed for profits sharing as a feedback to the employee contributions to the Company. (1)Year-end bonuses: According to the Employee Performance Evaluation Guidelines, the Company releases yearly bonuses based on the overall profitability at the end of the year. (2)Employee compensations: According to the Employee Compensation Distribution Guidelines, the annual surplus recognized by the Shareholders’ Meeting is distributed to the employees. (3)Allotment of shares: Depending on the overall operational needs, shareholding, seasoned equity offering, and stock options may be given according to relevant guidelines, formulated for employees to follow. 2.Salary increases 2017 average pay raise 2018 average pay raise 2019 average pay raise 0% 4.2% 3.4%	No major discrepancy

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Evaluation item			Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
2. Sustainable environment (1)Does the Company endeavor for effective utilization of resources and use recyclable materials to reduce environmental impact? (2)Does company set up environmental control mechanism based on its industrial characteristics? (3)Does the Company pay attention to the impact of climate change on the corporate operations and implement the greenhouse gas investigation, along with formulation of energy conservation and greenhouse gas reduction strategies?	  		For better utilization of resources, energy conservation programs are implemented and garbage classification is enforced for collection of recyclable wastes; to reduce environmental impact, recyclable materials are used, mainly of office papers, which are required for double-side copy and printing. The company is located in the urban area of Taipei, where the waste disposal is handled in accordance with the relevant regulations of the building management. The Company has no factory, thus causing no violation of environmental protection regulations. In promoting environmental safety and health, promulgation of relevant regulations and concepts are given from time to time to enhance employees’ awareness and reduce workplace risks. In response to the impact of climate change on the corporate operations, relevant strategies and measures have been established by setting mid- and long-term environmental protection goals, aimed to conserve water and electricity, as well as reduce waste discharge and greenhouse gas emissions. The year 2016 was taken as the baseline, with which the carbon dioxide emission in 2018 was 16.02% less than the previous year, much earlier and much more achieving the 2019 goal of 5% reduction of gas emissions. Further examination of the 2018 data reveals that the carbon dioxide emission of that year is 19.4% less than in 2016. As a result, the climate change will neither affect the corporate development nor bring in negative impact on the finance and business in the foreseeable future. Nevertheless, we are committed to a sustainable environment that we all share with one another. We are indeed facing the increasingly subtle climate change in recent years, and that’s an issue for us all to seriously face with. To know more about our dedication to the climate agenda, please see the Corporate Social ResponsibilityReport.	No major discrepancy No major discrepancy No major discrepancy

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Evaluation item			Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
3. Social welfare (1)Does the Company establish social welfare policies and procedures according to relevant statutory regulations and the International Bill of Human Rights? (2)Does the Company establish employee complaint filing mechanism and properly handle the complaints?	 		In order to fulfill CSR and protect the basic human rights of all colleagues, clients and stakeholders, we strictly comply with the principles disclosed in the International Bill of Human Rights and respect internationally recognized basic human rights of labors, such as prohibiting child labor, eliminating employment and occupational discrimination. We establish relevant administration policies and procedures, and abide by the labor-related laws and regulations of the local competent authorities to protect the legitimate rights and interests of employees. The company's human rights policy has been disclosed on the company's website as follows: The company respects and supports internationally recognized human rights norms and principles, including the Universal Declaration of Human Rights, the UN Global Compact and the ILO Declaration on Fundamental Principles and Rights at Work, and complies with local laws and regulations and endeavors to reduce human rights risks or alleviate the impact of human rights incidents through remedial measures. Principles of administration 1. Prohibiting any and all forms of discrimination. 2. Prohibiting forced labor and child labor. 3. Providing fair and reasonable salaries and work conditions. 4. Establishing safe, hygienic and healthy work environment. 5. Reviewing and evaluating relevant mechanisms regularly. The company provides a proper complaint filing mechanism, which involves HR as well as the direct supervisor and department head of the complainants, whose identities are strictly confidential. In addition, the Company's code of ethics explicitly stipulates the disciplinary and filing mechanism concerning violation of code of integrity, and so far no major appeals have been filed.	No major discrepancy No major discrepancy

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Evaluation item			Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(3) Does the Company provide employees with safe and healthy work environment and give regular safety and health training?			In addition to compliance with the government safety and health related laws and regulations, and consideration for employees' safety, the Company has established an occupational safety and health management manual and related procedures in accordance with the OHSAS 18001:2007 standard, and officially introduced it in June 2018, aiming for zero occupational disasters. We strengthen self-management, continuously improve occupational safety and health performance, reduce occupational disasters, protect labor safety and health, and meet the requirements set by relevant authorities for customers, employees and other stakeholders. All colleagues should abide by the procedures and specifications stipulated in the manual, and maintain effective operations of the occupational safety and health management system. Safety: In compliance with labor regulations, the Occupational Safety and Health Act and OHSAS 18001 standards, we have organized labor safety and health education and disaster prevention training every year since 2018, so that employees can be aware of and follow the relevant rules, to ensure effective implementation of occupational safety and health management. There were no cases of workplace injury in the year of 2018, and we’ll continue the track to take care of employees and promulgate the safety concepts. Health: We offer corporate health insurance and new employee health checkups, and based on the OHSAS 18001 health check procedures, give health check-ups for all employees every two years to look after the employees’ health. In addition, according to the Labor Health Protection Act, operations exposed to ionizing radiation are particularly looked into, where the high-risk employees are medical technicians, and their belonging departments send their names each year to HR which will then file applications to the Bureau of Labor Insurance for special hazard health checks and regular follow-ups to protect these employees. In addition to the above measures, in order to prevent sexual harassment, the Sexual Harassment Prevention and Appeal Guideline is established with a dedicated complaint filing mechanism, to ensure any sexual harassment, gender discrimination or violence, threats and intimidation are strictly prohibited, for a gender equality workplace. We make every effort to create a happy,secure and rest assured workingenvironment.	No major discrepancy

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Evaluation item			Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(4)Does the Company establish a mechanism for regular communication with employees and take a reasonable approach to notify employees of operational changes that may result in significant impact. (5)Does the Company offers effective training programs for employees’ career development? (6)Does the company establish consumer protection policies and complaint filing procedures for issues related to research and development, procurement, production, and services? (7)Does the Company comply with relevant statutory regulations and international norms regarding the marketing and labeling of products and services? (8)Does the Company look into whether the suppliers have records of disciplinary action or misconduct before doing business with them?	    		When employees face difficulties, pressures or setbacks in their work and life, and needs assistance or appeal, the Company will arrange their direct supervisors and HR for their consultation to help solve the problems, and the management and labor council will be given quarterly, with the labor representatives directly communicating with the employer. In the event of a major operational change, dedicated personnel will communicate with the employees, or announcement or notice will be promulgated through the internal channels or corporate website. The training programs come in four categories: 1.Pre-employment training: New employees are counseled and oriented to understand the Company’s organization, business overview, labor safety and health, and standard procedures. 2.Internal training: Employees are given internal training to enhance their basic job competence and professional capability. 3.External training: Depending on the employees’ job needs and positions, the external training is given to enhance their professional skills and leadership capability. 4.Overseas training: To meet the future corporate development or job requirement, employees are recommended by their supervisors for going abroad to receive professional training. Engaged in distribution and maintenance of instruments and equipment, the Company maintains good communication with customers and, based on ISO 9001:2015 Quality Management System, formulates the Customer Service Management Procedure for a transparent and effective complaint filing channel concerning the products and services. The equipment and equipment distributed by the Company must be verified and registered according to the relevant regulations of the Department of Health before being sold in the local market. The equipment has correct labeling or package insert, and instructions for use, subject to relevant regulations and international standards. The company introduced the ISO 9001:2015 quality management system in 2017, and officially launched the implementation in February 2018. In the future, new suppliers and existing qualified suppliers will be evaluated and audited in terms of quality, and occupational safety and health, according to the supplier management procedures, to ensure that the quality of supplied materials meets relevant certification standards.	No major discrepancy No major discrepancy No major discrepancy No major discrepancy No major discrepancy

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Evaluation item	Implementation Status	Implementation Status	Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(9)Does the Company emphasize that if the suppliers violate the CSR policy leading to significant impact on the environment and society in a negative way, the contracts shall be terminated or dismissed immediately?			Based on the ISO 9001:2015 quality management system, the Company executes annual auditing and evaluation on local suppliers, and unqualified ones may be excluded from dealings with the Company. The local suppliers are required to sign CSR statements every year, in collaboration with the Company on the issues of environmental protection, safety, health, code of ethics, and compliance with the CSR enacted by competent authorities, for a joint effort to reach the CSRgoals.	No major discrepancy
4.Information disclosure enhancing (1)Does the Company disclose relevant and reliable information regarding its corporate social responsibility on its website and the Market Observation PostSystem(MOPS)?			The Company’s website has a “CSR section” where the CSR Committee structure and SCR reports are disclosed. In addition, the critical and reliable CSR information is published on MOPS and the annual report.	No major discrepancy
5. If the Company has established the corporate social responsibility principles based on “Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies”, please describe any discrepancy between the Principles and their implementation: The Company has established “Corporate Social Responsibility Principles”, which has no major discrepancy from the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx ListedCompanies”.For more information in this regard, pleasevisit the corporatewebsite and MOPS.
6. Other important information to facilitate better understanding of the Company’s corporate social responsibility practices: (1)Environmental protection: The Company has issued a Corporate Social Responsibility Statement that requires local suppliers to sign and comply with relevant norms; and in response to the introduction of ISO 9001 Quality Management System in 2018, mechanisms are established to evaluate and audit new suppliers and existing qualified suppliers in terms of their quality, occupational safety and health, based on the supplier management procedures, for joint commitment to basic human rights and environmental sustainability. (2)Social contributions: The Company hopes that the introduction of high-end medical equipment and technical services can bring in more precise treatment, more adequate medical resources and higher quality of medical services to the public, thereby promoting overall health and well-being of the people. (3)Social services: The company has organized the CHC Medical Volunteer Service with the aim of "Medical Services, Charity, and Healthy Living", to actively engage in social welfare activities, by helping disadvantaged groups in rural areas, offering voluntary clinical services, and promoting healthy living awareness. We encourage employees to engage in volunteer services, congregating individual influences into the greatest synergy for contributions to the society. (4)Social welfare: With a mind of feedback to the society, we provide resources to disadvantaged groups in need of help. And in case of natural disasters and major accidents, we also provide emergency assistance, sparing no effort for disaster relief or caring activities initiated by various sectors. (5)Consumer rights: The Company distributes high-end medical equipment and cultivates a factory-certified technical service team to assist customers in equipment installation and test run. We also provide training programs and after-sale maintenance with comprehensive services. Customer complaints are handled and responded immediately, and the customer service toll-free telephone numbers ensure the consumer rights. (6)Human rights: The Company is committed to a friendly workplace, diverse and discrimination-free, regardless of gender, age, nationality, race, color and political stand. Every employee enjoys equal right to work in the Company. We also provide opportunities for individuals to freely express ideas and seek development. We are committed to a workplace that values human rights and is free from discrimination and harassment.

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Evaluation item	Implementation Status	Implementation Status	Implementation Status	Deviations from “Corporate Social Responsibility Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Abstract Explanation
(7)Safety and health: In compliance with the government safety and health regulations, the Company protects employees’ safety and well-being. The OHSAS 18001 Occupational Health and Safety Management System was introduced in 2018, based on which the corporate Occupational Safety and Health Management Manual was created to continuouslyimprove occupational safetyand health,reduce occupational disasters,andprotect employees’ safetyand health.
7. A clear statement shall be made below if the corporate social responsibility reports were verified by external certification institutions: The Company has established a CSR Committee to implement corporate governance, safeguard the rights and interests of all stakeholders, promote environmental protection, and practice social participation. Also, the CSR Committee resolved to publish the first CSR Report in 2016, and the latest report was released on August 10, 2018,andpublished on the Company’s official website and MOPS. Since this is not a mandatoryreport,we have not sought external assurance.

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Duties of CSR Committee

==> picture [738 x 483] intentionally omitted <==

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2018 CSR Results of Implementation

No.	Content	Date	Location	Resultsof implementation
1	【CSR Society】 Initiative of employee donation: the Group and employees donated a total of NT$ 1.23 million to designated account for the Hualien earthquake victims.	February 8-12	Hualien County Government	■completed□in progress/pending□canceled Achievement: The strong 0206 Hualien earthquake caused serious casualties. The Group donated NT$ 1 million to help with the disaster relief. At the same time, President Pei-Lin, Lee also made a donation in his own name to induce the staff to the donation activities, sending love to Hualien together. The staff donation raised a total of $237,100, plus the Group’s donation of $1 million, making a total of more than NT$ 1.23 million to the Hualien earthquake disaster designated account. It was hoped that through the corporate provision of resources, resonated by the employee responses, hand in hand we made an effort together to relief the Hualien earthquake disaster.
2	【CSR Environment】 Earth Hour: Switch off all lights for one hour	March 24	Corporate internal	■completed□in progress/pending□canceled Achievement: On March 24th, the employees and their families were called upon to participate in the international environmental event "Earth Hour", the lights-off activity throughout our offices at home and abroad, hoping that this easy action allowed us to make a personal effort for the environment, arousing everyone's awareness of energyconservation and carbon reduction.
3	【CSR Employee】 Annual training	(See Result Statements for details)	(See Result Statements for details)	■completed□in progress/pending□canceled Achievement: The Human Resource & General Affairs Department arranged five training sessions from June 23 to August 11, a total of 35 hours, with 150 participants, and a budget of nearly NT$ 480,000. The courses were as follows: Course Session Date Location Business-consultant sales (Taipei) 2 6/23,6/24 Taipei office convention center General knowledge - proactive response (Taichung& Kaohsiung) 1 7/28 Taichung office convention center General knowledge - business etiquette and reception skills(Taipei) 1 8/4 GIS convention center General knowledge - proactive response (Taipei) 1 8/11 GIS convention center
4	【CSR Governance】 Publishing annual CSR report	August 10	Corporate website and MOPS	■completed□in progress/pending□canceled Achievement: The 2017 CSR Report was issued on August 10, in hopes that opinions from all parties could be heard through diverse channels. The report disclosed five major interests of stakeholders: corporate governance, customer service, employee welfare, environmental sustainability and social participation. It was hoped that the report would allow all the individuals and groups concerned to better understand the Company beyond its financial information.

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No.	Content	Date	Location	Resultsof implementation
5	【CSR Society】 Sponsorship of NT$ 200,000 for golf tournament "CTBC Ladies Open"	August 30 - September 1	Tong Hwa Golf & Country Club	■completed□in progress/pending□canceled Achievement: The Group sponsored an NT$ 200,000 grant to the golf tournament "CTBC Ladies Open" to promote the sport. The event was held from August 30 to September 1, with the participating players including Yi-Ting, Shi, Xin-Ning, Ye, Si-Jia, Cheng and Yu-Ling, Xie. It was hoped that the event would bring Taiwan's outstanding female golf players to the international stage, letting the world see Taiwan’s golf strength, thus enhancingTaiwan's visibility.
6	【CSR Employee】 All-around Elite Training Program	Beginning in October for a one-year term	Corporate headquarters	□completed■in progress/pending□canceled Achievement: The "All-round Elite Training Program", launched in October and lectured by the corporate instructors, was focused on the business model, finance, accounting, and regulations. By the year end, 8 courses were scheduled, for a total of 10 hours, and with 168 participants. This was a project with a one-year term, and the first evaluation was given in early 2019 to review the implementation effect as a reference for follow-upcourses.
7	【CSR Governance】 Introduction of ISO 9001 Quality Management System	October 11	Corporate internal	■completed□in progress/pending□canceled Achievement: In order to improve the service quality and operational process, as well as demonstrate the determination and ability to connect with international standards, the Company introduced the ISO9001 Quality Management System in 2017 to formulate relevant measures and regulations on the operational structure and mechanism, ensuring compliance with requirements from customers and regulatory enactment and strengthening organizational performance. In October 2018, the parent company along with its subsidiaries of Chiu Ho Medical System, Tomorrow Medical System and Chiu Ho Scientific were jointly certified by SGS.
8	【CSR Governance】 Introduction of OHSAS 18001 Occupational Health and Safety Management System	October 30	Corporate internal	■completed□in progress/pending□canceled Achievement: Starting in 2017, the OHSAS 18001 Occupational Health and Safety Management System was introduced. Based on the management standards and requirements provided by the system, the potential risks of product services and operational environment were re-examined. The system was combined with existing work practices, for systematical improvement of the overall operations, products and services, aimed for higher operational efficiency and better protection of the Company, employees and properties. During the introduction period, staff were counseled to complete the internal audit and risk assessment, and actively engaged in the environmental safety training. In October 2018, the parent company along with its subsidiaries of Chiu Ho Medical System, Tomorrow Medical System and Chiu Ho Scientific were jointly certified bySGS.
9	【CSR Society】 CHC Medical Volunteer Service: voluntary clinical service	November 10	Xinyi Township, Nantou County	■completed□in progress/pending□canceled Achievement: The voluntary clinical service entered its sixth year in a row. In addition to the basic physical checks, the local disease characteristics and medical needs were taken into consideration,coveringthe hearing

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No.	Content	Date	Location	Resultsof implementation
				examination, ophthalmologic computer optometry, and intraocular pressure test, as well as non-invasive abdominal ultrasound for liver and kidney screening, to meet the growing number of elderly people and children of the local population, hoping that the clinic activities would meet the local medical needs and provide a better quality of medical services. The recent clinic service was given on November 10 at the health office of Tong-Fu Village, a familiar and convenient location for local residents, and there were 146 people served,near 50% of whom were elderlyover 65years old.
10	【CSR Society】 Sponsorship of NT$ 1 million for the "CPBL Fubon Guardians Tournament"	Year-round	CPBL Fubon Guardians Tournament	■completed□in progress/pending□canceled Achievement: Sponsorship of NT$ 1 million to the CPBL Fubon Guardians Tournament, hoping to promote sports through the activities. The employees are encouraged to go to the games and enjoy the fun while the sports spirits and habits are developed, for positive energy of life, strengthened concept of exercise, higher attention to sports events,and ultimatelyleadingto healthyliving.

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2019 CSR Concrete Promotion Plans

No.	Content	Date	Location	Concrete promotion plans
1	【CSR Employee】 Outlook Conference	January 19	Taipei International Convention Center	In the afternoon of January 19, the CHC New Year Outlook Conference was given. The department heads were invited to present their planning and visions for the 2019 market deployment at home and abroad. It was hoped that through the conference the employees could better understand the prospects of departmental and corporate goals. The two-hour event had a total of 133 attendees, with a budget of nearly NT$ 93,000. ■completed□inprogress/pending □canceled
2	【CSR Environment】 Earth Hour: Switch off all lights for one hour	March 30	Corporate internal	The World Wildlife Fund launched the international environmental event "Earth Hour" in the evening of March 30. It was the largest environmental movement with the participation of more than 172 countries and more than 7,000 cities as well as hundreds of millions of people around the world. The Group called upon the employees and their families to positively engage. Throughout the corporate branches at home and aboard, the lights-off activity, may it be an easy action, raising the awareness of energy conservation for carbon reduction to protect the environment. ■completed□inprogress/pending □canceled
3	【CSR Employee】 Language (TOEIC) courses	April 1 – September 30	Corporate internal	In order to improve the employees’ English proficiency for global connection, the TOEIC courses were arranged and taught by external lectures on the TOEIC exams and daily conversation needs arranging by the Human Resource & General Affairs Department. A total of 72 employees enrolled for the 2 sessions in Taipei and 1 session each in Taichung and Kaohsiung, with each one of 2 hours on a weekly basis. The program, beginning in April, was designed to help employees grow together with the Group, and cultivate professionals needed for corporate development. □completed■inprogress/pending □canceled
4	【CSR Employee】 Annual training	Scheduled for July	To be decided	Since its inception, the Group has been adhering to the principle of “Employees as the key corporate assets” and based on which training programs are planned accordingly. To strengthen the sales skills and put the employees’ will together, two workshops are scheduled for July on general knowledge of corporate business. The first one is titled "Quick Learning of Negotiation", which gives VR experience from table games, helping the students to learn how to get preemptive initiatives and reach agreement on the bargaining table. The second one is "Creativity Brainstorm", aimed to cultivate creativity and inspire new thinking for breaking constraints and effectively improving the efficiency of individuals, departments and the corporate as a whole. □completed■inprogress/pending □canceled
5	【CSR Governance】 Publishing annual CSR Report	June 25	Corporate website and MOPS	The disclosure of the 2018 CSR Report was based on the GRI Guidelines released by GSSB, following the “core” options, and making reference to the “Taiwan Stock Exchange Corporation Rules Governing the Preparation and Filing of Corporate Social Responsibility Reports by TWSE Listed Companies”. The period of the report was the 2018 fiscalyear(from January1 to December 31,2018),coveringthe five

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No.	Content	Date	Location	Concrete promotion plans
				major aspects of corporate governance, customer service, employee welfare, environmental sustainability and social participation, along with relevant performance data. □completed■inprogress/pending □canceled
6	【CSR Society】 CHC Medical Volunteer Service: voluntary clinical service	Scheduled for November	Xinyi Township, Nantou County	Lead by Mr. Pei-Lin, Lee, the Group’s President, the CHC volunteer service team has worked hand-in-hand with medical staff of the Yeezen General Hospital, who are committed to serving the remote aboriginal people, deeply into to Xinyi Township, Nantou County for the activity of "Joining hands up in the mountain, tribal charity clinic", teaching local residents the concept of health and endeavoring to improve the medical conditions in that remote area, in the hope of raising their awareness of self-care for health and developing their habit of regular health checkups. □completed■inprogress/pending □canceled

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(6) Business integrity and relevant measures

(6) Business integrity and relevant measures
Evaluation item			Operations	Discrepancy from code of integrity and the causes
	Yes	No	Description
1. Formulation of integrity policies and programs (1) Does the Company explicitly manifest the integrity policies and measures in the corporate charters and external documents, and have the Board and management team committed to the policies? (2)Does the Company have a plan to prevent dishonesty, with specific operating procedures, behavioral guidelines, disciplinary and grievance systems for violations, and fully implement it? (3)Does the Company take preventive measures against business activities with higher risk of dishonesty as provided in Paragraph 2, Article 2 of the “Code of Integrity of Listed Companies” or otherwise stipulated?	  		The Company has established the "Integrity Procedures and Guidelines" and published it on the CSR section of the Company's website at http://www.cyhc.com.tw, which regulates all employees’ ethics and responsibilities in practicing business, covering individuals, groups and the corporation, for the public and stakeholders. In addition, the directors and managers are all faithfully performing their duties and the due care of a good administrator, exercising their authority with a high degree of self-discipline and prudence. The Company has established the "Integrity Procedures and Guidelines" and the "Code of Ethics", which include operating procedures, behavioral guidelines, disciplinary and grievance systems for violations, and implemented it by requiring newcomers to sign ethics statements when reporting to their jobs. The "Integrity Procedures and Guidelines" explicitly stipulates that illegitimate interests directly or indirectly provided, committed, requested or accepted, whatever the form or in the name of whatever, should be expressly refused, including rebates, commissions, facilitation fees or other illegitimate interests; there are also regulations for political contributions and illegal ones are strictlyforbidden.	No major discrepancy No major discrepancy No major discrepancy
2. Implementation of integrity (1)Does the Company evaluate the integrity records of counterparties and specify the terms of good faith in its contracts with the counterparties? (2)Does the Company set up a special (part-time) unit under the Board to implement the corporate integrity and regularly report the implementation to the Board?			The Company evaluates and audits the quality/environmental safety systems of counterparties, and deals only with qualified ones, while the unqualified ones will, with approvals from supervisors, be excluded from dealing with us, and the provisions of integrity will be expressly stipulated in the future procurement contracts. The HR & General Affairs Department is assigned the responsibilities for amendment, execution, interpretation, consulting and archiving the matters related to “Integrity Procedures and Guidelines”, as well as supervising the implementation and annually reporting to the Board. The procedures and guidelines have been disclosed on the Company's website and propagated through the monthly general meeting of employees for full-range implementation. In the year of 2018, there were a total of 12 employees' general meetings, and no major violation of integrity was reported.	No major discrepancy No major discrepancy

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Evaluation item			Operations	Discrepancy from code of integrity and the causes
	Yes	No	Description
(3)Does the Company have a policy to prevent conflicts of interest with a proper complaint filing mechanism for implementation? (4) Does the Company establish an effective accounting system and internal control system for the implementation of integrity management, and conduct regular auditing by internal audit units or entrusted CPAs? (5)Does the company regularly give internal and external training of integrity management?	  		The Company has established a policy to prevent conflicts of interest in the "Integrity Procedures and Guidelines" along with the "Internal Major Information Processing and Prevention of Internal Transactions" to provide directors and managers through appropriate channels to explain whether they have potential conflicts of interest. The above procedures, guidelines and measures have been disclosed on the Company's website, and propagated through executive meetings; there were a total of 24 such executive meetings given in the year of 2018. To ensure the implementation of integrity management, the Company has established an effective accounting system and internal control system, and compliance is regularly inspected by the internal auditors. Through the executive meetings and monthly staff meetings, the integrity management is fully propagated and its philosophy and norms are clearly conveyed.	No major discrepancy No major discrepancy No major discrepancy
3. Grievance mechanism (1)Does the company have a specific mechanism to reward reporting of compliance violations, with a convenient reporting channel and appropriate personnel to respond? (2)Does the Company set standard operating procedures and related confidentiality mechanism for violation reports? (3)Does the Company take measures to protect the informers from illegitimate treatment due to the incident of reporting?	  		To protect the corporate reputation, safeguard the property, avoid and prevent corruption, theft, encroachment or other illegal and disorderly deeds, that may damage the rights and interests of shareholders, employees, counterparties and partners, a reporting mechanism has been established. Scope: The operating units, personnel as well as external affiliates and individuals of the Company and its subsidiaries. Authority: The HR & General Affairs Department is charged with the business, and if a violation reported involves the directors or high-level executives, the report should be submitted to independent directors. The Company has established a standard operating procedure to receive and investigate violation reports, including the types of reports, the procedures for reporting, etc. In addition, a confidentiality mechanism is also set to strictly protect the identities of informers as well as the reported contents and evidence in the proceeding of investigation, The Company has established relevant provisions in the reporting mechanism to protect informers, such as non-disclosure of informer’s identity, and no consequent discrimination of job interests or work conditions,in order toprotect the informers from illegitimate treatment.	No major discrepancy No major discrepancy No major discrepancy

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Evaluation item	Operations	Operations	Operations	Discrepancy from code of integrity and the causes
	Yes	No	Description
4. Enhancement of information disclosure (1)Does the Company disclose its code of integrity and implementation efficacy on its official website and MOPS?			The Company has published its “Integrity Procedures and Guidelines” on its official website and MOPS. In addition, the official website has a CSR dedicated section to disclose the corporate CSR governance, while the corporate governance subsection further discloses the code of good practice and its implementation efficacy.	No major discrepancy
5.If the Company has its own code of conduct in accordance with the Code of Business Conduct and Ethics, please describe the difference between the two: The Company has established the "Integrity Procedures and Guidelines" and the “Code of Ethics and Conduct", and the operations of which are conformable to the standard Code. The corporate codes are based on the business philosophy of integrity, fairness, transparency and self-discipline, upon which good corporate governance and risk control mechanism are built for sustainable development.
6.Other important information that helps understanding of the Company's integrity management (such as reviews and amendments of the code of conduct, etc.): Internal audits are conducted on a regular basis for daily operational processes to reduce corruption and bribery through effective internal control mechanisms such as self-assessments.

• (7) If the Company has a corporate governance code and related regulations, the method of inquiry should be disclosed.

Please see the CSR section of the Company’s website (http://www.chcg.com), where a subsection is dedicated to the corporate governance, allowing inquirers to download various management methods.

• (8) Other important information that helps further understand the corporate governance should also be disclosed.

The Company’s website (http://www.chcg.com) has a CSR section, describing the operations of corporate governance. Please see the subsections of “Corporate Social Responsibility”  “Corporate Governance”  “The Operations”.

• (9) The following matters concerning internal control system should be disclosed:

• Internal Control Statement: see Page 58.

• If the Company entrusts CPAs to conduct internal control system, the CPA auditing reports should be disclosed: N/A.

• (10)The incidents with major defects and subsequent improvement concerning the Company and its staff being punished by laws, and the staff being punished by the Company due to violation of internal controls system, in the most recent year and as of the date of the annual report: N/A.

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CHC Healthcare Group

Internal Control Stateme nt

The implementation of the Company’s internal control system in 2018, based on the self-evaluation results, is hereby declared as follows:

1. The Company is fully aware that the establishment, implementation and maintenance of an internal control system are the responsibility of the Board of Directors and managers of the Company, and therefore the Company has established the system. Its purpose is to reasonably assure the fulfillment of operational effectiveness and efficiency (including profitability, performance and asset security), as well as reliability, immediacy, and transparency of reports and promulgation, and compliance with laws and regulations.

2. An internal control system has its inherent limitations. No matter how perfect the design is, an effective internal control system can only provide reasonable assurance of achieving the above three objectives. Moreover, due to changes in circumstances and conditions, the effectiveness of the system may change accordingly. Nevertheless, the Company's internal control system has a self-monitoring mechanism, by which corrective action will be taken immediately once a flaw is identified.

3. Based on the effectiveness indicators of the “Standards for Publicly Held Companies to Internal Control Systems” (hereinafter referred to as the Standards), the Company determines whether the design and implementation of the internal control system is effective. According to the process of internal control management, the indicators adopted by the Standards consist of five components: (1) environment of control; (2) assessment of risks; (3) operations of control; (4) information and communication; and (5) monitoring. Each component consists of several items, which are described in the Standards.

4. The Company has adopted the aforementioned indicators to evaluate the system design and implementation effectiveness.

5. Based on the results of the above evaluation, the Company believes that the December 31, 2018 report of the Company’s internal control system (covering subsidiaries) including the understanding of the operational effectiveness and level of efficiency, is reliable, timely and transparent, and the system is designed and implemented in compliance with relevant laws and regulations, reasonably ensuring the achievement of the above objectives.

6. This statement will become the main content of the Company's annual report and public statement, and will be made public. If the content of the above disclosure is hypocritical or concealing, it will be violation of Articles 20, 32, 171 and 174 of the Securities Exchange Law.

7. This statement was approved in the Board meeting on March 22, 2019, and all the 7 attending directors held no objections, and agree with the content of the statement. The resolution is herewith combined with this statement.

CHC Health Group

President: Pei-Lin Lee

General Manager: Pei-Lin Lee

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(11) Major resolutions of the Shareholders' Meeting and the Board meetings in the most recent year and as of the date of the annual report

Type of meeting	Date	Major resolutions
Board meeting	3/21/2018	1. Ratification of financial assets impairment. 2. Individual and consolidated financial statements, 2017 3. Disposition of net earnings, 2017. 4. Business report, 2017. 5. Internal control statement, 2017. 6. Business plan and annual budget, 2018. 7. Remunerations for employees, directors and supervisors, 2017. 8. Lift of the non-compete restriction on the directors and their representatives. 9. Proposal of private equity fundraising with common stocks. 10. The 2018 Shareholders' Meeting and processing of masters concerning the premises of shareholders with more than 1% of the holding during the proposal period, and exercise of electronic voting. 11. Annual bonuses for managers, 2017. 12. Proposal of the list of employees to receive stock options for the first time, 2017. 13. Replacement of CAP due to the accounting firm’s internal job rotation. 14. Proposal of amendment of “Board Performance Evaluation”. 15. Proposal of loans to affiliates. 16. Proposal of endorsements for affiliates. 17. Proposal of amendment of “Computer Information System Cycle” of the internal control system. 18. Joint project of proton instruments with the subsidiary Tomorrow Medical System. 19. Proposal of the capital increase benchmark date for the exercise of 2018 Q1 employees’ stock options, as well as the second and third guaranteed domestic convertible bonds. 20. Proposal of application for bank credit limits.
Board meeting	5/11/2018	1. Proposal of loans to affiliates. 2. Proposal of endorsement for affiliates. 3. Proposal of the capital increase benchmark date for the exercise of 2018 Q2 employees’ stock options, as well as the second and third guaranteed domestic convertible bonds. 4. Proposal of application for bank credit limits.
Shareholders meeting	6/11/2018	1. Ratification of business report and financial statements, 2017. 2. Ratification of distribution of earnings, 2017. 3. Approval of the “Fund Lending Procedures” and “Endorsement Procedures”. 4. Approval of lifting the non-compete restriction on the directors and their representatives. 5. Approval of theprivate equityfundraisingwith common stocks.
Board meeting	6/25/2018	1. Proposal of loans to affiliates. 2. Proposal of endorsements for affiliates. 3. Proposal of application for bank credit limits. 4. Replacement of General Manager.
Board meeting	8/13/2018	1. Proposal of loans to affiliates. 2. Proposal of endorsements for affiliates. 3. Proposal of the capital increase benchmark date for the exercise of 2018 Q3 employees’ stock options, as well as the second and third guaranteed domestic convertible bonds. 4. Proposal of application for bank credit limits. 5. Proposal of buying the Company’s stocks for transfer to employees based on relevant regulations.
Board meeting	10/24/2018	1. Proposal of application for bank credit limits. 2. Proposal of endorsements for affiliates. 3. Proposal of reinvestment for 100% holdingof a subsidiary.
Board meeting	11/12/2018	1. Auditing plan, 2019. 2. Evaluation of CPA independence, 2018. 3. Proposal of loans to affiliates. 4. Estimation of remunerations to employees and directors, 2018. 5. Proposal of the capital increase benchmark date for the exercise of 2018 Q4 employees’ stock options, as well as the third guaranteed domestic convertible bonds. 6. Subsequent ratification of the amendment of the "Measures for the first buyingback

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Type of meeting	Date	Major resolutions
		shares for transfer to employees”. 7. Proposal of application for bank credit limits. 8. Supplementary explanation of the Company’s reinvestment for 100% holding of a subsidiary.
Board meeting	3/22/2019	1. Individual and consolidated financial statements, 2018. 2. Distribution of earnings, 2018. 3. Business report, 2018. 4. Internal control statement, 2018. 5. Annual operational plan and budget, 2019. 6. Distribution of remunerations to employees and directors, 2018. 7. Proposal of amendment of “Corporate Charter”. 8. Proposal of amendment of “Assets Acquisition or Disposition Procedures”. 9. Proposal of amendment of “Fund Lending Procedures” and “Endorsement Procedures”. 10. Proposal of amendment of “Shareholders’ Meeting Rules”. 11. Lift of the non-compete restriction on the directors and their representatives. 12. Proposal oftransferring the buy-back stocks to employees at a price lower than the averaged buy-back prices. 13. Proposal of private equity fundraising with common stocks. 14. The 2019 Shareholders' Meeting and processing of masters concerning the premises of shareholders with more than 1% of the holding during the proposal period, and exercise of electronic voting. 15. Distribution of year-end bonuses to managers, 2018. 16. Proposal of amendment of “Board Performance Evaluation”. 17. Proposal of amendment of “Internal Control – Sales and Receivables Cycle”. 18. Proposal of loans to affiliates. 19. Proposal of endorsements for affiliates. 20. Proposal of the capital increase benchmark date for the exercise of 2019 Q1 employees’ stock options, as well as the third guaranteed domestic convertible bonds. 21. Proposal of indirect reinvestment for 100% holding of a Mainland China subsidiary. 22. Proposal of setting up a supervisor position for the corporate governance and the “SOP for Director Requests”. 23. Proposal of lifting the non-compete restriction on the executives. 24. Proposal of amendment of “Corporate Governance Code of Practice”.
Board meeting	5/8/2019	1. Proposal of loans to affiliates. 2. Proposal of endorsements for affiliates. 3. Proposal of the capital increase benchmark date for the exercise of 2019 Q2 employees’ stock options,as well as the thirdguaranteed domestic convertible bonds.

(12) Implementation of the 2018 Shareholders' Meeting resolutions

Resolution	Implementation
1. Ratification of the 2017 business report andfinancialstatements	After the resolution of the shareholders' meeting, the business report and financialstatements were published on MOPS.
2. Ratification of the 2017 distribution of earnings.	According to the resolution of the Shareholders' Meeting, allotment of cashdividends totaled $153,904,983 was completed onJuly 31,2018.
3. Ratification of amendment of the “Fund Lending Procedures” and “Endorsement Procedures”.	According to the resolution of the Shareholders’ Meeting, the new version of “Fund Lending Procedures” and “Endorsement Procedures” are enacted.
4. Ratification of lifting the non-compete restriction on the directors and their representatives.	Unanimous concurrence by all the attending shareholders.
5. Ratification of private equity fundraising with common stocks.	Unanimous concurrence by all the attending shareholders.

(13) Any disagreement on the Board resolutions from directors or supervisors that is officially documented or has written statement in the most recent year and as of the date of the annual report: N/A.

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

Name	Date of inaugulation	Date of dismissal	Cause of resigantion or dismissal
Goung-Yu Chen	11/12/2012	7/31/2018	Resignation Due To Personal Causes

V. Information Regarding the Company’s Audit Fee and Independence

Accountingfirm	CPA	CPA	Year	Remark
PricewaterhouseCoopers (PwC)Taiwan	Sheng-Wei Teng	Audrey Tseng	2018	N/A

Unit: NT$ thousands

Fee item Amount level	Fee item Amount level	Audit fee	Non-audit fee	Total
1	Less than 2,000	－	－	－
2	2,000 thousands(incl)～4,000 thousands	3,230	－	3,230
3	4,000 thousands (incl)～6,000 thousands	－	－	－
4	6,000 thousands(incl)～8,000 thousands	－	－	－
5	8,000 thousands(incl)～10,000 thousands	－	－	－
6	More than 10,000 thousands(incl)	－	－	－

(1) If the non-audit fee paid to CPA, CPA’s accounting firm and its affiliates is more than a quarter of the audit fee, the audit and non-audit fees and the content of the non-audit service should be disclosed.

Unit: NT$ thousands

Accounting firm	CPA	Audit fee		Non-audit fees	Non-audit fees	Non-audit fees		Audit period	Remark
			System of design	Company registration	Human resources	Others	Subtotal
Pricewater houseCoop ers (PwC) Taiwan	Sheng-Wei Teng	3,230	0	0	0	0	0	01/01/2018~ 12/31/2018
	Audrey Tseng

(2) If the accounting firm is changed and the annual audit fee changed is less than that of the previous year, the audit fees before and after the change of accounting firm and the causes of change should be disclosed.

N/A

(3) If the audit fee is over 15% less than the previous year’s, the reduced amount of audit fee, the proportion and the causes of reduction should be disclosed.

N/A

VI. Replacement of CPA

• (1) Regarding the former CPA

N/A ement of CPA egarding the former CPA
Date of replacement	March 21, 2018
Replacement reasons and explanations	The accounting firm’s internal job rotation
Whether the appointor erminates or CPA refuses to ccept the appointment	Principal Situation	CPA	Appointer
	Termination	N/A	N/A
	Refusal of (subsequent)appointment	N/A	N/A

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Audit report opinions other than unqualified ones issued in the most recent two years and thereason	N/A
Any different opinions with the issuer	Yes		Accounting principles orpractices
			Disclosure of financialstatements
			Audit scope orsteps
			Others
	No	
	Explanation
Other disclosure (Item 1.4 thru 1.7 of Paragraph 6 of Article 10 of the Guidelines should be disclosed)	N/A

(2) Regarding the successor CPA

Regarding the successor CPA
Accounting firm	PricewaterhouseCoopers (PwC) Taiwan
Name of CPA	Sheng-Wei eng, Audrey Tseng
Date of appointment	March 21, 2018
Accounting methods or accounting principles for specific transactions and consulted matters that may be issued for financial reporting prior to appointment,and the result.	No discrepancy
Different written opinions between the former and successor CPAs	N/A

• (3) Reponse from the former CPA concerning Item 1, 2-3 of Paragraph 6 of Article 10 of

“Guidelines for Things to be Documented in Annual Report for Pulibly Listed Companies”.

N/A

VII. If the Company’s President, General Manager, and/or executives in charge of finance and accounting worked for the CPA’s accounting firm or its affiliates in the most recent years, their names, job titles and the durations should be disclosed.

N/A

VIII. Changes in Shareholding of Directors, Supervisors, Managers and Major Shareholders

(1) Changes of equity by directors, supervisors, managers and key shareholders (holding more than 10% of total shares)

Unit: share

Title	Name	2018	2018	As of April 14, 2019	As of April 14, 2019
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Director, also major shareholder	Princeton Healthcare Limited	0	0	0	0
Juristic-person director, representative, chairman of the Board	Princeton Healthcare Limited Juristic presentative: Pei-Lin Lee

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Title	Name	2018	2018	As of April 14, 2019	As of April 14, 2019
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Director	Tien-Ying Lee	0	200,000	0	0
Director	Chun-Shung Huang	0	0	0	0
Director	Yen-Hsin Investment Ltd.	0	0	0	0
Director	Yen-Hsin Investment Ltd. Representative: Yung-Shun Chuang	0	0	0	0
Independent director	Gui-Duan Chen	0	0	0	0
Independent director	Chang-Jian Ho	0	0	0	0
Independent director	Geng-Wang Laiw	0	0	0	0
General Manager	Pei-Lin Lee	291,000	1,030,000	0	0
CEO, Oncology Business Group	Yee-Min Jen	0	0	0	0
Deputy GM	Ming-Lun Lee	0	0	78,750	0
Deputy GM	Yi-Chun Chen	0	0	0	0
GM, Greater China	Goung-Yu Chen (note 1)	0	0	0	0

Note 1: Mr. Goung-Yu Chen, the GM of Greater China region resigned on July 31, 2018, and the increase/decrease of his shareholding was the numbers during his term of office.

(2) Information of the counterparties, as related persons, of the equity transfer: N/A.

(3) Information of the counterparties, as related persons, of the equity pledge: N/A.

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IX. Relationship among the Top Ten Shareholders

Unit: share

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	%	Name	Relationship
Princeton Healthcare Limited Representative: Pei-Lin Lee	28,257,983	20.13%	0	0.00%	0	0.00%	Su-Ching Chen	Representative of Princeton Healthcare Limited is the spouse of Su-ChingChen	NA
	5,682,151	4.05%	2,862,808	2.04%	0	0.00%	Tien-Yin Lee	Representative of Princeton Healthcare Limited is the father of Tien-Yin Lee
Tien-Yin Lee	8,922,985	6.36%	31,000	0.02%	0	0.00%	Princeton Healthcare Limited	Tien-Yin Lee is the son of the representative of Princeton Healthcare Limited	NA
							Pei-Lin Lee	Father & Son
							Su-Ching Chen	Mother & Son
Pei-Lin Lee	5,682,151	4.05%	2,862,808	2.04%	28,257,983	20.13%	Princeton Healthcare Limited	The representative of Princeton Healthcare Limited	NA
							Su-Ching Chen	Spouse
							Tien-Yin Lee	Father & Son
Fidelity Investments	5,115,191	3.64%	0	0.00%	0	0.00%	N/A	N/A	NA
Fubon Life Insurance Co., Ltd Representative: Ming-ShingTsai	5,089,961	3.63%	0	0.00%	0	0.00%	N/A	N/A	NA
	0	0.00%	0	0.00%	0	0.00%	N/A	N/A	NA
Shui-Cheng Tu	3,640,033	2.59%	13,000	0.01%	0	0.00%	N/A	N/A	NA
Su-Ching Chen	2,862,808	2.04%	5,682,151	4.05%	0	0.00%	Princeton Healthcare Limited	Shu-Ching Chen is the spouse of the representative of Princeton Healthcare Limited	NA
							Pei-Lin Lee	Spouse
							Tien-Yin Lee	Mother & Son
Nan Shan Life Insurance Co., Ltd. Representative: Du Ying-ZongDu	2,682,000	1.91%	0	0.00%	0	0.00%	N/A	N/A	NA
	0	0.00%	0	0.00%	0	0.00%	N/A	N/A	NA
Indeed Co., Ltd. Representative: YoudongJian	2,500,000	1.78%	0	0.00%	0	0.00%	N/A	N/A	NA
	0	0.00%	0	0.00%	0	0.00%	N/A	N/A	NA
Dong-Liang Wang	1,631,805	1.16%	49,015	0.03%	0	0.00%	N/A	N/A	NA

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• X. The number of shares of reinvested businesses concurrently held by the Company, the Company’s directors, supervisors, managers, and affiliates directly/indirectly controlled by the Company, and the consolidated shareholding ratio.

the consolidated shareholding ratio.	the consolidated shareholding ratio.	the consolidated shareholding ratio.
			March 31,2019 Unit: thousand shares
Affiliated Enterprises (Note 1)	Ownership by the Company		Direct or Indirect Ownership by Directors/Supervisors /Managers		Total Ownership
	Shares	%	Shares	%	Shares	%
Chiu Ho Medical System Co.,Ltd.	299,340	100%	0	0%	299,340	100%
Tomorrow Medical System Co.,Ltd.	43,200	100%	0	0%	43,200	100%
Chiu Ho Scientific Co., Ltd.	9,854	100%	0	0%	9,854	100%
Hua Lin Instruments Co., Ltd.	55,600	100%	0	0%	55,600	100%
Shin-Ho Instruments Co., Ltd.	300	100%	0	0%	300	100%
Hsin Lin Biotech Co., Ltd.	10,000	100%	0	0%	10,000	100%
E Century Health Care Corporation	60,000	100%	0	0%	60,000	100%
Tong-Lin Instruments Co., Ltd.	40,000	100%	0	0%	40,000	100%
Chiu Ho Biotech Co., Ltd.	37,000	100%	0	0%	37,000	100%
CHC Healthcare (BVI) Limited	0.94	100%	0	0%	0.94	100%
CHC Healthcare (HK) Limited	100	100%	0	0%	100	100%
Guanzhou Chiu Ho Medical System Co., Ltd.	USD9,503 thousands (Note 2)	100%	0	0%	USD9,503 thousands (Note 2)	100%
Chiu Ho (China) Medical Technology Co., Ltd.	USD7,544 thousands (Note 2)	100%	0	0%	USD7,544 thousands (Note 2)	100%
Medlink healthcare Limited	154,125	100%	0	0%	154,125	100%
Hsing-Yeh Biotechnology Co.,Ltd	93,600	100%	0	0%	93,600	100%
Neusoft CHC Medical Service Co., Ltd	RMB15,300 thousands (Note 2)	51%	0	0%	RMB15,300 thousands (Note 2)	51%
SenCare Healthcare Company	19,400	65.99%	0	0%	19,400	65.99%
Cheng-Hsin Biotechnology Co.,Ltd	1,200	40%	0	0%	1,200	40%
Neusoft-CHC Office of Medical Intelligence & Services, Shenyang	RMB2,000 thousands (Note 2)	40%	0	0%	RMB2,000 thousands (Note 2)	40%
Dalian Neusoft Kangrui Jiuhe Medical Management Co.,Ltd.	RMB2,000 thousands (Note 2)	40%	0	0%	RMB2,000 thousands (Note 2)	40%

Note 1: Long-term investment by the equity method. Note 2: Limited corporation, and unissued shares, therefore the listing of share capital and ratio of capital contribution.

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Four. Capital Overview

I. Capital and Shares

(1) Source of Capital

Unit: share; NTD

Month/Year	Par value (NT$)	Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Remark	Remark	Remark
		Number of shares	Amount	Number of shares	Amount	Sources of Capital	Capital Increased by Assets Other than Cash	Others
Nov. 2009	10	100,000	1,000,000	10,000	100,000	Incorporation	None	Note 1
Dec. 2009	13.6585	60,000,000	600,000,000	60,000,000	600,000,000	Conversion of 44,818,604 shares and exchange of 15,171,396 shares	None	Note 2
Feb. 2010	13.6585	100,000,000	1,000,000,000	78,742,908	787,429,080	Cash capital increase	None	Note 3
Mar. 2010	13.6585	130,000,000	1,300,000,000	101,407,472	1,014,074,720	Cash capital increase	None	Note 4
Dec. 2010	77	130,000,000	1,300,000,000	105,303,576	1,053,035,760	Cash capital increase	None	Note 5
June 2011	71.5	130,000,000	1,300,000,000	108,103,576	1,081,035,760	Cash capital increase	None	Note 6
Nov. 2012	78	130,000,000	1,300,000,000	120,000,000	1,200,000,000	Cash capital increase	None	Note 7
Oct. 2013	80	200,000,000	2,000,000,000	130,000,000	1,300,000,000	Cash capital increase	None	Note 8
Oct. 2014	10	200,000,000	2,000,000,000	130,264,250	1,302,642,500	Exercising employee stock option	None	Note 9
Jan. 2015	10	200,000,000	2,000,000,000	130,346,000	1,303,460,000	Exercising employee stock option	None	Note 10
Apr. 2015	10	200,000,000	2,000,000,000	130,373,250	1,303,732,500	Exercising employee stock option	None	Note 11
July 2015	10	200,000,000	2,000,000,000	130,383,250	1,303,832,500	Exercising employee stock option	None	Note 12
Oct. 2015	10	200,000,000	2,000,000,000	130,409,750	1,304,097,500	Exercising employee stock option	None	Note 13
Dec. 2015	58.8	200,000,000	2,000,000,000	139,409,750	1,394,097,500	Cash capital increase	None	Note 14
Jan. 2016	10	200,000,000	2,000,000,000	139,702,750	1,397,027,500	Exercising employee stock option	None	Note 14
Apr. 2016	10	200,000,000	2,000,000,000	139,723,750	1,397,237,500	Exercising employee stock option	None	Note 15
Aug. 2016	10	200,000,000	2,000,000,000	139,733,750	1,397,337,500	Exercising employee stock option	None	Note 16
Oct. 2016	10	200,000,000	2,000,000,000	139,793,750	1,397,937,500	Exercising employee stock option	None	Note 17
Jan. 2017	10	200,000,000	2,000,000,000	139,847,750	1,398,477,500	Exercising employee stock option	None	Note 18
Apr. 2017	10	200,000,000	2,000,000,000	139,855,750	1,398,557,500	Exercising employee stock option	None	Note 19
July 2017	10	200,000,000	2,000,000,000	139,870,750	1,398,707,500	Exercising employee stock option	None	Note20

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Month/Year	Par value (NT$)	Authorized capital	Authorized capital	Paid-in capital	Paid-in capital	Remark	Remark
		Number of shares	Amount	Number of shares	Amount	Sources of Capital	Capital Increased by Assets Other than Cash	Others
Oct. 2017	10	200,000,000	2,000,000,000	139,913,621	1,399,136,210	Exercising employee stock option	None	Note 21

Note 1: Letter of Approval, dated 11/27/2009, Fu-Tsen-Yie-Shan-Zi No.09891131200. Note 2: Letter of Approval, dated 12/18/2009, Gin-Sho-Shan-Zi No.09801290060. Note 3: Letter of Approval, dated 02/09/2010, Gin-Sho-Shan-Zi No.09901029260. Note 4: Letter of Approval, dated 03/17/2010, Gin-Sho-Shan-Zi No.09901050740. Note 5: Letter of Approval, dated 12/22/2010, Gin-Sho-Shan-Zi No.09901281880. Note 6: Letter of Approval, dated 06/09/2011, Gin-Sho-Shan-Zi No.10001115870. Note 7: Letter of Approval, dated 11/08/2012, Gin-Sho-Shan-Zi No.10101231660. Note 8: Letter of Approval, dated 10/11/2013, Gin-Sho-Shan-Zi No.10201208320. Note 9: Letter of Approval, dated 10/17/2014, Gin-Sho-Shan-Zi No.10301216930. Note 10: Letter of Approval, dated 01/26/2015, Gin-Sho-Shan-Zi No.10401007850. Note 11: Letter of Approval, dated 04/24/2015, Gin-Sho-Shan-Zi No.10401068910. Note 12: Letter of Approval, dated 07/23/2015, Gin-Sho-Shan-Zi No.10401147860. Note 13: Letter of Approval, dated 10/14/2015, Gin-Sho-Shan-Zi No.10401214610. Note 14: Letter of Approval, dated 01/08/2016, Gin-Sho-Shan-Zi No.10501000920. Note 15: Letter of Approval, dated 04/14/2016, Gin-Sho-Shan-Zi No.10501069930. Note 16: Letter of Approval, dated 08/03/2016, Gin-Sho-Shan-Zi No.10501170840. Note 17: Letter of Approval, dated 10/18/2016, Gin-Sho-Shan-Zi No.10501243740. Note 18: Letter of Approval, dated 01/17/2017, Gin-Sho-Shan-Zi No.10601006010. Note 19: Letter of Approval, dated 04/19/2017, Gin-Sho-Shan-Zi No.10601049020. Note 20: Letter of Approval, dated 07/18/2017, Gin-Sho-Shan-Zi No.10601101290. Note 21: Letter of Approval, dated 10/20/2017, Gin-Sho-Shan-Zi No.10601143210.

Unit: share

				Unit: share
Type of shares		Authorized Capital		Remark
	Outstanding Shares (note)	Unissued shares	Total Shares
Registered common stock	140,386,871	59,613,129	200,000,000

Note 1: The Company’s stocks are listed stocks.

Note 2: The Company’s repurchase of treasury shares are 1,000,000 shares.

Note 3: Including the 473,250 shares of the employees’ stock option have been exercised but yet to be registered, as of the book closure starting date.

(2) Status of Shareholders

(2) Status of Shareholders	(2) Status of Shareholders
						April 14, 2019 Unit:person/share
Shareholder structure Number	Government	Financial institute	Other juristic person	Individual	Foreign institute and individual	Treasury stock	Total
Number of Shareholders	0	3	40	9,892	67	1	10,003
Shareholding (shares)	0	8,931,961	4,321,694	82,391,058	43,742,158	1,000,000	140,386,871
Percentage	0.00%	6.36%	3.08%	58.69%	31.16%	0.71%	100.00%

Note: The Company has no shareholders with natural or legal entitites from Mainland China.

(3) Shareholding Distribution Status

Common stocks

(3) Shareholding Distribution Status Common stocks	(3) Shareholding Distribution Status Common stocks	(3) Shareholding Distribution Status Common stocks	(3) Shareholding Distribution Status Common stocks
April 14,2019
Class of Shareholding (Unit: Share)	Number of shareholders	Shareholding (Shares)	Percentage (%)
1 -999	1,220	192,876	0.14
1,000-5,000	7,022	13,250,996	9.44
5,001 - 10,000	905	7,017,849	5.00
10,001 - 15,000	257	3,240,113	2.31
15,001 - 20,000	154	2,807,177	2.00
20,001 -30,000	135	3,389,786	2.41
30,001 - 40,000	80	2,809,617	2.00

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Class of Shareholding (Unit: Share)	Number of shareholders	Shareholding (Shares)	Percentage (%)
40,001 -50,000	43	2,008,702	1.43
50,001 - 100,000	84	5,885,631	4.19
100,001 - 200,000	48	6,795,789	4.84
200,001 - 400,000	21	6,035,137	4.30
400,001 - 600,000	8	4,105,101	2.92
600,001 -800,000	5	3,661,356	2.61
800,001 – 1,000,000	5	4,778,173	3.40
Over 1,000,001	16	74,408,568	53.01
Total	10,003	140,386,871	100.00

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• (4) List of Major Shareholders (holding more than 5% of the total shares or top ten shareholders, with their names, number of shsares held and the shareholding ratios)

List of Major Shareholders (holding more than 5% of the total shares or top ten shareholders, with their names, number of shsares held and the shareholding ratios)	List of Major Shareholders (holding more than 5% of the total shares or top ten shareholders, with their names, number of shsares held and the shareholding ratios)	List of Major Shareholders (holding more than 5% of the total shares or top ten shareholders, with their names, number of shsares held and the shareholding ratios)
April 14,2019 Unit: share
Shares Shareholder	Shareholding	Percentage
Princeton Healthcare Limited	28,257,983	20.13%
Tien-Ying Lee	8,922,985	6.36%
Pei-Lin Lee	5,682,151	4.05%
Fidelity Investments	5,115,191	3.64%
Fubon Life Insurance Co., Ltd	5,089,961	3.63%
Shui-Cheng Tu	3,640,033	2.59%
Su-Ching Chen	2,862,808	2.04%
Nan Shan Life Insurance Co., Ltd.	2,682,000	1.91%
Indeed Co., Ltd	2,500,000	1.78%
Dong-Liang Wang	1,631,805	1.16%

• (5) Market Price, Net Worth, Earnings, and Dividends per Share and related information for the last two years

Unit: NTD: per thousand shares

Item	Year	Year	2017	2018	As of March 31 of theyear
Market price per share	Highest		48.45	38.50	36.15
	Lowest		33.80	30.00	30.40
	Average		40.69	33.87	32.70
Net worth per share	Before distribution		35.12	35.54	36.01
	After distribution		34.02	Note 1	Note 1
Earnings per share	Weighted average shares		139,872	139,651	138,914
	Earningsper share		(0.62)	2.32	0.43
Dividends per share	Cash dividends		1.1	Note 1	－
	Stock dividends	from Retained Earnings	－	Note 1	－
		from Capital Surplus	－	Note 1	－
	Retained dividends		－	Note 1	－
ROI analysis	Price / Earnings Ratio(Note 2)		0	14.60	－
	Price / Dividend Ratio(Note 3)		36.99	Note 1	－
	Cash Dividend Yield Rate (Note 4)		0.03	Note 1	－

Note 1: Based on the resolution of the Shareholders’ Meeting of the following year; however the distribution of 2018 earnings hasn’t been ratified by the Shareholders' Meeting.

Note 2: Price / Earnings Ratio = Average Market Price / Earnings per Share Note 3: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share

Note 4: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price

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• (VI) Company dividend policy and implementation

• Dividend policy

The Company’s earnings, if any, should be applied to pay tax and make up for losses, and then appropriate 10% legal reserve from the remaining amount thereafter. However, when the legal reserve is equivalent to the paid-in capital of the Company, the appropriation of legal reserve could be ceased. In addition, special reserve will be appropriated or reversed according to law and regulations. The remaining amount, if any, plus the accumulated undistributed earnings of previous years will be available for distribution, so at least 50% of the said amount should be appropriated according to the proposal of the Board of Directors; also, it should be presented in the shareholders meeting for resolutions.

The Company’s business development is growing currently, and the distribution of dividend and bonus is with the comprehensive dividend policy planned for the distribution of stock dividends and cash dividends appropriately. The Company’s dividend amount is based on having cash dividends accounted for 20% ~ 100% of the total dividends distributed in the current year. However, the actual distribution ratio will be adjusted depending on the actual profitability of the current year and the future capital planning.

1. The proposed dividend distribution in this shareholders meeting

The Company’s 2018 earnings distribution proposal was resolved by the Board of Directors on March 22, 2019 with cash dividend of NT$1.8/share for a total of NT$250,044,518 to be distributed after the resolution reached in the 2019 annual shareholders meeting.

1. The expected significant changes in the dividend policy: None.

2. (VII) The impact of the stock dividend proposed in the shareholders meeting on the company’s operating performance and earnings per share

The Company’s 2018 earnings distribution proposal was resolved by the Board of Directors on March 22, 2019 with cash dividend of NT$1.8/share to be distributed; therefore, no stock dividend was to be distributed and on impact resulted.

(VIII) Remuneration to employees, directors, and supervisors

1. The percentage or scope of remuneration to employees, directors, and supervisors as stipulated in the Company’s Articles of Association

If the Company makes a profit in the year (i.e. the net income before tax and before deducting the remuneration to employees and directors) after deducting the accumulated losses, should appropriate 0.5% or more of the earnings as remunerations to employees and 5% or less of the earnings as remunerations to directors. The aforementioned remuneration to employees and directors shall be resolved in the board meeting with the attendance of more than two-thirds of the directors and the consent of the majority of the attending directors, which should be reported in the shareholders meeting. The remuneration to employees is paid with stock shares or in cash. The employees of the subsidiaries who have met certain conditions are also entitled to the said remunerations. The Chairman is responsible for stipulating the remuneration distribution plan.

1. The estimation basis for the remuneration to employees, directors, and supervisors in the current period, the basis for the calculation of stock dividend to employees, and the accounting treatment for the difference between the actual distribution amount and the estimated amount

The estimation basis for the remuneration to the Company’s employees and directors and the basis for the calculation of stock dividend are based on a certain percentage as stipulated in the Articles of Association, which are recognized as expenses and liabilities. When there is a significant difference between the distribution amount resolved by the Board of Directors and the estimated amount, it should be adjusted retrospectively to the profit or loss of the current year. When there is a difference between the actual distribution

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amount resolved in the shareholders meeting and the estimated amount, it should be adjusted to the profit or loss of the following year.

1. The distribution of remuneration resolved by the Board of Directors

2. (1) If the remuneration to employees, directors, and supervisors paid in cash or with stock dividend is different from the estimated amount in the expense recognition year, the difference amount, cause, and treatment should be disclosed.

It had been resolved in the board meeting on March 22, 2019, but is yet to be reported in the 2019 annual shareholders meeting.

The remuneration to employees, directors, and supervisors approved by the Board of Directors is as follows:

Directors is as follows:
Distribution item	Amount(NTD)
Cash dividend to employees	139,919
Stock dividend to employees	None
Remuneration to directors and supervisors	5,600,000

The proposed remuneration to employees and directors and supervisors is not different from the estimated amount in 2018.

• (2) The amount of stock dividend distributed to employees and its ratio to the net income and total remuneration to employees on the only or individual financial report. The Company’s remuneration to employees was resolved by the Board of Directors

• on March 22, 2019 without stock dividend planned; therefore, it is not applicable.

• The actual distribution of remuneration (including the distributed number of shares, amount, and stock price) to employees, directors, and supervisors in the previous year, and if it is different from the remuneration to employees, directors, and supervisors recognized, the amount of difference, the cause, and the handling of the difference should be detailed.

For the 2017 earnings distributions proposal resolved in the annual shareholders meeting on June 11, 2018, the actual cash dividend and stock dividend to employees, and remuneration to directors and supervisors are as follows:

Distribution items	Amount(NTD)
Cash dividend to employees	0
Stock dividend to employees	None
Remuneration to directors and supervisors	0

The aforementioned dividend distribution is not different from the estimated amount in 2017 and the resolution of the Board of Directors on March 21, 2018.

• (IX) The stock shares repurchased by the company

Stock dividend to employees None Remuneration to directors and supervisors 0 The aforementioned dividend distribution is not different from the estimated amount in 2017 and the resolution of the Board of Directors on March 21, 2018. The stock shares repurchased by the company	Stock dividend to employees None Remuneration to directors and supervisors 0 The aforementioned dividend distribution is not different from the estimated amount in 2017 and the resolution of the Board of Directors on March 21, 2018. The stock shares repurchased by the company
April 14,2019
Repurchase time	1stTime
Purpose of the repurchase	Share transfer to employees
Plannedperiod for the repurchase	August 14,2018 – October 13,2018
Price range of the shares to be repurchased	NT$30 – NT$48
Types and volumes of shares repurchased	1,000,000 shares
Shares amount repurchased	NT$34,955,961
Number of shares that have been processed for sale and transfer	None
Cumulative holding of the Company’s shares	1,000,000 shares
Ratio of the cumulative holding of the Company’s shares to the total shares issued(%)	0.71%

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II. Bonds

(I) Corporate bond issuance

orporate bond issuance
Type of corporate bond	The 3rddomestic guaranteed convertible corporate bond
Issuance (handling) date	November 2, 2017
Face value	NT$100,000
Place of issuance and transaction	Domestic
Issuance price	Fully issued at par value
Total amount	NT$1,200,000,000
Interest rate	0%
Term	3-year Due date: November 2,2020
Guarantee agency	First Commercial Bank, Tun-Hua Branch CTBC Bank,Chengde Branch
Trustee	Yuanta Commercial Bank
Underwriting institution	MasterLink Securities Corp.
Certification Lawer	Handsome Attorneys-at-Law Lawer Yawen Qiu
Certification CPA	PricewaterhouseCoopers (PwC) Taiwan Sheng-Wei Tengand Hsiao-Tzu Chou
Repayment method	According to the provisions of Article 6 of the Rules Governing the Transfer of Corporate Bonds, except for that the holder of the convertible corporate bond has it converted into the common stock shares of the Company in accordance with Article 10 of the Rules, or the Company has it redeemed in advance according to Article 18 of the Rules, or has it redeemed from TPEx and cancelled, the Company will fully pay in cash for the face value of the convertible corporate bonds that are held bythe bondholders at the maturitydate.
Unpaid principal	NT$1,200,000,000
Redemption or early payment terms	Please refer to the Company’s 2017 3rddomestic guaranteed convertible corporate bond issuance and conversion rules.
Restrictions	Please refer to the Company’s 2017 3rddomestic guaranteed convertible corporate bond issuance and conversion rules.
Names of credit rating agencies, evaluation dates, corporate bond evaluation results	Not applicable

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Type of corporate bond	Type of corporate bond	The 3rddomestic guaranteed convertible corporate bond
Other rights attached	Common stock amount, overseas depositary receipts, or other securities that have been converted (exchanged or subscribed) as of the annual report printing date	No creditor has had the convertible corporate bond converted.
	Issuance and Conversion (stock exchange or subscription)Rules	Please refer to the company’s 2017 3rdDomestic Guaranteed Convertible Corporate Bond Issuance and Conversion Rules.
The issuance and conversion, stock exchange or subscription method, and the impact of the issuance conditions on possible dilution of equity and existing shareholders’ equity		When the remaining corporate bonds are converted into common stock shares entirely based on the existing conversion price, additional 29,556,650 shares should be issued, and the share capital expansion rate is 21.05%, which has limited impact on the existing shareholders’ equity.
Name of the depository agency for the exchange subject matter		Not applicable

(II) Convertible corporate bond information

Type of corporate bond	Type of corporate bond	The 3rddomestic guaranteed convertible corporate bond	The 3rddomestic guaranteed convertible corporate bond	The 3rddomestic guaranteed convertible corporate bond
Item	Year	2017	2018	As of March 31 of the year
Convertible corporate bond market price	Max. Min. Average	107.30	108.10	108.00
		104.00	101.60	103.70
		106.06	105.05	106.75
Conversion price		42.0	40.6	40.6
Issuance (handling) date and conversion price at the time of issuance		Issuance date: November 2, 2017 Conversion price at the time of issuance: NT$42.0	Issuance date: November 2, 2017 Conversion price at the time of issuance: NT$42.0	Issuance date: November 2, 2017 Conversion price at the time of issuance: NT$42.0
Performance of conversion obligation		Issuing of new stocks	Issuing of new stocks	Issuing of new stocks

• (III) Exchangeable Bonds

None

• (IV) Shelf Registration for Issuing Bonds

None

• (V) Corporate Bonds with Warrants

None

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III. Preferred Stock Issuance

None

IV. Global Depository Receipts

None

• V. Employee stock options and new restricted employee shares

• (I) The outstanding employee stock options of the company and its impact on shareholder’s equity

April 14, 2019

equity		April 14,2019
Type of employee stock options	First employee stock option in 2012	First employee stock option in 2017
Effective filingdate	July17,2012	August 24,2017
Issuance (handling) date	August 31, 2012	April 13, 2018
Number of units issued	3,000 units	2,000 units
Ratio of shares to be subscribed to total shares issued	2.14%	1.42%
Subscriptionperiod	7years	7years
Performance method	Issuingof new stocks	Issuingof new stocks
Restrict subscription period and ratio (%)	Subscriber with stock option for two years may exercise stock subscription rights according to the following schedule and ratio: Stock options Schedule Ratio (cumulative) 2 years 25% 3 years 50% 4 years 75% 5years 100%	Subscriber with stock option for two years may exercise stock subscription rights according to the following schedule and ratio: Stock options Schedule Ratio (cumulative) 2 years 25% 3 years 50% 4 years 75% 5years 100%
Number of shares obtained	1,386,871 shares	0 share
Shares amount obtained	NT$53,798,576	NT$0
Number of shares not subscribed	503,250 shares	1,980,000 shares
The price per share of shares not subscribed	NT$36.2	NT$33.4
Ratio of shares not subscribed to total shares issued(%)	0.36%	1.41%
Impact on shareholder’s equity	The stock options can be exercised after two years from the issuance date. The original shareholder’s equity will be diluted year by year, which will not have a significant impact.	The stock options can be exercised after two years from the issuance date. The original shareholder’s equity will be diluted year by year, which will not have a significant impact.

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• (II) The names, acquisitions, and subscriptions of the managers with stock options and the top-ten employees with cumulative stock options for stock subscription as of the annual report printing date

1. The first stock option in 2012

								April 14,2019 Unit: NT$thousands(unless otherwise stated);1,000 shares	April 14,2019 Unit: NT$thousands(unless otherwise stated);1,000 shares	April 14,2019 Unit: NT$thousands(unless otherwise stated);1,000 shares	April 14,2019 Unit: NT$thousands(unless otherwise stated);1,000 shares	April 14,2019 Unit: NT$thousands(unless otherwise stated);1,000 shares
	Job Title	Name	Number of shares obtained	Ratio of shares acquired to total shares issued		Implemented				Not Implemented
					Number of shares subscribed	Subscription price	Subscription amount	Ratio of shares subscribed to total shares issued	Number of shares subscribed	Subscription price	Subscription amount	Ratio of shares subscribed to total shares issued
Managers	General Manager	Pei-Lin Lee (Note 1)	255	0.18%	56 79 (Note 3)	NT$41.4 NT$36.2 (Note 3)	5,178.2	0.10%	120	NT$36.2 (Note 3)	4,344	0.09%
	General Manager of Great China Region	Goung-Yu Chen (Note 2)
	Chief Executive Officer, Oncology Business Group	Yee-Min Jen
	Vice President	Ming-Lun Lee
	Vice President	Yi-Chun Chen
Employees (please confirm whether they are sorted by rank)	Vice President	Zhongming Zhuang	629	0.45%	125 168 53.5 127.5 (Note 3)	NT$41.4 NT$39.8 NT$38.3 NT$36.2 (Note 3)	18,525.95	0.34%	155	NT$36.2 (Note 3)	5,611	0.11%
	Junior Vice President	Minzong Zhuang
	Junior Vice President	Yuanxin Wu
	Junior Vice President	Mingfa Hsieh
	Special Aide	Guixiang Huang
	Chief Engineer	Junwei Luo
	Manager	ShiShon Sang
	Assistant Manager	Wenbo Lu
	Senior Engineer	Jingan Lin
	Special Engineer	Shengfu Liang

Note 1: The Chairman, Pei-Lin Lee, has also served as the General Manager of the company since July 31, 2018.

Note 2: Goung-Yu Chen, General Manager, resigned on July 31, 2018.

Note 3: In response to the 2018 dividend distribution, the Company adjusted the employee stock option price from NT$37.4 to NT$36.2 on July 15, 2018 according to the Company’s “Rules Governing the Issuance of Employee Stock Option.” In response to the 2017 dividend distribution, the Company adjusted the employee stock option price from NT$38.3 to NT$37.4 on July 16, 2017 according to the Company’s “Rules Governing the Issuance of Employee Stock Option.” In response to the 2016 dividend distribution, the Company adjusted the employee stock option price from NT$39.8 to NT$38.3 on July 16, 2016 according to the Company’s “Rules Governing the Issuance of Employee Stock Option.” In response to the 2015 dividend distribution, the Company adjusted the employee stock option price from NT$41.4 to NT$39.8 on July 15, 2015 according to the Company’s “Rules Governing the Issuance of Employee Stock Option.”

Note 4: The number of shares issued as of April 14, 2019 was 140,386,871 shares.

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2. The first employee stock option in 2017

	2. The first employee stock option in 2017	2. The first employee stock option in 2017	2. The first employee stock option in 2017	2. The first employee stock option in 2017
								April 14,2019 Unit: NT$thousands(unless otherwise stated);1,000 shares
	Job Title	Name	Number of shares obtained	Ratio of shares acquired to total shares issued		Implemented			Not Implemented
					Number of shares subscribed	Subscription price	Subscription amount	Ratio of shares subscribed to total shares issued	Number of shares subscribed	Subscription price	Subscription amount	Ratio of shares subscribed to total shares issued
Managers	General Manager	Pei-Lin Lee (Note 1)	210	0.15%	0	NT$33.4 (Note 3)	0	0%	210	NT$33.4 (Note 3)	7,014	0.15%
	General Managerof Great China Region	Goung-Yu Chen (Note 2)
	Chief Executive Officer, Oncology Business Group	Yee-Min Jen
	Vice President	Ming-Lun Lee
	Vice President	Yi-Chun Chen
Employees	Vice President	Zhongming Zhuang	565	0.40%	0	NT$33.4 (Note 3)	0	0%	565	NT$33.4 (Note 3)	18,871	0.40%
	Junior Vice President	Minzong Zhuang
	JuniorVicePresident	Fangqin Zhang
	Junior Vice President	Mingfa Hsieh
	Special Aide	Guixiang Huang
	Manager	ShiShonSang
	Manager	Shihong Dai
	Assistant Manager	Wenbo Lu
	AssistantManager	SuhuaLou
	Superintendent	Jiaxua Wu

Note 1: The Chairman, Pei-Lin Lee, has also served as the General Manager of the company since July 31, 2018.

Note 2: Goung-Yu Chen, General Manager, resigned on July 31, 2018.

Note 3: In response to the 2018 dividend distribution, the company adjusted the employee stock option price from NT$34.5 to NT$33.4 on July 15, 2018 according to the Company’s “Rules Governing the Issuance of Employee Stock Option.”

Note 4: The number of shares issued as of April 14, 2019 was 140,386,871 shares.

(III) Issuance of new restricted employee shares

The Company did not issue new restricted employee shares as of the annual report printing date.

VI. Status of New Shares Issuance in Connection with Mergers and Acquisitions None

VII. Financing Plans and Implementation

The Company has no issuance of securities or outstanding private placement of securities, or the issuance of private placement of securities have been completed in the last three years without significant effect resulted as of the last quarter prior to the annual report printing date.

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Five. Operational Highlights

I. Business Activities

(I) Business Scope

1. The Company: General investment industry

2. The Group

3. (1) Main content of the business

Engaged in the distribution, repair and maintenance, and lease of the equipment for radiation oncology, neurology, medical imaging, ophthalmology, and surgery/surgical service, and the sale of related parts, consumables, and medicines.

• (2) Business ratio

Business ratio
	Unit: NT$thousands 2018 Amount Business ratio 865,643 34.52% 142,626 5.69% 171,500 6.84% 1,068,772 42.62% 258,925 10.33% 2,507,466 100.00%
Products	2018
	Amount	Business ratio
Sales of equipment for radiation oncology and neurology	865,643	34.52%
Other sales	142,626	5.69%
Medicines sales	171,500	6.84%
Rental revenue	1,068,772	42.62%
Service revenue	258,925	10.33%
Total	2,507,466	100.00%

• (3) The Group’s products (services)

• Products (services)

  • A. Radiation oncology equipment brands for distribution: Elekta, PTW Freiburg Gmb (PTW), GE, Ashland, C-RAD, IBA, and Klarity Medical.

  • B. Neuroscience equipment brands for distribution: Stryker, Elekta, Leica, IMRIS, Sony, Hill-Rom, Crownjun, Microtek Medical, and CAScination.

  • C. Medical imaging equipment brands for distribution: Swissray and GE.

  • D. Ophthalmology equipment brands for distribution: Bausch+Lomb, Ellex, Leica, PhysIOL, Wexler, Hill-Rom, Albomed, and ScienceBased Health.

  • E. Distribution of Nippon Electric Glass Co., Ltd. lead glass for medical use.

  • F. Maintenance, repair, technical consultation, system upgrade, and parts replacement of distribution equipment.

  • G. Leasing equipment for radiation oncology, medical imaging, and neuroscience: Refers to leasing businesses, including medical equipment, instruments, consumables, information software and hardware, and other specific equipment for all divisions, site planning, radiation shielding calculation, radiation information consultation, and management services.

  • H. Leasing equipment for ophthalmology: Refers to leasing businesses, including medical equipment, surgical instruments, information software and hardware, and other specific equipment for hospital ophthalmology departments and ophthalmic clinics, site planning, information consultation, and management services.

  • I. Professional consultation: Provide relevant evaluations on the establishment, procurement, and update of medical device and equipment, consultation on the establishment of relevant software and hardware for medical institutions, and consultation on the construction of large medical equipment.

  • J. Medicines sales: Supply medicines needed by hospitals.

  • K. Research and Development Project: Integrated Radiation Oncology Information Platform.

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 Distribution product brand and item

A. Radiation oncology

Radiation oncology
Distribution brands	Products
Elekta	Radiation oncology linear accelerator MRI linear accelerator Image-guided radiotherapy Electronic medical information management system Computer treatment planning system Radiotherapy patient fixation equipment Ultrasound image-guided radiotherapy system Remote after-loading intracavitary brachytherapy system Intracavitary brachytherapy device Analog positioning X-ray camera Integrated X-ray intracavitary brachytherapy special photography system Low-dose prostate tissue interstitial implantation treatment system Computer treatment planning system
PTW	Radiotherapy quality confirmation equipment Radiological diagnostic quality confirmation equipment Radiation calibration measurement system equipment
GE	Computer tomography simulation positioning X-ray camera Computer treatment positioning planning system
Ashland	Self-displayfilm forqualityvalidation
C-RAD	Radiotherapy laser scanning instant positioning system
IBA	Proton therapysystem
Klarity Medical	Radiation oncology patient peripheral equipment

B. Neuroscience

Neuroscience
Distribution brands	Products
Stryker	SPY surgical fluorescence imagingsystem
Elekta	Leksell gamma knife Magnetoencephalography(MEG) system Stereotactic radiosurgerysystem
Leica	Medical surgerymicroscope
IMRIS	MRI hybrid surgical theatre
Sony	NUCLeUS
Hill-Rom	Operating room products, such as operating table, surgical lamp, air bag, etc.
Crownjun	Surgical sutures and instruments
Microtek Medical	Surgical microscope sterilization set
CAScination	Tumor interventional ablation therapy navigation system

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C. Medical imaging

Medical imaging
Distributionbrands	Products
Swissray	Digital X-rayimaginarydiagnostic system
GE	Computed tomography system Nuclear magnetic resonance imaging system Nuclear medical imaging system Positron tomography system Digital mammographysystem

D. Ophthalmology

Ophthalmology
Distribution brands	Products
Bausch+Lomb	Ophthalmic excimer laser system Ophthalmic femtosecond laser system Corner template cutter Intraocular lens
Ellex	Ophthalmoscope laser
Leica	Ophthalmic special medical operation microscope
PhysIOL	Intraocular lens
Wexler	Surgical microscope
Hill-Rom	Direct/indirect ophthalmoscope Retinal lens Otoscope Handheld vision scanner
Albomed	Artificial vitreous
ScienceBased Health	Eye supplements for dry eye syndrome, lutein, glaucoma,retina,etc.

• (4) New products (services) to be developed by the Group

  • Medical service construction and cooperation (equipment leasing and technical training transfer).

  • Proton Therapy System

  • MRI linear accelerator

  • Expand the scope of application of the leased cooperative medical department of medical institutions.

  • Integrated Radiation Oncology Information Platform development.

  • Development of the elderly welfare business.

• (II) Industry overview

1. The Company

The Company is an investment holding company. The subsidiaries of the Company are mainly engaged in medical equipment distribution, medical equipment leasing, and medical technology management services. Through the holding platform, the Company combines professionals and technical services in various medical fields, and integrates logistics management operations to reduce operating costs, so business performance has grown continuously since its incorporation. The Company will continue the operation of the

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medical industry’s holding business model to outperform the industry, increase profits, and become the leader in the medical equipment sales service channel in the Asia Pacific region.

1. The Group

2. (1) Current status and development of industry

The medical equipment industry covers a wide range of products. The “2018 Medical Devices Industry Yearbook” published by the Industrial Economics and Knowledge Center of the Industrial Technology Research Institute of Taiwan (hereinafter referred to as “IEK”) by referring to the Taiwan Pharmaceutical Law and the “Medical Equipment Classification” announced in 2000 has medical equipment divided into medical equipment for diagnosis and monitoring, medical equipment for surgery and treatment, medical equipment for patient aid and recovery, equipment for in vitro diagnosis, and other related medical equipment products. The Group organized by the Company and its subsidiaries focuses on the sale and lease of medical equipment for surgery and treatment. The radiation oncology equipment is mostly large medical device with relatively high technology aspect and mainly imported. For the sake of safety, the brand has become the main consideration factor. Such products are mainly manufactured by few manufacturers. At present, the radiotherapy equipment-linear accelerator market is dominated by Elekta and Varian, the top two global market players with high barrier to keep new manufacturers from entering the market.

Since the types of technologies related to the production of medical devices include electronics, electrical engineering, biotechnology, biochemistry, medical engineering, measurement and chemical engineering, etc., the research and development period is long and the product validation and clinical testing are needed, especially high-end medical equipment requires precision technology. Product distribution requires a large amount of working capital, and the medical equipment license application is time-consuming, regardless of production or distribution, and the barriers of market entry are quite high. As far as the market is concerned, the medical equipment industry is deeply affected by government policies. The medical insurance policy directly affects market demand. Therefore, the demand for medical equipment mainly comes from the developed countries, such as North America, Europe, and Japan. Also, the medical product certification and medical insurance payment system is slightly different in each country; therefore, it is difficult to enter the market. However, once the product is successfully introduced into the market, its profits are also higher than those of other industries due to the protection of patents and certifications and the long product life cycle.

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==> picture [434 x 249] intentionally omitted <==

Source: Industrial Development Bureau, Ministry of Economic Affairs, 2018 Biotechnology Industry in Taiwan

According to the 2018 Biotechnology Industry in Taiwan (as shown above), the global medical device market in 2017 was US$ 359.8 billion and is expected to reach US$ 425.3 billion in 2020. The compound annual growth rate from 2017 to 2020 is approximately 5.7%. In terms of region, the overall top-three ranking remains America, Western Europe, and Asia Pacific. The America region has long been a leader in the global medical device market and is considered to be due to its relatively mature medical insurance system. Although the economic growth pace in Western Europe has been relatively slow in recent years, it is expected to drive the demand for medical and healthcare products due to the aging population in the region; therefore, the growth of the medical devices market is promising. The Asia-Pacific region has the highest compound annual growth rate among the top three markets and is a regional market with considerable development potential. Although it is still dominated by Japan currently; however, Janapese market is already a mature market; therefore, market growth will gradually slow down, and the strong growth of the medical device in Asia-Pacific is expected to rely on the market of China and other emerging countries.

In terms of medical equipment market in Taiwan, the turnover in 2017 was approximately NT$ 146.3 billion. It has been grown continuously in the last ten years (as shown below). The compound annual growth rate in the decade from 2008 to 2017 is as high as 7%. The medical equipment industry is one of the industries with growth potential. According to the customs data of the Republic of China, the import value of medical equipment in Taiwan in the last five years has also increased annually. The importing countries are mainly Europe, the United States, and Japan. The imported products are mostly advanced medical products of leading brands in the advanced nations, which are currently unable to be manufactured in Taiwan, for example, radiation

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oncology equipment, medical imaging high-end equipment, surgical treatment equipment, etc. It is expected that the import items will be the same if Taiwan’s industrial structure has not been changed significantly.

==> picture [434 x 233] intentionally omitted <==

Source: Industrial Development Bureau, Ministry of Economic Affairs, 2018 Biotechnology Industry in Taiwan

Although the size of the domestic market is not as large as that of Europe and the United States, the domestic market demand and per capita medical supplies consumption are increasing year by year due to the aging population structure and the expectation of the public in medical care quality. In particular, with the aging population and the increasing demand for medical care driven by the increase in chronic diseases, under the healthcare system, the demand for overall medical resources is significant, the public’s demand for medical quality and services has increased, and the growing demand for self-funded plastic surgery and ophthalmology, the demand for imported novel medical supplies is also quite high. With the growth of domestic demand, it is expected that the growth of imported medical supplies will continue to grow in the future.

Asia Pacificper capita medical expense	Asia Pacificper capita medical expense	Asia Pacificper capita medical expense	Asia Pacificper capita medical expense	Asia Pacificper capita medical expense
Country	Australia	New Zealand	Taiwan	Japan	Singapor e	S. Korea
Per capita medical expense (USD)	5,635.6	4,480.3	1,552.4	3,638.0	3,203.3	2,286.3

Source: Industrial Development Bureau, Ministry of Economic Affairs, 2018 Medical Devices Industry Yearbook

In terms of Chinese market for medical equipment, China’s overall medical expenditure in 2017 reached US$ 723.07 billion, a growth of nearly 10% compared with 2016. Although the country’s overall medical expenditure ranked first in the Asia-Pacific region, it was only US$ 513 per capita medical expenditure. It is far less than the advanced countries in the Asia-Pacific region (as shown above), and has become the

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focus of the global medical equipment industry. In addition, the government has implemented a new medical reform system to drive the purchase of medical equipment, and the overall market scale continues to expand. In 2017, China’s medical equipment market reached US$ 21.52 billion, a 12.0% increase from 2016. It is a stable growth trend and it is the second largest medical equipment market in Asia and ranks the fourth largest medical equipment market in the world.

With the relevant medical reform plan and the 13[th] Five-Year Plan officially launched in 2016 to promote the construction of “Healthy China,” it is hoped that through deepening the reform of the medical and health system, implementing graded diagnosis and treatment, establishing a basic medical and health system covering urban and rural areas and a modern hospital management system to improve the medical equipment quality of hospitals and to derive the demand for medical equipment and hospital management systems. With the support of policy and huge domestic market demand, it is expected that the Chinese medical supplies market will continue to grow strongly in the future. The compound growth rate in 2017 ~ 2020 is expected to reach 13.7%; also, the Chinese medical supplies market will reach US$31.59 billion in 2020.

In terms of Southeast Asian market, according to the IEKConsulting report in 2017, the total medical expenditure of ASEAN and South Asia was US$ 269.8 billion, and the compound annual growth rate is expected to reach 9.1% in the next five years. The total medical expenditure in 2022 will reach US$ 443.9 billion, and the grown rate will be the highest worldwide. Among the 10 ASEAN countries, the medical equipment markets of Singapore, Thailand, Malaysia, the Philippines, Indonesia, and Vietnam are the most concerned. In terms of per capita medical expenditure and medical equipment market growth potential in each country, the per capita medical expenditure of Vietnam, the Philippines, and Indonesia are less than US$ 150; especially the US$ 136 of Indonesia is the lowest. The Indonesian government has implemented the National Health Insurance Plan(BPJS) since January 2014, which is a program promoted by the Indonesian government to cater for the general public who are unable to enjoy medical care due to economic disadvantage. By the end of December 2017, there were approximately 138 million of people joined this insurance program, over 50% of the population is insured, and the local government expects to increase the rate of insurance to 90% in recent years. Considering Indonesia’s huge medical needs and the prevailing of health insurance, added the country’s dependence on medical equipment imports exceeding 90%, the demand for imported medical equipment is huge, and the market has great potential for development.

The medical equipment industry is with a wide range of products and detailed classification. The Group currently focuses on the sale and lease of medical equipment and consumables for radiation oncology, neuroscience, medical imaging, and ophthalmology.

 Radiation oncology and neuroscience

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A. Global radiotherapy market conditions

As shown below, Market Data Forecast indicates that the global radiotherapy market had a market value of US$ 6.12 billion in 2018. The number of cancer patients is increasing year by year, and the technology and equipment of radiotherapy are changing with each passing day. It is expected that the market value will reach US$ 8.19 billion in 2023 with a compound annual growth rate of 6.00% in the period from 2018 to 2023. North America remains a market leader by region with a market value of US$ 2.02 billion in 2018, accounted for one-third of the global market value, followed by Europe, Asia Pacific, Latin America, and the Middle East and Africa in that order. Further analysis of regional markets, the Asia-Pacific region and Latin America benefited from the growing maturity of the medical infrastructure and the improvement of the system are considered to be the two markets with the strongest growth in 2018-2023 for a compound annual growth rate of 6.82% and 6.54%, respectively, which are both much higher than the global average with a bright future expected.

==> picture [433 x 297] intentionally omitted <==

Source: Market Data Forecast

B. Global radiotherapy system equipment market share

The global radiotherapy equipment linear accelerator market is an oligopoly market. The two major manufacturers, the Swedish brand Elekta and the American brand Varian, are accounted for nearly 90% of the global market. Further analyzing the market share, Varian has an advantage in America; also, the two brands share the European market and Asian market equally.

In addition to the linear accelerator that is currently popular in all advanced countries, Elekta and Philips have collaborated to create the world’s first MRI linear accelerator. The head is mounted in a ring-shaped device that shields the

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magnetic field, avoiding the interference of magnetic field on the accelerator head. Under the circumstance, physicians are able to obtain clear MRI images in radiotherapy that helps improve treatment accuracy. Moreover, MRI images have advantages over CT imaging in soft tissues and can avoid unnecessary medical radiation therefore, it is an exclusive product fairly competitive in market. Elekta has obtained EU CE certification and US FDA license in mid-2018 and at the end of the year, respectively. Currently, the Group is applying for a TFDA license from the Ministry of Health and Welfare, and this radiotherapy tool can be included in the product portfolio in the near future.

In addition, proton therapy has been gradually introduced in recent years. The advantage of proton therapy is that it can effectively damage cancer cells while reducing the damage to normal tissues. When proton rays pass through the tissues, only less energy is released on the path of crossing when reaching the specific depth where the tumor located with a large amount of energy released to fight the cancer cells and to significantly reduce the amount of radiation received by the normal tissues behind the tumor. At the same time, the doctor can arrange a customized treatment plan for each patient according to his/her physical condition and treatment needs in order to effectively improve the cure rate and reduce the treatment-related side effects, which is a piece of great news to all cancer patients.

Referring to the information released by IBA on the leader in proton therapy technology (as shown below), the global population exceeded 7.4 billion in 2016, and the annual new cancer population is about 14 million, of which, about 71 thousand persons are potential patients for proton therapy (accounted for 5% of the new cancer patients). Based on this estimate, there are about 2,500 PT rooms needed for performing proton therapy worldwide, but as of the end of 2016, there were only 191 PT rooms in operation worldwide. Furthermore, there are around 250 PT rooms in construction that is far below market demand; therefore, it is expected that there will still be huge room for growth in the future.

==> picture [401 x 224] intentionally omitted <==

Source: IBA

At present, the mainstream of domestic radiation oncology equipment is Elekta, Varian, and Accuray (has merged TomoTherapy). The Elekta linear accelerator distributed by the Group is with nearly 50% market share in Taiwan, outperforming the world’s largest brand, Varian. Also, in recent years, Elekta has become the first

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choice of brand in domestic hospitals in recent years. Elekta itself has actively invested in research and development and successfully launched the world’s first MRI linear accelerator. In the future, the product will also be exclusively distributed by the Group in the Taiwan market. Apparently, the products distributed by the Group are competitive options in the domestic market and customer procurement considerations. The brands related to the distribution of radiotherapy equipment are with over 60% market share owned by the Group, indicating that the Group is the main distributor of radiotherapy equipment in Taiwan.

In recent years, the Group has also actively promoted the precision medicine - proton therapy system. The Group hopes that by introducing high-end medical equipment and technical services the public will be able to enjoy more precise treatment, more adequate medical resources, and higher quality medical services in order to improve the overall health and well-being of the citizens. The IBA distributed by the Group is a global leading brand with more than 100,000 patients treated worldwide. As a reference, IBA currently has a market share of over 65% worldwide. The Group officially introduced the proton therapy system into Taiwan medical market in 2016 and it had taken up 40% market share in Taiwan by the end of 2018.

As far as the types of radiation oncology equipment are concerned, the products distributed by the Group include radiation oncology linear accelerator and TomoTherapy system, as well as Leksell gamma knife, computer treatment planning system, auxiliary equipment, the proton therapy system introduced in recent years, and the global exclusive product – MRI linear accelerator. The product line provided by the Group is quite complete in depth and breadth and should be able to meet the domestic market demand.

 Medical imaging

A. Diagnostic imaging market development overview

BMI Espicom has medical device products divided into six categories: Diagnostic imaging, Orthopaedic and Prosthetic, Dental products, Consumables, Patient aids, and Others. As shown below, the category “Others” of the global medical device market accounted for the highest proportion of the global medical supplies market in 2017, and it was not a single item, but a combination of many items. In terms of the largest single category diagnostic imaging product is accounted for 24%. Apparently, the market demand for diagnostic imaging products is very big. Diagnostic imaging products include radiation diagnostic imaging equipment, such as, X-ray machines, computed tomography (CT), and positron emission tomography (PET); non-radiological diagnostic imaging equipment, such as, medical ultrasound scanners and magnetic resonance imaging (MRI); in addition, the parts, accessories, consumables, etc. of diagnostic imaging equipment are also within the scope of such products.

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==> picture [410 x 282] intentionally omitted <==

Source: Industrial Development Bureau, Ministry of Economic Affairs, 2018 Medical Devices Industry Yearbook

In recent years, emerging markets are actively engaged in the construction of basic medical care, and the demand for diagnostic imaging products is rising. The Asia-Pacific region is an emerging market. In China, due to the overall medical policy, it drives the demand for basic diagnostic imaging products in rural hospitals, including ultrasound, X-ray and electrocardiographs; high-end hospitals focus on the procurement of advanced diagnostic imaging products, such as magnetic resonance imaging (MRI) and computed tomography (CT).

==> picture [408 x 311] intentionally omitted <==

Source: ITIS; IEK, 2018 Medical Devices Industry Yearbook

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The above Fig indicates that the scale of China’s medical equipment market in 2017 was approximately US$ 21.52 billion, of which, diagnostic imaging products accounted for 32%, which was not only far exceeding other categories of products, but also far greater than the proportion of diagnostic imaging products in the global medical equipment market. Apparently, China is a huge market for diagnostic imaging products with market size of about US$ 6.93 billion, and it is expected to reach nearly US$ 9.91 billion by 2020, and the compound annual growth rate will reach 12.7% in the period from 2017 to 2020.

Further analysis of Chinese market for diagnostic imaging products, due to China’s lifting restrictions on the quantity, specifications, and intended use of large-scale medical equipment purchases in public hospitals in recent years and the promotion of the overall medical policies, the demand for diagnostic imaging proceeds by hospitals is activated. According to the “2018-2020 Large Medical Equipment Configuration Plan” issued by National Health Commission of the People’s Republic of China on October 29, 2018, the plan is to add 28 units of the positron emission tomography system (PET/MR) during this period; 377 units of X-ray positron emission tomography scanners (PET/CT, including PET); 3,535 units of 64-cut and above X-ray computed tomography scanners (64-cut CT and above); and 4,451 units of 1.5T and above magnetic resonance imaging (1.5T and above MR) system. Rural hospitals mainly use front-line products, such as, ultrasonic, X-ray machines, and electrocardiographs as the main procurement targets; high-end hospitals focus on the procurement of computed tomography scanners and magnetic resonance scanners, which is clearly reflected in the market performance. The top three products of diagnostic imaging products in Chinese market are ultrasonic equipment, other medical X-ray equipment, and other imaging equipment parts and accessories, with a market size of US$ 1.38 billion, US$ 1.05 billion, and US$ 920 million, respectively, which accounted for nearly 50% market share of the overall diagnostic imaging products market in China.

Considering diagnostic imaging product is the largest and most important imports in China’s medical device market, the market demands for such product has attracted multinational manufacturers and local manufacturers in China to participate. International companies, GE, Philips, and Siemens, have also set up medical imaging product R&D centers and manufacturing centers in China to provide mid- and low-end product lines worldwide in the future. However, due to the limit of multinational manufacturers’ positioning of the product line and the manufacturing capabilities of local manufacturers in China, the current high-end medical imaging products still rely heavily on imports, which is also an important factor why over 70% of the diagnostic imaging products in China currently still relies on imports.

B. Medical digital X-ray market

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Medical X-ray equipment can be divided into two categories: analog radiography (AR) and digital X-Ray system. With the rise of digital concept awareness, low radiation dose, seamless integration workflow, safe measurement methods, and competitive prices, digital X-ray equipment has emerged in recent years, and analog radiography used in the past has gradually been replaced by digital X-Ray system in advanced countries; however, there is still much analog radiography used in emerging countries. According to the data of the Markets and Markets, the global digital X-ray equipment market in 2017 was US$ 8.08 billion, and it is expected to reach US$ 13.04 billion in 2023 with a compound annual growth rate of 8.5% in the period from 2017 to 2023.

Although the advanced countries in Europe and the United States are still the main markets for medical digital X-ray equipment, the Asia-Pacific region is the market that has real growth potential and development potential in the future. In the Asia-Pacific market, China with the medical reform plan promoted currently and the 13th Five-Year Plan will become a country with a large increase in demand for medical digital X-ray equipment.

• C. Diagnostic imaging market development trends and strategies

• (A) Technology trends - equipment integration (positron emission tomography combined with computed tomography, positron emission tomography combined with nuclear magnetic resonance), low-dose, portable/mobile, special-purpose equipment development, etc.

• (B) The specification conversion drives the digital X-ray equipment market. In addition to the original general chest X-ray application, future special-purpose models will continue to be introduced, such as, the application for mammography, plastic surgery, dentistry, and general surgery.

• (C) The trend of aging population also drives the demand for medical diagnostic imaging equipment.

 Ophthalmology

Due to the prevalence of 3C products and the trend of aging population, in recent years, in addition to the myopia and presbyopia found in young generation, the problems and diseases caused by aging have also increased. Ophthalmology has become one of the star industries under the trend. According to the research data of the Market Data Forecast (as shown below), the global ophthalmology device market in 2018 was US$ 38.4 billion and it is estimated to reach US$ 50.2 billion in 2023 with a compound annual growth rate of 5.5% in the period from 2018 to 2023. The number of patients with cataracts, refractive, and glaucoma patients is increasing gradually that will drive the therapeutic equipment market to grow, such as excimer lasers, femtosecond knifeless lasers, and photocoagulation lasers. If analyzed by region, the Asia Pacific ophthalmology device market is considered to have the highest compound annual growth rate of 6.5% in the period from 2018 to 2023, and

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the market scale is expected to grow from US$ 6.1 billion in 2018 to US$ 8.4 billion in 2023. The reason is that the global myopia population is mostly in the Asia-Pacific region, especially in Singapore, Hong Kong, Taiwan, and Japan. The incidence of myopia in China is also increasing, especially in big cities, such as Beijing, Shanghai, and Guangzhou. In addition, aging population is a common problem in Asia and is considered to be one of the major factors for the high growth rate of the ophthalmology device market in the Asia Pacific region.

==> picture [419 x 281] intentionally omitted <==

Source: Market Data Forecast

Taiwan’s current myopia patients account for more than 40% of the population, which is more than 10 million people, and the highest percentage in the world. The ratio of severe myopia (over 600 degrees) is about 20% of the total myopia population. The patients with severe myopia without proper treatment are with high risk of having complications, such as peripheral retinal lesions. It shows that there is indeed a potential market for laser vision correction surgery. The market penetration rate is still low in Taiwan; the medical laser technology is minimally invasive, cost-effectiveness, good curative effect, and shortened medical time course all favored by physicians; therefore, it is expected that the future business of laser technology will be huge. The brands distributed by the Group include Bausch+Lomb, Leica, and other internationally renowned manufacturers. The product line includes ophthalmic excimer laser systems, ophthalmic femtosecond laser systems, and artificial vitreous.

In addition, according to the latest data from the Ministry of Health and Welfare, a total of 220,000 cataract surgeries were performed in 2017, which is a common eye disease. The lens in the eye will atomize and affect vision as people grow old, and because of severe myopia and the extensive use of 3C products with eyes has caused

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the cataract in young generation to go up too. The number of patients with cataracts between the ages of 40 and 50 has grown by more than 50% in the past decade, which is no longer the exclusive eye disease of senior citizens. At present, the clinical treatment for cataract is mainly a surgical replacement of intraocular lens. With cataracts found in young generation and the improvement of average lifespan, the time of using intraocular lens by cataract patients is greatly lengthened in life, so patients are willing to have their intraocular lens replaced at their own expense. The Group distributes high-grade intraocular lens of PhysIOL in Belgium with many types of products available for selection, such as astigmatic intraocular lens and multifocal intraocular lens. Patients can choose according to their own conditions and needs. At the same time, they can also overcome the problems of presbyopia, myopia, hyperopia and astigmatism by choosing the right functional lens.

(2) Correlation between upstream, midstream, and downstream

As indicated below, the midstream distributors can make up for the upstream medical equipment manufacturers’ insufficient marketing network and regional maintenance services, so that they can concentrate on the design, research and development, and production of medical device and equipment. In addition, the channel dealers through the comprehensive distribution network covering the market can construct a most cost-effective marketing channel, save marketing expenses, and help them quickly enter the market and increase market share. For downstream medical institutions, midstream distributors can quickly provide the medical equipment and technology they need to reduce associated costs and reduce operational risks. In general, the midstream channel dealers integrate the demands of the downstream medical institutions to purchase from the upstream manufacturers, through the division of labor of the upstream, midstream, and downstream industry in order to effectively improve the operational efficiency of the overall medical equipment industry with the flexible inventory management and diversified brand distribution adopted.

==> picture [483 x 193] intentionally omitted <==

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

Upstream Midstream Downstream
Medical equipment Channel distributor Medical institutions
manufacturers Medical management (Hospitals and clinics)
consulting company
Medical technical service
company
Foreign manufacturers
Radiation oncology
(Such as: Elekta, IBA, IMRIS, Neuroscience
Leica, GE, Bausch+Lomb, Medical imaging and
PhysIOL, etc.) The Group Ophthalmology
----- End of picture text -----

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• (3) Various product development trends

• Medical equipment technology development trend

  • A. Electronic digitization of equipment: the combination of medical device technology and electronic information, bio-engineering precision manufacturing, new materials, and other technologies into emerging high-tech medical device applications, and the need to integrate with other medical devices in the medical department through network transmission is growing and becoming the main trend in the development of the medical equipment industry.

  • B. Minimally invasive medical surgical equipment: Medical devices have shifted from trauma-type (invasive) surgery to minimally invasive surgical equipment or new technologies, which reflect in cancer treatment, neurosurgery, and ophthalmic presbyopic laser correction surgery. Due to advances in technology, traditional hospitalizations may be replaced by outpatient treatment.

  • C. Revolutionary and innovative medical equipment development: The medical industry has developed along with the rapid development of technologies, such as MRI linear accelerator, compact proton therapy systems, MRI hybrid surgical theatre, and excimer laser systems. These devices have escaped the framework of traditional diagnosis and treatment. The production of equipment requires more advanced technology and future development is expected.

• New trends in the development of radiotherapy technology

In recent years, radiation physics, radiation biology, and computer technology have been developed rapidly, with a focus on newer radiotherapy technology developments and more accurate tumor localization. The former is mainly in the pursuit of more advanced methods of irradiation (such as, the use of better physical sources of radiation, or the development of more complex radiation techniques, etc.) to achieve dose concentration; the latter is to reduce the uncertainty of treatment during irradiation (i.e. Correct positioning of the target position of the irradiated tumor). The radiotherapy equipment distributed by the Group has evolved with the current global market and covers the latest radiotherapy technologies and functions described.

The intensity-modulated radiotherapy (IMRT) utilizes the mathematical and computer-based inverse planning of the photon intensity to avoid the important organs close to the photon intensity at different positions in the field in order to achieve the purpose of increasing the dose on the tumor or reducing the dose on important organs. Modern clinical treatment machines are designed with this concept to have special treatment techniques for different diseases developed, such as TomoTherapy, Leksell gamma knife, and stereotactic radiosurgery.

Proton therapy has better physical properties than traditional photon radiation therapy. The principle is that positively charged protons continue to accelerate in the electric field. After reaching a certain speed and energy, proton rays traverse the tissue,

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using the Bragg peak phenomenon to release a small amount of energy on the path of the traversing and release a large amount of energy at a certain depth to destroy the tumor. Under the circumstance, the amount of radiation received by the normal tissue behind the tumor is greatly reduced, which can effectively improve the cure rate and reduce the treatment-related side effects, providing patients with a safer and more effective treatment. The IBA proton therapy system distributed by the Group is also equipped with “Pencil Beam Scanning (PBS)” technology together with Intensity-modulated proton therapy (IMPT) are utilizing very small protons modulation to scan the cancer tumor dot-by-dot, to precisely focus on the tumor tissues only, even in the shape of a complex tumor, in order to protect the surrounding normal organs comprehensively and apply higher energy to destroy the tumor tissue, making it the biggest weapon for IBA to lead the industry today.

At present, the Group is actively introducing the latest radiotherapy equipment –MRI linear accelerator developed by Elekta. It combines high-resolution images in the treatment to instantly locate the latest position of the tumor and adjust the treatment plan accordingly. It is the world’s first radiotherapy equipment combined with MRI imaging.

 E-management of tumor medical record

Today, hospitals are turning to information technology (computer and network technology), and oncology medical care requires the establishment and management of electronic information systems while integrating Picture Archiving and Communication System (PACS) to provide better therapeutic quality. Elekta provides such solution needed: MOSAIQ, an integrated electronic medical record system for the course of radiation oncology for each patient, including basic information, medical history and diagnosis at the outset, therapeutic prescription dose given by the doctor, treatment plan and medical imaging, as well as the cumulative dose during treatment, etc., so the doctor can browse the patient’s treatment situation on the computer at any time.

In addition, the Group has also invested in the Integrated Radiation Oncology Information Platform (IROIP) to integrate patient treatment information between the Hospital Information System (HIS) and the Oncology Information System (OIS); also, provide all medical staff in the hospital’s radiation oncology department, medical staff in the hospital, oncology outpatients and out-of-hospital medical personnel to conduct treatment-related information inquiries, and can make systematic warnings or reminders for the key points of the radiotherapy process, which will effectively improve the convenience, correctness, timeliness, and completeness of all aspects of radiotherapy.

 The growing demand for radiotherapy equipment in Mainland China

Surgery, chemotherapy, and radiotherapy are the three major methods of cancer treatment. These three methods can be used individually or in combination for

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different cancers at different stages of treatment to achieve the best therapeutic effect. In the current situation, most cancer patients need radiotherapy, which is the key to the growing demand for radiotherapy equipment.

According to official information from Taiwan and China, there were 490 hospitals in Taiwan by the end of 2016, of which, 84 hospitals were with radiation oncology departments (accounting for about 17% of the total hospitals); while there were 27,587 hospitals in China by the end of 2015, including radiation oncology hospitals, but only 1,413 hospitals were established with the department of radiation oncology (about 5% of the total hospitals). The Chinese government is in line with the situation that radiotherapy is in short supply, and at the same time promoting the rational allocation of large-scale medical equipment. National Health Commission of the People’s Republic of China released the “2018-2020 Large Medical Equipment Configuration Plan” on October 29, 2018. The plan is based on the provincial or inter-provincial units, taking into account the factors of economic and social development standards, regional functional positioning, medical service capabilities, configuration needs, social medical development, etc. to plan and configure the number of large-scale medical equipment. A total of 10,097 units of large-scale medical equipment for a three-year period from 2018 to 2020 are to be added, including 10 new proton therapy systems; 188 new high-end radiotherapy equipment, and 1,208 linear accelerators (including X-knife). Apparently, in correspondence with the promotion of policies, radiotherapy equipment is with growth potentials in the Chinese market.

 Medical equipment rental and medical management services

The demand for large-scale medical device and equipment in Taiwan has increased year by year, and the acceptance of equipment rental has been increasing. The medical rental products provided by medical equipment dealers have become more extensive, and the scale of operations has also expanded. In addition to the medical device and equipment rental service provided, the Group in response to customer needs, such as, site planning, construction, business consulting, education and training, repair and maintenance, upgrade services, etc., has further developed a full range of integrated services with increasingly diversified and comprehensive services provided.

While stabilizing the Taiwanese market, the Group will also export its proud medical management services to China and Southeast Asia; also, the services range is from the most basic medical device and equipment rental and business consulting to the management service of individual department and even the entire hospital. The initial target customer is mainly based on local large-scale medical institutions, and the Group expects to penetrate overseas markets by taking advantage of its own soft power.

The medical management service not only provides all the medical equipment

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required by each department of the medical institution in order to eliminate the problem of integration efficiency on different systems, but also supports the education and training of equipment in various medical institutions at any time, providing professional skills or the planning of the medical staff training courses to deepen the dependence of the other party.

(4) Competitions

• Distribution of medical equipment (radiation oncology, neuroscience, medical imaging, surgery, and ophthalmology)

The medical products distributed by the Group are mostly manufactured by renowned large manufacturers in Europe and the United States, and are the leading brands in the world. In addition to the professional R&D team and the clinical test reports and academic papers of renowned foreign medical centers, the manufacturers have obtained EU CE certification, US FDA license and TFDA license from the Ministry of Health and Welfare with the relevant supporting documents made available. At present, competitors’ products in the market are mostly limited to a few non-mainstream models, which are difficult to obtain customer recognition. Also, the competitor’s brands are facing the dilemma of not having new functional models from the foreign manufacturers; therefore, they are unable to compete against the brands with large-scale R&D capabilities that are distributed by the Group.

 Medical equipment rental and medical management services

The general leasing companies in the industry are mostly with financial backgrounds. The main operations are loaning of funds, and the leasing projects are for factory equipment, aviation equipment, general vehicles, etc. Currently, there are renowned large-scale leasing companies in market, including Hotai, ORIX, Chailease, and Taiwan Life Insurance, but they are not specialized in medical equipment rental, and thus lack of professional medical equipment integration services. The Group provides professional services to meet the needs of medical institutions. The Group not only sells medical equipment but also provides technical support from the manufacturer’s certified technical engineers with the most comprehensive maintenance services provided to ensure that the medical equipment leased by customers is operated accurately. The Group has a sound financial position and a long-term good relationship maintained with the banks to provide customers with an appropriate lease cooperation practice.

(III) Technology and R&D Overview

1. The Company

The Company is an investment holding company and is not engaged in technology and research and development.

2. The Group

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The Group is mainly engaged in the trading and service of medical equipment and has not engaged in manufacturing activities; therefore, has no full-time R&D department set up. The Group participated in the “IROIP development plan - Integrated Radiotherapy Oncology Information Platform” of industry upgrade innovation plan of the Small Business Innovation Research program, MOEA in 2018. According to the plan, the Group has invested in R&D and construction information platform from 2018 to 2020. The Group bases on the experience of working with the radiation oncology departments of major hospitals and the technical team to construct the patient-related treatment information platform for the integration of hospital medical information systems and radiation oncology medical information systems in order to improve the convenience, correctness, timeliness, and integrity of each radiotherapy. In terms of product development strategy, The Group bases on the future development trend of medical technology and has it classified according to the medical department. It is classified according to the Company’s current product application as follows: radiation oncology, neurology, medical imaging, and ophthalmology, and is ready to cooperate with new medical technology introduced to plan for future product introduction and medical technology education programs. At the same time, the Group maintains good interaction with international manufacturers in order to learn about the latest medical equipment and actively market it.

The Group has professional education courses arranged by senior engineers within the company; also, has regularly assigned engineers to be trained for the installation and repair and maintenance services of various instruments at the foreign manufacturer’s facilities. The competence of personnel is continuously improved through the aforementioned education and training programs in order to provide the best service to each medical institution. In addition, adequate and complete spare parts and components for repair and maintenance service are another major guarantee from the Group to the customers. The Group has set up customer service centers in Taipei, Taichung, and Kaohsiung to provide customers with the operation and application training courses for various instruments. At the same time, the Group has built warehouses with temperature and humidity monitoring and provided timely repair and maintenance and other services. In the future, the Group will continue to maintain the aforementioned strategies and enhance the customer’s trust in the Group.

• (IV) Long-term and short-term business development plans

1. The Company

The Company is an investment holding company. Its subsidiaries are mainly engaged in the distribution of medical equipment and medical equipment rental management services. Therefore, the long-term and short-term business development plans are based on the Group as a whole. Please refer to the following.

2. The Group

• (1) Short-term business development plan

• Actively promote precision medical care in the Taiwanese market, introduce high-end

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equipment, such as, miniaturized proton therapy systems and MRI linear accelerators in a parallel manner between sales and leasing cooperation, and establish high-end cancer treatment centers to increase the market share of the products in Taiwan and increase longer-term rental operating income at the same time.

• Actively operate the sales of radiation oncology equipment and other related instruments in the Chinese market, expand the scale of professional medical equipment channel, continuously enhance the quality of service and technology, and increase the market share of related system equipment.

• Continuously expand medical equipment leasing and technical cooperation services domestically and internationally, provide customers with professional medical equipment construction planning consultation, medical technology training and transfer, department operation management optimization, and medical quality establishment and improvement in order to become the first choice of customers in establishing medical special investment cooperation.

• Continuously train professional technical teams to provide relevant installation and after-sales repair and maintenance services for overseas customers; also, ensure the best medical service quality for patients and enhance the market competitiveness of the Group with more immediate technical support and after-sales service provided.

• Continuously introduce the latest medical equipment and technology, seek to distribute the medical products required by other medical specialists, and actively extend the medical channels in depth and breadth in order to develop diversified product sales business and provide more comprehensive and multifaceted medical technologies and services.

• (2) Long-term business development plan

• The overall market deployment for expanding the current business to the Asia-Pacific medical market, integrate upstream and downstream medical resources, distribute the most complete product line, and continue to improve high value-added medical technologies and services in order to enhance the leading position of medical management cooperation service and achieve the goal of becoming an international medical equipment integration supplier.

• Externally, continue to introduce competitive products in order to expand service channels and increase strategic partners for achieving economic scale. Internally, effectively simplify the organizational structure to reduce various management costs, focus on resource integration to improve business performance, and continue to lead the industry in order to help the Group become a leader in healthcare services in the Asia Pacific region.

• In response to Taiwan’s being an “aging society” currently and “super-aging society” in the future, plan to develop the elderly welfare business. The plan is to approach the market with a differentiation strategy, focusing on multi-level continuous long-term care and taking into account the needs of the elderly. The goal is to create a living environment that can respond to different aging stages of the occupants. In the future,

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the company will extend its institutional care for elderly to community-based retirement and home-based care, and then develop hardware and software for elder-friendly products and information management systems through heterogeneous cooperation in order to realize economic scale and establish branding business for the healthcare market.

II. Market and Sales Overview

• (I) The Company

Not applicable

• (II) The Group

1. Market analysis

• (1) Sales (supply) area of major products (services)

			Unit: NT$thousands;%	Unit: NT$thousands;%
Sales area	2017		2018
	Amount	Ratio	Ratio	Ratio
Taiwan	2,008,905	94.89	2,319,272	92.50
China	101,427	4.79	181,575	7.24
Others	6,784	0.32	6,619	0.26
Total	2,117,116	100.00	2,507,466	100.00

(2) Market share

The market shares of the main products distributed or sold by the Group in Taiwan

are as follows:

re as follows:
Products	Brands	Market share
Radiation oncologyequipment	Elekta and other	≥60%
Proton therapysystem	IBA	≥40%
Brachytherapysystem	Elekta Nucletron	≥80%
Waterphantomqualityassurance system	PTW	≥70%
Stereotactic radiosurgerysystem	Elekta Gamma Knife	≥60%
Medical SurgeryMicroscope - Neuroscience	Leica	≥80%
Femtosecond cataract laser system	Bausch+Lomb	≥35%
Intraocular lens - high-end self-supportingmarket	PhysIOL	≥ 30%

• (3) Market supply and demand and growth in the future

• Market supply and demand changes in the future

In the medical equipment market of Taiwan, the turnover in 2017 was approximately NT$ 146.3 billion. It has grown year after year in the past decade and the compound annual growth rate had reached 7% in 2008-2017. In terms of population, the world population had exceeded 7.5 billion in 2017, of which, about 7.9% of the population was over 65 years old. The average life expectancy of the

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world is 67.07 years old, including 69 years old for women and 65 years old for men. There were about 23.57 million people in Taiwan at the end of 2017, the people over 65 years old had reached 13.9%, and the average life expectancy was 80.0 years old, including 83.4 years old for women and 76.8 years old for men. All indicators have reached record highs and are far higher than the world level, and Taiwan has officially become an “aged society” since the end of March 2018 with more than 14% of the population over the age of 65. It is expected that by the year 2026, Taiwan will become a “super-aged society.” The elderly population ratio will exceed 20%. The proportion of chronic diseases will gradually increase along with the increase of aging population due to the extension of the average life expectancy; therefore, the demand for medical resources will also be increased year by year.

A. Radiation oncology specialist and neuroscience specialist

Malignant tumors have been at the top of the top ten causes of death for 35 consecutive years. According to the statistics of the Ministry of Health and Welfare, a total of 171,857 persons died in 2017, of which, 48,037 persons died of malignant tumors, accounted for nearly 30% of the total deceased, indicating that malignant tumors have become one serious challenge to the medical community of Taiwan. According to the statistics up to the end of 2017, there was more than 160 radiotherapy equipment used for treating malignant tumors in Taiwan. Considering that there are nearly 500 hospitals in Taiwan, only 80 more hospitals have radiation oncology department setup, but there are 140 hospitals with more than 300 beds in service. Such hospitals are large enough to open a radiation oncology department to treat more patients. All of the aforementioned phenomena show that there is still room for growth in the demand for cancer radiation equipment in Taiwan.

B. Diagnostic imaging specialist

Taiwan is facing an aging population issue. The cardiovascular and orthopedic diseases of the aging population will worsen that drives the demand for X-ray imaging equipment to go up. The elderly over age 65 will be one of the main driving forces for the growth of the diagnostic imaging equipment market. In the past, digital X-ray imaging equipment (DR) was expensive, and hospitals were limited by insufficient funds to purchase traditional analog radiography equipment (AR) or indirect computer X-ray imaging equipment (CR). However, the advantages of DR in providing high-quality images with dose radiation not only help reduce costs but also reduce exposure to radiation. With the evolution of information technology, DR has become more and more popular, and the medical cost has been greatly reduced. Together with the DR modularization production, the users of traditional AR device can move to the DR digitalized system in a more economical way, which drive the cost of DR equipment to go down and the demand for DR equipment to go up.

C. Ophthalmology

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As of the end of 2017, there were approximately 23.57 million people in Taiwan, and the population aged 65 and above was about 3.27 million people, accounted for 13.9% of the total population. The proportion of the elderly population had officially reached 14% of the total population and become an “aging society” with the average life expectancy extended significantly; therefore, the elderly demand higher quality of life and the demand for the treatment of various eye diseases increases.

In addition, the 3C products in the modern world, such as computers, mobile phones, and tablets have become an indispensable tool to modern people. In the past, the ultraviolet rays in the sun are the only light hazard that is damaging to the human eyes, but now the light hazard from the use of 3C products indoors is also damaging to human eyes. The long-term direct view of the bright screen with the blue light from the 3C products causes eye diseases, such as cataracts and macular degeneration not only to the elderly but also to younger generation.

In response to the way people use their eyesight in Taiwan and the trend of aging population, the Group actively introduces various ophthalmic equipment and related products, such as, excimer laser systems, femtosecond laser systems, ophthalmic special medical operating microscopes and intraocular lens, etc. to take care of the eyes of the citizens.

 Economic development accelerates the upgrading of medical service demand

The prevention and treatment of diseases in modern medicine rely heavily on the diagnosis results of advanced medical equipment. In developed countries in Europe and America, the output value of medical equipment and instrument industry and pharmaceutical industry is roughly the same. With the rapid development of the economy and the continuous improvement of people’s living standards, the quality requirements for the medical service market have risen sharply, which directly leads to an increase in the demand for medical device and has accelerated the pace of capital investment in the medical service industry domestically and internationally. The selection of medical device in market will be more advanced, the product structure will be continuously adjusted, the functions will be more diversified, and the market capacity will be expanded continuously.

 Mainland China’s medical reform creates huge market and business opportunities

In 2017, China’s overall medical expenditure reached US$ 723.07 billion. Although the proportion of medical expenditure in overall GDP has increased continuously, from 5% in 2011 to 6% in 2017, it is still lower than in other advanced countries. Chinese government has actively promoted relevant medical reform plans in recent years and is expected to promote the positive development of China’s medical supplies market continuously. Driven by the “12th Five-Year Special Plan for Medical Device Technology Industry” and related medical device regulations and systems, China’s medical technology and industry have already established a foundation, but

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there are still uneven distribution of medical resources in urban and rural areas, insufficient medical treatment effect, and high-end medical device and equipment heavily relying on foreign imports. In the 13th Five-Year Plan, which has been officially launched in 2016, it clearly pointed out that the promotion of “healthy China” construction is expected to deepen the reform of the medical and health system, promote the separation of medicals and medicines, implement graded diagnosis and treatment, and establish a basic medical and health system and modern hospital management system covering urban and rural areas in order to activate the demand for medical equipment and hospital management system. Apparently, there is still room for strong growth in the Chinese medical market in the future. The compound annual growth rate from 2017 to 2020 is estimated to be 13.7%; also, the Chinese medical equipment market can reach US$ 31.59 billion in China by 2020.

The main driving force of the market comes from the said country’s high economic growth rate, consumer’s expectations for health awareness and quality medical care, and the support of government policy. In addition, the government’s expanding the medical related infrastructure for medical services has helped drive the growth of overall medical expenses. Therefore, the medical equipment market has flourished; moreover, China is facing the problem of aging population.

According to the number of elderly people in China announced by the China National Bureau of Statistics in early 2018, there were 240 million people in 2017, accounted for 17% of the total population. The acceleration of aging population will also increase the demand for healthcare and medical equipment, moreover, the proportion of chronic diseases is rising that is also a driving force for the increasing market demand for medical products.

Under the trend of medical reform in China, medical insurance will cover most medical services. Therefore, how to promote products to the medical insurance system will be an important issue. At the same time, under the medical insurance system, high-end and high-quality medical services will be implemented to satisfy more patients. It is easier for brands and high-profile foreign manufacturers to enter large medical institutions in China. The Group is actively thinking about the overall development strategy, such as, mastering key medical technologies and developing high-end products in line with local clinical applications, or combining the advantages of medical management services for transformation into an integrated system platform and turnkey model in order to provide a total solution for a higher acceptance and to grasp this wave of business opportunities.

 Aging population is the driving force for the development of elderly welfare business

The aging population is an inevitable issue in the world, and Taiwan is no exception. According to the statistics of the Department of Household Registration, Ministry of the Interior, the proportion of the elderly population over age 65 in Taiwan reached 14.05% at the end of March 2018. That is to say, one out of seven people are

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an elderly person. So, Taiwan is officially an “aged society” and is expected to be a “super-aged society” by 2026. The elderly population ratio will exceed 20%, and the population will age faster than that of Europe and the United States. Long-term care has officially become a non-negligible issue. It is indeed a huge business opportunity, so the Group is actively planning to enter this market currently.

Judging from the ratio of the elderly population in the counties and cities, there are as many as 15 counties and cities out of the 22 in Taiwan are with aging population in general, indicating that the population is aging rapidly. Considering that the number of elderly people in Taiwan will increase year by year, the proportion of the total number will also increase year by year. The Government has actively promoted the “Long-Term Care 10-Year Plan 2.0.” All of the above shows that Taiwan’s long-term care market still has room for growth. The Group plans to connect the needs of the aging population with other industries, develop diversified operations and combine with heterogeneous industries to develop elder-friendly products, and develop the hardware and software of information management systems to achieve economic scale and to approach the health industry market in China.

 Global Development and Asia Pacific Operations

The Group based in Taiwan will move towards global development, transform into an integrated comprehensive medical service provider by exercising core experience and technology expansion; also, strengthen performance through merger and organizational reforms. Once the medical market of Taiwan is mature, the Group will duplicate the advantages of operation mode, marketing channel, and professional technology to enter the huge markets, such as, China and Southeast Asia, and to approach the Asia-Pacific medical market that is with great potential for growth.

In recent years, the Group has committed to gradually transforming into an integrated and comprehensive medical technology service leader from a medical importer and distributor, at the same time, actively utilized the advantages of professional repair and maintenance technology and medical electronics experience to form heterogeneous alliances with domestic electronics and information industry, or, enter the upstream of the medical equipment industry with core components to seek new opportunities for industrial development, and further develop the medical electronic equipment in-house as a long-term goal in order to achieve a sustainable business operation.

(4) Competitive niche

 Professional technical team

The high-end medical equipment distributed by the Group is designed with precision, from installation to upgraded maintenance and repair, which requires sophisticated technology. The Company’s technical team has been trained by the manufacturers so the team is familiar with the mechanical structure and has sufficient

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and practical experience. Therefore, the medical institutions are willing to cooperate continuously and the manufacturers are worry free and rely on the Company for business promotion and market development with distribution rights secured soundly.

• Equip with professional medical operation experience and maintain stable cooperation with medical institutions

The Group has engaged in the medical equipment industry for more than 40 years and has extensive experience in cooperation with hospitals. In addition to a lease operation, the Group further provides upgraded maintenance and repair services in order to establish a deeper and more stable relationship with medical institutions.

 Comprehensive radiation oncology, neuroscience, medical imaging, and ophthalmology product lines and ample marketing staff system

The Group distributes the medical equipment that is manufactured by European and American manufacturers, including product lines of radiation oncology, neuroscience, diagnostic imaging, and ophthalmology. There are sufficient products for selection. The Group continues to import the latest medical equipment for the selection of medical institutions. The Group has an experienced business and technical team to market the products to various medical institutions. The Group after the installation of equipment assigns professional technicians to conduct training courses to medical institutions and provide comprehensive services to medical institutions.

 Network value highly recognized by foreign manufacturers

The Group endeavors in operating medical device and equipment business for more than 40 years with a good name built-up. Apart from the fact that foreign suppliers have actively negotiated distribution issues with the Group in view of the Group’s professional service image, the Group also selects appropriate product line for sales from various suppliers.

In terms of channel value highly recognized by the suppliers, the Group has considerable initiative and relative bargaining power, which can help the Group gain favorable conditions for the company, and has more distributors contracted to sell the products with the professional marketing ability and complete distribution network. It indicates that the Group has strong distribution capabilities and successfully created the value of professional marketing channels for medical devices.

• (5) Advantages and disadvantages of developing prospects, and countermeasures

• Advantages

A. The Group’s complete and diversified brands distribution

The Group’s distribution of products is comprehensive, and the brands of radiation oncology equipment distributed by the Group are: Elekta, PTW, GE, Ashland, C-RAD, IBA, and Klarity Medical; the brands of neuroscience equipment are: Stryker, Elekta, Leica, IMRIS, Sony, Hill-Rom, Crownjun, Microtek Medical, and CAScination; the brands of medical imaging equipment are: Swissray and GE; the brands of ophthalmology equipment are: Bausch+Lomb, Ellex, Leica, PhysIOL,

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Wexler, Hill-Rom, Albomed, and ScienceBased Health; and Nippon Electric Glass Co., Ltd. lead glass for medical use. The aforementioned distributions are all internationally renowned brands with high celebrity and market share. At the same time, those branding companies continue to invest in research and development of new products and new functional technologies in order to create new market demand and maintain their competitive advantage.

B. Professional customer technical service department

The Group has engaged in the establishment, training, and manufacturer’s certification of professional teams for more than 40 years. At present, there are more than 70 technical engineers in the technical service department and professionals with medical physics and medical radiation background to help customers quickly complete the installation and construction of the equipment, and provide complete educational application training courses and comprehensive repair and maintenance services in the future to fully grasp the market demand and ensure high profit and market share.

C. Sound financial structure

The Group has a sound financial structure and has been engaged in the medical equipment market for more than 40 years; also, the Group has a profound management team, professional stability, long-term cooperation with banks, and cautious fund use.

D. Obtained the opportunity for business expansion in Mainland China

The Group continues its successful experience in Taiwan and has it duplicated to the medical equipment market in China and Southeast Asia. The Group has subsidiaries set up in China to gain access to the local medical market with the business model of sales and medical management service combined. Priority is given to introduce radiation oncology and neuroscience related device for sales. In terms of medical service, actively cooperate with the large medical institutions in the market. The Group is also actively focusing on the Southeast Asian market. Currently, the Group has started a partnership with the Indonesian local medical service team “Mayapada Hospital Group” to provide a more comprehensive and diversified integration service.

E. Equipment Leasing

New types of device and equipment are continuously introduced along with the economic development upgrade and medical quality upgrade. The demand for medical device by medical institutions will continue to grow, and new types of inspection or treatment device are costly. Except for a few private consortium corporations or government-supported medical centers can afford it, general private hospitals or remote medical institutions are financially impossible to have equipment upgraded. Under the circumstance, in terms of medical equipment rental and professional cooperation, the Group cooperates with professional specialists and partners in medical equipment rental, not only because of the quantity discount

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in procurement, but also a custom-made professional service is made available. In addition, the Group also integrates device and equipment to achieve the best use rate, avoid waste of equipment, and provide added value of subsequent repair and maintenance services. Therefore, from the standpoint of saving taxes, financial planning, or the convenience of replacement of device and equipment, an equipment rental service is the best choice. More and more medical institutions and even clinics choose to cooperate with medical equipment leasing companies, instead of a direct procurement or a bank financing; therefore, the medical equipment rental market has potential for development.

• Unfavorable factors and countermeasures

• A. Foreign medical equipment manufacturer distribution contract is the main source of product sales

At present, domestic high-end or large-scale medical equipment is still mainly imported from Europe and the United States. Although the Group and foreign medical equipment manufacturers have signed equipment distribution contracts; however, if there is a change in the distribution rights subsequently, it will affect the company’s operations. The countermeasures are as follows:

• (A) Win the affirmation of foreign medical equipment manufacturers with the stable and continuous sales results, and train professional repair and maintenance engineers to install machines, replace parts, and perform repair and maintenance services subsequently. Also, take advantage of the marketing channels to help expand consumer market demand in order to obtain the affirmation of foreign medical equipment manufacturers. They will rely on the Group heavily, resulting in an irreplaceable status and the distribution rights will not be replaced arbitrarily.

• (B) Obtain the medical equipment certificate issued by the Ministry of Health and Welfare. The medical equipment to be imported into Taiwan must be inspected and registered according to the relevant regulations of the Ministry of Health and Welfare. The documents to be inspected are cumbersome and time-consuming, and must be handled by personnel familiar with professional requirements. The equipment registration certificate is owned by the applicants so the foreign manufacturers cannot arbitrarily change the distribution rights and influence the import rights.

• (C) Cooperate with foreign medical equipment manufacturers to arrange academic courses. In addition to regularly inviting foreign professional doctors or technical engineers to give lectures or courses in Taiwan, occasionally hold seminars in response to academic research or medical technology updates, sign contracts with large medical centers to conduct clinical research, and establish professional teaching centers so foreign manufacturers will have to rely on the Group to assist on the education promotion and regional markets development

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and to establish a partnership.

• B. National Health Insurance adopts a total payment system to squeeze the profit of medical institutions

The income of various medical institutions is unstable, which has an impact on domestic medical-related industries. As a result, medical institutions have adopted a conservative attitude in preparing budget for the procurement of large-scale medical electronic equipment. Since there is a limit on the purchase amount, the Group strives to reach a balance between the selling price of the manufacturers and the buying price of the customers in order to generate profits. The countermeasures are as follows:

• (A) Base on the Group’s medical integration and comprehensive professional experience to analyze and assess costs for customers, and apply the innovative technology advantages to make comprehensive construction planning and arrangements. Also, provide a lease cooperation model to help customers shorten the learning curve and improve or maintain products and service price reasonably.

• (B) Reduce the proportion of products paid by National Health Insurance. Introduce self-funded health care related items, such as MRI linear accelerator, compact proton therapy systems, high-end Intraocular lens, etc.

• (C) Expand investment in China area and other overseas markets in Asian regions.

• C. Difficulty in engineer recruitment

Since the electronic equipment specialists are needed for the installation and maintenance of medical equipment, the Company makes the graduation from an electronic engineering department of a university the basic requirements when recruiting engineers. However, with the reality of the current workplace, many graduates of the electronic engineering major mostly prefer to work for electronics industry, which makes it difficult for the Company to recruit electronic engineering talents. The countermeasures are as follows:

Attract more professional talents with the incentives of a well-established labor-management communication platform of a listed company, perfect welfare system, reasonable salary policy, and diversified talents training channels.

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2. Intended use and production process of the main products

(1) Intended use of major products

Product name	Intended use
Linear accelerator	Linear accelerator produces high-energy radiation for treatment by accelerating high-energy electrons in a vacuum linear accelerating tube, causing electrons to strike the tungsten target, releasing energy to produce high-energy (million volts) therapeutic radiation in order to destroy cancer (Tumor) cells. Also, in terms of equipment technology, the linear accelerator used to perform 3D spatial conformal radiotherapy and intensity-modulated radiotherapy. These new radiotherapy technologies aim to increase the therapeutic dose in order to increase tumor control rates. The current popular models on the market can perform the latest image-guided treatments with integrating accelerators, X-ray sources, and instant electronic verification imaging systems. The doctor before operating on the patient will use the X-ray to confirm the tumor position. If necessary, the treatment position can be adjusted, which can effectively prevent the error caused by the patient’s posture, increase the treatment accuracy, and reduce the side effects of the treatment. The latest model introduced by the manufacturer combined with MRI and linear accelerator and the real-time nuclear magnetic resonance imaging to locate the patient’s treatment position, and accurately identify the location of the tumor by the unique precision of the magnetic resonance imagingto improve treatment accuracy.
Computer treatment planning system	Before radiotherapy, use the device that inputs the computed tomography image of the patient, using a high-performance and high-computation computer, to plan the radiation angle, time, and dose of the radiotherapy; also, evaluate the relative position of other important organs and their radiation dose.
Computer tomography simulation positioning X-raycamera	Before receiving radiotherapy, use the device to capture tumor images and related locations of the body parts by computed tomography.
Leksell gamma knife - stereotactic radiosurgery system	This is a high precision 3D spatial stereotactic head radiosurgery device and is used to perform irradiation on tiny intracranial tumors or vascular lesions; also, more than one hundred independent beams are applied to irradiate on one single target duringthe treatment.
Proton therapy system	Proton therapy system is high-end radiotherapy equipment. Its physical characteristics are that when the proton beam penetrates human tissue, its energy will go up with distance and go down at the end of the range (i.e., where the tumor is located) with Bragg peak generated to give high-dose radiation and kill cancer cells without damaging healthy tissues. Because proton therapy has the characteristics of spread-out Bragg peak (SOBP), in addition to reducing the risk of damage to normal tissues during the treatment, the side effects of radiotherapy will be reduced to a minimum.
TomoTherapy system	The device is mounted on a 360-degree rotating head like computed tomography and can be spirally rotated to irradiate high-energy X-rays at various tumor positions in human body. In addition to accurately grasping the tumor position through image guide, it can be irradiated in multi-angles in order to reduce the impact on normal tissues. The device

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Product name	Intended use
	can also precisely regulate the radiation dose distribution and simultaneously treat multiple lesions.
Brachytherapy system	Brachytherapy is to approach the lesion tissues with a sealed Ir-192 radiation source or placed at the therapy target, including interstitial implantation and intracavitary treatment, to achieve the desired radiation over short distances.
Radiotherapy and radiological diagnostic quality confirmation equipment	Product for quality confirmation of linear accelerator and other radiation devices. It is used as a qualitative characteristic adjustment and calibration measurement for periodic radiation equipment in order to ensure radiation exposurequality.
Magnetoencephalography (MEG)	Magnetoencephalography (MEG) is used to examine the magnetic field change during brain nerve activity. MEG records can be used to explore the functions of individual brain sensory cortex, functional interactions between specific brain regions, research attention, language, cognition, and other complex functions; also, it can be used to explore the recovery or adaptability of specific brain regions, the assessment of specific brain functional regions before and after surgery, and the location of epilepsylesions.
Swissary direct digital X-ray imaginary diagnostic system	Digital X-ray photography is an X-ray technology with digitalized X-ray images. It can directly project X-ray images onto a digital sensor board, instantly digitize the images, and then display the high-resolution images on the computer digitally and instantly, which will not be distorted by negative developing and it is basic medical equipment needed byall medical institutions.
Surgical fluorescence imaging system	Stryker’s surgical fluorescence imaging system is mainly used for flap reconstruction and lymphangiography in orthopedic surgery. It includes the lymph node perfusion imaging and vascular or lymphatic anastomosis surgery fluorescence imaging for head and neck tumor removal surgery and debridement surgery of other body parts; also, it cangive clinicians more accurate images and data for reference.
Medical surgery microscope	The medical surgery microscope is specifically to be used in an operating room for enlarging the surgical field of view so that the doctor can accurately view the blood vessels, soft tissues, and lymphatic vessel structures in the operation, and it is needed for an organ transplant surgeryand tissue repair.
MRI hybrid surgical theatre	The sky track MRI of IMRIS is the only device in the world that can perform multi-functional imaging diagnosis on patients without moving patients. It can confirm the result of surgical treatment in the process; also, it can greatly reduce the risk of infection caused by mobilizing patients and save time. If there is not a surgery scheduled, general routine angiography can be performed to greatly improve the utilization of equipment and to maximize the value of the equipment.
NUCLeUS	Sony’s operating room audio and video integration system can integrate any brand of medical imaging equipment in the operating room, provide a single operating interface to healthcare professionals, and improve the efficiency of healthcare personnel management data and workflow. This system can also share images to the hospital’s intranet system and provide live surgery for a two-way interaction between the operating room and the conference room.
Hill-Romoperatingroom	Hill-Rom offers a series of state-of-the-art operatingroomproducts and

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Product name	Intended use
prodocts	services, including flexible operating tables, innovative exclusive operating room lighting technology, and surgical related consumables. With its intelligent product line, it can completely improve the workflow in the operating room and clinical related fields, provide the best solution for the hospital, and provide an efficient and safe operatingenvironment for medical staff.
Crownjun surgical sutures	Crownjun’s surgical sutures are very helpful for surgical vascular sutures, allowing tighter tissue or blood vessel anastomosis, which not only increases the success rate of the patient’s surgery but also greatly enhances the surgeon’s surgical fluency.
PhysIOL intraocular lens	Intraocular lens is made of PMMA, silicone or acrylic to synthesize artificial lens with refractive properties according to the refractive characteristics of the lens in the human eye. The refractive focus function of the turbid lens helps the image projection to focus on the retina in order to restore thepatient’s vision.

(2) Production process of major products

The Group is not engaged in the manufacturing industry so it does not apply.

3. Supply of main raw materials

The Group is not engaged in the manufacturing industry so it does not apply.

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4. List of major customers and suppliers

• (1) The names of the suppliers who have accounted for more than 10% of the Company’s total purchase amount in one of the last two years and the purchase amount and ratio; also, explain the reasons for the said increase and decrease

Unit: NT$ thousands

										Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
	2017					2018				Last quarter of 2019
Item	Name	Amount	Percentage of net annual purchase (%)	Relationship with the issuer	Name	Amount	Percentageof net annual purchase (%)	Relationship with the issuer	Name	Amount	Percentage of net purchase up to the last quarter of theyear(%)	Relationship with the issuer
1	甲	231,323	32.21	None	甲	369,526	36.78	None	甲	288,640	51.82	None
2	丑	125,551	17.48	None	丑	142,869	14.22	None	己	76,190	13.68	None
3	戊	93,883	13.07	None	己	135,238	13.46	None	戊	17,126	3.07	None
4	己	65,179	9.08	None	戊	60,535	6.03	None	丑	15,354	2.76	None
	Others	202,165	28.16		Others	296,532	29.51		Others	159,685	28.67
	Net purchase amount	718,101	100.00		Net purchase amount	1,004,700	100.00		Net purchase amount	556,995	100.00

Analysis of increase and decrease:

The Group’s suppliers, which accounted for more than 10% of the total purchases, are mainly for the suppliers of radiation oncology instruments and pharmaceuticals. Supplier 甲 , 丑 , 戊 , and 己 are continuing to supply in response to market demand.

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• (2) The name of the customers who have accounted for more than 10% of the Company’s total sales amount in one of the last two years and the sales amount and ratio; also, explain the reasons for the increase and decrease

Unit: NT$ thousands

										Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
	2017					2018				Last quarter of 2019
Item	Name	Amount	Percentage of net annual sales(%)	Relationship with the issuer	Name	Amount	Percentage of net annual sales(%)	Relationship with the issuer	Name	Amount	Percentage of net sales up to the last quarter of theyear(%)	Relationship with the issuer
1	Yee Zen General Hospital	287,480	13.58	Note	Yee Zen General Hospital	250,512	9.99	Note	H	116,402	18.47	None
2	I	13,107	0.62	None	I	132,582	5.29	None	I	89,035	14.13	None
3	H	12,810	0.61	None	H	12,971	0.52	None	Yee Zen General Hospital	78,778	12.50	Note
	Others	1,803,719	85.19		Others	2,111,401	84.20		Others	345,895	54.90
	Net sales amount	2,117,116	100.00		Net sales amount	2,507,466	100.00		Net sales amount	630,110	100.00

Note: Yee Zen General Hospital is a substantive related party of the Group.

Analysis of increase and decrease:

The Group’s sales revenue is mainly from the radiation oncology instruments. The sales price of radiation oncology equipment is high and its service life is long, so it is difficult to concentrate on the same customer. Customer H and Customer I received high-end radiation oncology equipment in the first quarter of 2019, which led to a substantial increase in related revenues.

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5. Production value of the last two years

The Group is not engaged in manufacturing industry so it oes not apply.

6. Sales value and volume in the last two years

Unit: Piece, set: NT$ thousands

Year Sales QTY & value Major products (or bydepartment)	2017	2017			2018	2018
	Domestic sales		Exports		Domestic sales		Exports
	QTY	Amount	QTY	Amount	QTY	Amount	QTY	Amount
Sales of equipment for radiation oncology and neurology	17	435,965	8	49,626	18	750,542	19	115,101
Other sales	17,777	111,738	1,520	2,462	19,696	140,111	1,010	2,515
Medicine sales	20,488,279	197,094	0	0	21,394,907	171,500	0	0
Rental revenue	46	1,024,382	1	14,501	45	1,048,132	1	20,640
Service revenue	0	239,726	0	41,622	0	208,987	0	49,938
Total	20,506,119	2,008,905	1,529	108,211	21,414,666	2,319,272	1,030	188,194

Analysis of changes: The sales of equipment for radiation oncology and neurology is increased due to the increase in the units of the high-priced instruments sold in 2018. The increase in other sales is mainly due to the growth of sales of ophthalmic products in 2018. The decrease in the medicine sales is mainly due to the unit price adjustment in 2018 so the volume sale is up but the amount sale is down. The increase in rental revenue is mainly due to the stable growth of the projects cooperated with the hospital in 2018. The slight decrease in the service revenue is due to the decrease of repair and maintenance service income in 2018.

III. Human Resources

(I) The Company

Unit: Number of persons

			Unit:	Number ofpersons
Year		2017	2018	3/31/2019
No. of employees	Management	15	14	14
	Marketing personnel (including sales and technology)	0	0	0
	General staff	31	30	30
	Total	46	44	44
Average age		39.3	39.6	39.8
Average serviceyears		6.26	7.17	7.41
Education distribution ratio (%)	Ph.D.	0.00	0.00	0.00
	Master	15.22	15.91	15.91
	Universityand college	67.39	65.91	65.91
	High school	17.39	18.18	18.18
	Below high school	0.00	0.00	0.00

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(II) The Group

Number of persons

				Number ofpersons
Year		2017	2018	3/31/2019
No. of employees	Management	31	31	31
	Marketing personnel (including sales and technology)	96	90	91
	General staff	62	62	63
	Total	189	183	185
Average age		36.88	36.6	36.6
Average serviceyears		6.1	6.7	6.8
Education distribution ratio (%)	Ph.D.	1.06	0.55	0.54
	Master	14.29	15.30	14.59
	Universityand college	74.07	74.32	75.14
	High school	10.58	9.83	9.73
	Below high school	0.00	0.00	0.00

IV. Environmental Protection Expenditure

The total amount of losses (including compensation) and the amount of fines caused by environmental pollution in the most recent year and as of the annual report printing date, and the future countermeasures (including corrective actions) and possible expenses (including possible losses due to not taking countermeasures, fines, and the estimated amount of compensation, if it cannot be reasonably estimated, state the fact that it cannot be reasonably estimated)

None

V. Labor Relations

• (I) Illustrate the company’s employee welfare measures, advanced study, training, retirement system and its implementation, as well as the agreement between labor and management and the employee benefits maintenance measures.

1. Employee welfare measures

The Company is committed to creating a worry-free work environment for employees, strives to improve the various systems, and provides good and comprehensive welfare measures, so that every employee and their families can enjoy a comfortable and pleasant life; also, enjoy the care and consideration of the company.

(1) Salary system

The Company has recruited talents and motivated employees with a fair and competitive compensation system. The salary of each employee is determined according to the individual and group performance and the company’s operational performance. In

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addition, by offering different salary portfolio and year-end bonus, the concepts of sharing profits with employees and rewarding employees’ hard work are achieved.

• Year-end bonus: According to the “Rules Governing Employee Performance” of the Company, the year-end bonus will be distributed at the end of the year depending on the overall operating performance of the company.

• Annual employee remuneration distribution: After being resolved by the Board of Directors and reported in the shareholders meeting, it is distributed to the employees of the Company. The remuneration distribution is handled according to the Company’s “Rules Governing the Distribution of Remuneration to Employees.”

• Employee shareholding, cash capitalization and stock subscription, and issuance of employee warrants: It is handled depending on the company’s overall operations with the relevant rules stipulated for the compliance of employees.

• (2) Merciful employee welfare system

• Insurance plan: Provide labor insurance and health insurance to each employee, so that they can be fully protected. In addition, the company also plans a group insurance for employees starting from the date they report to duty, including life insurance, accident insurance, medical insurance and cancer insurance. If the employee is on a sabbatical leave due to a military service, major injury, or childbirth, he or she may continue to participate in the company group insurance, so that the protection can be continued.

• Three festivals gift money

• Retirement system: According to the “Labor Standards Act,” a sound pension system and retirement-related measures are enacted. According to the “Labor Pensions Act,” an amount equivalent to 6% of the monthly salary is paid to the personal account with the Bureau of Labor Insurance, Ministry of Labor, and together with the Company’s sound financial structure to provide solid pensions appropriation and payment.

• Health management: In addition to the fully subsidized health checkup for the new recruits, the Company regularly applies to the Bureau of Labor Insurance for occupational hazard inspections every year, covering general health checkups, special health checkups, etc., and handles annual health checkups for all employees once in every two years.

• Staff dormitory: Considering the needs of short-term travel of employees and the safety and convenience of long-distance commuting employees, the company has staff dormitory available to provide a comfortable living environment for employees who are traveling or in training.

• Employee Welfare Committee: The “CHC Healthcare Group Employee Welfare Committee” is established in accordance with the law to actively promote various employee welfare measures, including funeral subsidies, medical subsidies, marriage

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subsidies, travel subsidies, birthday gifts, maternity benefits, advanced study subsidies, and cultural and recreational activities subsidies.

2. Education and training

In order to improve the competence of employees, enhance the work knowledge of employees, and reserve technical and management talents to cope with the business development of the Company, and to seek effective use of manpower, the Group has stipulated the “Incentives for Education and Training and Professional License” to encourage the Company’s employees to go for an advanced study and to obtain professional license in order to enhance their competitiveness.

• (1) Education and training

• Pre-job training: All new recruits will be instructed to understand the Company’s organization, business profile, labor safety and health, and the standard operating procedures of the company.

• Internal training: Enhance the basic functions and professional functions that each position should have in order to strengthen the work ability of each employee at the workplace.

• External training: Base on the needs of each employee or each position to arrange an external training in order to strengthen the professional skills of each employee and the leadership of the management.

• Overseas training: In line with the development of the company or the needs of work in the future, the department heads select competent personnel to go abroad for professional training.

• (2) Application for and issuance of various professional licenses

According to the standard certificate classification, the employees shall submit the original certificate or the transcript together with the original enrollment fee receipt, and the test reward application form to the Human Resources Department and the General Affairs Department for the registration fee subsidies according to the original receipt. Class A (difficult): Each certificate is with NT$10,000 awarded. Class B (medium): Each certificate is with NT$ 5,000 awarded. Class C (Basic): Each certificate is with NT$ 3,000 awarded.

• (3) Advanced study and training of employees

Each department of the Company regularly holds product or professional skills training on a monthly basis to enhance the professional skills of the employees at workplace. Employees shall apply for work-related external training according to the “Incentives for Education and Training and Professional License” of the company.

The statistics of the courses arranged for the employees by the Company’s Human Resources Department and General Affairs Department in 2018 are as follows:

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Courses	Classes	Persons	Hours	Expenses(NT$)
Consultingsales	2	42	16	242,000
Proactive response	2	74	16	159,000
Business etiquette and foreign customer reception skills	1	34	8	74,000
Total	5	150	40	475,000

1. Retirement system and its implementation

2. (1) For the work seniority before and after being subject to the “Labor Standards Act,” the pensions shall be calculated according to the pension standard as stipulated in Articles 84-2 and Article 55 of the Labor Standards Act.

3. (2) Choose to be subject to the pension plan as stipulated in the “Labor Standard Act” in accordance with the Labor Pension Act or reserve the work seniority accumulated before applying the Labor Pension Act to be paid according to the provision of the preceding paragraph.

4. (3) For employees who are subject to the pension plan as stipulated in the “Labor Standards Act” and who are forced to retire in accordance with Subparagraph 2, Paragraph 1 of Article 35, if their mental disability or physical disability is caused by the execution of their duties, they are entitled to additional 20% of the pension according to the provisions of the preceding paragraph.

5. (4) For employees who are subject to the Labor Pension Act, the Company will have an amount equivalent to 6% of the monthly salary appropriated and deposited into the personal pension account.

6. Agreement between labor and management and various employee benefits protection measures

In order to coordinate labor relations, enhance mutual understanding, promote labor-management cooperation, and improve work efficiency, we have held labor-management meetings in accordance with the “Rules Governing the Labor-Management Meetings” to meet regularly and communicate with each other. Both employers and employees should resolve issues through consultation harmoniously.

• (II) Illustrate the losses suffered by the company due to labor disputes in the most recent year and as of the annual report printing date, and disclose the current and future estimated amount and countermeasures; if it cannot be reasonably estimated, state the fact that it cannot be reasonably estimated)

The Company has a good interaction with the employees regarding the welfare measures, management system, and labor relations. There has no labor disputes and losses occurred in the most recent year and as of the annual report printing date; therefore, no such events are

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expected in the future.

VI. Important Contracts (illustrate the valid supply and sales contracts as of the annual report printing date and those that will be expired in the most recent year; the parties, contents, restrictive clauses, and beginning and ending dates of the technical cooperation contracts, engineering contracts, long-term loan contracts, and other major contracts that are significant enough to affect shareholders’ equity)

(I) The Company: None

(II) The Group:

Contractual nature	Parties	Beginning and ending date of the contract	Major contents	Restrictive clauses
Purchase and distribution rights	C-RAD AB (Chiu Ho Medical System Co., Ltd.)	2010/10/13 ~ no expiry date	Laser products	Sales in Taiwan area only
Purchase and distribution rights	Leica Microsystems IR Gmbh (Chiu Ho Medical System Co., Ltd.)	2012/04/01 ~ no expiry date	Surgical microscope series	Sales in Taiwan area only
Purchase and distribution rights	Elekta Limited (Chiu Ho Medical System Co., Ltd.)	2019/03/08~2022/03/07	Digital Linear Accelerator and Gamma Knife Series Related Equipment	Sales in Taiwan area only
Purchase and distribution rights	PTW-Freiburg (Chiu Ho Medical System Co., Ltd.)	1996/10/08 ~ no expiry date	Quality assurance related equipment and products	Sales in Taiwan area only
Purchase and distribution rights	Chiyoda Technol Corporation (Chiu Ho Medical System Co., Ltd.)	2008/12/10 ~ no expiry date	Quality assurance verification series	Sales in Taiwan area only
Purchase and distribution rights	Ashland Specialty (Chiu Ho Medical System Co., Ltd.)	2015/03/01~2021/01/02	Radiographic and dose verification film	Sales in Taiwan area only
Purchase and distribution rights	Nippon Electric Glass Co., Ltd. (Chiu Ho Medical System Co., Ltd.)	2017/06/01~2020/05/31	Medical lead glass agent sales	Sales in Taiwan area only
Purchase and distribution rights	Microtek Medical, Inc. (Chiu Ho Medical System Co., Ltd.)	2009/07/01 ~ no expiry date	Disinfection sleeve series	Sales in Taiwan area only
Purchase and distribution rights	Swissray Medical AG (Chiu Ho Medical System Co., Ltd.)	2012/02/02 ~ no expiry date	Digital X-ray machine	Sales in Taiwan, China, Hong Kong, and Macao area only
Purchase and distribution rights	Swissray Medical AG (Chiu Ho Medical System Co., Ltd.)	2012/10/09~2021/10/08	Proton therapy equipment	Sales in Taiwan area only
Purchase and distribution rights	Stryker Far East Inc., Taiwan Branch (Chiu Ho Medical System Co., Ltd.)	2019/01/01~2019/12/31	Intraoperative real-time fluorescent angiography system	Sales in Taiwan area only
Supply and sales contract	Bausch & Lomb HK (Chiu Ho Medical System Co., Ltd.)	2016/01/01~2019/12/31	TPV	Sales in Taiwan area only
Purchase and distribution rights	Ritter IMAGING Inc. (Tomorrow Medical System Co.,Ltd.)	2008/12/01 ~ no expiry date	Dental treatment chair series	Sales in Taiwan area only

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Contractual nature	Parties	Beginning and ending date of the contract	Major contents	Restrictive clauses
Purchase and distribution rights	Ellex Medical Pty., Ltd. (Tomorrow Medical System Co., Ltd.)	2013/04/01 ~ no expiry date	Ophthalmic instrument products	Sales in Taiwan area only
Purchase and distribution rights	GE Medical Systems (Tomorrow Medical System Co., Ltd.)	2019/01/01~2019/12/31	CT, MR, MI, DXR, and BMD-Aria	Sales in some hospital system in Taiwan area only
Purchase and distribution rights	Accuray Incorporated (Tomorrow Medical System Co., Ltd.)	2016/01/01~2019/12/31	Radiation therapy related equipment	Sales in Taiwan area only
Purchase and distribution rights	Leica Microsystems IR (Chiu Ho Scientific Co., Ltd.)	2012/04/01 ~ no expiry date	Surgical microscope series	Sales in Taiwan area only
Purchase and distribution rights	Ellex Medical Pty., Ltd. (Chiu Ho Scientific Co., Ltd.)	2017/08/17 ~ no expiry date	Ophthalmic instrument products	Sales in Taiwan area only
Purchase and distribution rights	Deerfield Imaging, Inc. (Chiu Ho Medical System Co., Ltd.)	2018/04/05~2021/04/04	Intraoperative imaging system	Sales in Taiwan area only
Purchase and distribution rights	Yesng Co. (Chiu Ho Medical System Co., Ltd.)	2018/05/18~2023/12/31	Electrical surgical pencil	Sales in China area only
Purchase and distribution rights	KONO SEISAKUSHO Co, Ltd. (Chiu Ho Medical System Co., Ltd.)	2018/09/25~2022/09/24	Surgical suture	Sales in Taiwan area only
Purchase and distribution rights	Modern Material Enterprises Co., Ltd. (Chiu Ho Medical System Co., Ltd.)	2018/08/01~2020/07/31	SONY Medical image integration system	Sales in Taiwan area only
Purchase and distribution rights	CAScination AG (Chiu Ho Medical System Co., Ltd.)	2018/11/28~2022/05/27	Interventional ablation navigation system	Sales in Taiwan area only
Sales contract	Changhua Christian Medical Foundation Changhua Christian Hospital	2016/05/18 ~ inspection and acceptance completed	Proton therapy system	To be processed according to the contract signed
Equipment use and technical service cooperation	Taipei Medical University Hospital	2017/01/20 ~ expiry date of the cooperation agreement	Proton therapy related equipment use and technical service cooperation	To be processed according to the contract signed
Syndicate credit contract	The syndicate credit bank group organized by the First Bank, CTBC Bank, etc.	Contract signing date: 11/07/2018 (The credit period is for 5 years from the date of the first-time use of any sub-credit line)	Repayment for the existing financial liabilities and the establishment of the Proton Therapy Center of the Taipei Medical University Hospital and the procurement of one set of Proton Therapy System (including repayment of transitional financing)	To be processed according to the contract signed

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Six. Financial Information

I. Five-Year Financial Summary

(I) The Group

Condensed Balance Sheet

						Unit: NT$thousands	Unit: NT$thousands
Year Item			Financial Data of the Last Five Years				Financial data as of March 31 of the year
		2014	2015	2016	2017	2018
Current assets		1,813,405	2,838,473	2,507,591	3,041,583	3,204,585	3,371,092
Property, plant, and equipment		4,671,616	4,550,081	4,754,993	4,609,262	4,752,936	4,680,085
Intangible assets		11,129	161,746	161,746	161,746	161,746	161,746
Other assets		754,077	932,697	964,982	1,523,449	1,467,681	1,514,494
Total assets		7,611,380	9,907,169	9,783,456	10,592,963	10,847,735	11,051,394
Current liabilities	Before distribution	1,073,205	751,499	2,190,558	1,803,512	1,353,032	1,958,533
	After distribution	1,333,897	1,031,463	2,331,048	1,957,417	Note 2	Note 2
Non-current liabilities		1,847,631	3,589,481	2,623,433	3,875,014	4,361,184	3,892,924
Total liabilities	Before distribution	2,920,836	4,340,980	4,813,991	5,678,526	5,714,216	5,851,457
	After distribution	3,181,528	4,620,944	4,954,481	5,832,431	Note 2	Note 2
Equity attributable to shareholders of theparent		4,686,770	5,161,246	4,967,394	4,913,368	4,972,363	5,038,866
Share capital		1,303,460	1,397,028	1,398,478	1,399,136	1,399,136	1,399,136
Capital surplus		2,379,917	2,882,624	2,891,710	2,927,016	2,930,253	2,931,376
Retained earnings	Before distribution	1,008,913	974,739	849,201	620,427	1,041,551	1,101,317
	After distribution	748,221	694,775	708,711	466,522	Note 2	Note 2
Other equity		(5,520)	(93,145)	(171,995)	(33,211)	(363,621)	(358,007)
Treasuryshares		－	－	－	－	(34,956)	(34,956)
Non-controllinginterest		3,774	404,943	2,071	1,069	161,156	161,071
Total equity	Before distribution	4,690,544	5,566,189	4,969,465	4,914,437	5,133,519	5,199,937
	After distribution	4,429,852	5,286,225	4,828,975	4,760,532	Note 2	Note 2

Note 1: The above financial data are audited or reviewed by a certified public accountant. Note 2: The 2018 earnings distribution proposal has not yet been resolved in the shareholders meeting..

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Condensed Comprehensive Income Statement

Condensed Comprehensive Income Statement	Condensed Comprehensive Income Statement	Condensed Comprehensive Income Statement	Condensed Comprehensive Income Statement	Condensed Comprehensive Income Statement
					Unit: NT$thousands
Year Item	Financial Data of the Last Five Years					Financial data as of March 31 of theyear
	2014	2015	2016	2017	2018
Operating revenue	2,091,026	2,395,331	2,205,206	2,117,116	2,507,466	630,110
Gross profits	606,749	759,729	619,611	688,653	730,786	144,863
Operating profit	373,446	369,914	308,155	352,875	459,981	75,715
Non-operating income and expense	(49,038)	(87,046)	(80,421)	(378,951)	(91,812)	138
Profit (loss) before income tax	324,408	282,868	227,734	(26,076)	368,169	75,853
Profit (loss) of the continuingdepartment	263,793	222,687	160,604	(89,286)	317,829	58,215
Loss of discontinued department	－	－	－	－	－	－
Profit (loss) for the year	263,793	222,687	160,604	(89,286)	317,829	58,215
Other comprehensive income (after tax) for theyear	(19,222)	(87,625)	(78,850)	138,784	(53,085)	5,614
Total comprehensive income for the year	244,571	135,062	81,754	49,498	264,744	63,829
Profit (loss) attributable to owners of the parent	265,766	226,518	158,932	(86,695)	323,422	59,766
Profit (loss) attributable to non-controlling interest	(1,973)	(3,831)	1,672	(2,591)	(5,593)	(1,551)
Comprehensive income attributable to shareholders’ of the parent	246,544	138,893	80,082	52,089	270,337	65,380
Comprehensive income attributable to non-controllinginterest	(1,973)	(3,831)	1,672	(2,591)	(5,593)	(1,551)
Earnings per share	2.04	1.73	1.14	(0.62)	2.32	0.43

Note 1: The above financial data are audited or reviewed by a certified public accountant.

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(II) The Company

Condensed Balance Sheet

Unit: NT$ thousands

					Unit: NT$thousands	Unit: NT$thousands
Year Item			Financial Data of the Last		Five Years
		2014	2015	2016	2017	2018
Current assets		143,071	716,649	264,550	708,120	657,925
Property, plant, and equipment		5,689	4,538	3,911	2,996	1,832
Intangible assets		－	－	－	－	－
Other assets		3,691	23,657	7,155	57,886	108,007
Total assets		5,758,091	7,001,993	6,826,430	7,183,203	7,793,090
Current liabilities	Before distribution	103,730	18,213	1,093,411	509,517	202,958
	After distribution	364,422	298,177	1,233,901	663,422	Note 2
Non-current liabilities		967,591	1,822,534	765,625	1,760,318	2,617,769
Total liabilities	Before distribution	1,071,321	1,840,747	1,859,036	2,269,835	2,820,727
	After distribution	1,332,013	2,120,711	1,999,526	2,423,740	Note 2
Equity attributable to shareholders of theparent		4,686,770	5,161,246	4,967,394	4,913,368	4,972,363
Share capital		1,303,460	1,397,028	1,398,478	1,399,136	1,399,136
Capital surplus		2,379,917	2,882,624	2,891,710	2,927,016	2,930,253
Retained earnings	Before distribution	1,008,913	974,739	849,201	620,427	1,041,551
	After distribution	748,221	694,775	708,711	466,522	Note 2
Other equity		(5,520)	(93,145)	(171,995)	(33,211)	(363,621)
Treasuryshares		－	－	－	－	(34,956)
Non-controllinginterest		－	－	－	－	－
Total equity	Before distribution	4,686,770	5,161,246	4,967,394	4,913,368	4,972,363
	After distribution	4,426,078	4,881,282	4,826,904	4,759,463	Note 2

Note 1: The above financial data are audited by a certified public accountant. Note 2: The 2018 earnings distribution proposal has not yet been resolved in the shareholders meeting.

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Unit: NT$ thousands

Condensed Comprehensive Income Statement

	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands	Unit: NT$thousands
Year Item	Financial Data of the Last Five Years
	2014	2015	2016	2017	2018
Operatingrevenue	368,503	377,477	307,929	326,640	435,545
Grossprofits	286,260	275,997	209,973	236,931	333,770
Operating profit	286,260	275,997	209,973	236,931	333,770
Non-operatingincome and expense	(22,667)	(54,931)	(43,413)	(323,593)	(59,671)
Profit(loss)before income tax	263,593	221,066	166,560	(86,662)	274,099
Profit (loss) of the continuing department	265,766	226,518	158,932	(86,695)	323,422
Loss of discontinued department	－	－	－	－	－
Profit(loss)for theyear	265,766	226,518	158,932	(86,695)	323,422
Other comprehensive income (after tax) for theyear	(19,222)	(87,625)	(78,850)	138,784	(53,085)
Total comprehensive income for theyear	246,544	138,893	80,082	52,089	270,337
Profit (loss) attributable to owners of the parent	－	－	－	－	－
Profit (loss) attributable to non-controllinginterest	－	－	－	－	－
Comprehensive income attributable to shareholders’ of theparent	－	－	－	－	－
Comprehensive income attributable to non-controllinginterest	－	－	－	－	－
Earningsper share	2.04	1.73	1.14	(0.62)	2.32

Note 1: The above financial data are audited by a certified public accountant.

(III) Name of accountant and audit opinions issued in the last five years

Year	CPA Firm	CPAs	Audit Opinions
2014	PricewaterhouseCoopers (PwC)	Audrey Tseng and Sheng-Wei Teng	Unqualified opinions
2015	PricewaterhouseCoopers (PwC)	Audrey Tseng and Sheng-Wei Teng	Unqualified opinions
2016	PricewaterhouseCoopers (PwC)	Sheng-Wei Teng and Hsiao-Tzu Chou	Unqualified opinions
2017	PricewaterhouseCoopers (PwC)	Sheng-Wei Teng and Hsiao-Tzu Chou	Unqualified opinions
2018	PricewaterhouseCoopers (PwC)	Sheng-Wei Teng and AudreyTseng	Unqualified opinions

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II. Five-Year Financial Analysis

Consolidation

Year Analysis item	Year Analysis item	Financial analysis of the last five years	Financial analysis of the last five years	Financial analysis of the last five years	Financial analysis of the last five years	Financial analysis of the last five years	As of March 31 of theyear
		2014	2015	2016	2017	2018
Financial structure(%)	Debt Ratio	38.37	43.82	49.21	53.61	52.68	52.95
	Ratio of long-term capital und to property, plant,and equipment	139.96	201.22	159.68	190.69	199.77	194.29
Solvency (%)	Current ratio	168.97	377.71	114.47	168.65	236.84	172.12
	Quick ratio	121.53	316.45	98.83	133.22	166.66	114.03
	Interest earned ratio(times)	676.81	444.44	393.36	69.38	478.63	422.87
Operating performance	Account receivable turnover(times)	2.78	2.39	2.07	2.26	2.50	2.42
	Average collectionperiod	131	152	176	161	146	150
	Inventoryturnover(times)	1.82	2.19	2.63	2.05	2.12	1.77
	Accountpayable turnover(times)	9.09	8.94	7.66	8.52	9.60	8.17
	Average days in sales	200	166	138	178	172	206
	Property, plant, and equipment turnover(times)	0.49	0.52	0.47	0.45	0.54	0.53
	Total assets turnover(times)	0.29	0.27	0.22	0.21	0.23	0.23
Profitability	Return on total assets(%)	4.29	3.32	2.29	(0.18)	3.72	2.81
	Return on shareholders’ equity (%)	5.64	4.34	3.05	(1.81)	6.33	4.51
	Pre-tax income topaid-in capital(%)	24.89	20.25	16.28	(1.86)	26.31	21.69
	Profit ratio(%)	12.62	9.30	7.28	(4.22)	12.68	9.24
	Earningsper share(NT$)	2.04	1.73	1.14	(0.62)	2.32	0.43
Cash flows	Cash flow ratio(%)	59.10	76.60	38.57	16.29	28.88	6.79
	Cash flow adequacyratio(%)	54.40	55.02	72.35	90.76	78.87	81.10
	Cash reinvestment ratio(%)	4.69	3.20	6.54	1.50	2.17	1.27
Leverage	Operational leverage	2.49	2.68	3.02	2.87	2.48	3.18
	Financial leverage	1.18	1.29	1.34	1.32	1.27	1.45
Reasons for the increase or decrease in the financial ratios over 20% of the last two years: (1) The increase in the current ratio is mainly due to the decrease in the current liabilities of 2018. (2) The increase in the quick ratio is mainly due to the decrease in the current liabilities of 2018. (3) The increase in the interest earned ratio is mainly due to the increase in the net income before tax of 2018. (4) The increase in the return on total assets is mainly due to the increase in the net income of 2018. (5) The increase in the return on shareholders’ equity is mainly due to the increase in net income of 2018. (6) The increase in the pre-tax income to paid-in capital is mainly due to the increase in the net income before tax of 2018. (7) The increase in the profit ratio is mainly due to the increase in net income of 2018. (8) The increase in earnings per share is mainly due to the increase in net income of 2018. (9) The increase in the cash flow ratio is mainly due to the increase in net cash inflows from operating activities. (10) The increase in the cash reinvestment ratio is mainly due to the increase in net cash inflows from operatingactivities.

Note 1: The above financial data are audited or reviewed by a certified public accountant.

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Standalone

		Standalone	Standalone	Standalone	Standalone	Standalone
Year Analysis item		Financial analysis of the Last Five Years
		2014	2015	2016	2017	2018
Financial structure (%)	Debt Ratio	18.61	26.29	27.23	31.60	36.20
	Ratio of long-term capital und to property, plant, and equipment	99,391.12	153,895.55	146,587.04	222,753.20	414,308.52
Solvency (%)	Current ratio	137.93	3,934.82	24.19	138.98	324.17
	Quick ratio	136.83	3,915.05	23.76	138.15	320.96
	Interest earned ratio(times)	1,201.84	878.81	531.85	(118.61)	749.71
Operating ability	Account receivable turnover (times)	50.00	33.60	67.37	62.98	49.82
	Average collectionperiod	7	10	5	5	7
	Inventoryturnover(times)	－	－	－	－	－
	Account payable turnover (times)	－	－	－	－	－
	Average days in sales	－	－	－	－	－
	Property, plant, and equipment turnover (times)	117.36	73.82	72.89	94.58	180.42
	Total assets turnover(times)	0.06	0.06	0.04	0.05	0.06
Profitability	Return on total assets(%)	5.01	3.92	2.76	(0.77)	4.79
	Return on shareholders’ equity (%)	5.69	4.60	3.14	(1.75)	6.54
	Pre-tax income to paid-in capital (%)	20.22	15.82	11.91	(6.19)	19.59
	Profit ratio (%)	72.12	60.01	51.61	(26.54)	74.26
	Earnings per share (NT$)	2.04	1.73	1.14	(0.62)	2.32
Cash flows	Cash flow ratio (%)	312.78	414.31	10.72	31.26	(43.91)
	Cash flow adequacy ratio (%)	21.90	20.79	20.73	20.23	18.46
	Cash reinvestment ratio (%)	1.14	(2.65)	(2.84)	0.28	(3.20)
Leverage	Operational leverage	1.22	1.28	1.35	1.28	1.23
	Financial leverage	1.09	1.11	1.23	1.20	1.14
Reasons for the increase or decrease in the financial ratios over 20% of the last two years: (1) The increase in ratio of long-term capital to property, plant, and equipment is mainly due to the increase in the noncurrent liability of 2018. (2) The increase in the current ratio is mainly due to the decrease in the current liabilities of 2018. (3) The increase in the quick ratio is mainly due to the decrease in the current liabilities of 2018. (4) The increase in the interest earned ratio is mainly due to the increase in the net income before tax of 2018. (5) The decrease in the account receivable turnover is mainly due to the increase in the account receivable of 2018. (6) The increase in the average collection period is mainly due to the increase in the account receivable of 2018. (7) The increase in the property, plant, and equipment turnover is mainly due to the increase in the net sales of 2018. (8) The increase in the total assets turnover is mainly due to the increase in the net sales of 2018. (9) The increase in the return on total assets is mainly due to the increase in the net income of 2018. (10) The increase in the return on shareholders’ equity is mainly due to the increase in the net income of 2018. (11) The increase in the pre-tax income to paid-in capital is mainly due to the increase in the net income before tax of 2018. (12) The increase in the profit ratio is mainly due to the increase in the net income of 2018. (13) The increase in the earnings per share is mainly due to the increase in the net income of 2018. (14) The decrease in the cash flow ratio is mainly due to the net cash outflow from operating activities of 2018. (15) The decrease in the cash reinvestment ratio is mainly due to the net cash outflow from operating activities of 2018.

Note 1: The above financial data are audited by a certified public accountant.

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Note 2: The equation for the calculation of each financial ratio is as follows:

1. Financial structure

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

3. (2) Ratio of long-term capital to property, plant, and equipment = (Total equity + noncurrent liabilities) / net property, plant, and equipment

4. Solvency

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

6. (2) Quick ratio = (Current assets – inventory – prepaid expense) / Current liabilities

7. (3) Interest earned ratio (times) = Net income before tax and interest expense / Current interest expense

8. 1. Operating performance

9. (1) Account receivable turnover (including accounts receivable and notes receivable from operating activities) = Net sales / Average accounts receivable balance amount for each period (including accounts receivable and notes receivable from operating activities)

10. (2) Average collection period = 365 / Account receivable turnover

11. (3) Inventory turnover = Cost of goods sold / Average inventory amount

12. (4) Account payable turnover (including accounts payable and notes payable from operating activities) = Cost of goods sold / Average accounts payable balance amount for each period (including accounts payable and notes payable from operating activities)

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

14. (6) Property, plant, and equipment turnover = Net sales / Average property, plant, and equipment amount (net)

15. (7) Total assets turnover = Net sales / Total average assets

16. Profitability

17. (1) Return on total assets = [Net income (loss) + interest expense x (1- tax rate)] / Total average assets

18. (2) Return on shareholders’ equity = Net income (loss) / Total average equity

19. (3) Profit ratio = Net income (loss) / Net sales

20. (4) Earnings per share = (Profit and loss attributable to shareholders’ equity of parent company – preferred stock dividend) / Weighted average shares issued

21. Cash flows

22. (1) Cash flow ratio = Net cash flow from operating activities / Current liabilities

23. (2) Cash flow adequacy ratio = Net cash flow from operating activities in the last 5 years / (Capital expenditure + increase in inventory + cash dividend) in the last 5 years

24. (3) Cash reinvestment ratio = (Net cash flow from operating activities – cash dividend) / (Gross amount of property, plant, and equipment + Long-term investment + other noncurrent assets + Working capital)

25. Leverage:

26. (1) Operational leverage = (Net operating income – variable cost and expense) / Operating profit

27. (2) Financial leverage = Operating profit / (Operating profit – Interest expense)

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III. Supervisors’ or Audit Committee’s Report in the Most Recent Year

CHC Healthcare Group

Audit Committee’s Review Report

The Company’s Board of Directors has prepared and presented the 2018 consolidated and standalone financial statements that were audited by CPAs Sheng-Wei Teng and Audrey Tseng of PricewaterhouseCoopers (PwC) with an independent auditor’s report issued concluding that the Company’s financial status, operating performance, and cash flow were present fairly; also, the said financial statements together with the business report and earnings distribution proposal were reviewed by the Audit Committee members and concluded to be complying with the relevant law and regulations. The Review Report of the Audit Committee is prepared and presented in accordance with the provisions of Article 14-4 of the Securities Exchange Act and Article 219 of the Company Act.

Sincerely yours,

2019 Annual shareholders’ meeting of CHC Healthcare Group

CHC Healthcare Group Convener of Audit Committee Guiduan Chen

March 22, 2019

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• IV. Financial Statements for the Years Ended December 31, 2018 and 2017, and Independent Auditors’ Report

Please refer to pages 144 ~ 242

• V. Standalone financial report of the company that has been audited by an accountant in the most recent year, excluding the statement of major accounting items Please refer to pages 243 ~ 310.

• VI. The impact of financial difficulty of the company and its affiliated enterprises on the financial status of the company detailed in the financial report of the most recent and as of the annual report printing date

Not applicable

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Seven. Review of Financial Conditions, Operating Results, and Risk Management

I. Analysis of Financial Status (The main reasons for the significant changes in assets, liabilities, and equity in the last two years and their impacts, if the impact is significant, the future response measures should be explained)

(I) The Company

The Company	The Company
			Unit: NT$thousands
Year Item	2017	2018	Difference
			Amount	%
Current assets	708,120	657,925	(50,195)	(7.09)
Financial assets at fair value through profit and loss – non-current	660	492	(168)	(25.45)
Financial assets at fair value through other comprehensive profit and loss – non-current	0	14,394	14,394	100.00
Available-for-sale financial assets – non-current	62,890	0	(62,890)	(100.00)
Investment accounted for using equitymethod	6,350,651	7,010,440	659,789	10.39
Property, plant,and eqipment	2,996	1,832	(1,164)	(38.85)
Other assets	57,886	108,007	50,121	86.59
Total assets	7,183,203	7,793,090	609,887	8.49
Current liabilities	509,517	202,958	(306,559)	(60.17)
Non-current liabilities	1,760,318	2,617,769	857,451	48.71
Total liabilities	2,269,835	2,820,727	550,892	24.27
Share capital	1,399,136	1,399,136	0	0.00
Capital surplus	2,927,016	2,930,253	3,237	0.11
Retained earnings	620,427	1,041,551	421,124	67.88
Other equity	(33,211)	(363,621)	(330,410)	994.88
Treasuryshares	0	(34,956)	(34,956)	(100.00)
Total equity	4,913,368	4,972,363	58,995	1.20
Description of major changes: (The amount changes by more than 10%, and the amount reaches 1% of the total assets of the current year) Investment accounted for using equity method: It is mainly due to the new investment in the subsidiaries of the current period. Current liabilities: It is reduced mainly due to the repayment of the second domestic guaranteed convertible corporate bonds. Non-current liabilities: It is mainly due to the increase in long-term loans during the period. Total liabilities: It is mainly due to the increase in long-term loans during the period. Retained earnings: It is mainly due to the increase in the net income of the period. Other equity: It is reduced mainly due to recognizing the evaluation adjustments of the financial assets at fair value through other comprehensive profit and loss-non-current as a result of the application of the IFRS for the current period. Impact of changes in financial status in the last two years: No significant impact on financial status. Future responseplan: Not applicable

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(II) The Group

) The Group	) The Group
Year Item	2017	2018	Difference
			Amount	%
Current assets	3,041,583	3,204,585	163,002	5.36
Financial assets at fair value through profit and loss – non-current	660	492	(168)	(25.45)
Financial assets at fair value through other comprehensive profit and loss – non-current	0	47,231	47,231	100.00
Available-for-sale financial assets – non-current	89,837	0	(89,837)	(100.00)
Investment accounted for using equitymethod	14,241	18,484	4,243	29.79
Property, plant, and equipment	4,609,262	4,752,936	143,674	3.12
Investment property - net	1,152,185	1,194,580	42,395	3.68
Intangible assets	161,746	161,746	0	0.00
Other assets	1,523,449	1,467,681	(55,768)	(3.66)
Total assets	10,592,963	10,847,735	254,772	2.41
Current liabilities	1,803,512	1,353,032	(450,480)	(24.98)
Non-current liabilities	3,875,014	4,361,184	486,170	12.55
Total liabilities	5,678,526	5,714,216	35,690	0.63
Share capital	1,399,136	1,399,136	0	0.00
Capital surplus	2,927,016	2,930,253	3,237	0.11
Retained earnings	620,427	1,041,551	421,124	67.88
Other equity	(33,211)	(363,621)	(330,410)	994.88
Treasuryshares	0	(34,956)	(34,956)	(100.00)
Non-controllinginterest	1,069	161,156	160,087	14,975.40
Total equity	4,914,437	5,133,519	219,082	4.46
Description of major changes: (The amount changes by more than 10%, and the amount reaches 1% of the total assets of the current year) Current liabilities: It is reduced mainly due to the repayment of the second domestic guaranteed convertible corporate bonds and loans. Non-current liabilities: It is mainly due to the increase in long-term loans during the period. Retained earnings: It is mainly due to the increase in the net income of the period. Other equity: It is reduced mainly due to recognizing the evaluation adjustments of the financial assets at fair value through other comprehensive profit and loss-non-current as a result of the application of the IFRS for the current period. Non-controlling interest: The increase in the non-controlling interest is mainly due to the new investment in the subsidiaries. Impact of changes in financial status in the last two years: No significant impact on financial status. Future responseplan: Not applicable

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II. Analysis of Operation Results

• (I) Main reasons for significant changes in operating income, net operating profit, and net income before tax in the last two years

• The Company

Unit: NT$ thousands

The Company			Unit: NT$thousands	Unit: NT$thousands
Year Item	2017	2018	Increase/Decrease
			Amount	Percentage of change (%)
Operatingrevenue	326,640	435,545	108,905	33.34
Operatingcost	(89,709)	(101,775)	(12,066)	13.45
Grossprofits	236,931	333,770	96,839	40.87
Non-operating income and expense	(323,593)	(59,671)	263,922	(81.56)
Profit (loss) before income tax	(86,662)	274,099	360,761	(416.29)
Income tax profit (expense)	(33)	49,323	49,356	(149,563.64)
Profit(loss)for theyear	(86,695)	323,422	410,117	(473.06)
Description of major changes: (The amount changes by more than 10%, and the amount reaches 1% of the total assets of the current year Operating revenue and gross profits: Mainly due to recognizing the investment profits from the subsidiaries. Non-operating income and expenses, profit (loss) before income tax, and profit (loss) for the year: It is increased mainly due to recognizing the impairment loss of the available-for-sale financial assets – non-current in the lastperiod,but not in currentperiod.

1. The Group

Unit: NT$ thousands

Year Item	2017	2018	Increase/Decrease	Increase/Decrease
			Amount	Percentage of change (%)
Operatingrevenue	2,117,116	2,507,466	390,350	18.44
Operatingcost	(1,428,463)	(1,776,680)	(348,217)	24.38
Grossprofits	688,653	730,786	42,133	6.12
Operatingexpense	(335,778)	(270,805)	64,973	(19.35)
Operating profit	352,875	459,981	107,106	30.35
Non-operating income and expense	(378,951)	(91,812)	287,139	(75.77)
Profit (loss) before income tax	(26,076)	368,169	394,245	(1,511.91)
Income tax expense	(63,210)	(50,340)	12,870	(20.36)
Profit (loss) attributable to owners of theparent	(86,695)	323,422	410,117	(473.06)
Description of major changes: (The amount changes by more than 10%, and the amount reaches 1% of the total assets of the current year Operating income and operating cost: Operating cost is increased mainly due to the growth of sales revenue. Non-operating income and expense, profit (loss) before income tax, profit (loss) attributable to owners of the parent: It is increased mainly due to recognizing the impairment loss of the available-for-sale financial assets – non-current in the lastperiod,but not in currentperiod.

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• (II) Expected sales volume and its reference, possible impact on the company’s future financial business, and the response measures

• The Company ： Not applicable

• The Group ： Please refer to the “One. Letter to Shareholders”

III. Analysis of Cash Flow

• (I) Analysis of changes in cash flows of the most recent year

• The Company

lysis of Cash Flow nalysis of changes in cash flows of the most . The Company	lysis of Cash Flow nalysis of changes in cash flows of the most . The Company	recent year
			Unit: NT$thousands
Year Item Operatingactivities	2017	2018	Amount increase (decrease)	Ratio increase (decrease) (%)
	159,267	(89,128)	(248,395)	(155.96)
Investingactivities	49,097	(755,954)	(805,051)	(1,639.72)
Financingactivities	276,629	346,039	69,410	25.09
Analysis of changes: Operating activities: It is mainly due to the decrease in the dividend collected from the subsidiaries in the current period. Investment activities: It is mainly due to the increase in the investment accounted for using equity method in the current period. Financingactivities: It is mainlydue to the increase in long-term loans duringtheperiod.

1. The Group

. The Group	. The Group
			Unit: NT$thousands
Year Item Operatingactivities	2017	2018	Amount increase (decrease)	Ratio increase (decrease) (%)
	293,759	390,688	96,929	33.00
Investingactivities	(812,727)	(406,205)	406,522	(50.02)
Financing activities	786,129	(187,969)	(974,098)	(123.91)
Analysis of changes: Operating activities: It is mainly due to the decrease in payables in the current period. Investment activities: It is mainly due to the decrease in the prepaid equipment during the period. Financing activities: It is mainly due to the increase in issuing the 3rd domestic guaranteed convertible corporate bond in the lastperiod,but not in currentperiod.

(II) Improvement plan for insufficient liquidity

The Company and the Group are without any insufficient liquidity issue.

• (III) Cash liquidity analysis of next year (2019)

The Company

The Company
				Unit: NT$thousands
Cash balance – beginning (1)	Expected annual cash flow from operating activity (net) (2)	Estimated annual cash inflow (outflow) (3)	Cash surplus (insufficient) amount (1)+(2)+(3)	Remedy for insufficient cash
				Investment Plan	Financial plan
				Not	Not
50,008	254,153	(195,784)	108,377
				applicable	applicable

1. Operating activities ： The cash flow from operating activities of the Company in the coming year mainly comes from management consulting service fee income, dividend income from subsidiaries, and operating expense of the

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Group.

  2. Investing activities `：` The Company’s cash flow from the investing activities in the coming year is mainly invested for the operation and development of the subsidiaries.

  3. Remedy for insufficient cash `：` Not applicable

• IV. Major Capital Expenditure Items

• (I) The Company

None

• (II) The Group

The acquisition of instrument and equipment (booked as fixed assets) and the land and buildings required for expansion and operation in response to the cooperation with medical institutions will have a positive effect on the financial business.

• V. Investment Policy in Last Year, Main Causes for Profits or Losses, Improvement Plans and the Investment Plans for the Coming Year

Investment Plans for the Coming Year	Investment Plans for the Coming Year	Investment Plans for the Coming Year
				December 31,2018 Unit: NT$ thousands
Remark Item	Long-term investment amount	Policies	Investment profit and loss in 2018	Main reason for profit or loss	Improvement plan	Future investment plans
Chiu Ho Medical System Co., Ltd.	3,395,576	Medical instrument sales, leasing, and service	109,233	The company is with good performance.	None	None
Tomorrow Medical System Co., Ltd.	522,515	Medical instrument sales, leasing, and service	40,638	The company is with good performance.	None	None
Chiu Ho Scientific Co., Ltd.	133,829	Ophthalmic equipment sales, leasing, and service	11,004	The company is with good performance.	None	None
Hua Lin Instruments Co., Ltd.	696,442	Medical instrument leasing	40,895	The company is with good performance.	None	None
Shin-Ho Instruments Co., Ltd.	15,068	Medical instrument leasing	7,250	The company is with goodperformance.	None	None
Hsin Lin Biotech Co., Ltd.	110,487	Medical instrument leasing	431	The company is with good performance.	None	None
E Century Health Care Corporation	838,041	Medical instrument leasing	57,900	The company is with good performance.	None	None
Tong-Lin Instruments Co., Ltd.	497,563	Medical instrument leasing	29,013	The company is with good performance.	None	None
Chiu Ho Biotech Co., Ltd.	378,298	Medical instrument leasing	3,396	The company is with a stable operation gradually.	None	None
CHC Healthcare (BVI) Limited	422,621	holding and indirect investment	28,791	The company is with good performance.	None	None
CHC Healthcare (HK) Limited (Note 1)	40,534	Medical instrument sales, leasing, and service	249	The company is with good performance.	None	None
Guangzhou Chiuho Medical System Co., Ltd. (Note 1)	237,824	Medical instrument sales, leasing, and service	1,660	The company is with a stable operation gradually.	None	None
Chiu Ho (China) Medical Technology Co., Ltd. (Note 1)	135,297	Medical instrument sales, leasing, and service	26,882	The company is with a stable operation gradually.	None	None
Medlink Healthcare Limited(Note 2)	1,587,637	Medical instrument sales	36,981	The company is with goodperformance.	None	None

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Remark Item	Long-term investment amount	Policies	Investment profit and loss in 2018	Main reason for profit or loss	Improvement plan	Future investment plans
Hsing-Yeh Biotechnology Co., Ltd. (Note 3)	1,623,149	Medical instrument sales, leasing, and drug sales	39,094	The company is with good performance.	None	None
CHENG-HSIN Biotechnology Co., Ltd. (Note 4)	1,309	Management consulting and medical consumables, foods, and pharmaceuticals retailing	(3,867)	The company’s initial operating costs were high, resulting in losses.	Actively expand business	None
Neusoft-CHC Office of Medical Intelligence & Services, Shenyang (Note 5)	8,232	Medical management service	(655)	The company’s initial operating costs were high, resulting in losses.	Actively expand business	None
Neusoft CHC Medical Service Co., Ltd (Note 5)	64,820	Medical instrument sales, leasing, and service	(3,706)	The company’s initial operating costs were high, resulting in losses.	Actively expand business	None
SenCare Healthcare Company (Note 2)	191,825	Management consulting and elderly residence	(2,175)	The company’s initial operating costs were high, resulting in losses.	Actively expand business	None
Dalian Neusoft Kangrui Jiuhe Medical Management Co., Ltd. (Note 5)	8,943	Medical management service	(6)	The company’s initial operating costs were high, resultingin losses.	Actively expand business	None

Note 1: Indirect investment of CHC Healthcare (BVI) Limited, a 100%-owned subsidiary of the Company. Note 2: Indirect investment of Chiu Ho Medical System Co., Ltd., a 100%-owned subsidiary of the Company. Note 3: Indirect investment of Medlink Healthcare Limited, a 100%-owned subsidiary of the Company. Note 4: Indirect investment of Hsing-Yeh Biotechnology Co., Ltd., a 100%-owned subsidiary of the Company. Note 5:Indirect investment of Guangzhou Chiuho Medical System Co., Ltd., a 100%-owned subsidiary of the Company.

Note 6: The exchange rate of each currency to New Taiwan Dollar is based on the announcement of the Bank of Taiwan: USD to NTD was 30.72 on December 31, 2018; USD to RMB was 6.8658 on December 31, 2018; USD to HKD was 7.8347 on December 31, 2018; the average USD to NTD was 30.15 in 2018; the average USD to RMB was 6.6152 in 2018; and the average USD to HKD was 7.8393 in 2018.

VI. Analysis of Risk Management

• (I) The impact of changes in interest rate, exchange rate, and inflation on the company’s profit and loss and the future countermeasures

1. Changes in interest rate

The interest expenses of the Group are mainly due to the bank loans borrowed as working capital for business operation. The interest expense incurred in 2018 was NT$55,807 thousand, accounted for 2.23% of the net operating revenue of the year, which was a small ratio, so the impact of the changes in interest rate on the Group’s profit and loss was limited.

In order to avoid the impact of interest rate fluctuations on the Group’s cost of capital, the Group has been paying attention to interest rate trends at all times, maintaining close contract with the banks, and increasing the proprietary funds to reduce interest expenses and dependence on financial institutions.

2. Changes in exchange rate

The Group’s purchases are mainly for imports. The net foreign currency exchange

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interest in 2018 was NT$6,147 thousand, accounted for 0.25% of the net operating revenue of the year, which had no significant impact resulted.

In order to effectively reduce the impact of the changes in exchange rate on the overall profitability of the Group, the specific countermeasures are as follows ：

• (1) Setup foreign currency deposit accounts to manage foreign exchange positions, and trade foreign currency deposits on a timely manner to repay foreign currency payable for imports in order to reduce the impact of exchange rate fluctuation on profit and loss and achieve natural hedging effects.

• (2) The financial staff maintains an appropriate net foreign exchange position based on the judgment of the future exchange rate trend in order to reduce the impact of exchange rate fluctuation on the Group’s profitability.

• Inflation

The Group’s products are not necessities consumables; therefore, there is no immediate pressure on the sensitivity of inflation. However, the Group will still pay close attention to the fluctuation of market prices, plan the timing for incoming inventory, and maintain a good cooperative relationship with suppliers.

• (II) The policies, reasons for profit or loss, and future countermeasures for engaging in high-risk, high-leverage investment, loaning of funds, making endorsements and guarantees, and trading of financial derivatives

• Basing on the principle of prudence and pragmatic business philosophy, the Company does not engage in high-risk and highly leveraged investments other than focusing on long-term equity investments under the equity method.

• The Company has stipulated relevant procedures, such as, “Procedures for Loaning of Funds,” “Procedures for Making of Endorsements and Guarantees,” and “Procedures for the Acquisition and Disposal of Assets,” for the compliance of the Company and its subsidiaries in engaging in related operations. As of the annual report printing date, the Company and its subsidiaries have not engaged in any trading of financial derivatives. In addition, the loaning of funds and making of endorsements and guarantees are based on the aforementioned policies and countermeasures. Furthermore, the Group has always focused on the operations of the industry with limited risks associated.

• (III) Future R&D projects and estimated R&D expenses

The Group is engaged in the sales, leasing, and maintenance of instruments and equipment, such as, radiation oncology, neurology, medical imaging, ophthalmology, and surgery/surgical operation, but does not have a full-time R&D department. In 2018, the Group invested in the Science and Technology Research and Development Project Industry Upgrade and Innovation Platform Coaching Scheme of the Ministry of Economic Affairs: “Integrated Radiation Oncology Information Platform (IROIP).” The Group has invested in R&D and construction of the information platform in 2018-2020 according to the said plan. The information platform for the integration of hospital medical information systems and radiotherapy medical information systems for patients’ treatment information is built through the Group’s experience in cooperation with and technical team in the radiation oncology departments of major hospitals to enhance the convenience, correctness, timeliness, and integrity of the work of radiotherapy. The estimated R&D expenditure in 2019-2020 is NT$26,807 thousand.

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• (IV) The impact of the changes in domestic and international major policies and law on the company’s financial business and the countermeasures

The Group handles daily operations in accordance with relevant domestic and foreign law and regulations. As of the annual report printing date, the changes in the major domestic and international policies and law have no significant impact on the Group’s financial business. In the future, the management of the Group will also pay attention to any changes in major domestic and international policies and law, consult relevant experts if necessary, and take adequate measures to meet the operational needs of the company.

• (V) The impact of changes in technologies and industry on the company’s financial business and the countermeasures

The Group’s main distribution products are world-renowned brands of radiation oncology, neurology, medical imaging, ophthalmology, and surgery. The technological changes and industrial changes will help the Group strengthen its supply chain relationship and provide new products to satisfy the needs of customers.

• (VI) The impact of the changes in corporate image on corporate’s crisis management and the countermeasures

The Group adheres to the principle of good faith and the spirit of steadfastness and pragmatism. Since its incorporation, the Group has actively strengthened internal management to enhance quality and efficiency. Also, the Group continues to recruit outstanding talents to work for the company in order to build up the strength of the management team, and then feedback the operating results to the shareholders and the public in order to fulfill the corporate social responsibilities. So far, there has been no corporate crisis resulted from a corporate image change.

• (VII) The expected benefits of the mergers and acquisitions, the possible risks, and the countermeasures

None

(VIII) The expected benefits of the plant expansion, the possible risks, and the countermeasures

None

• (IX) The risks of the purchases or sales concentration and the countermeasures

• Purchases

The net purchase from supplier 甲 who was the Group’s main supplier accounted for 36.78% of the total purchases in 2018, mainly because the Company’s subsidiary, Chiu Ho Medical System Co., Ltd., was the exclusive agent of Supplier 甲 for radiation oncology instruments and equipment in Taiwan. 甲 concentrated purchase is resulted due to the increase in purchase in response to a rising market demand. The Group continues to maintain partnerships with major suppliers, by training professional maintenance engineers to perform self-installation, parts replacement, and follow-up maintenance and together with the advantages of marketing channels to increase the supplier’s dependence on the Group in order to create an irreplaceable position that will protect the Group from being replaced by other agents arbitrarily.

1. Sales

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The Group’s main sales targets are the department of radiation oncology and ophthalmology of major public hospitals, consortium corporations, military hospitals, and general clinics in Taiwan. The sales target is quite scattered and there is no concentrated sale.

• (X) The impact and the massive equity transfer or exchange on the directors, supervisors, or shareholders with more than 10% shareholdings, the risks, and the countermeasures

There had been no massive equity transfer or exchange made by the Company’s directors, supervisors, and shareholders with more than 10% shareholdings in the most recent year and as of the annual report printing date.

• (XI) The impact of changes in management rights on the company, the risks, and the countermeasures

The company had no change in management rights in the most recent year and as of the annual report printing date.

• (XII) Litigation or non-litigation events

• The major litigation cases, non-litigation cases, or administrative disputes that were concluded or yet to be concluded in the most recent year and as of the annual report printing date and the results that may have a significant impact on the shareholders’ equity or security price, the fact in contention, the amount of the subject matter, the commencement date of the litigation, the parties involved in the proceedings, and the current situation should be disclosed.

None

1. For the company’s directors, supervisors, president, substantive responsible person, major shareholders with more than 10% shareholdings, and subordinate companies, the major litigation cases, non-litigation cases, or administrative disputes that were concluded or yet to be concluded in the most recent year and as of the annual report printing date and the results that may have a significant impact on the shareholders’ equity or security price, the fact in contention, the amount of the subject matter, the commencement date of the litigation, the parties involved in the proceedings, and the current situation should be disclosed.

None

• (XIII) Other major risks and countermeasures

• Whether the company has established an information security risk management framework and formulated information security policies and specific management plans ：

• Information Security Risk Management Framework

The Company has set up the Information Department to be responsible for information security management, planning, supervision, and promotion of implementation, and regularly reported the information security management operation to the directors of the business group.

1. Information security policy

2. (1) Ensure the security of our Company’s data, systems, equipment, and network communications, and prevent external invasion and destruction.

3. (2) Ensure that system information account access rights and system changes are handled in accordance with the company’s prescribed authorization procedures.

4. (3) The scrapped computer storage media should be destroyed to avoid accidental exposure of data.

5. (4) Monitor the security status and activity records of the information system to

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effectively grasp and handle information security incidents.

• (5) Maintain the availability and integrity of data and systems in order to resume normal operations in the event of a disaster or damage.

• Specific management plan (whether information security insurance is obtained, if not, detail the relevant preventive measures)

At present, the Company’s information security maintenance measures are complete; also, considering that the information security insurance is still an emerging insurance policy and involving security grading and claims forensics, so it remains in the stage of evaluating its future applicability.

However, the Company has established a written internal control system – a computerized information system cycle, an information management approach, and a disaster recovery plan to substantiate internal control and maintain information security policies. Ensure its appropriateness and effectiveness by reviewing and evaluating its safety regulations and procedures annually. The following classifications are described in details：

• (1) Information security network structure

• The Company’s internal systems are in the virtual network, the external network is isolated and cannot be accessed to directly, and multiple network security defense systems are adopted; also, the firewall in the front-end of the network and the intrusion prevention connection are to screen the systems.

• Chunghwa Telecom’s HIBOX is used for email service. Chunghwa Telecom’s HIBOX is with a security control system that is responsible for filtering the incoming and outgoing content of the network. It can defend against external network attacks and immediately block the latest malicious software, harmful website links, spam emails, and other threats.

• The internal host and endpoints are deployed with anti-virus software to update the virus codes and to instantly identify the signs of malicious behaviors. It can instantly block virus Trojan worms, ransomware, and malicious files in folders, and effectively reduce the risk of damage caused by hackers.

• (2) System account and account authorization management

Program the user’s account number and authorization according to each business scope and rights and responsibilities. Data access must be authorized through an electronic document workflow authorization process; also, the relevant application and change must be applied for and approved by each competent supervisor. The user’s account and authorization must be revoked immediately once the user has left the job position in order to prevent any unauthorized use.

• (3) Information system reservation and backup

Both the system and the files are backed up every day locally and remotely, and the system data recovery test drills are performed regularly every year to ensure the normal operation and data preservation of the information system in order to reduce the risk of data loss caused by unwarranted natural disasters and human disasters.

• (4) The process for the disposal of computer equipment

The hard disk of the scrapped server must be disassembly and destroyed in compliance with the regulatory management system and the information security policy.

VII. Other major matters

None

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Eight. Special Disclosure

I. Summary of Affiliated Companies

• (I)Consolidated business report of the affiliated enterprises

• Organizational chart of the affiliated enterprises

==> picture [497 x 349] intentionally omitted <==

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2. Basic information of each affiliated enterprise

2. Basic information of each affiliated enterprise	2. Basic information of each affiliated enterprise	2. Basic information of each affiliated enterprise	2. Basic information of each affiliated enterprise	2. Basic information of each affiliated enterprise
December 31,2018 Unit: NT$ (unless otherwiseprovided)
Company	Incorporation date	Address	Paid-in capital	Main business operation or products
Chiu Ho Medical System Co., Ltd.	03/17/2000	5F, No. 380, Changchun Road, Jhongshan District, Taipei City	2,993,400,000	Medical instrument sales, leasing, and service
Tomorrow Medical System Co., Ltd.	03/20/2006	6F, No. 366, Changchun Road, Jhongshan District, Taipei City	432,000,000	Medical instrument sales, leasing, and service
Chiu Ho Scientific Co., Ltd.	03/17/2006	4F-1, No. 380, Changchun Road, Jhongshan District, Taipei City	98,538,410	Ophthalmic equipment sales, leasing, and service
Hua Lin Instruments Co., Ltd.	07/10/1999	5F, No. 380, Changchun Road, Jhongshan District, Taipei City	556,000,000	Medical instrument leasing
Shin-Ho Instruments Co., Ltd.	10/16/2002	5F, No. 380, Changchun Road, Jhongshan District, Taipei City	3,000,000	Medical instrument leasing
Hsin Lin Biotech Co., Ltd.	03/07/2008	5F, No. 380, Changchun Road, Jhongshan District, Taipei City	100,000,000	Medical instrument leasing
E Century Health Care Corporation	12/06/2002	6F, No. 366, Changchun Road, Jhongshan District, Taipei City	600,000,000	Medical instrument leasing
Tong-Lin Instruments Co., Ltd.	02/25/2002	5F-1, No. 380, Changchun Road, Jhongshan District, Taipei City	400,000,000	Medical instrument leasing
Chiu Ho Biotech Co., Ltd.	12/16/2003	5F-1, No. 380, Changchun Road, Jhongshan District, Taipei City	370,000,000	Medical instrument leasing
CHC Healthcare (BVI) Limited	11/23/2010	Walkers Chambers P.O. Box 92, Road Town, Tortola, British Virgin Islands	USD940	Holding and indirect investment
CHC Healthcare (HK) Limited	09/19/2012	Unit 806, 8/F Two Harbourfront, 22 Tak Fung Street, Hunghom, Kowloon, Hong Kong	HKD 1,000,000	Medical instrument sales, leasing, and service
Guangzhou Chiuho Medical System Co., Ltd.	07/13/2011	1009 GIE Tower, No. 403 HuangShi Rd. East, Yuexiu Dist., GuangZhou 510095, P.R.C	USD 9,502,777.42	Medical instrument sales, leasing, and service
Chiu Ho (China) Medical Technology Co., Ltd	05/30/2013	Unit 01, 15th Floor, Fangheng Times Center, Building B, No. 10 Courtyard, Wangjing Street, Chaoyang District, Beijing. 100102, P.R.C	USD 7,544,411.00	Medical instrument sales, leasing, and service
Medlink Healthcare Limited	01/21/2015	5F, No. 380, Changchun Road, Jhongshan District, Taipei City	1,541,250,000	Medical instrument sales
Hsing-Yeh Biotechnology Co., Ltd	09/21/2015	5F, No. 380, Changchun Road, Jhongshan District, Taipei City	936,000,000	Medical instrument sales, leasing, and drug sales
Neusoft CHC Medical Service Co., Ltd	03/28/2018	Room 227, No. 177-1, ChuangXin Street, Hun Nan District, Shenyang, Liaoning Province, 110179, China	RMB 30,000,000	Medical instrument sales, leasing, and service
SenCare Healthcare Company	09/27/2018	6F, No. 366, Changchun Road, Jhongshan District, Taipei City	294,000,000	Management consulting and elderlyresidence

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1. The information of the same shareholders of the affiliated enterprises that are presumed to be with a control and subordination relationship with the Company: Not applicable

2. The overall business operation of the affiliated enterprises

The businesses of the Company and the Company’s affiliated enterprises include medical instrument wholesale, medical instrument retail, medical instrument leasing, holdings, general investment, and pharmaceuticals trading. The division of labor is as follows:

Name of enterprises	Division of labor
Chiu Ho Medical System Co., Ltd., Tomorrow Medical System Co., Ltd., and Chiu Ho Scientific Co.,Ltd.	Medical instrument sales, leasing,and service
Hua Lin Instruments Co., Ltd., Shin-Ho Instruments Co., Ltd., Hsin Lin Biotech Co., Ltd., E Century Health Care Corporation, Tong-Lin Instruments Co., Ltd., and Chiu Ho Biotech Co., Ltd.	Medical instrument leasing
CHC Healthcare (BVI) Limited	Holding and indirect investment
CHC Healthcare (HK) Limited, Guangzhou Chiuho Medical System Co., Ltd., Chiu Ho (China) Medical Technology Co., Ltd., and Neusoft CHC Medical Service Co., Ltd	Medical instrument sales, leasing, and service
Medlink Healthcare Limited	Medical instrument sales
Hsing-Yeh Biotechnology Co., Ltd	Medical instrument sales, leasing,and drugsales
SenCare Healthcare Company	Management consulting and elderlyresidence

5.Information on the directors, supervisors, and president of each affiliated enterprise

5.Information on the directors, supervisors, and president of each affiliated enterprise	5.Information on the directors, supervisors, and president of each affiliated enterprise	5.Information on the directors, supervisors, and president of each affiliated enterprise	5.Information on the directors, supervisors, and president of each affiliated enterprise	5.Information on the directors, supervisors, and president of each affiliated enterprise
December 31,2018 Unit：Shares; %
Company	Job title	Name or representative	Shareholdings
			Shares	Shareholding ratio (%)
Chiu Ho Medical System Co., Ltd.	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-Ying Lee (Representative of the Company)	299,340,000	100%
Tomorrow Medical System Co., Ltd.	Chairman Director Director Supervisor	Tzu-Lan Tung (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-Ying Lee (Representative of the Company)	43,200,000	100%
Chiu Ho Scientific Co., Ltd.	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-Ying Lee (Representative of the Company)	9,853,841	100%
Hua Lin Instruments Co., Ltd.	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-YingLee (Representative of the Company)	55,600,000	100%
Shin-Ho Instruments Co., Ltd.	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-YingLee(Representative of the Company)	300,000	100%
Hsin Lin Biotech Co., Ltd.	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) MingLun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-YingLee(Representative of the Company)	10,000,000	100%

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Company	Job title	Name or representative	Shareholdings	Shareholdings
			Shares	Shareholding ratio (%)
E Century Health Care Corporation	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-YingLee (Representative ofthe Company)	60,000,000	100%
Tong-Lin Instruments Co., Ltd.	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-YingLee (Representative ofthe Company)	40,000,000	100%
Chiu Ho Biotech Co., Ltd.	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of the Company) Ming-Lun Lee (Representative of the Company) Yi-Chun Chen (Representative of the Company) Tien-YingLee (Representative ofthe Company)	37,000,000	100%
CHC Healthcare (BVI) Limited	Chairman	Pei-Lin Lee (Representative of the Company)	940	100%
CHC Healthcare (HK) Limited	Chairman	Pei-Lin Lee	100,000	100%
Guangzhou Chiuho Medical System Co.,Ltd.	Chairman / President	Hsin-Hsiung Huang (Representative of CHC Healthcare (BVI) Limited)	USD 9,502,777.42 (Note 1)	100%
Chiu Ho (China) Medical Technology Co., Ltd.	Chairman / President	Hsin-Hsiung Huang (Representative of CHC Healthcare (BVI) Limited)	USD 7,544,411.00 (Note 1)	100%
Medlink Healthcare Limited	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of Chiu Ho Medical System Co., Ltd.) Ming-Lun Lee (Representative of Chiu Ho Medical System Co., Ltd.) Yi-Chun, Chen (Representative of Chiu Ho Medical System Co., Ltd.) Tien-Ying Lee (Representative of Chiu Ho Medical System Co., Ltd.)	154,125,000	100%
Hsing-Yeh Biotechnology Co., Ltd	Chairman Director Director Supervisor	Pei-Lin Lee (Representative of Medlink Healthcare Limited) Ming-Lun Lee (Representative of Medlink Healthcare Limited) Yi-Chun Chen (Representative of Medlink Healthcare Limited) Tien-Ying Lee (Representative of Medlink Healthcare Limited)	93,600,000	100%
Neusoft CHC Medical Service Co., Ltd	Chairman Director Director Director Director Supervisor Supervisor	Shaojie Wu (Representative of Neusoft Medical Technology Co., Ltd.) Donglong Han (Representative of Neusoft Medical Technology Co., Ltd.) Tien-Ying Lee (Representative of Guangzhou Chiuho Medical System Co., Ltd.) Ming-Lun Lee (Representative of Guangzhou Chiuho Medical System Co., Ltd.) Fangqin Zhang(Representative of Guangzhou Chiuho Medical System Co., Ltd.) Yi-Chun Chen (Representative of Guangzhou Chiuho Medical System Co., Ltd.) Sue Kong (Representative of Neusoft Medical TechnologyCo.,Ltd.)	RMB 15,300,000 (Note 1)	51%

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Company	Job title	Name or representative	Shareholdings	Shareholdings
			Shares	Shareholding ratio (%)
SenCare Healthcare Company	Chairman Director Director Director Director Supervisor Supervisor	Tien-Ying Lee (Representative of Chiu Ho Medical System Co., Ltd.) Pei-Lin Lee (Representative of Chiu Ho Medical System Co., Ltd.) Ming-Lun Lee (Representative of Chiu Ho Medical System Co., Ltd.) Sakurajyuji Co., Ltd. KAJI MASATO (梶正登) Yi-Chun Chen NISHIKAWA TOMOKI(西川朋希)	19,400,000	65.99%

Note 1: It is a limited company without any share issued, so the invested capital amount and ratio are listed.

6. Affiliated enterprise operational overview

6. Affiliated enterprise operational	6. Affiliated enterprise operational	6. Affiliated enterprise operational	overview
							Unit: NT$thousands
Company	Capital stock	Total assets	Total liabilities	Net worth	Operating income	Operating profits	Profit and loss (after tax)	Earnings per share (NT$) (after tax)
Chiu Ho Medical System Co., Ltd.	2,993,400	5,077,645	1,672,916	3,404,729	1,021,768	122,476	108,424	0.45
Tomorrow Medical System Co., Ltd.	432,000	1,404,819	882,304	522,515	366,104	53,670	40,638	0.94
Chiu Ho Scientific Co., Ltd.	98,538	284,188	150,359	133,829	154,470	11,776	11,004	0.97
Hua Lin Instruments Co., Ltd.	556,000	836,454	140,012	696,442	252,494	56,726	40,895	0.67
Shin-Ho Instruments Co., Ltd.	3,000	16,128	1,060	15,068	11,162	7,242	7,250	24.17
Hsin Lin Biotech Cp., Ltd.	100,000	109,603	1,711	107,892	25,422	525	431	0.04
E Century Health Care Corporation	600,000	1,020,881	188,116	832,765	290,491	79,768	57,900	0.90
Tong-Lin Instruments Co., Ltd.	400,000	643,594	145,673	497,921	162,956	40,848	28,970	0.72
Chiu Ho Biotech Co., Ltd.	370,000	383,523	5,216	378,307	78,156	3,946	3,375	0.09
CHC Healthcare (BVI) Limited	28	422,621	0	422,621	0	(18)	28,791	32,593.58
CHC Healthcare (HK) Limited	3,987	40,651	0	40,651	0	(58)	207	0.002
Guangzhou Chiuho Medical System Co., Ltd.	291,925	343,229	105,405	237,824	147,765	6,300	1,660	Note 3
Chiu Ho (China) Medical Technology Co., Ltd.	231,765	144,040	8,743	135,297	40,749	21,180	19,550	Note 3
Medlink Healthare Limited	1,541,250	1,628,201	40,564	1,587,637	0	(603)	36,981	0.27

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Company	Capital stock	Total assets	Total liabilities	Net worth	Operating income	Operating profits	Profit and loss (after tax)	Earnings per share (NT$) (after tax)
Hsing-Yeh Biotechnology Co., Ltd.	936,000	1,103,702	108,631	995,071	230,387	56,534	43,637	0.47
Neusoft CHC Medical Service Co., Ltd	134,231	129,170	2,073	127,097	0	(7,371)	(7,266)	Note 3
SenCare Healthcare Company	294,000	293,764	3,060	290,704	0	(3,299)	(3,296)	(1.51)

Note 1: It is filled out in accordance with the individual financial report that is audited by a certified public accountant in conformity with the International Financial Reporting Standards.

Note 2: The exchange rate of each currency to New Taiwan Dollar is based on the announcement of the Bank of Taiwan: USD to NTD was 30.72 on December 31, 2018; USD to RMB was 6.8658 on December 31, 2018; USD to HKD was 7.8347 on December 31, 2018; the average USD to NTD was 30.15 in 2018; the average USD to RMB was 6.6152 in 2018; and the average USD to HKD was 7.8393 in 2018. Note 3: It is not applicable to a limited company that does not issue stock shares.

(II) Consolidated financial statements of the affiliated enterprises

The companies to be included in the Company’s 2018 (from January 1, 2018 to December 31, 2018) consolidated financial statements of the affiliated enterprises in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” are the same companies to be included in the consolidated financial statements of the parent company and subsidiaries in accordance with Article 27 of the International Accounting Standards; also, the relevant information in the consolidated financial statements of the affiliated enterprise that should be disclosed has already been disclosed in the aforementioned consolidated financial statements of the parent company and subsidiaries. Therefore, the consolidated financial statements of the affiliated enterprise will not be prepared separately.

(III) Relationship report

According to the provisions of Article 369-12 of the Company Act, the Company is not a public offering company’s subsidiary, so it is not necessary to prepare a relationship report.

• II. Private Placement Securities in the Most Recent Years None

• III. The Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years None

• IV. Other supplementary information None

• V. The impact of the events as stipulated in Subparagraph 2, Paragraph 3, Article 36 of the Securities Exchange Act on shareholder ’ s equity or security price in the most recent year and as of the annual report printing date

• (I) Change of General Manager: Mr. Goung-Yu Chen, the general manager of Greater China Region of the Company, resigned on July 31, 2018 due to personal reasons. The position he left behind was assumed by Mr. Pei-Lin Lee, the Chairman, starting from July 31, 2018.

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REPRESENTATION LETTER

The entities that are required to be included in the combined financial statements of CHC Healthcare Group as of and for the year ended December 31, 2018, under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the International Financial Reporting Standard 10, “Consolidated Financial Statements.” In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, CHC Healthcare Group and Subsidiaries do not prepare a separate set of combined financial statements.

Very truly yours,

CHC HEALTHCARE GROUP

By

Pei-Lin Lee Chairman

March 22, 2019

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of CHC Healthcare Group

Opinion

We have audited the accompanying consolidated balance sheets of CHC Healthcare Group and subsidiaries (the “Group”) as at December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (“ROC GAAS”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. 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 the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our

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opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters on the consolidated financial statements for the year ended December 31, 2018 were as follows:

Impairment assessment of goodwill

Description

As of December 31, 2018, the Group generated goodwill of NT$150,617 thousand as the result of a merger with Shih-Lu Co., Ltd.

After identifying the smallest cash generating unit which can generate independent cash flows, the Group used the recoverable amount of each cash generating unit to assess whether goodwill may be impaired. Since the assumptions that management used to assess whether goodwill is impaired involve subjective judgement and have high uncertainty, we considered the impairment assessment of goodwill a key audit matter.

Refer to Note 4(19) for the accounting policy on goodwill impairment and Note 5(2) for uncertainty of accounting estimates and assumptions in relation to goodwill impairment.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• A. Obtained an understanding of whether the management identifies the objective evidence of goodwill impairment by following the procedure and taking into account certain factors in a consistent manner and confirmed whether the management uses reliable information.

• B. Obtained the report on the valuation of the subsidiary issued by an expert as per the management’s request and performed the following:

• (1) Assessed the expert’s independence, objectiveness and competence by reviewing the expert’s qualification.

• (2) Assessed whether the valuation model is reasonable based on our knowledge of the Group’s businesses and industry.

• (3) Confirmed whether the expert uses the same future cash flows relative to the budget for the next five years provided by the management.

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• (4) Checked whether the comparable assets adopted in appraisal report are consistent with the actual operation.

• (5) Assessed whether the significant assumptions applied by the expert are relevant and reasonable and tested the mathematical accuracy.

Impairment assessment of property, plant and equipment

Description

Some of the Group’s leasing businesses were not as profitable as expected due to fierce competition in healthcare industry. The Group assesses the impairment based on the estimated recoverable amounts of leasing assets (shown as property, plant and equipment) where there is an indication that they are impaired. Given that the calculation of recoverable amounts requires significant accounting estimates relying upon subjective judgement and uncertainty, we consider the impairment assessment of leasehold assets using the cash-generating units as a key audit matter.

Refer to Note 4(19) for the accounting policy on asset impairment and Note 5(2) for accounting estimates and assumption uncertainty of asset impairment.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• A. Obtained an understanding of whether the management identifies the objective evidence of impairment by following the procedure and taking into account certain factors in a consistent manner and confirmed whether the management uses reliable information.

• B. Acquired the asset appraisal report issued by an expert as per the management’s request and performed the following:

• (1) Assessed the independence, objectiveness and competence by reviewing the expert’s qualification.

• (2) Assessed whether the valuation method is widely adopted and appropriate based on our knowledge of the Group’s businesses and industry.

• (3) Confirmed whether the replacement cost, comparative objects and the assets’ use indicated on the appraisal report truthfully reflect the actual operation.

• (4) Assessed whether the significant assumptions applied by the expert is relevant and reasonable and tested the mathematical accuracy.

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Other matter – Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of CHC Healthcare Group as at and for the years ended December 31, 2018 and 2017.

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 “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, 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 financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, 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.

Those charged with governance, including the audit committee, are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated 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 ROC GAAS 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 financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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• A. Identify and assess the risks of material misstatement of the consolidated 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 controls.

• B. 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 Group’s internal controls.

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

• D. 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 Group’s ability to continue as a going concern. 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 consolidated financial 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.

• E. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• F. 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.

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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 the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our 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.

For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2019

---

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated 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, PricewaterhouseCoopers 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.

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CHC HEALTHCARE GROUP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

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December 31, 2018 December 31, 2017
Assets Notes Amount % Amount %
Current assets
1100 Cash and cash equivalents 6(1) $ 1,209,636 11 $ 1,444,363 14
1110 Financial assets at fair value through 6(2) (23)
profit or loss - current 53,482 1 - -
1140 Contract assets - current 6(21) and 7 40,959 - - -
1150 Notes receivable, net 6(4) and 8 44,838 1 45,082 -
1170 Accounts receivable, net 6(4) 501,782 5 511,801 5
1180 Accounts receivable - related parties 7 240,038 2 231,771 2
1200 Other receivables 205 - 1,937 -
1210 Other receivables due from related 7
parties 153,369 1 88,659 1
1220 Current tax assets 3,671 - 20,644 -
130X Inventories 6(5) 489,977 5 290,360 3
1410 Prepayments 6(6) 459,705 4 348,650 3
1470 Other current assets 8 6,923 - 58,316 1
11XX Total current assets 3,204,585 30 3,041,583 29
Non-current assets
1510 Financial assets at fair value through 6(2)(23) and
profit or loss - non-current 12(4) 492 - 660 -
1517 Financial assets at fair value through 6(3)
other comprehensive income - non-
current 47,231 - - -
1523 Available-for-sale financial assets - 12(4)
non-current - - 89,837 1
1550 Investments accounted for using equity 6(7)
method 18,484 - 14,241 -
1600 Property, plant and equipment 6(8), 7 and 8 4,752,936 44 4,609,262 43
1760 Investment property, net 6(9) and 8 1,194,580 11 1,152,185 11
1780 Intangible assets 6(29) 161,746 1 161,746 2
1840 Deferred tax assets 6(26) 68,298 1 22,543 -
1980 Other financial assets - non-current 6(10), 7 and 8 720,468 7 612,925 6
1990 Other non-current assets 6(8)(9)(11) 678,915 6 887,981 8
15XX Total non-current assets 7,643,150 70 7,551,380 71
1XXX Total assets $ 10,847,735 100 $ 10,592,963 100
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CHC HEALTHCARE GROUP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

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December 31, 2018 December 31, 2017
Liabilities and equity Notes Amount % Amount %
Current liabilities
2100 Short-term borrowings 6(12) and 8 $ 686,932 6 $ 641,535 6
2130 Contract liabilities - current 6(21) 30,047 - - -
2150 Notes payable 4,346 - 4,139 -
2170 Accounts payable 204,951 2 136,576 1
2180 Accounts payable - related parties 7 11,229 - 4,696 -
2200 Other payables 6(8) 149,934 2 58,549 1
2230 Current tax liabilities 64,063 1 44,827 -
2250 Provisions for liabilities - current 10,685 - 9,752 -
2300 Other current liabilities 6(13)(14) 190,845 2 903,438 9
21XX Total current liabilities 1,353,032 13 1,803,512 17
Non-current liabilities
2527 Contract liabilities - non-current 6(21) 309,500 3 - -
2530 Bonds payable 6(13) and 8 1,177,035 11 1,164,693 11
2540 Long-term borrowings 6(14) and 8 2,812,608 26 2,349,362 22
2550 Provisions for liabilities - non-current 400 - 745 -
2570 Deferred tax liabilities 6(26) 40,431 - 40,131 1
2600 Other non-current liabilities 6(15) 21,210 - 320,083 3
25XX Total non-current liabilities 4,361,184 40 3,875,014 37
2XXX Total liabilities 5,714,216 53 5,678,526 54
Equity attributable to owners of the
parent
Share capital 6(18)
3110 Share capital - common stock 1,399,136 13 1,399,136 13
Capital surplus 6(13)(17)
(19)
3200 Capital surplus 2,930,253 27 2,927,016 27
Retained earnings 6(20)
3310 Legal reserve 245,206 2 245,206 2
3320 Special reserve 33,211 - 171,995 2
3350 Unappropriated retained earnings 763,134 7 203,226 2
Other equity 6(3) and
12(4)
3400 Other equity ( 363,621) ( 3) ( 33,211) -
3500 Treasury shares 6(18) ( 34,956) - - -
31XX Total equity attributable to owners
of the parent 4,972,363 46 4,913,368 46
36XX Non-controlling interest 161,156 1 1,069 -
3XXX Total equity 5,133,519 47 4,914,437 46
Significant contingent liabilities and 9
unrecognised contract commitments
3X2X Total liabilities and equity $ 10,847,735 100 $ 10,592,963 100
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The accompanying notes are an integral part of these consolidated financial statements.

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CHC HEALTHCARE GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT FOR EARNINGS (LOSS) PER SHARE AMOUNTS)

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2018 2017
Items Notes Amount % Amount %
4000 Operating revenue 6(9)(21)(28) and
7 $ 2,507,466 100 $ 2,117,116 100
5000 Operating costs 6(5)(9)(16)(25)
and 7 ( 1,776,680) ( 71) ( 1,428,463)( 67)
5950 Gross profit 730,786 29 688,653 33
Operating expenses 6(9)(16)(17)(25)
(28)
6100 Selling expenses ( 124,613) ( 5) ( 113,773)( 5)
6200 General and administrative
expenses ( 192,217) ( 7) ( 222,005)( 11)
6300 Research and development
- - -
expenses ( 1,193)
6450 Gain on expected credit
impairment loss 47,218 2 - -
6000 Total operating expenses ( 270,805) ( 10) ( 335,778)( 16)
6900 Operating profit 459,981 19 352,875 17
Non-operating income and
expenses
7010 Other income 6(22) and 7 15,621 - 22,285 1
7020 Other gains and losses 6(2)(23), 7 and
12(4) ( 20,840) ( 1) ( 322,035)( 15)
7050 Finance costs 6(13)(24) ( 82,066) ( 3) ( 71,509)( 4)
7060 Share of loss of associates 6(7)
and joint ventures
accounted for using equity
method ( 4,527) - ( 7,692) -
7000 Total non-operating
income and expenses ( 91,812) ( 4) ( 378,951)( 18)
7900 Profit (loss) before income tax 368,169 15 ( 26,076)( 1)
7950 Income tax expense 6(26) ( 50,340) ( 2) ( 63,210)( 3)
8200 Profit (loss) for the year $ 317,829 13 ($ 89,286)( 4)
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CHC HEALTHCARE GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT FOR EARNINGS (LOSS) PER SHARE AMOUNTS)

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2018 2017
Items Notes Amount % Amount %
Other comprehensive income
Components of other comprehensive
income that will not be reclassified
to profit or loss
8316 Unrealised gains (losses) from 6(3)
investments in equity instruments
measured at fair value through other
comprehensive income ($ 42,606) ( 2) $ - -
Components of other comprehensive
income that will be reclassified to
profit or loss
8361 Financial statements translation
-
differences of foreign operations ( 8,676) ( 8,487) ( 1)
8362 Unrealised gain (losses) on valuation 12(4)
of available-for-sale financial assets - - 146,222 7
8370 Share of other comprehensive income
of associates and joint ventures
accounted for using equity method,
components of other comprehensive
income that will be reclassified to
profit or loss 347 - ( 453) -
8399 Income tax related to components of 6(26)
other comprehensive income that
- -
will be reclassified to profit or loss ( 2,150) 1,502
8300 Other comprehensive (loss) income for
the year ($ 53,085) ( 2) $ 138,784 6
8500 Total comprehensive income for the
year $ 264,744 11 $ 49,498 2
Profit (loss) attributable to:
8610 Owners of the parent $ 323,422 13 ($ 86,695) ( 4)
8620 Non-controlling interest ($ 5,593) - ($ 2,591) -
Comprehensive income attributable
to:
8710 Owners of the parent $ 270,337 11 $ 52,089 2
8720 Non-controlling interest ($ 5,593) - ($ 2,591) -
Earnings (loss) per share 6(27)
9750 Basic earnings (loss) per share $ 2.32 ($ 0.62)
9850 Diluted earnings (loss) per share $ 2.02 ($ 0.62)
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The accompanying notes are an integral part of these consolidated financial statements.

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CHC HEALTHCARE GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

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Equity attributable to owners of the parent
Capital Reserves Retained Earnings Other Equity Interest
Unrealised gains
Financial (loss) on
statements financial assets Unrealised gains
translation at fair value (loss) on
Unappropriated differences of through other available-for-
Treasury share Employee share Special retained foreign comprehensive sale financial Treasury Non-controlling
Notes Ordinary share Share premium transactions options Others Legal reserve reserve earnings operations income assets shares Total interest Total equity
2017
Balance at January 1, 2017 $ 1,398,478 $ 2,806,521 $ 173 $ 57,416 $ 27,600 $ 229,313 $ 93,146 $ 526,742 ($ 11,320) $ - ($ 160,675) $ - $ 4,967,394 $ 2,071 $ 4,969,465
Consolidated net loss - - - - - - - ( 86,695 ) - - - - ( 86,695) ( 2,591) ( 89,286)
Other comprehensive income (loss) - - - - - - - - ( 7,438) - 146,222 - 138,784 - 138,784
Total comprehensive income (loss) - - - - - - - ( 86,695 ) ( 7,438) - 146,222 - 52,089 ( 2,591) 49,498
Appropriations of 2016 earnings 6(20)
Legal reserve - - - - - 15,893 - ( 15,893 ) - - - - - - -
Special reserve - - - - - - 78,849 ( 78,849 ) - - - - - - -
Cash dividends - - - - - - - ( 140,490 ) - - - - ( 140,490) - ( 140,490)
Redemption of convertible bonds 6(13) - 18,765 - - ( 18,765) - - - - - - - - - -
Conversion of convertible bonds 6(13) - - - - 30,842 - - - - - - - 30,842 - 30,842
Exercise of employee stock options 6(18) 658 5,104 - ( 3,277) - - - - - - - - 2,485 - 2,485
Compensation cost of employee stock 6(17)
options - - - 1,279 - - - - - - - - 1,279 - 1,279
Compensation cost of employee stock 6(17)
options of subsidiaries - - - 1,358 - - - - - - - - 1,358 - 1,358
Difference between consideration and
carrying amount of subsidiaries
acquired or disposed - - - - - - - ( 1,589 ) - - - - ( 1,589) - ( 1,589)
Non-controlling interest - - - - - - - - - - - - - 1,589 1,589
Balance at December 31, 2017 $ 1,399,136 $ 2,830,390 $ 173 $ 56,776 $ 39,677 $ 245,206 $ 171,995 $ 203,226 ($ 18,758) $ - ($ 14,453) $ - $ 4,913,368 $ 1,069 $ 4,914,437
2018
Balance at January 1, 2018 $ 1,399,136 $ 2,830,390 $ 173 $ 56,776 $ 39,677 $ 245,206 $ 171,995 $ 203,226 ($ 18,758) $ - ($ 14,453) $ - $ 4,913,368 $ 1,069 $ 4,914,437
Effects of retrospective application 12(4)
and restatement - - - - - - - 251,607 - ( 291,778) 14,453 - ( 25,718) - ( 25,718)
Balance at January 1 after adjustments 1,399,136 2,830,390 173 56,776 39,677 245,206 171,995 454,833 ( 18,758) ( 291,778) - - 4,887,650 1,069 4,888,719
Consolidated net income - - - - - - - 323,422 - - - - 323,422 ( 5,593) 317,829
Other comprehensive income (loss) - - - - - - - - ( 10,479) ( 42,606 ) - - ( 53,085) - ( 53,085)
Total comprehensive income (loss) - - - - - - - 323,422 ( 10,479) ( 42,606 ) - - 270,337 ( 5,593) 264,744
Appropriations of 2017 earnings 6(20)
Cash dividends - - - - - - - ( 153,905 ) - - - - ( 153,905) - ( 153,905)
Reversal of special reserve - - - - - - ( 138,784) 138,784 - - - - - - -
Compensation cost of employee stock 6(17)
options - - - 1,207 - - - - - - - - 1,207 - 1,207
Compensation cost of employee stock 6(17)
options of subsidiaries - - - 2,030 - - - - - - - - 2,030 - 2,030
Expired employee stock warrants - - - ( 7,372) 7,372 - - - - - - - - - -
Purchase of treasury shares 6(18) - - - - - - - - - - - ( 34,956 ) ( 34,956) - ( 34,956)
Non-controlling interest - - - - - - - - - - - - - 165,680 165,680
Balance at December 31, 2018 $ 1,399,136 $ 2,830,390 $ 173 $ 52,641 $ 47,049 $ 245,206 $ 33,211 $ 763,134 ($ 29,237) ($ 334,384) $ - ($ 34,956 ) $ 4,972,363 $ 161,156 $ 5,133,519
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The accompanying notes are an integral part of these consolidated financial statements.

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CHC HEALTHCARE GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM OPERATING ACTIVITIES Profit (loss) before tax Adjustments Adjustments to reconcile profit (loss) Provision for bad debts expense Expected credit gain Depreciation charge Gain on disposal of property, plant and equipment Interest expense Interest income Share of loss of associates and joint ventures accounted for using equity method Net loss on disposal of investments accounted for using equity method Loss on financial assets or liabilities at fair value through profit or loss Amortisation of discount on bonds payable Compensation cost of employee stock options Impairment loss on financial assets Impairment loss on non-financial assets Changes in operating assets and liabilities Changes in operating assets Financial assets at fair value through through profit or loss Contract assets-current Notes receivable, net Notes receivable due from related parties Accounts receivable, net Accounts receivable due from related parties Other receivables Other receivables due from related parties Inventories Prepayments Other current assets Changes in operating liabilities Contract liabilities-current Notes payable Accounts payable Accounts payable to related parties Other payables Other payables to related parties Provisions for liabilities-current Other current liabilities Provisions for liabilities - non-current Cash inflow generated from operations Interest paid during the year Interest received during the year Income tax paid Net cash flows from operating activities

Notes 2018 2017 $ 368,169 ($ 26,076 ) - 37,864 ( 47,218 ) - 6(8)(9)(25) 428,598 432,245 6(23) ( 279 ) ( 57 ) 72,806 63,592 6(22) ( 8,250 ) ( 4,581 ) 6(7) 4,527 7,692 6(23) 350 - 6(2)(23) 21,586 9,242 6(24) 15,855 13,573 6(17) 3,237 2,637 6(23) - 277,325 6(23) 1,350 - 6(2) ( 74,900 ) - ( 7,029 ) - 283 9,787 - 140,619 6,104 ( 18,040 ) ( 8,267 ) ( 166,658 ) 1,732 398 ( 65,537 ) ( 53,000 ) ( 182,455 ) ( 75,102 ) ( 111,055 ) ( 221,876 ) ( 6,615 ) 50,481 ( 10,274 ) - 207 ( 1,499 ) 77,410 ( 49,755 ) 6,533 1,446 19,304 ( 22,840 ) - ( 1,161 ) 933 ( 6,235 ) 4,946 8,265 ( 345 ) ( 2,222 ) 511,706 406,064 ( 67,535 ) ( 61,690 ) 8,250 4,581 ( 61,733 ) ( 55,196 ) 390,688 293,759

(Continued)

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CHC HEALTHCARE GROUP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM INVESTING ACTIVITIES Decrease in other current assets Acquisition of investments accounted for using equity method Acquisition of property, plant and equipment Capitalised interest of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of investment property Increase in refundable deposits Decrease in refundable deposits Decrease (increase) in other non-current assets Capitalised interest from increase in other non- current assets Increase in other financial assets - non-current Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Decrease in short-term loans Proceeds from long-term debt Repayments of long-term debt Increase in guarantee deposits received Decrease in guarantee deposits received Increase in other non-current liabilities Decrease in other non-current liabilities Repayments of bonds Proceeds from issuing bonds Bonds issue cost Payment of cash dividends Exercise of employee stock options Payments to acquire treasury shares Acquisition of ownership interests in subsidiaries Change in non-controlling interest Net cash flows (used in) from financing activities Effect of changes in foreign currency exchange rates on cash and cash equivalents (Decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes

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

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CHC HEALTHCARE GROUP AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANISATION

CHC Healthcare Group (CHC or the “Company”) was incorporated in the Republic of China. The shares of the Company were listed on the Taiwan Stock Exchange on October 24, 2012. The Company and its subsidiaries (the “Group”) are primarily engaged in the trading of pharmaceutical products and the sale, leasing, installation, and repair of medical instruments.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on March 22, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by the FSC effective from 2018 are as follows:

follows:
New Standards, Interpretations and Amendments Amendments to IFRS 2, ‘Classification and measurement of share- based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9, Financial instruments with IFRS 4, Insurance contracts’ IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers’ Amendments to IAS 7, ‘Disclosure initiative’ Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised losses’ Amendments to IAS 40, ‘Transfers of investment property’ IFRIC 22, ‘Foreign currency transactions and advance consideration’	Effective date by International Accounting Standards Board
	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018

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New Standards, Interpretations and Amendments Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS 28, ‘Investments in associates and joint ventures

Effective date by International Accounting Standards Board

January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

• A. IFRS 9, ‘Financial instruments’

• (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present subsequent changes in the fair value of an investment in an equity instrument that is not held for trading in other comprehensive income.

• (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

• (c) The Group has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Notes 12(4)B and C.

• B. IFRS 15, ‘Revenue from contracts with customers’ and amendments

• (a) IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction contracts’, IAS 18, ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

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The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

Step 1: Identify contracts with customer.

Step 2: Identify separate performance obligations in the contract(s).

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

Step 5: Recognise revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

• (b) The Group has elected not to restate prior period financial statements and recognised the cumulative effect of initial application as retained earnings at January 1, 2018, using the modified retrospective approach under IFRS 15. The significant effects of adopting the modified transition as of January 1, 2018 are summarised below:

• i. Accounting for long-term advance sales receipts

Certain sales contract of medical instruments contain provisions for advance sales receipts, wherein the period between advance collection and the transfer of control of goods is longer than one year. The committed price is adjusted and interest expense is recognised on advance sales receipts if the Group considers that the contract contains a significant financing component under IFRS 15, but is not regulated in previous revenue standards. Due to this difference, retained earnings was reduced by $8,093 and contract liabilities increased by $8,093 on January 1, 2018, respectively.

• ii. Presentation of assets and liabilities in relation to contracts with customers

In line with IFRS 15 requirements, the Group changed the presentation of certain accounts in the balance sheet as follows:

• (i) Under IFRS 15, maintenance and repair services contracts whereby services have been rendered but not yet billed are recognised as contract assets, but were previously presented as part of accounts receivable in the balance sheet. As of January 1, 2018, the balance amounted to $33,933.

• (ii) Under IFRS 15, liabilities in relation to maintenance and repair services and medical instruments contracts are recognised as contract liabilities, but were previously presented as receipts in advance (shown as ‘other current liabilities’ and ‘other non-current liabilities’) in the balance sheet. The balances of

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contract liabilities-current and contract liabilities-non-current amounted to $43,495 and $301,223 on January 1, 2018, respectively.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

follows:
	Effective date by
	International Accounting
New Standards, Interpretations and Amendments	Standards Board
Amendments to IFRS 9, ‘Prepayment features with negative	January 1, 2019
compensation’
IFRS 16, ‘Leases’	January 1, 2019
Amendments to IAS 19, ‘Plan amendment, curtailment or	January 1, 2019
settlement’
Amendments to IAS 28, ‘Long-term interests in associates and joint	January 1, 2019
ventures’
IFRIC 23, ‘Uncertainty over income tax treatments’	January 1, 2019
Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. IFRS 16, ‘Leases’

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a ‘right-of-use asset’ and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

The Group expects to recognise the lease contract of lessees in line with IFRS 16. However, the Group intends not to restate the financial statements of prior period (referred herein as the “modified retrospective approach”). On January 1, 2019, it is expected that ‘right-of-use asset’ and ‘lease liability’ will be both increased by $36,089.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

as endorsed by the FSC are as follows:
New Standards, Interpretations and Amendments Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’	Effective date by International Accounting Standards Board
	January 1, 2020 January 1, 2020

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Effective date by International Accounting New Standards, Interpretations and Amendments Standards Board Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets To be determined by between an investor and its associate or joint venture’ International Accounting Standards Board IFRS 17, ‘Insurance contracts’ January 1, 2021

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”. International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

• A. Except for the following items, these consolidated financial statements have been prepared under the historical cost convention:

• (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

• (b) Financial assets and liabilities at fair value through other comprehensive income / Available-for-sale financial assets measured at fair value.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Company has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting

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policies and details of significant accounts.

• (3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

  • (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

  • (b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

  • (c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income 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.

  • (d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.

• B. Subsidiaries included in the consolidated financial statements:

Investor	Subsidiary	Main business activities Medical instrument sale, leasing and services Medical instrument sale, leasing and services Ophthalmic equipment sale, leasing and services Medical instrument leasing	Ownership (%) December 31, 2018 December 31, 2017 100 100 100 100 - 100 100 100	Description
CHC CHC CHC CHC	Chiu Ho Medical System Co., Ltd. (Chiu Ho Medical) Tomorrow Medical System Co., Ltd. (Tomorrow) Chiu Ho Scientific Co., Ltd. (Chiu Ho Scientific) Chiu Ho Biotech Co., Ltd. (Chiu Ho Biotech)			Note 5

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Investor	Subsidiary	Main business activities Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument sale, leasing and services Holdings and indirect investments Medical instrument sale Consulting service and elderly residence Medical instrument sale and leasing; drug sale Medical instrument sale and leasing; drug sale Medical instrument sale, leasing and services Medical instrument sale, leasing and services Medical instrument sale, leasing and services	Ownership (%) December 31, 2018 December 31, 2017 - 100 100 100 100 100 100 100 100 100 100 100 - 70 100 100 100 100 66 - - - 100 100 100 100 100 100 100 100	Description
CHC CHC CHC CHC CHC CHC CHC CHC Chiu Ho Medical Chiu Ho Medical Medlink Medlink CHC (BVI) CHC (BVI) CHC (BVI)	Ho-Shin Instruments Co., Ltd. (Ho-Shin) Shin-Ho Instruments Co., Ltd. (Shin-Ho) Tong-Lin Instruments Co., Ltd. (Tong-Lin) Hua Lin Instruments Co., Ltd. (Hua Lin) Hsin Lin Biotech Co., Ltd. (Hsin Lin) E Century Healthcare Corporation (E Century) J. Ab Beauty Co., Ltd. (J. Ab Beauty) CHC Healthcare (BVI) Limited (CHC (BVI)) Medlink Healthcare Limited (Medlink) SenCare Healthcare Company (SenCare) Shih-Lu Co., Ltd. (Shih-Lu) Hsing-Yeh Biotechnology Co., Ltd. (Hsing-Yeh) CHC Healthcare (HK) Limited (CHC (HK)) Guangzhou Chiuho Medical System Co., Ltd. (Guangzhou Chiuho) Chiu Ho (CHINA) Medical Technology Co., Ltd. (Chiu Ho (CHINA))			Note 5 Note 1 Note 4 Note 2

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Investor	Subsidiary	Main business activities Medical instrument leasing	Ownership (%) December 31, 2018 December 31, 2017 51 -	Description
Guangzhou Chiuho	Neusoft CHC Medical Service Co., Ltd. (Neusoft CHC)			Note 3

• Note 1: The shareholders resolved to dissolve the Company’s subsidiary, J. Ab Beauty Co., Ltd., during their meeting on April 20, 2018. Consequently, the Company no longer controls J. Ab Beauty Co., Ltd. thereafter.

• Note 2: To simplify the investment structure and integrate Group resources, the Board of Directors of the Company’s subsidiary, Shih-Lu Co., Ltd., during its meeting on July 25, 2016 has resolved to dissolve the company effective September 30, 2016, and the liquidation was completed on February 16, 2017.

• Note 3: On June 12, 2018, the Company’s subsidiary, Guangzhou Chiuho, established Neusoft CHC which was included in the consolidated financial statements thereafter.

• Note 4: On September 27, 2018, the Company’s subsidiary, Chiu Ho Medical, established SenCare which was included in the consolidated financial statements thereafter.

• Note 5: The Company’s subsidiary, Ho-Shin Instruments Co., Ltd., was merged into Chiu Ho Scientific Co., Ltd. on December 12, 2018, with Chiu Ho Scientific Co., Ltd. as the surviving company. Under the merger, the Company held a 100% equity interest in Chiu Ho Scientific Co., Ltd. As the merger was made in line with the group restructuring, there is no significant impact to the parent company’s shareholder’s equity.

• C. Subsidiaries not included in the consolidated financial statements: None.

• D. Adjustments for subsidiaries with different balance sheet dates: None.

• E. Significant restrictions: None.

• F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan Dollars, which is the Company’s functional and the Group’s presentation currency.

• A. Foreign currency transactions and balances

• (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

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• (b) Monetary assets and liabilities denominated in foreign currencies at the period end are re-translated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

• (c) All foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other gains or losses’.

• B. Translation of foreign operations

The operating results and financial position of all the group entities and associates that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

  - (a) Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

  - (b) Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

  - (c) All resulting exchange differences are recognised in other comprehensive income.

• (5) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

  • (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

  • (b) Assets held mainly for trading purposes;

  • (c) Assets that are expected to be realised within twelve months from the balance sheet date;

  • (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

  • (a) Liabilities that are expected to be paid off within the normal operating cycle;

  • (b) Liabilities arising mainly from trading activities;

  • (c) Liabilities that are to be paid off within twelve months from the balance sheet date;

  • (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. 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.

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(6) Cash equivalents

Cash equivalents refer to short-term highly liquid investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitment in operations are classified as cash equivalents.

(7) Financial assets at fair value through profit or loss

Effective 2018

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using settlement date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.

• D. The Group recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(8) Financial assets at fair value through other comprehensive income

Effective 2018

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using settlement date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value:

• The changes in fair value of equity investments that are recognised in other comprehensive income are reclassified to retained earnings. When the equity instruments are derecognised the cumulative gain or loss previously recognised in other comprehensive income is not reclassified from equity to profit or loss. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(9) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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(10) Impairment of financial assets

For financial assets at amortised cost including accounts receivable or contract assets that have a significant financing component, lease receivables, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

(11) Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(12) Lease receivables/ operating leases (lessor)

• A. Based on the terms of a lease contract, a lease is classified as a finance lease if the lessee assumes substantially all the risks and rewards incidental to ownership of the leased asset.

• (a) At commencement of the lease term, the lessor should record a finance lease in the balance sheet as ‘lease receivables’ at an amount equal to the net investment in the lease (including initial direct costs). The difference between gross lease receivable and the present value of the receivable is recognised as ‘unearned finance income of finance lease’.

• (b) The lessor should allocate finance income over the lease term based on a systematic and rational basis reflecting a constant periodic rate of return on the lessor’s net investment in the finance lease.

• (c) Lease payments (excluding costs for services) during the lease term are applied against the gross investment in the lease to reduce both the principal and the unearned finance income.

• B. Lease which is excluded in finance lease is classified as an operating lease. If the Group recognises rental revenue based on a certain percentage of lessees’ operating revenue, then the rent is belong to a contingent rent, which should be treated as an operating lease. The revenue will be recognised based on the receivable rents during the contract period.

(13) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses. Some subsidiaries entered into an agency contract with the original equipment manufacturer for repair parts. Under a range of guarantee paid by subsidiaries, repair parts will be provided by the original

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equipment manufacturer without consideration. Subsidiaries return those repair parts, and the original equipment manufacturer returns the guarantee if the agency contract is terminated.

(14) Investments accounted for using the equity method / associates

• A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost.

• B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds the Group’s interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.

• C. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognises change in ownership interests in the associate in ‘capital surplus’ in proportion to its ownership.

• D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.

• E. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it retains significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

(15) Property , plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are

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depreciated using the straight-line method to allocate their cost over their estimated useful lives. 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 must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change.

The estimated useful lives of property, plant and equipment are as follows:

Buildings and structures 40 ~ 50 years Transportation equipment 5 years Machinery and equipment 5 ~ 12 years Lease assets-Machinery and equipment 1.33 ~ 50 years Lease assets-other 1.33 ~ 15 years Other equipment 1~ 10 years

(16) Leased assets/ operating leases (lessee)

• A. Based on the terms of a lease contract, a lease is classified as a finance lease if the Group assumes substantially all the risks and rewards incidental to ownership of the leased asset.

• (a) A finance lease is recognised as an asset and a liability at the lease’s commencement at the lower of the fair value of the leased asset or the present value of the minimum lease payments.

• (b) The minimum lease payments are apportioned between the finance charges and the reduction of the outstanding liability. The finance charges are allocated to each period over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

• (c) Property, plant and equipment held under finance leases are depreciated over their estimated useful lives. If there is no reasonable certainty that the Group will obtain ownership at the end of the lease, the asset shall be depreciated over the shorter of the lease term and its useful life.

• B. Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(17) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 10~55 years.

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(18) Intangible assets

Goodwill arises in a business combination accounted for by applying the acquisition method.

(19) Impairment of non-financial assets

• A. The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

• B. The recoverable amounts of Goodwill, intangible assets with an indefinite useful life and intangible assets that have not yet been available for use an evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

• C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

(20) Borrowings

Borrowings comprise long-term and short-term bank borrowings.

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

(21) Notes and accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(22) Convertible bonds payable

Convertible bonds issued by the Group contain conversion options (that is, the bondholders have the right to convert the bonds into the Group’s common shares by exchanging a fixed amount of cash for a fixed number of common shares), call options and put options. The Group classifies

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the bonds payable upon issuance as a financial asset, a financial liability or an equity instrument in accordance with the contract terms. They are accounted for as follows:

• A. The embedded call options and put options are recognised initially at net fair value as ‘financial assets or financial liabilities at fair value through profit or loss’. They are subsequently remeasured and stated at fair value on each balance sheet date; the gain or loss is recognised as ‘gain or loss on valuation of financial assets or financial liabilities at fair value through profit or loss’.

• B. The host contracts of bonds are initially recognised at fair value. Any difference between the initial recognition and the redemption value is accounted for as the premium or discount on bonds payable and subsequently is amortised in profit or loss as an adjustment to ‘finance costs’ over the period of circulation using the effective interest method.

• C. The embedded conversion options which meet the definition of an equity instrument are initially recognised in ‘capital surplus-share options’ at the residual amount of total issue price less the amount of financial assets or financial liabilities at fair value through profit or loss and bonds payable as stated above. Conversion options are not subsequently remeasured.

• D. Any transaction costs directly attributable to the issuance are allocated to each liability or equity component in proportion to the initial carrying amount of each abovementioned item.

• E. When bondholders exercise conversion options, the liability component of the bonds (including bonds payable and ‘financial assets or financial liabilities at fair value through profit or loss’) shall be remeasured on the conversion date. The issuance cost of converted common shares is the total book value of the abovementioned liability component and ‘capital surplus - share options’.

(23) Derecognition of financial liabilities

A financial liability is derecognised when the obligation specified in the contract is discharged or cancelled or expires.

(24) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

• (25) Provisions

Provisions (including warranties and decommissioning) are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the

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provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

(26) Employee benefits

• A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expense in that period when the employees render service.

• B. Pensions

For defined contribution plans, the contributions are recognised as pension expense when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

• C. Employees’ compensation and directors’ and supervisors’ remuneration

Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

- (27) Employee share based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

(28) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates

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positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

(29) Treasury share

Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

(30) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

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(31) Revenue recognition

• A. Sales of goods

• (a) The Group sells medicine and medical equipment. Sales are recognised when control of the products has transferred, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

• (b) The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised as a provision.

• (c) A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

• (d) Installment sales with periodic collections of consideration

  • Revenue attributable to the sales price (excluding interest) is recognised on the date of sale. The sales price is the present value of consideration to be collected, calculated by discounting future payments receivable. Interest income is recognised when earned using the effective interest method.

• B. Maintenance, repair, and installation service

• (a) The Group provides maintenance, repair, and installation services for medical equipment. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on the actual cost spent relative to the total expected cost. The customer pays at the time specified in the payment schedule. If the services rendered exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

• (b) Certain customer contracts include equipment sale and installation services. In such contracts, the Group provides a significant service of integrating goods and services into a combined item, therefore the equipment and the installation service cannot be separately identified. The timing of revenue recognition is the same as that of the sale of goods.

• (c) The Group’s estimate about revenue, costs and progress towards complete satisfaction of a performance obligation is subject to a revision whenever there is a change in circumstances. Any increase or decrease in revenue or costs due to an estimate revision is reflected in profit or loss during the period when the management become aware of the changes in circumstances.

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• (d) Revenue from a service contract in which the Group bills a fixed amount based on the period of service provided is recognised at the amount to which the Group has the right to invoice.

• C. For detailed information on rental revenue, please refer to Note 4(12).

• D. Financing components

The Group adjusts the transaction prices for the time value of money if the contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year.

(32) Business combinations

• A. The Group uses the acquisition method to account for business combinations. The consideration transferred for an acquisition is measured as the fair value of the assets transferred, liabilities incurred or assumed and equity instruments issued at the acquisition date, plus the fair value of any assets and liabilities resulting from a contingent consideration arrangement. All acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. For each business combination, the Group measures at the acquisition date components of non-controlling interests in the acquiree that are present ownership interests and entitle their holders to the proportionate share of the entity’s net assets in the event of liquidation at either fair value or the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets. All other non-controlling interests should be measured at the acquisition-date fair value.

• B. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree over the fair value of the identifiable assets acquired and the liabilities assumed is recorded as goodwill at the acquisition date. If the total of consideration transferred, non-controlling interest in the acquire recognised and the fair value of previously held equity interest in the acquiree is less than the fair value of the identifiable assets acquired and the liabilities assumed, the difference is recognised directly in profit or loss on the acquisition date.

(33) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates

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concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

• (1) Critical judgements in applying the Group’s accounting policies

Except for the accounting estimates (detailed in (2) below), the management does not make any judgement that significantly affect the recognised amounts in consolidated financial statements when applying the Group’s accounting polices.

• (2) Critical accounting estimates and assumptions

The Group makes estimates and assumptions based on the expectation of future events that are believed to be reasonable under the circumstances at the end of the reporting period. The resulting accounting estimates might be different from the actual results. The estimates and assumptions that may significantly adjust the carrying amounts of assets and liabilities within the next financial year are addressed below:

• A. Impairment assessment of tangible assets

The Group assesses impairment based on its subjective judgement and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.

• B. Impairment assessment of goodwill

The impairment assessment of goodwill relies on the Group’s subjective judgement, including identifying cash-generating units, allocating assets and liabilities as well as goodwill to related cash-generating units, and determining the recoverable amounts of related cash-generating units.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash on hand Checking accounts and demand deposits Time deposits	December 31, 2018 $ 1,299 1,093,394 114,943 $ 1,209,636	December 31, 2017 $ 1,481 1,341,933 100,949 $ 1,444,363

• A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The Group classified restricted cash and cash equivalents pledged to others as other current assets and other non-current financial assets. Please refer to Note 8 for details.

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(2) Financial assets and liabilities at fair value through profit or loss

Effective 2018

	Effective 2018
	Items		December 31, 2018
	Current items:
	Financial assets mandatorily measured at fair
	value through profit or loss
	Listed stocks	$		74,900
	Valuation adjustment	(		21,418)
		$		53,482
	Non-current items:
	Financial assets mandatorily measured at fair
	value through profit or loss
	Non-hedging derivatives
	(Redemption rights to the third domestic
	issuance of secured convertible corporate
	bonds)	$		292
	Valuation adjustment			200
		$		492
	A. For the year ended December 31, 2018, net loss on financial	assets	at fair value throug
	profit or loss was ($21,586) shown as ‘other gains and losses’.
	B. Information on financial assets and liabilities at fair value through profit or loss as o
	December 31, 2017 is provided in Note 12(4).
	Financial assets at fair value through other comprehensive income
	Effective 2018
	Items		December 31, 2018
	Non-current items:
	Listed stocks
	Swissray Global Healthcare Holding Ltd.	$		340,215
	Unlisted stocks
	AESolution Biomedical Co., Ltd.			39,000
	Huede Healthtech Co., Ltd.			2,400
	Valuation adjustment	(		334,384)
		$		47,231

• A. For the year ended December 31, 2018, net loss on financial assets at fair value through profit or loss was ($21,586) shown as ‘other gains and losses’.

• B. Information on financial assets and liabilities at fair value through profit or loss as of December 31, 2017 is provided in Note 12(4).

(3) Financial assets at fair value through other comprehensive income

• A. The Group recognised ($42,606) in other comprehensive loss for fair value change for the year ended December 31, 2018.

• B. Information on available-for-sale financial assets and financial assets at cost as of December 31, 2017 is provided in Note 12(4).

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(4) Notes and accounts receivable

Notes and accounts receivable
		December	31, 2018		December	31, 2017
Notes receivable	$		19,059	$		8,888
Installment notes receivable			26,962			37,010
Less: Unrealised interest revenue-installment
notes receivable	(		1,183)	(		812)
			44,838			45,086
Less: Allowance for doubtful accounts			-	(		4)
	$		44,838	$		45,082
Accounts receivable	$		475,791	$		556,150
Installment accounts receivable			46,400			3,800
Less: Unrealised interest revenue-installment
accounts receivable	(		2,757)	(		124)
Lease payments receivable			3,396			3,899
Less: Unearned finance income of finance lease (			41)	(		145)
			522,789			563,580
Less: Allowance for doubtful accounts	(		21,007)	(		51,779)
	$		501,782	$		511,801
A. The ageing analysis of notes receivable is as follows:
					December	31, 2018
Not past due				$		44,838
B. The ageing analysis of accounts receivable is		as follows:
					December	31, 2018
Not past due					$	485,478
Up to 1 month						6,303
Up to 2 months						6,081
Up to 3 months						4,548
Up to 4 months						1,000
Up to 5 months						-
Up to 6 months						-
Over 6 months						19,379
				$		522,789

The above ageing analysis was based on past due date.

• C. The Group expected to recover installment accounts receivable as follows:

Not later than one year Over one year	December 31, 2018 $ 43,643 95,981 $ 139,624	December 31, 2017 $ 3,676 11,317 $ 14,993

D. The Group leases certain machinery and other equipment through finance leases. Under the terms of the agreement, the lease term is for the major part of the economic life of the

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underlying asset, and the unguaranteed residual value is $0. The Group expects all lease payments to be collected on time. The gross investments in those leases and present value of total minimum lease payments receivable as at December 31, 2018 and 2017 were as follows:

follows:
Current Not later than one year Current Not later than one year Non-current Later than one year but not later than five years	December 31, 2018		Net lease payments receivable $ 3,355 Net lease payments receivable $ 3,754 3,055 $ 6,809
	Total lease payments Unearned finance receivable income $ 3,396 ($ 41) December 31, 2017
	Total lease payments receivable $ 3,899 3,096 $ 6,995	Unearned finance income ($ 145) ( 41) ($ 186)

• E. For information on notes and accounts receivable pledged as collateral, please refer to Note 8.

• F. Information relating to credit risk of notes and accounts receivable is provided in Notes 12(2) and (4).

• G. The information on December 31, 2017 is provided in Note 12(4).

(5) Inventories

Inventories
Merchandise inventories Inventory in transit Less: Collateral pledged ( Merchandise inventories Inventory in transit Less: Collateral pledged (	December 31, 2018	Book value $ 507,303 77,006 94,332) $ 489,977 Book value $ 368,577 16,115 94,332) $ 290,360
	Allowance for Cost valuation loss $ 575,527 ($ 68,224) 77,006 - 94,332) - ( $ 558,201 ($ 68,224) December 31, 2017
	Allowance for Cost valuation loss $ 431,932 ($ 63,355) 16,115 - 94,332) - ( $ 353,715 ($ 63,355)

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• A. The abovementioned inventories were not secured or pledged to others.

• B. The cost of inventories recognised as expense and operating costs for the year:

Cost of goods sold Repair supplies Loss on decline in market value and obsolescence Others Cost of inventories Cost of rental Cost of services Total operating costs	Years ended December 31, 2018 2017 $ 900,700 $ 580,138 67,119 63,623 12,850 14,641 23 6 980,692 658,408 688,352 669,629 107,636 100,426 $ 1,776,680 $ 1,428,463
	2018 $ 900,700 67,119 12,850 23 980,692 688,352 107,636 $ 1,776,680

	Others Cost of inventories Cost of rental Cost of services Total operating costs	23 980,692 688,352 107,636 $ 1,776,680	6 658,408 669,629 100,426 $ 1,428,463
(6)	Prepayments Prepayments to suppliers Excess business tax paid Others	December 31, 2018 $ 381,741 35,049 42,915 $ 459,705	December 31, 2017
			$ 269,529 54,921 24,200 $ 348,650

• (7) Investments accounted for using equity method

Investments accounted for using equity	method
Associates PT. NAVI Medical Indonesia Neusoft-CHC office of Medical Intelligence & Services, Shenyang Dalian Neusoft Kangrui Jiuhe Medical Management Co., Ltd. CHENG-HSIN Biotechnology Co., Ltd	December	31, 2018 Book value $ - 8,232 8,943 1,309 $ 18,484	December 31, 2017 Ownership Book % value - $ - 40% 9,065 - - 40% 5,176 $ 14,241
	Ownership % - 40% 40% 40%		Ownership % - 40% - 40%

1. The summarised financial information of the associates that are not material to the Group is as follows:

as follows:
		Years ended	December 31,
		2018		2017
Loss for the year	($	4,527)	($	7,692)
Other comprehensive loss, net of tax		-		-
Total comprehensive loss for the year	($	4,527)	($	7,692)

1. The shareholders resolved to dissolve PT. NAVI Medical Indonesia during their meeting on May 22, 2017. The liquidation of the company was completed on February 7, 2018.

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(8) Property, plant and equipment

																					Constructions in	Constructions in
					Buildings					Machinery		Leased assets-										progress and
					and		Transportation			and		machinery and		Leased assets-		Leasehold			Other		equipment under
		Land			structures			equipment		equipment		equipment		others		improvements			equipment			acceptance		Total
At January 1, 2018
Cost	$	989,241		$	132,296	$		9,745	$	207,665	$ 4,959,708		$ 852,959		$	10,996		$	24,109	$		144,923	$7,331,642
Accumulated depreciation
and impairment			-	(	14,678) (			5,855)	(	169,489)	(	2,069,977)	(	439,053)	(	10,783)		(	12,545)			-	(	2,722,380)
	$	989,241		$	117,618	$		3,890	$	38,176	$ 2,889,731		$ 413,906		$	213		$	11,564	$		144,923	$4,609,262
2018
Opening net book amount
as at January 1	$	989,241		$	117,618	$		3,890	$	38,176	$ 2,889,731		$ 413,906		$	213		$	11,564	$		144,923	$4,609,262
Additions (Note 1)			-		-			-		-		27,961		25,976			-		1,960			369,459		425,356
Disposals			-		-	(		344)		-		-		-			-	(	20)			-	(	364)
Depreciation charge			-	(	2,992)(			1,338)	(	11,898)	(	324,554)	(	72,400)	(	213)		(	3,112)			-	(	416,507)
Impairment loss			-		-			-		-	(	1,196)	(	154)			-		-			-	(	1,350)
Reclassifications (Note 2)	(	48,510)			-			-	(	22,170)		201,853		24,399			-		13	(		19,821)		135,764
Net exchange differences			-	(	1,849) (			11)		3,753	(	932)	(	50)			-	(	11)	(		125)		775
Closing net book amount
as at December 31	$	940,731		$	112,777	$		2,197	$	7,861	$ 2,792,863		$ 391,677		$		-	$	10,394	$		494,436	$4,752,936
At December 31, 2018
Cost	$	940,731		$	130,251	$		6,981	$	100,733	$ 4,947,846		$ 900,344		$	940		$	25,992	$		494,436	$7,548,254
Accumulated depreciation
and impairment			-	(	17,474) (			4,784)	(	92,872)	(	2,154,983)	(	508,667)	(	940)		(	15,598)			-	(	2,795,318)
	$	940,731		$	112,777	$		2,197	$	7,861	$ 2,792,863		$ 391,677		$		-	$	10,394	$		494,436	$4,752,936

• Note 1: The acquisition of property, plant and equipment includes the beginning and end balances of payable on machinery and equipment in the amounts of $9,462 and $72,340, respectively, and the cash payment in the amount of $362,478.

• Note 2: Reclassifications with no cash flow effect are as follows:

• (a) Other non-current assets transferred to property, plant and equipment amounted to $203,419.

• (b) Property, plant and equipment transferred to inventories amounted to $22,170.

• (c) Inventories transferred to property, plant and equipment amounted to $3,025.

• (d) Land transferred to investment property amounted to $48,510.

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																		Construction in	Construction in
			Buildings					Machinery		Leased assets-								progress and
			and		Transportation			and		machinery and		Leased assets-		Leasehold		Other		equipment under
	Land		structures			equipment		equipment		equipment		others		improvements		equipment			acceptance		Total
At January 1, 2017
Cost	$ 988,956	$	133,804	$		9,089	$	250,990	$ 4,792,529		$ 779,588		$	11,011	$	30,335		$	125,583	$	7,121,885
Accumulated depreciation
and impairment	-	(	11,757)	(		4,417)	(	196,858)	(	1,757,465)	(	369,499)	(	8,957)	(	17,939)			-	(	2,366,892)
	$ 988,956	$	122,047	$		4,672	$	54,132	$ 3,035,064		$ 410,089		$	2,054	$	12,396	$		125,583	$	4,754,993
2017
Opening net book amount
as at January 1	$ 988,956	$	122,047	$		4,672	$	54,132	$ 3,035,064		$ 410,089		$	2,054	$	12,396		$	125,583	$	4,754,993
Additions (Note 1)	285		-			206		6,750		47,176		42,285		-		2,117			137,753		236,572
Depreciation charge	-	(	2,964)	(		1,628)	(	22,300)	(	319,248)	(	69,853)	(	1,827)	(	2,933)			-	(	420,753)
Reclassifications (Note 2)	-		-			630	(	491)		127,659		31,434		-		-	(		118,395)		40,837
Net exchange differences	-	(	1,465)			10		85	(	920)	(	49)	(	14)	(	16)	(		18)	(	2,387)
Closing net book amount
as at December 31	$ 989,241	$	117,618	$		3,890	$	38,176	$ 2,889,731		$ 413,906		$	213	$	11,564	$		144,923	$	4,609,262
At December 31, 2017
Cost	$ 989,241	$	132,296	$		9,745	$	207,665	$ 4,959,708		$ 852,959		$	10,996	$	24,109		$	144,923	$	7,331,642
Accumulated depreciation
and impairment	-	(	14,678)	(		5,855)	(	169,489)	(	2,069,977)	(	439,053)	(	10,783)	(	12,545)			-	(	2,722,380)
	$ 989,241	$	117,618	$		3,890	$	38,176	$ 2,889,731		$ 413,906		$	213	$	11,564	$		144,923	$	4,609,262

Note 1: The acquisition of property, plant and equipment includes the beginning and end balances of payable on machinery and equipment in the amounts of $11,104 and $9,462, respectively, and the cash payment in the amount of $238,214.

Note 2: Reclassifications with no cash flow effect are as follows:

• (a) Other non-current assets transferred to property, plant and equipment amounted to $40,894.

• (b) Property, plant and equipment transferred to prepayments amounted to $57.

• (c) Machinery and equipment transferred to leased asset - machinery and equipment amounted to $491.

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• A. Amount of borrowing costs capitalised as part of property, plant and equipment and prepayments for business facilities (shown as other non-current assets) and the range of the interest rates for such capitalisation are as follows:

Amount capitalised Range of the interest rates for capitalisation	Years ended December 31, 2018 2017 $ 8,576 $ 7,991 1.64%~2.06% 1.64%~2.96%
	2018 $ 8,576 1.64%~2.06%

• B. Information about the property, plant and equipment that were pledged to others as collateral is provided in Note 8.

(9) Investment property

At January 1, 2018 Cost Accumulated depreciation and impairment 2018 Opening net book amount as at January 1 Additions from accquisitions (Note 1) Reclassifications (Note 2) Depreciation charge Closing net book amount as at December 31 At December 31, 2018 Cost Accumulated depreciation and impairment	Land $ 786,909 - ( $ 786,909 $ 786,909 - 48,510 - ( $ 835,419 $ 835,419 - ( $ 835,419	Buildings and structures $ 498,102 132,826) $ 365,276 $ 365,276 - - 12,091) $ 353,185 $ 498,102 144,917) $ 353,185	Construction in progress $ - - ( $ - $ - 4,931 1,045 - ( $ 5,976 $ 5,976 - ( $ 5,976	Total $1,285,011 132,826) $1,152,185 $1,152,185 4,931 49,555 12,091) $1,194,580 $1,339,497 144,917) $1,194,580

Note 1: The acquisition of investment property-construction in progress with cash payment in the amount of $4,931.

Note 2: Reclassifications with no cash flow effects are as follows:

Land and other non-current assets transferred to investment property amounted to $48,510 and $ 1,045, respectively.

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At January 1, 2017 Cost Accumulated depreciation and impairment 2017 Opening net book amount as at January 1 Additions-from subsequent expenditures (Note 1) Reclassifications (Note 2) Depreciation charge Closing net book amount as at December 31 At December 31, 2017 Cost Accumulated depreciation and impairment	Land $ 786,909 - ( $ 786,909 $ 786,909 - - - ( $ 786,909 $ 786,909 - ( $ 786,909	Buildings and Construction structures in progress Total $ 494,335 $ 2,511 $1,283,755 121,334) - ( 121,334) $ 373,001 $ 2,511 $1,162,421 $ 373,001 $ 2,511 $1,162,421 3,767 - 3,767 - ( 2,511) ( 2,511) 11,492) - ( 11,492) $ 365,276 $ - $1,152,185 $ 498,102 $ - $1,285,011 132,826) - ( 132,826) $ 365,276 $ - $1,152,185

Note 1: The acquisition of investment property with cash payment in the amount of $3,767. Note 2: Reclassifications with no cash flow effects are as follows:

Investment property transferred to other non-current assets amounted to $2,511.

• A. Rental income from lease of the investment property and direct operating expenses arising from investment property are shown below:

Rental income from lease of the investment from investment property are shown below:	property and direct operating expenses arisin
Rental income from the lease of the investment property Direct operating expenses arising from the investment property that generated rental income during the year	Years ended December 31, 2018 2017 $ 51,717 $ 62,327 $ 14,914 $ 14,369
	2018 $ 51,717 $ 14,914

• B. As of December 31, 2018 and 2017, the fair value of the investment property held by the Group amounted to $1,227,844 and $1,159,989, respectively. Certain fair values of investment property were valued by independent appraisers, and certain fair values were estimated based on the transaction price of similar properties. Independent appraisers adopted comparison approach and land development analysis approach to evaluate the land, assessed the building based on cost method, and considered weights on aforementioned costs to calculate the fair value.

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• C. Information about the investment property that was pledged to others as collateral is provided in Note 8.

(10) Other financial assets-non-current

Long-term notes and accounts receivable Guarantee deposits paid Restricted assets	December 31, 2018 $ 186,500 452,435 81,533 $ 720,468	December 31, 2017 $ 133,799 413,853 65,273 $ 612,925

• A. A summary of ‘long-term notes and accounts receivable’ under ‘other financial assets - noncurrent’ as of December 31, 2018 and 2017 is as follows:

		December	31, 2018		December	31, 2017
Long-term installment notes receivable	$		22,799	$		26,751
Long-term installment accounts receivable			100,300			12,000
Long-term lease payments receivable
(including related parties)			72,524			102,331
Less: Unrealised interest revenue-long-term
installment notes receivable	(		902)	(		759)
Less: Unrealised interest revenue-long-term
installment accounts receivable	(		4,319)	(		683)
Less: Unearned finance income of finance
lease (including related parties)	(		3,699)	(		5,838)
			186,703			133,802
Less: Allowance for doubtful accounts	(		203)	(		3)
	$		186,500	$		133,799

• B. Information relating to credit risk is provided in Notes 12(2) and (4).

• C. Information about the long-term notes receivable and restricted assets that were pledged to others as collateral is provided in Note 8.

(11) Other non-current assets

Deferred expenses Prepayments for equipment Others Short-term borrowings Type of borrowings Bank borrowings Secured borrowings Credit borrowings Interest rate range	December 31, 2018 $ 1,283 677,632 - $ 678,915 December 31, 2018 $ 31,272 655,660 $ 686,932 1%~3.48%	December 31, 2017 $ 2,408 884,528 1,045 $ 887,981 December 31, 2017 $ 208,175 433,360 $ 641,535 1.06%~2.18%

(12) Short-term borrowings

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Information about the short-term borowings that were pledged to others as collateral is provided in Note 8.

(13) Bonds payable

Bonds payable Less: Discount on bonds payable ( Less: Current portion or exercise of put options (shown as ‘other current liabilities’)	December 31, 2018 $ 1,200,000 22,965) ( 1,177,035 - ( $ 1,177,035	December 31, 2017 $ 1,520,100 38,820) 1,481,280 316,587) $ 1,164,693

• A. The terms of the second domestic secured convertible bonds issued by the Company are as follows:

• (a) The Company issued the second domestic secured convertible bonds totalling $1,000,000 with zero coupon rate as approved by the regulatory authority. The bonds mature three years from the issue date (November 10, 2015 ~ November 10, 2018) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on November 10, 2015.

• (b) The bondholders have the right to request Taiwan Depository & Clearing Corporation (“TDCC”) through the security dealers for conversion of the bonds into common shares of the Company during the period from the date after one month of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

• (c) The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price on the issue date is NT$58.8 (in dollars). On December 21, 2015, July 16, 2016, July 16, 2017, and July 15, 2018, the Company adjusted the conversion price per share to NT $58.4, NT $56.2, NT $54.9, and NT $53.1 (in dollars), respectively, according to the rules described above.

• (d) The bondholders have the right to require the Company to redeem any bonds at the price of the bonds’ face value plus 1% of the face value as interests upon two years from the issue date.

• (e) The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company’s common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one months of the bonds

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issue to 40 days before the maturity date.

• (f) Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

• (g) The Company signed a corporate bond issuance agreement with Chinatrust Commercial Bank. Under the terms of the agreement, the Company will periodically issue a financial assurance letter to Chinatrust Commerical Bank, stating that the financial ratios on the annual and semi-annual consolidated financial statements issued after November 10, 2015, will meet the following requirements:

  • a. Current ratio must be 120% or higher.

  • b. Debt ratio must equal to or less than 100%.

  • The Company negationated with Chinatrust Commercial Bank for credit term on August 17 2018, They will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

  • a. Current ratio must be 100% or higher.

  • b. Debt ratio must equal to or less than 150%.

  • c. Interest coverage ratio must be 3 or higher.

  • d. Tangible net assets must be $4,000,000 or higher.

  • If the Company fails to meet any of the requirements stated above, Chinatrust Commercial Bank will determine whether there has been a breach of contract.

• (h) On November 10, 2017, holders of convertible corporate bonds exercised their redemption rights under the issuance terms, requiring the Company to buy back $679,900 of the aforementioned bonds. The Company incurred a loss of $5,953, which was included in ‘other gains and losses’.

• (i) The convertible bonds matured on November 10, 2018, and were redeemed $320,100 by cash. The Company transferred the forfeited stock options $8,835 to capital surplusforfeited stock options (shown as capital surplus-others).

• B. The terms of the third domestic secured convertible bonds issued by the Company are as follows:

• (a) The Company issued the third domestic secured convertible bonds totalling $1,200,000 with zero coupon rate as approved by the regulatory authority. The bonds mature three years from the issue date (November 2, 2017 ~ November 2, 2020) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on November 2, 2017.

• (b) The bondholders have the right to request TDCC through the security dealers for conversion of the bonds into common shares of the Company during the period from the date after three month of the bonds issue to the maturity date, except for the stop

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transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

• (c) The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price on the issue date is NT$42 (in dollars). On July 15, 2018, the Company adjusted the conversion price per share to NT$40.6 (in dollars) according to the rules described above.

• (d) The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company’s common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after three month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one months of the bonds issue to 40 days before the maturity date.

• (e) Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

• (f) The Company signed a corporate bond issuance agreement with Chinatrust Commercial Bank. Under the terms of the agreement, the Company will periodically issue a financial assurance letter to Chinatrust Commerical Bank, stating that the financial ratios on the annual and semi-annual consolidated financial statements issued after November 2, 2017, will meet the following requirements:

• a. Current ratio must be 120% or higher.

• b. Debt ratio must equal to or less than 120%.

• The Company negationated with Chinatrust Commercial Bank for credit term on August 17 2018, They will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

• a. Current ratio must be 100% or higher.

• b. Debt ratio must equal to or less than 150%.

• c. Interest coverage ratio must be 3 or higher.

• d. Tangible net assets must be $4,000,000 or higher.

If the Company fails to meet any of the requirements stated above, Chinatrust Commercial Bank will determine whether there has been a breach of contract.

• C. Regarding the third issuance of secured convertible bonds, the equity conversion options amounting to $30,842 were separated from the liability component and were recognised in ‘capital surplus - others’ in accordance with IAS 32 as of December 31, 2018, respectively.

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The call and put options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets or liabilities at fair value through profit or loss’ in net amount in accordance with IAS 39 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts. The effective interest rates of the bonds payable after such separation ranged between 0.7784%~0.8489%.

• D. Information about corporate bonds that were pledged to others as collateral is provided in Note 8.

- (14) Long term borrowings

Type of borrowings Bank borrowings Secured borrowings Credit borrowings Less: Current portion (shown as 'other current liabilities') Interest rate range	Borrowing period 2006.4~2024.8 2006.4~2023.11 (	December 31, 2018 $ 2,835,598 159,606 2,995,204 182,596) ( $ 2,812,608 1.52%~5.88%	December 31, 2017 $ 2,317,425 571,990 2,889,415 540,053) $ 2,349,362 1.42%~2.03%

Interest rate range

• A. In July 2015, the Company, Chiu Ho Medical System Co., Ltd., and Medlink Healthcare Limited signed a syndicated loan agreement in the amount of $3,300,000 with a group of lenders led by First Commercial Bank and agreed to the following terms:

• (a) Before each credit line expires, the borrower is required to draw down at least 80% of the available credit limit. If this required amount is not fully drawn down, the borrower must pay a fee, equal to 0.15% of the difference between the actual drawdown amount and the required amount, to the agency bank after the expiration of all credit lines. The agency bank will then distribute this fee among the syndicate lenders according to the share of credit risk each lender bears.

• (b) Loan funds must be used for a specified purpose.

• (c) The Company will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

  • i. Current ratio must be 100% or higher.

  • ii. Debt ratio must equal to or less than 150%.

  • iii. Interest coverage ratio must be 3 or higher.

  • iv. Tangible net assets must be $3,800,000 or higher.

If the Company fails to meet any of the requirements stated above, remedial measures, such as capital increase, must be taken to address the issue before the financial reporting date of the next annual or half-year consolidated financial statements. If the issue is

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resolved with the remedial measures, it is not considered a breach of contract. However, the Company is required to pay a fee, equal to 0.1% of the unpaid principal balance on the audit date, to the agency bank, who will distribute this fee among the syndicate lenders.

The financial ratios derived from the aforementioned consolidated financial statements of the Company meet the requirements specified in the syndicated loan agreement.

• (d) The Company’s direct and/or indirect ownership percentage of Chiu Ho Medical System Co., Ltd., Hua Lin Instruments Co., Ltd., Tong-Lin Instruments Co., Ltd., E Century Healthcare Corporation, Chiu Ho Biotech Co., Ltd. and Chiu Ho Scientific Co.,Ltd. must be at least 66.67%, and the Company must maintain control over the operations of these subsidiaries. The shares of the aforementioned subsidiaries necessary to maintain the required minimum ownership percentage cannot be pledged or transferred to a third party, nor can they be placed in a trust.

• (e) The Company’s direct and/or indirect ownership percentage of its investment holding company in Myanmar and Medlink Healthcare Limited must be at least 70%, and the Company must maintain control over the operations of these subsidiaries. The shares of the aforementioned subsidiaries necessary to maintain the required minimum ownership percentage cannot be pledged or transferred to a third party, nor can they be placed in a trust.

• (f) The Company’s direct and/or indirect ownership percentage of Hsing-Yeh Biotechnology Co., Ltd must be 100%, and the Company must maintain control over the operations of the subsidiary. The shares of the aforementioned subsidiary necessary to maintain the required ownership percentage cannot be pledged or transferred to a third party, nor can they be placed in a trust. However, these restrictions do not apply if Hsing-Yeh Biotechnology Co., Ltd. merges with the Company and is dissolved.

• If the Company fails to meet this requirement, First Commercial Bank will determine whether there has been a breach of contract and, if necessary, call a meeting with all the syndicate lenders to discuss the matter.

The financial ratios derived from the aforementioned consolidated financial statements of the Company meet the requirements specified in the syndicated loan agreement. In July 2017, the Company cancelled an unused credit line of $1,600,000, which was part of the syndicated loan agreement led by First Commercial Bank.

In November 2018, the Company fully paid in advance the outstanding principal.

• B. In November 2018, the Company and Tomorrow Medical System Co., Ltd. signed a syndicated loan agreement in the amount of $2,440,000 with a group of lenders led by First Commercial Bank and agreed to the following terms:

• (a) If the actual drawn amount is less than 80% of each available borrowing facility, the difference shall be imposed at a rate of 0.15% as a commitment fee at the end of the

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limit on borrowing facilities. The commitment fee shall be paid in full to the lead bank within 5 trading days after the end of the limit on borrowing facilities. Subsequently, the lead bank shall pay syndicated banks based on its committed ratio.

• (b) Loan funds must be used for a specified purpose.

• (c) The Company will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

• i. Current ratio must be 100% or higher.

• ii. Debt ratio must equal to or less than 150%.

• iii. Interest coverage ratio must be 3 or higher.

• iv. Tangible net assets must be $4,000,000 or higher.

If the Company fails to meet any of the requirements stated above, remedial measures, such as capital increase, must be taken to address the issue before the financial reporting date of the next annual or half-year consolidated financial statements. If the issue is resolved with the remedial measures, it is not considered a breach of contract. However, the Company is required to pay a fee, equal to 0.1% of the unpaid principal balance on the audit date, to the agency bank, who will distribute this fee among the syndicate lenders.

• (d) The Company shall directly/indirectly hold a 100% equity interest in Tomorrow Medical System Co., Ltd., Hsing-Yeh Biotechnology Co., Ltd., Medlink Healthcare Limited and Chiu Ho Medical System Co., Ltd., and directly/indirectly hold at least a 66.67% equity interest in Hua Lin Instruments Co., Ltd., Tong-Lin Instruments Co., Ltd., E Century Healthcare Corporation, Chiu Ho Biotech Co., Ltd. and Chiu Ho Scientific Co., Ltd., and the Company has control over those companies’ operations. Above equity interests can not be pledged or transferred to the third party in any assumption or method as well as trust.

If the Company fails to meet this requirement, First Commercial Bank will determine whether there has been a breach of contract and, if necessary, call a meeting with all the syndicate lenders to discuss the matter.

• C. In August 2018, Guangzhou Chiuho Medical System Co., Ltd. entered into a borrowing contract with CTBC Bank Co., Ltd. amounting to RMB 22 million. The Company is required to hold a 100% equity interest directly/indirectly in Guangzhou Chiuho Medical System Co., Ltd. until settlement of the borrowing, or the borrowing will be deemed as matured.

• D. Information about long-term borrowings that were pledged to others as collateral is provided in Note 8.

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(15) Other non-current liabilities

Advance sales receipts Guarantee deposits received Credit balance of investments Long-term notes payable	December 31, 2018 $ - 19,535 - 1,675 $ 21,210	December 31, 2017 $ 293,130 26,831 122 - $ 320,083

(16) Pensions

• A. Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. The pension costs under the defined contribution pension plans of the Group for the years ended December 31, 2018 and 2017 were $6,539 and $6,321, respectively.

• B. The Group’s mainland China subsidiaries have a defined contribution plan. Monthly contributions to an independent fund administered by the government in accordance with the pension regulations in the People’s Republic of China (PRC) are based on certain percentage of employees’ monthly salaries and wages. The pension plan is administered by the government. Other than the monthly contributions, the Group has no further obligations. The pension costs under defined contribution pension plans of the Group for the years ended December 31, 2018 and 2017 were $2,440 and $3,109, respectively.

(17) Share-based payment

• A. As of December 31, 2018, the Company’s share-based payment transactions are as follows:

Type of arrangement Grant date Quantity Granted (in thousands of shares) Employee stock options-101 2012.8.31 3,000 Employee stock options-106 2018.4.13 2,000	Contract period	Vesting conditions
	7 years 7 years	Note Note

Note: After two years from the grant date, employees are allowed to exercise their stock options according to the vesting schedule specified in the plan.

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B. Details of the share-based payment arrangements are as follows:

		2018	2018		2017	2017
	No. of options		Weighted-average		No. of options	Weighted-average
		(in thousands	exercise price		(in thousands	exercise price
Stock options		of shares)	(in	dollars)	of shares)	(in dollars)
Options outstanding at
January 1		985	$	37.40	1,119	$	38.30
Options granted		2,000		34.50	-		-
Options forfeited	(	28)		34.47 (	68)		38.16
Options exercised		-		- (	66)		37.71
Options outstanding at December 31		2,957		34.32	985		37.40
Options exercisable at December 31		977			985

• C. For the year ended December 31, 2018, no stock options were exercised. For the year ended December 31, 2017, the weighted-average stock price of stock options on exercise dates was NT$41.66 (in dollars).

• D. The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:

follows:
Issue date approved 2012.8.31 2018.4.13	Expiry date 2019.8.30 2025.4.12	December	31, 2018 Exercise price (in dollars) 36.2 33.4	December	31, 2017
		No. of shares (in thousands of shares) 977 1,980		No. of shares (in thousands of shares) 985 -	Exercise price (in dollars)
					37.4 -

• E. The Black Scholes option-pricing model was used for valuation of fair value of the stock options granted. The related information is listed as follows:

Type of arrangement Employee stock options-101 Employee stock options-106	Grant date 2012.8.31 2018.4.13	Stock price (in dollars) $ 85.06 (Note 1) $ 34.50	Exercise price (in dollars) $ 44.0 $ 34.5	Expected price volatility 40.44% (Note 2) 30.02%	Expected option life 5.25 years 5.25 years	Expected dividends 0% 0%	Risk-free interest rate fair value 1.00% 0.75%	Fair value per unit (in dollars)
								$48.23~ $51.29 $8.46~ $10.91

• Note 1: Estimated using the market approach with necessary adjustments, the price of the common shares of the Company that have no controlling rights and cannot be traded in the open market was NT$85.06 (in dollars) on the grant date.

• Note 2: Expected price volatility is estimated based on the historical stock prices of comparable companies.

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. Expenses incurred on the Group’s share-based payment transactions are shown below:

Equity-settled	Years ended December 31, 2018 2017 $ 3,237 $ 2,637
	2018 $ 3,237

• G. On July 15, 2018, the exercise prices of employee stock options-101 and employee stock options-106 were adjusted to NT$36.2 and NT$33.4 (in dollars), respectively, according to the rules of the employee stock option plan. The adjustment of exercise prices had no significant impact on the fair value of the aforementioned stock options.

(18) Share capital

• A. As of December 31, 2018, the Company’s authorised capital was $2,000,000, consisting of 200 million shares of ordinary stock, and the paid-in capital was $1,399,136 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

Movements in the number of the Company’s ordinary shares outstanding are as follows:

At January 1 Employee stock options exercised Shares retired ( At December 31	2018 139,914 - 1,000) 138,914	(In thousands of shares) 2017 139,848 66 - 139,914

• B. For the year ended December 31, 2017, 66,000 common shares were issued as a result of employees exercising their stock options under the stock option plan. All shares had par value of $10 (in dollars), with total capital raised amounting to $658.

• C. Treasury shares

• (a) Reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

shares are as follows:
Name of company holding the shares The Company	Reason for reacquisition To be reissued to employees	December 31,2018
		Number of shares 1,000,000	Carrying amount $ 34,956

• (b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realized capital surplus.

• (c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

• (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued

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within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

(19) Capital surplus

• A. Pursuant to Paragraph 4, Article 31 of the Business Mergers and Acquisitions Act, if a company becomes a wholly-owned subsidiary of another company through a share exchange, its undistributed earnings become part of the capital surplus of the acquiring company (parent company). Therefore, if the increase in the investment holding company’s capital surplus is from the undistributed earnings of the subsidiary before the share exchange, this amount can be distributed as cash dividends or capitalised. Moreover, the proportion that can be capitalised is not subject to the restrictions set forth in Article 8 of the Securities and Exchange Act Enforcement Rules. In addition, according to Tai-Cai-Rong-Yi-Zi No. 0910016280, such increase in capital surplus was not generated by the holding company’s business operations and thus will not affect the remuneration of directors and supervisors and bonuses of employees. As of December 31, 2018, capital surplus that is attributable to the undistributed earnings of Chiu Ho Medical System Co., Ltd. and other associates before share exchanges amounted to $44,390.

• B. Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. However, capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

• C. Please refer to Note 6(17) for information on capital surplus - employee stock options.

(20) Retained earnings

• A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve unless legal reserve equals the authorised share capital. Special reserve is then appropriated or reversed in accordance with related regulations. At least 50% of the remainder, if any, and accumulated undistributed earnings from prior years is distributable under the stockholders’ resolution at their meeting as proposed by the Board of Directors.

• B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

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• C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• D. The proposal on reversal of special reserve and 2017 earnings appropriation and the proposal on 2016 earnings appropriation which were resolved at the shareholders’ meeting on June 11, 2018, and June 13, 2017, respectively, are as follows:

11, 2018, and June 13, 2017, respectively, are as follows:	11, 2018, and June 13, 2017, respectively, are as follows:	11, 2018, and June 13, 2017, respectively, are as follows:
Years ended December 31, 2017 2016 Dividends Dividends Amount per share (in dollars) Amount per share (in dollars) Legal reserve $ - $ 15,893 Special reserve - 78,849 Reversal of special reserve( 138,784) - Cash dividends 153,905 $ 1.1000 140,490 $ 1.0046 $ 15,121 $ 235,232
	Amount $ 15,893 78,849 - 140,490 $ 235,232	Dividends per share (in dollars)
		$ 1.0046

The aforementioned earnings appropriations for the years ended December 31, 2017 and 2016 were in agreement with the amounts resolved by the Board of Directors during its meetings held on March 21, 2018 and March 24, 2017, respectively, and the ex-dividend dates resolved in the same meetings were July 15, 2018 and July 16, 2017, respectively. For more information on the aforementioned earnings appropriations proposed by the Board of Directors and resolved by the shareholders, please go to the Market Observation Post System website maintained by the Taiwan Stock Exchange.

• E. The appropriations for 2018 as resolved by the Board of Directors on March 22, 2019 are as follows:

follows:
Legal reserve Special reserve Cash dividends	Year ended December 31, 2018
	Amount $ 32,342 330,410 250,045 $ 612,797	Dividends per share (in dollars)
		$ 1.8000

• F. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(25).

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(21) Operating revenue

Revenue from contracts with customers Rental revenue Others	Year ended December 31, 2018 $ 1,431,331 1,068,772 7,363 $ 2,507,466

• A. Disaggregation of revenue from contracts with customers

The Group’s revenue is derived from the transfer of goods and services over time and at a point in time in the following major product lines:

Year ended December 31, 2018 Revenue from external customer contracts Timing of revenue recognition At a point in time Over time	Sale of drugs $ 171,500 $ 171,500 - $ 171,500	Sale of medical instruments $ 1,000,906 $ 1,000,906 - $ 1,000,906	Repair maintenance and other services $ 258,925 $ - 258,925 $ 258,925	Total $1,431,331 $1,172,406 258,925 $1,431,331

• B. Contract assets and liabilities

• (a) The Group has recognised the following revenue-related contract assets and liabilities:

Contract assets: Contract assets - repair and maintenance contracts Contract liabilities: Contract liabilities - repair and maintenance contracts Contract liabilities - sale of medical instrument contracts	December 31, 2018 $ 40,959 $ 9,802 329,745 $ 339,547

• (b) Revenue recognised that was included in the contract liability balance at the beginning of the year

Revenue recognised that was included in the contract liability balance at the beginning of the year Repair and maintenance contracts Sale of medical instrument contracts	Year ended December 31, 2018 $ 7,558 16,886 $ 24,444

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• C. Unfulfilled long-term repair, maintenance and medical instrument contracts

Aggregate amount of the transaction price allocated to long-term contracts that are partially or fully unsatisfied as at December 31, 2018, amounted to $309,500. Management expects that the transaction price allocated to the unsatisfied contracts as of December 31, 2018, will be recognised as revenue from 2019 to 2021. As permitted under the transitional provisions in IFRS 15, the transaction price allocated to partially unsatisfied performance obligations as of December 31, 2017, is not disclosed.

Except for the abovementioned contracts, all other repair and maintenance contracts are for periods of one year or less or are billed based on time incurred. As permitted under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

• D. Related disclosures on operating revenue for 2017 are provided in Note 12(5) B.

• (22) Other income

(23)

Years ended December 31, 2018 2017 Interest income $ 8,250 $ 4,581 Rent income 1,617 1,332 Gains on write-off of past due payable - 14,893 Other income 5,754 1,479 $ 15,621 $ 22,285 Other gains and losses Years ended December 31, 2018 2017 Gains on disposal of property, plant and equipment $ 279 $ 57 Losses on disposal of investment ( 350) - Netcurrency exchange gains (losses) 6,147 ( 34,816) Net loss on financial assets and liabilities at fair value through profit or loss ( 21,586) ( 9,242) Impairment loss on financial assets - ( 277,325) Impairment loss on property, plant and equipment ( 1,350) - Other loss ( 3,980) ( 709) ($ 20,840) ($ 322,035)

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(24) Finance costs

Finance costs
Interest expense: Bank borrowings Convertible bonds Long-term contract liabilities Others	Years ended December 31, 2018 2017 $ 49,213 $ 46,304 15,855 13,573 5,103 - 11,895 11,632 $ 82,066 $ 71,509
	2018 $ 49,213 15,855 5,103 11,895 $ 82,066

(25) Expenses by nature

Expenses by nature
Employee benefit expense Wages and salaries Employee stock options Labor and health insurance fees Pension costs Other personnel expenses Depreciation charge	Years ended December 31, 2018 2017 $ 216,389 $ 191,372 3,237 2,637 16,011 15,985 8,979 9,430 7,141 6,094 428,598 432,245 $ 680,355 $ 657,763
	2018 $ 216,389 3,237 16,011 8,979 7,141 428,598 $ 680,355

• A. In accordance with the Articles of Incorporation of the Company, a ratio of distributable profit of the current year (i.e. profit before tax less profit margin before the appropriation of employees’ compensation and directors’ and supervisors’ remuneration), after covering accumulated losses, shall be distributed as employees’ compensation and directors’ and supervisors’ remuneration. The ratio shall not be lower than 0.05% for employees’ compensation and shall not be higher than 5% for directors’ and supervisors’ remuneration. The aforementioned employees’ compensation and directors’ and supervisors’ remuneration requires the approval from the majority of the directors attending a board meeting, with more than two thirds of all directors in attendance, and must be reported to the shareholders. Employees’ compensation is distributed in the form of shares or cash, and the recipients may include employees of affiliates who meet certain conditions. The distribution plan is set by the Chairman.

• B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $140 and $0, respectively; directors’ and supervisors’ remuneration was accrued at $5,600 and $0, respectively. The aforementioned amounts were recognised in salary expenses. For the year ended December 31, 2017, the Company did not recognise the employees’ compensation and directors’ and supervisors’ remuneration due to the net loss. Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved at the meeting of Board of Directors and approved by shareholders

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at their meeting will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(26) Income tax

• A. Income tax expense

• (a) Components of income tax expense:

ax me tax expense Components of income tax expense:
		Years ended	December 31,
		2018		2017
Current tax:
Current tax on profits for the year	$	72,996	$	67,709
Tax on undistributed surplus earnings		25,316		-
Prior year income tax (over)
underestimation	(	367)		356
Total current tax		97,945		68,065
Deferred tax
Origination and reversal of temporary
differences	(	44,136)	(	4,855)
Impact of change in tax rate	(	3,469)		-
Income tax expense	$	50,340	$	63,210

(b) Reconciliation between income tax expense and accounting profit:

		Years ended	December	31,
		2018		2017
Income tax calculated based on profit
before tax and statutory tax rate	$	149,994	$	65,239
Expenses disallowed by tax regulation		1,559		44,831
Tax exempt income by tax regulation	(	67,345)	(	57,791)
Temporary differences not recognised
as deferred tax assets		-		10,392
Taxable loss not recognised as deferred
tax assets		1,725		602
Change in assessment of realisation of
deferred tax assets	(	57,073)	(	419)
Prior year income tax (over)
underestimation	(	367)		356
Tax on undistributed surplus earnings		25,316		-
Impact of change in the tax rate on
temporary differences between
current year and the year realised	(	3,469)		-
Income tax expense	$	50,340	$	63,210

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• (c) The income tax (charge)/credit relating to components of other comprehensive income is as follows:

Currency translation differences	Years ended December 31, 2018 2017 ($ 2,150) $ 1,502

• B. Amounts of deferred tax assets or liabilities as a result of temporary differences, tax losses and investment tax credits are as follows:

					2018	2018	2018
								Recognised
				Recognised				in other
				in profit			comprehensive
		January 1		or loss				income			December 31
Temporary differences
- Deferred tax assets:
Unrealised allowance for
inventory obsolescence	$	9,525	$	802		$		-	$		10,327
Unrealised exchange loss		4,351	(	4,304)				-			47
Warranty obligations		1,657		480				-			2,137
Long-term contract liabilities
interest expense		-		2,639				-			2,639
Currency translation
differences		2,150		-		(		2,150)			-
Others		1,201		1,634				-			2,835
Income tax losses		3,659		46,654				-			50,313
		22,543		47,905		(		2,150)			68,298
Temporary differences
- Deferred tax liabilities:
Land revaluation increment tax	(	39,395)		-				-	(		39,395)
Others	(	736)	(	300)				-	(		1,036)
	(	40,131)	(	300)				-	(		40,431)
	($	17,588)	$	47,605		($		2,150)		$	27,867

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January 1 Temporary differences - Deferred tax assets: Unrealised allowance for inventory obsolescence $ 10,003 Unrealised exchange loss 1,227 Warranty obligations 2,275 Currency translation differences 648 Others 670 Income tax losses 1,323 16,146 Temporary differences - Deferred tax liabilities: Land revaluation increment tax( 39,395) Others ( 696) ( 40,091) ($ 23,945)		2017
		Recognised in profit or loss ($ 478) 3,124 ( 618) - 531 2,336 4,895 - ( 40) ( 40) $ 4,855
		( (

• C. Expiration dates of unused tax losses and amounts of unrecognised deferred tax assets are as follows:

as follows:
	December 31, 2018
Year incurred 2012 2013 2014 2015 2016 2017 2018	Amount filed/assessed $ 5,451 17,125 4,626 9,659 10,904 15,829 252,083 $ 315,677	Unused amount $ - - 347 2,798 6,139 888 252,083 $ 262,255	Unrecognised deferred tax assets $ - - 347 2,798 3,359 888 3,296 $ 10,688	Expiry year
				2022 2023 2024 2025 2026 2027 2028

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December 31, 2017

Year incurred 2012 2013 2014 2015 2016 2017	Amount filed/assessed $ 6,351 36,693 13,972 24,537 22,665 18,321 $ 122,539	Unused amount $ 6,351 26,376 13,678 23,497 22,665 18,321 $ 110,888	Unrecognised deferred tax assets $ 6,351 26,376 13,678 21,435 17,981 3,540 $ 89,361	Expiry year
				2022 2023 2024 2025 2026 2027

• D. The amounts of deductible temporary differences that were not recognised as deferred tax assets are as follows:

December 31, 2018 December 31, 2017 Deductible temporary differences $ 83,505 $ 97,445

• E. Income tax assessment of the Company and its domestic subsidiaries is as follows:

Tomorrow Medical System CO., Ltd., Shin-Ho Instruments Co., Ltd., Tong-Lin Instruments Co., Ltd., Hsin Lin Biotech Co., Ltd., E Century Healthcare Corporation, Medlink Healthcare Limited, Hsing-Yeh Biotechnology Co., Ltd.

Recent assessment Through 2017

The Company, Chiu Ho Medical System Co., Ltd., Chiu Ho Scientific Co., Ltd., Chiu Ho Biotech Co., Ltd. and Hua Lin Instruments Co., Ltd.

Through 2016

• F. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

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(27) Earnings (loss) per share

Earnings (loss) per share
Year Amount after tax Basic earnings per share Profit attributable to ordinary shareholders of the parent $ 323,422 Diluted earnings per share Profit attributable to ordinary shareholders of the parent $ 323,422 Assumed conversion of all dilutive potential ordinary shares Employee stock options (Note) - Employees’ compensation - Convertible bonds 27,919 Profit attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares $ 351,341 Year Amount after tax Basic loss per share Loss attributable to ordinary shareholders of the parent ($ 86,695) Diluted loss per share Loss attributable to ordinary shareholders of the parent ($ 86,695) Assumed conversion of all dilutive potential ordinary shares Employee stock options (Note) - Employees’ compensation (Note) - Convertible bonds (Note) - Loss attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares ($ 86,695)	Year	ended December 31, 2018 Weighted average number of ordinary shares outstanding Earnings per share (shares in thousands) (in dollars) 139,651 $ 2.32 139,651 - 5 34,679 $ 174,335 $ 2.02 ended December 31, 2017 Weighted average number of ordinary shares outstanding Loss per share (shares in thousands) (in dollars) 139,872 ($ 0.62) 139,872 - - - 139,872 ($ 0.62)
	Amount after tax $ 323,422 $ 323,422 - - 27,919 $ 351,341 Year
		Weighted average number of ordinary shares outstanding (shares in thousands) 139,872 ( 139,872 - - - 139,872 (

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Note: Not included due to antidilutive effect.

Because employees’ compensation may be distributed in the form of shares, the calculation of diluted earnings per share assumes that employees’ compensation would be distributed entirely in shares. These dilutive potential common shares are included in the weighted average number of outstanding shares when calculating diluted earnings per share. When calculating basic earnings per share, shares issued as part of employees’ compensation are included in the weighted average number of outstanding shares only if the number of such shares have been confirmed and resolved by the shareholders. Shares issued as part of employees’ compensation are not considered bonus shares, therefore no retrospective adjustment is applied when calculating basic and diluted earnings per share.

(28) Operating leases

• A. The Group leases property and machinery to others under operating lease agreements. Rents of $1,068,772 and $1,038,883 were recognised for these leases in profit or loss for the years ended December 31, 2018 and 2017, respectively.

• B. The Group leases assets such as real estate and warehouses under operating lease agreements. The lease terms are from 2011 to 2027, and all these lease agreements are renewable at the end of the lease period. For the years ended December 31, 2018 and 2017, the Group recognised rental expenses of $19,561 and $22,999, respectively. The future aggregate minimum lease payments under operating leases are as follows:

No later than one year Later than one year but not later than five years Later than five years	December 31, 2018 $ 12,025 24,811 6,183 $ 43,019	December 31, 2017 $ 14,508 38,291 15,733 $ 68,532

(29) Goodwill

• A. Goodwill is allocated as follows to the Group’s cash-generating units:

Hsing-Yeh Biotechnology Co., Ltd.	December 31, 2018 $ 150,617	December 31, 2017 $ 150,617

• B. Goodwill is allocated to the Group’s cash-generating units. The recoverable amount of all cash-generating units has been determined based on value-in-use calculations and fair value, net of disposed cost. These calculations use pre-tax cash flow projections based on financial budgets approved by the management covering a five-year period, and the details of evaluation on fair value are provided in Note 6(9).

The recoverable amount calculated using the value-in-use exceeded their carrying amount, so goodwill was not impaired.

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Management determined budgeted gross margin based on past performance and their expectations of market development. The weighted average growth rates used are consistent with the projection included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments. As of December 31, 2018 and 2017, the pre-tax discount rate applied on the Group’s major assessments is 9.07% and 9.27%, respectively.

(30) Supplemental cash flow information

Information on investing activities with partial cash payments is provided in Notes 6(8) and (9).

(31) Changes in liabilities from financing activities

January 1, 2018 Changes in cash flow from financing activities Impact of changes in foreign exchange rate( December 31, 2018	Short-term borrowings $ 641,535 55,091 9,694) $ 686,932	Long-term Guarantee deposits borrowings received $ 2,889,415 $ 26,831 105,789 ( 7,243) - ( 53) ( $ 2,995,204 $ 19,535	Total liabilities from financing activities $ 3,557,781 153,637 9,747) $ 3,701,671

7. RELATED PARTY TRANSACTIONS

• (1) Parent and ultimate controlling party

The Company’s stocks are held by the public, so it has neither an ultimate parent company nor ultimate controlling party.

(2) Names of related parties and relationship

Names of related parties

Yeezen General Hospital High-END VISION EYE CENTER Swissray Medical AG Swissray Global Healthcare Holding Ltd. White Essence AESolution Biomedical Co., Ltd. J. Ab Beauty Co., Ltd.

PT. NAVI Medical Indonesia CHENG-HSIN Biotechnology Co., Ltd

Relationship with the Group

Substantive related party Substantive related party Substantive related party Substantive related party Substantive related party Substantive related party Substantive related party Associate Associate

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• (3) Significant transactions and balances with related parties

A. Operating revenue

(a) Sales revenue

nt transactions and balances with related rating revenue Sales revenue	parties
Sales of goods: Yeezen General Hospital Others	Years ended December 31, 2018 2017 $ 177,209 $ 200,376 2,654 1,928 $ 179,863 $ 202,304
	2018 $ 177,209 2,654 $ 179,863

In terms of the transactions between the subsidiaries, Tomorrow Medical System Co., Ltd. and Chiu Ho Scientific Co., Ltd., and the abovementioned related parties, goods are sold based on the price lists in force and terms that would be available to third parties. Hsing-Yeh Biotechnology Co., Ltd. and the abovementioned related parties have no other similar transactions that can be used for comparison. The collection period is approximately six months.

(b) Service revenue

Service revenue
Service revenue: Others	Years ended December 31, 2018 2017 $ 43 $ 29
	2018 $ 43

The subsidiaries, Chiu Ho Medical System Co., Ltd. and Chiu Ho Scientific Co., Ltd., provide repair and maintenance services to the abovementioned related parties, with a collection period of approximately six months.

(c) Rental revenue

Rental revenue
Rental revenue: Others	Years ended December 31, 2018 2017 $ 76,927 $ 96,823
	2018 $ 76,927

• i. The subsidiary, Hsing-Yeh Biotechnology Co., Ltd., leases medical equipment and property to the abovementioned related parties. The lease terms are from 2016 to 2019. Lease payments are determined by negotiations between the two parties and are made monthly.

• ii. The subsidiaries, J. Ab Beauty Co., Ltd., Chiu Ho Scientific Co., Ltd., and E Century Healthcare Corporation, lease medical equipment to the abovementioned related parties. The lease terms are from 2016 to 2031. The monthly lease payment is set as a predetermined percentage of the monthly revenue of the related party. The collection period is between 2 and 6 months.

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B. Purchases

Purchases
Purchases of goods: Others	Years ended December 31, 2018 2017 $ 706 $ 6,043
	2018 $ 706

The subsidiaries, Chiu Ho Medical System Co., Ltd., Chiu Ho Scientific Co., Ltd., and Chiu Ho (CHINA) Medical Technology Co., Ltd., and the abovementioned related parties have no other similar transactions that can be used for comparison. The collection period is approximately three months.

• C. Notes and accounts receivable

• (a) Receivables from related parties:

Yeezen General Hospital Others Less: Allowance for doubtful accounts(	December 31, 2018 $ 205,356 7,299 212,655 15) ( $ 212,640	December 31, 2017 $ 196,664 16,367 213,031 6,280) $ 206,751

• (b) The ageing analysis of notes and accounts receivable due from related parties is as follows:

Not past due Past due Up to 1 month Up to 2 months Up to 3 months Up to 4 months Up to 5 months Up to 6 months Over 6 months	December 31, 2018 $ 134,669 16,894 16,234 16,591 13,569 14,698 - - $ 212,655

• (c) Lease payments receivable (shown as ‘accounts receivable due from related parties’ and ‘other non-current financial assets’)

The subsidiaries, Hsing-Yeh Biotechnology Co., Ltd. and Chiu Ho Scientific Co., Ltd., lease machinery and other equipment to Yeezen General Hospital under a finance lease. The lease terms are from 2015 to 2023 and from 2017 to 2022, respectively. Based on the terms of the lease contract, the ownership of the equipment shall be transferred to the lessee when the lease expires. In addition, Hsing-Yeh Biotechnology Co., Ltd. leases renovation project assets to CHENG-HSIN Biotechnology Co., Ltd under a finance lease. The lease term is from 2017 to 2024 and is for the major part of economic life of

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the underlying asset. The lease payments from the aforementioned agreements are expected to be collected on schedule. The gross investments in those leases and present value of total minimum lease payments receivable as at December 31, 2018 and 2017 were as follows:

were as follows:
Current Yeezen General Hospital CHENG-HSIN Biotechnology Co., Ltd Loss allowance ( Non-current Yeezen General Hospital CHENG-HSIN Biotechnology Co., Ltd Loss allowance ( Current Yeezen General Hospital CHENG-HSIN Biotechnology Co., Ltd. Non-current Yeezen General Hospital CHENG-HSIN Biotechnology Co., Ltd	December 31, 2018		Net lease payments receivable $ 18,414 8,985 1) $ 27,398 $ 22,758 46,067 3) $ 68,822 Net lease payments receivable $ 17,120 7,900 $ 25,020 $ 37,535 55,903 $ 93,438
	Total lease payments Unearned finance receivable income $ 19,452 ($ 1,038) 10,332 ( 1,347) 1) - $ 29,783 ($ 2,385) $ 23,447 ($ 689) 49,077 ( 3,010) 3) - $ 72,521 ($ 3,699) December 31, 2017	( (
	Total lease payments Unearned finance receivable income $ 18,525 ($ 1,405) 9,462 ( 1,562) $ 27,987 ($ 2,967) $ 39,024 ($ 1,489) 60,211 ( 4,308) $ 99,235 ($ 5,797)

(d) Information relating to credit risk is provided in Notes 12(2) and (4).

D. Contract assets – related parties

Others

	December 31, 2018 $ 7	December 31, 2017 $ -

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E. Other receivables due from related parties

• (a) Loans to related parties

r receivables due from related parties Loans to related parties
Yeezen General Hospital High-END VISION EYE CENTER Others Interest income Yeezen General Hospital High-END VISION EYE CENTER Others	December 31, 2018 December 31, 2017 $ 148,000 $ 73,000 5,000 5,000 - 1,000 $ 153,000 $ 79,000 Years ended December 31, 2018 2017 $ 3,139 $ 1,234 125 123 5 25 $ 3,269 $ 1,382
	2018 $ 3,139 125 5 $ 3,269

For the years ended December 31, 2018 and 2017, the loans carried an interest rate of 2.5% per annum.

• (b) Capital reduction of investments accounted for using equity method

F.	December 31, 2018 December 31, 2017 Others $ - $ 9,659 (c) Other receivables reclassified because of the dissolution of investees December 31, 2018 December 31, 2017 Others $ 369 $ - Notes and accounts payable December 31, 2018 December 31, 2017 Payables to related parties Others $ 11,229 $ 4,696

The payables to related parties arise mainly from purchases are due three months. The payables bear no interest.

G. Disposal of property, plant and equipment

Disposal of property, plant and equipment
White Essence	Year ended December 31, 2018 Disposal proceeds Gain on disposal $ 152 $ 152
	Disposal proceeds $ 152

For the year ended December 31, 2017, there was no disposal of property, plant and equipment with related parties.

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(4) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Share-based payments	Years ended December 31, 2018 2017 $ 31,696 $ 28,089 279 324 343 576 $ 32,318 $ 28,989
	2018 $ 31,696 279 343 $ 32,318

8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

Book value Asssets December 31, 2018 December 31, 2017 Notes receivable $ 4,290 $ 4,290 Long-term notes receivable (shown as ‘other financial assets - non-current’) 7,590 11,550 Time deposits (shown as ‘other current assets’) - 58,008 Reserve account (shown as ‘other financial assets - non-current’) 21,480 15,265 Time deposits (shown as ‘other financial assets - non-current’) 55,053 50,008 Property, plant and equipment (including investment property) Land 1,664,226 1,664,226 Buildings and structures 370,089 382,639 Leased assets - machinery and equipment 416,323 368,631 2,450,638 2,415,496 $ 2,539,051 $ 2,554,617

Purpose Collateral for long-term borrowings Collateral for long-term borrowings Performance guarantee and collateral for short-term borrowings Collateral for long-term borrowings Performance guarantee Collateral for short-term and long-term borrowings Collateral for short-term and long-term borrowings Collateral for long-term borrowings

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

(1) Contingencies

None.

• (2) Commitments

• A. Please refer to Notes 6(13) and 6(14) for commitments related to the second and the third domestic issuances of secured convertible corporate bonds and the syndicated bank loan.

• B. As of December 31, 2018 and 2017, capital expenditures on property, plant and equipment

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contracted for but not yet incurred was $1,586,518 and $1,476,994, respectively.

• C. As of December 31, 2018 and 2017, amounts available under unused letters of credit were $235,414 and $23,164, respectively.

• D. Operating lease agreements:

Please refer to Note 6 (28) for details.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

• A. Financial instruments by category

Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Designation of equity instrument Available-for-sale financial assets Available-for-sale financial assets Financial assets at amortised cost Cash and cash equivalents Contract assets Notes receivable Accounts receivable (including related parties) Other receivables (including related parties) Other financial assets	December 31, 2018 $ 53,974 $ 47,231 $ - $ 1,209,636 40,959 44,838 741,820 153,574 720,468 $ 2,911,295	December 31, 2017 $ 660 $ - $ 89,837 $ 1,444,363 - 45,082 743,572 90,596 670,933 $ 2,994,546

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Financial liabilities Financial liabilities at amortised cost Short-term borrowings Notes payable Accounts payable (including related parties) Other payables Bonds payable (including current portion) Long-term borrowings (including current portion) Other financial liabilities	December 31, 2018 $ 686,932 4,346 216,180 149,934 1,177,035 2,995,204 21,210 $ 5,250,841		December 31, 2017 $ 641,535 4,139 141,272 58,549 1,481,280 2,889,415 26,831 $ 5,243,021

• B. Financial risk management policies

• (a) The Group’s operating activities expose it to a variety of financial risks, including market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial position and financial performance.

• (b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Group conducts business worldwide and imports state-of-the-art medical equipment and supplies from various countries and is therefore exposed to foreign exchange rate risk from multiple foreign currencies, primarily the US dollar. Foreign exchange rate risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

• ii. Under the Group’s financial risk management policy, foreign exchange risk is managed using debt denominated in the relevant foreign currency.

• iii. The Group’s businesses involve some non-functional currency operations (the Company’s and certain subsidiaries’ functional currency: NTD; other certain

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subsidiaries’ functional currency: RMB or HKD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD EUR:NTD USD:RMB USD:HKD Financial liabilities Monetary items USD:NTD EUR:NTD SGD:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD EUR:NTD USD:RMB USD:HKD IDR:NTD Financial liabilities Monetary items USD:NTD EUR:NTD SGD:NTD USD:RMB Non-monetary items IDR:NTD	(Foreign currency: functional currency) Financial assets Monetary items USD:NTD EUR:NTD USD:RMB USD:HKD Financial liabilities Monetary items USD:NTD EUR:NTD SGD:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD EUR:NTD USD:RMB USD:HKD IDR:NTD Financial liabilities Monetary items USD:NTD EUR:NTD SGD:NTD USD:RMB Non-monetary items IDR:NTD	December 31, 2018 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 8,856 30.72 $ 272,056 22 35.20 774 1,327 6.87 40,765 1,302 7.83 39,997 5,068 30.72 155,689 263 35.20 9,258 765 22.48 17,197 December 31, 2017 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 12,493 29.76 $ 371,792 2,010 35.57 71,496 1,664 6.51 49,521 977 7.82 29,076 4,145,654 0.00223 9,659 1,054 29.76 31,367 6,682 35.57 237,679 1,682 22.26 37,441 230 6.51 6,845 54,833 0.00223 122	December 31, 2018 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 8,856 30.72 $ 272,056 22 35.20 774 1,327 6.87 40,765 1,302 7.83 39,997 5,068 30.72 155,689 263 35.20 9,258 765 22.48 17,197 December 31, 2017 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 12,493 29.76 $ 371,792 2,010 35.57 71,496 1,664 6.51 49,521 977 7.82 29,076 4,145,654 0.00223 9,659 1,054 29.76 31,367 6,682 35.57 237,679 1,682 22.26 37,441 230 6.51 6,845 54,833 0.00223 122	Year ended December 31, 2018 Sensitivity analysis Effect on Extent of profit variation or loss 1% $ 2,721 1% 8 1% 408 1% 400 1% 1,557 1% 93 1% 172 Year ended December 31, 2017 Sensitivity analysis Effect on Extent of profit variation or loss 1% $ 3,718 1% 715 1% 495 1% 291 1% 97 1% 314 1% 2,377 1% 374 1% 68
		Foreign currency amount (in thousands) $ 12,493 2,010 1,664 977 4,145,654 1,054 6,682 1,682 230 54,833	Exchange rate 29.76 35.57 6.51 7.82 0.00223 29.76 35.57 22.26 6.51 0.00223
				Extent of variation 1% 1% 1% 1% 1% 1% 1% 1% 1%

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• iv. The Group’s unrealised exchange gain (loss) arising from significant foreign exchange variation:

exchange variation:
		Year ended December 31, 2018
	Unrealised foreign exchange gain (loss)
	Foreign currency
	amount
	(in thousands)		Exchange rate	Book value
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD	$	-	30.72 $	22,594
EUR:NTD		-	35.20 (	6,357)
USD:RMB	(	36)	6.87 (	166)
USD:HKD		42	7.83	161
Financial liabilities
Monetary items
USD:NTD		-	30.72	331
EUR:NTD		-	35.20	9,589
USD:RMB	(	238)	6.87 (	1,086)
		Year ended December 31, 2017
	Unrealised foreign exchange gain (loss)
	Foreign currency
	amount
	(in thousands)		Exchange rate	Book value
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD	$	-	- ($	20,797)
EUR:NTD		-	-	6,359
USD:RMB	(	69)	6.51 (	310)
USD:HKD		57	7.82	221
Financial liabilities
Monetary items
USD:NTD		-	-	6,423
EUR:NTD		-	- (	10,066)
USD:RMB		233	6.51	1,047

Price risk

i. The Group is exposed to equity price risk from its investments classified on the consolidated balance sheet either as financial assets measured at fair value through profit or loss, financial assets measured at fair value through other comprehensive

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income or available-for-sale financial assets. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group has set stop-loss points and therefore does not expect to incur significant losses from equity price risk.

• ii. The Group’s investments in equity securities comprise domestic and foreign listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant, post-tax profit for the years ended December 31, 2018 and 2017 would have increased/decreased by $5,348 and $0, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $4,723 and $8,984, respectively, as a result of other comprehensive income classified as available-for-sale equity investment and equity investment at fair value through other comprehensive income.

Cash flow and fair value interest rate risk

• i. The Group’s interest rate risk arises from long-term borrowings. Long-term borrowings issued at variable rates expose the Group to cash flow interest rate risk, which is partially offset by cash and cash equivalents held at variable rates. The Group’s borrowings at variable rates are primarily denominated in NTD and USD.

• ii. If the borrowing interest rate had increased/decreased by 1% with all other variables held constant, profit, net of tax for the year ended December 31, 2018 and 2017 would have decreased/increased by $29,952 and $35,309, respectively. The main factor is that changes in interest expense result from floating rate borrowings.

• (b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients on the contract obligations. The main factor is the counterparties could not repay in full the accounts receivable based on the agreed terms. According to the Group’s credit policy, each local entity in the Group is responsible for managing and assessing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the credit control supervisor. The utilization of credit limits is regularly monitored.

• ii. The Group adopts the following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition:

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If the contract payments were past due over one month based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

• iii. The Group adopts the assumption under IFRS 9, that is, the default occurs when the contract payments are past due over three months and up to six months.

• iv. The Group classifies customer’s accounts receivable and contract assets in accordance with customer types. The Group applies the modified approach using provision matrix to estimate expected credit loss under the provision matrix basis.

• v. The Group took into consideration the forecastability to adjust historical and timely information to assess the default possibility of accounts receivable and contract assets. On December 31, 2018, the provision matrix is as follows:

December 31, 2018 Not past due Up to 1 month Up to 2 months Up to 3 months Up to 4 months Up to 5 months Up to 6 months Over 6 months	Expected loss rate 0.00%~0.26% 0.00%~3.70% 0.00%~6.72% 0.00%~12.22% 0.00%~100% 0.00%~100% 0.00%~100% 100%	Total book value Loss allowance $ 920,074 ($ 359) 23,197 ( 149) 22,315 ( 271) 21,139 ( 492) 14,569 ( 604) 14,698 - - - 19,379 ( 19,379) $ 1,035,371 ($ 21,254)

• vi. Movements in relation to the Group applying the simplified approach to provide loss allowance for accounts receivable, contract assets, long-term and short-term lease payments receivable are as follows:

Accounts receivable (including related parties) At January 1_IAS 39 $ 58,059 Adjustments under new standards 17,564 At January 1_IFRS 9 75,623 Provision for impairment 13,483 Reversal of impairment ( 61,365) Write-offs ( 6,281) Effect of foreign exchange ( 238) At December 31 $ 21,222		2018

vii. Credit risk information of 2017 is provided in Note 12(4).

• (c) Liquidity risk

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• i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the Group’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets.

• ii. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the expected or contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:

December 31, 2018 Short-term borrowings Notes payable and long- term notes payable Accounts payable (including related parties) Other payables Bonds payable and embedded derivative instruments Long-term borrowings (including current portion) December 31, 2017 Short-term borrowings Notes payable and long- term notes payable Accounts payable (including related parties) Other payables Bonds payable and embedded derivative instruments Long-term borrowings (including current portion)	Less than 1 year $ 693,648 4,346 216,180 147,760 - 238,617 Less than 1 year $ 647,958 4,139 141,272 55,323 316,587 587,569	Between 1 and 2 years $ - 1,340 - - 1,177,035 827,246 Between 1 and 2 years $ - - - - - 559,821	Between 2 and 5 years $ - 335 - - - 2,106,231 Between 2 and 5 years $ - - - - 1,164,693 1,839,875	Over 5 years $ - - - - - 14,019 Over 5 years $ - - - - - -

(3) Fair value information

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that

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the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks is included in Level 1.

• 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. The fair value of the Group’s investment in equity investment without active market is included in Level 3.

• B. Fair value information of investment property at cost is provided in Note 6(9).

• C. The carrying amount of a financial instrument not measured at fair value is a reasonable approximation of its fair value. Such financial instruments include cash and cash equivalents, notes receivable (including those from related parties), accounts receivable (including those from relaed parties), other receivables (including those from related parties), guarantee deposits paid, long-term notes and accounts receivable, other financial assets, short-term borrowings, notes payable, accounts payable (including those to related parties), other payables (including those to related parties), long-term notes payable, long-term borrowings (including the portion due within one year or one business cycle) and bonds payable.

• D. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities are as follows:

• (a) The related information of the nature of the assets and liabilities is as follows:

December 31, 2018 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities Derivative instruments Financial assets at fair value through other comprehensive income Equity securities	Level 1 $ 53,482 - 14,394 $ 67,876	Level 2 $ - - - $ -	Level 3 $ - 492 32,837 $ 33,329	Total $ 53,482 492 47,231 $101,205

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December 31, 2017 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Derivative instruments Available-for-sale financial assets Equity securities	Level 1 $ - 62,890 $ 62,890	Level 2 $ - - $ -	Level 3 $ 660 26,947 $ 27,607	Total $ 660 89,837
				$ 90,497

• (b) The methods and assumptions the Group used to measure fair value are as follows:

  • i. Listed stocks are instruments whose fair values are measured using quoted market prices (that is, Level 1). The quoted market prices used for these stocks are the closing prices on the balance sheet date.

  • ii. Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes.

• E. For the years ended December 31, 2018 and 2017, there was no transfer between Level 1 and Level 2.

• F. The following chart is the movement of Level 3 for the years ended December 31, 2018 and 2017.

2017.
					2018
				Derivative financial
		Equity securities			instruments		Total
At January 1	$	26,947		$	660	$	27,607
Gains and losses
recognised in profit
or loss			- (		168)	(	168)
Gains and losses
recognised in other
comprehensive income		5,890			-		5,890
At December 31	$	32,837		$	492	$	33,329

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At January 1 Current issue Gains and losses recognised in profit or loss Gains and losses recognised in other comprehensive income ( At December 31		2017	Total $ 34,721 292 368 7,774) $ 27,607
	Equity securities $ 34,721 - - 7,774) $ 26,947	Derivative financial instruments $ - 292 368 - ( $ 660

• G. For the years ended December 31, 2018 and 2017, there was no transfer into or out from Level 3.

• H. Financial accounting department is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions and performing reviews regularly.

• I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Fair value at December 31, 2018 Non-derivative equity instrument: AESolution Biomedical Co., Ltd. $ 32,163 Huede Healthtech Co., Ltd. 674 Hybrid instrument: Convertible bond 492	Valuation technique Market comparable companies Net asset value Binomial Model	Significant unobservable input Price to book ratio multiple Discount for lack of marketability Not applicable Volatility Discount rate	Range (weighted average) 5.55 30% 23.27% 0.7839%	Relationship of inputs to fair value The higher the multiple, the higher the fair value The higher the discount for lack of marketability, the lower the fair value Notapplicable The higher the volatility, the higher the fair value; The higher the discount rate, the lower the fair value

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Fair value at December 31, 2017 Non-derivative equity instrument: AESolution Biomedical Co., Ltd. $ 26,273 Huede Healthtech Co., Ltd. 674 Hybrid instrument: Convertible bond 660	Valuation technique Market comparable companies Net asset value Binomial Model	Significant Range unobservable (weighted input average) Price to book ratio multiple 4.26 Discount for lack of marketability 30% Not applicable Volatility Discount rate 17.71% 0.8231%	Relationship of inputs to fair value The higher the multiple, the higher the fair value The higher the discount for lack of marketability, the lower the fair value Not applicable The higher the volatility, the higher the fair value; The higher the discount rate, the lower the fair value

• J. The Group has carefully assessed the valuation models and assumptions used to measure fair value. However, use of different valuation models or assumptions may result in different measurement. For financial assets and financial liabilities classified as Level 3, an increase or decrease in their valuation parameter by 1% would have no material impact on gain or loss and other comprehensive income as at December 31, 2018 and 2017.

(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

• A. Summary of significant accounting policies adopted in 2017:

• (a) Financial assets and liabilities at fair value through profit or loss

  • i. It refers to financial assets and liabilities held for trading. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets and liabilities that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

    • (i) Hybrid (combined) contracts; or

    • (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or

    • (iii) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management practice.

  • ii. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using settlement date accounting.

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• iii. Financial assets and liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets and liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets and liabilities are recognised in profit or loss.

• (b) Available-for-sale financial assets

• i. They are non-derivatives that are either designated in this category or not classified in any of the other categories.

• ii. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using settlement date accounting.

• iii. They are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income.

• (c) Loans and receivables

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (d) Impairment of financial assets

• i. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

• ii. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:

  • (i) Significant financial difficulty of the issuer or debtor;

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

  • (iii) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

  • (iv) The disappearance of an active market for that financial asset because of financial difficulties;

  • (v) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

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• iii. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, the amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from ‘other comprehensive income’ to ‘profit or loss’. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognised, such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• B. The reconciliations of carrying amount of financial assets transferred from December 31, 2017, IAS 39, to January 1, 2018, IFRS 9, were as follows:

IAS 39 Impairment loss adjustment IFRS 9		Available-for-sale-equity Measured at fair value through other comprehensive income-equity $ 89,837 - $ 89,837		Effects	Effects
				Retained earnings $ - 277,325 ( $ 277,325 (	Other equity $ - 277,325) $ 277,325)

Under IAS 39, because the equity instruments, which were classified as available-for-sale financial assets amounting to $89,837, were not held for the purpose of trading, they were reclassified as ‘financial assets at fair value through other comprehensive income (equity instruments)’, and accordingly, retained earnings was increased and other equity interest was decreased in the amounts of $277,325 and $277,325 on initial application of IFRS 9, respectively.

• C. The reconciliation of allowance for impairment from December 31, 2017, as these are impaired under IAS 39, to January 1, 2018, as these are expected to be impaired under IFRS 9, are as follows:

IAS 39/IAS 37 Impairment loss adjustment IFRS 9	Notes and accounts receivable $ 58,066 17,625 $ 75,691

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• D. The significant accounts for the year ended December 31, 2017, are as follows:

• (a) Financial assets and liabilities at fair value through profit or loss

Items Non-current items: Financial assets held for trading Non-hedging derivatives (Redemption rights to the third domestic issuance of secured convertible corporate bonds) Valuation adjustment of financial assets held for trading	December 31, 2017 $ 292 368 $ 660

For the year ended December 31, 2017, the Company recognised net gains (losses) on financial assets and liabilities held for trading purposes in the amounts of $368, which was included in “other gains and losses”.

• (b) Available-for-sale financial assets

was included in “other gains and losses”. Available-for-sale financial assets
Items	December	31, 2017
Non-current items:
Listed stocks
Swissray Global Healthcare Holding Ltd.	$	340,215
Unlisted stocks
AESolution Biomedical Co., Ltd.		39,000
Huede Healthtech Co., Ltd.		2,400
Valuation adjustment	(	14,453)
Accumulated impairment	(	277,325)
	$	89,837

  - i. For the year ended December 31, 2017, the Group recognised fair value changes in other comprehensive income in the amounts of ($131,103).

  - ii. For the year ended December 31, 2017, certain investments have been impaired under the Group’s assessment, and the Group recognised and reclassified impairment loss from equity to profit or loss amounting to $277,325, which was listed in ‘Other gains and losses’.

• E. Credit risk information for the year ended December 31, 2017 is as follows:

• (a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance

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with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, including outstanding receivables and committed transactions.

• (b) For the year ended December 31, 2017, no credit limits were exceeded during the reporting periods, and management did not expect any significant losses from nonperformance by these counterparties.

• (c) Based on the Group’s loan standards, the credit quality information on accounts receivable that were neither past due nor impaired is as follows:

Group 1 Group 2 Group 3 Group 1: Hospitals. Group 2: Clinics. Group 3: Others.	December 31, 2017 $ 391,971 18,592 57,437 $ 468,000

• (d) The ageing analysis of financial assets that were past due but not impaired is as follows:

Up to 30 days 31 to 90 days 91 to 180 days Over 181 days	December 31, 2017 $ 2,597 7,438 10,724 74,821 $ 95,580

Note: Individually assessed impairment losses have been excluded, but not impairment losses from group assessments.

The above ageing analysis was based on past due date.

• (e) Movements in the provision for impairment of notes and accounts receivable are as follows:

At January 1 Provision for impairment loss Reversal of impairment loss Effect of foreign exchange At December 31		2017

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(f)	Movements in the provision for impairment of long-term notes and	Movements in the provision for impairment of long-term notes and	accounts receivable	accounts receivable
	are as follows:
			2017
	At January 1	$		4
	Reversal of impairment loss	(		1)
	At December 31	$		3

Excluding the impaired financial assets listed above, long-term notes and accounts receivable were neither past due nor impaired.

• (g) The ageing analysis of notes and accounts receivable due from related parites that were past due but not impaired is as follows:

Not past dueand not impaired Past due but not impaired Up to 30 days 31 to 90 days 91 to 180 days Over 181 days	December 31, 2017 $ 113,175 14,501 32,214 46,423 438 $ 206,751

(5) Effects of initial application of IFRS 15 and information on application of IAS 11 and IAS 18 in 2017

• A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below:

• (a) Sales of goods

  • Revenue is recognised when the installation of sold equipment is completed and the purchasing hospital has officially accepted the equipment. Revenue is measured at the fair value of the consideration received or receivable taking into account of value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

• (b) Please refer to Note 4(12) for information on rental revenue. Revenue from repair, maintenance, and other services are recognised as follows:

  • i. Revenue from rendering services is recognised based on the percentage of work completed at the balance sheet date, when the outcome of services provided can be reasonably estimated. Completion of work is measured by the percentage of the

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actual services performed to the total services to be performed.

  - ii. Revenue recognition must consider the possibility of recovering costs already incurred when the outcome of services provided cannot be reasonably estimated. If incurred costs are likely to be recovered, revenue should be recognised to the extent of the recoverable costs; if incurred costs are not likely to be recovered, no revenue should be recognised, and the incurred costs should still be recognised as expenses in the current period.

  - iii. Losses incurred when estimating the outcome of services provided are recognised immediately. However, if such losses are estimated to be lower later in the year, the amount of decrease should be recognised as a gain for the year.

• (c) Installment sales with periodic collections of consideration

  • Revenue attributable to the sales price (excluding interest) is recognised on the date of sale. The sales price is the present value of consideration to be collected, calculated by discounting future payments receivable. Interest income is recognised when earned using the effective interest method.

• B. The revenue recognised by using above accounting policies for the year ended December 31, 2017 are as follows:

Sales revenue Rental revenue Service revenue	Year ended December 31, 2017 $ 796,885 1,038,883 281,348 $ 2,117,116

• C. The effects and description of current balance sheet and comprehensive income statement if the Group continues adopting above accounting policies are as follows:

Balance sheet items Accounts receivable Contract assets Contract liabilities – current Other current liabilities Contract liabilities – non-current Other non-current liabilities Retained earnings	Description (1) (1) (2) (2) (3) (3) (3)	Year ended December 31, 2018	Year ended December 31, 2018
		Balance by using IFRS 15 $ 501,782 40,959 30,047 190,845 309,500 21,210 763,134	Balance by using previous Effects from changes in accounting policies accounting policy $ 542,741 ($ 40,959) - 40,959 - 30,047 220,892 ( 30,047) - 309,500 317,515 ( 296,305) 776,329 ( 13,195)

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Comprehensive income statement items	Description (3) (3)	Year ended December 31, 2018	Year ended December 31, 2018
		Balance by using IFRS 15 $ 82,066 317,829	Balance by using previous Effects from changes in accounting policies accounting policy $ 76,963 $ 5,103 322,932 ( 5,103)
Finance costs Profit for the period

Explanation:

(a) Services provided to customers but not yet billed, previously presented as part of ‘accounts receivable’ under IAS 18, are recognised as ‘contract assets’ under IFRS 15.

(b) Prepayments for repair and maintenance services and medical equipment sales contracts, previously presented as part of ‘prepayments for goods’ under IAS 18, are recognised as ‘contract liabilities’ under IFRS 15.

(c) Certain sales contract of medical instruments contain provisions for advance sales receipts, wherein the period between advance collection and the transfer of control of goods is longer than one year. The committed price should be adjusted and recognised as interest expense if the Group considers that the contract contains a significant financing component under IFRS 15, but is not regulated in previous revenue standards.

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

(The following intercompany transactions between the Company and its subsidiaries or between two subsidiaries were eliminated when preparing the consolidated financial statements.)

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: Please refer to table 2.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.

• D. Acquisition or sale of the same security with the accumulated cost reaching $300 million or 20% of paid-in capital or more: None.

• E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paidin capital or more: Please refer to table 4.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.

• I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2) (13) and 12(3) (4).

• J. Significant inter-company transactions during the reporting periods: None exceeds 100 million.

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(2) Information on investees

(The following intercompany transactions between the Company and its subsidaires or between two subsidiaries were eliminated when preparing the consolidated financial statements.)

Names, locations and other information of investee companies (not including investees in Mainland China) ： Please refer to table 6.

(3) Information on investments in Mainland China

(The following intercompany transactions between the Company and its subsidaires or between two subsidiaries were eliminated when preparing the consolidated financial statements.)

• A. Basic information: Please refer to table 7.

• B. Limits on investments in Mainland China: Please refer to table 7.

• C. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None exceeds 100 million.

14. Segment information

(1) General information

The Group operates business only in a single industry. The chief operating decision-maker, who allocates resources and assesses performance of the Group as a whole, has identified that the Group has only one reportable operating segment. The chief operating decision-maker assesses performance based on net profits, and the amounts of assets, liabilities, profits and losses provided to the decision-maker are consistent with those presented in the financial statements. Under one reportable segment, information on profits, losses, assets and liabilities of individual departments are not disclosed.

(2) Measurement of segment information

The chief operating decision-maker assesses performance based on net profits, and the amounts of assets, liabilities, profits and losses provided to the decision-maker are consistent with those presented in the financial statements. Under one reportable segment, information on profits, losses, assets and liabilities of individual departments are not disclosed.

(3) Information on products and services

Because the Company and its subsidiaries are all engaged in sales of drugs and sales, rent and installment and maintenance of medical device, information on products and services is the same with the financial information provided in Notes 6 (21) and 12(5).

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(4) Geographical information

Geographical information for the years ended December 31, 2018 and 2017 is as follows:

Years ended December 31,

Taiwan China Others	2018 Revenue (Note) Non-current assets $ 2,319,272 $ 6,835,852 181,575 138,825 6,619 - $ 2,507,466 $ 6,974,677	2018 Revenue (Note) Non-current assets $ 2,319,272 $ 6,835,852 181,575 138,825 6,619 - $ 2,507,466 $ 6,974,677	2017 Revenue (Note) Non-current assets $ 2,008,905 $ 6,769,624 101,427 175,350 6,784 - $ 2,117,116 $ 6,994,974
	Revenue (Note) $ 2,319,272 181,575 6,619 $ 2,507,466		Revenue (Note) $ 2,008,905 101,427 6,784 $ 2,117,116
		$ 6,835,852 138,825 -
		$ 6,974,677

Note: Revenue was reclassified based on the country where the customers are located.

(5) Major customer information

Major customer information
Yeezen General Hospital	Years ended December 31, 2018 2017 Revenue Revenue $ 250,512 $ 287,480
	2018 Revenue $ 250,512

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CHC Healthcare Group and Subsidiaries

Expressed in thousands of NTD (Except as otherwise indicated)

Loans to others

For the year ended December 31, 2018

Table 1

No. (Note 1)	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2018	Balance at December 31, 2018	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a single party (Note 2)	Ceiling on total loans granted (Note 3)	Footnote
													Item Value
0 0 0 0 0 0 0 0 0 0 0 0 0 1 2	The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company Chiu Ho Scientific Co., Ltd. Hsing-Yeh Biotechnology Co., Ltd.	Chiu Ho Medical System Co., Ltd. Chiu Ho Scientific Co., Ltd. Shin-Ho Instruments Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. E Century Healthcare Corporation Tomorrow Medical System CO., Ltd. Hsin Lin Biotech Co., Ltd. Chiu Ho Biotech Co., Ltd. Ho-Shin Instruments Co., Ltd. Medlink Healthcare Limited Hsing-Yeh Biotechnology Co., Ltd. Chiu Ho (CHINA) Medical Technology Co., Ltd. High-End Vision Eye Center Yeezen General Hospital	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y	350,000 $ 80,000 10,000 60,000 20,000 40,000 380,000 5,000 10,000 10,000 60,000 80,000 30,960 5,000 155,000	350,000 $ 50,000 - 60,000 15,000 20,000 380,000 - 10,000 - 60,000 80,000 30,715 5,000 148,000	180,000 $ 50,000 - - - - 300,000 - - - - 10,000 - 5,000 148,000	2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2.5% 2.5%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Business transaction Business transaction	- $ - - - - - - - - - - - - 4,736 222,799	Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation - -	- $ - - - - - - - - - - - - - -	None - $ None - None - None - None - None - None - None - None - None - None - None - None - None - None -	497,236 $ 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 4,736 199,014	1,988,945 $ 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 53,531 398,028

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Maximum

					Maximum
No. (Note 1)	Creditor	Borrower	General ledger account	Is a related party	outstanding balance during the year ended December 31, 2018	Balance at December 31, 2018	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a single party (Note 2)	Ceiling on total loans granted (Note 3)	Footnote
													Item Value
3 4	Medlink Healthcare Limited CHC Healthcare (HK) Limited	Hsing-Yeh Biotechnology Co., Ltd. Chiu Ho (CHINA) Medical Technology Co., Ltd.	Other receivables Other receivables	Y Y	15,000 $ 7,740	- $ 7,679 1,216,394 $	- $ - 693,000 $	2% 2%	Short-term financing Short-term financing	- $ -	Operation Operation	- $ -	None - $ None -	317,527 $ 8,130	635,054 $ 16,260

Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows:

• (1) The Company is ‘0’.

• (2) The subsidiaries are numbered in order starting from ‘1’.

• Note 2: (1) In accordance with the Company's lending policies and procedures, the credit limit for each type of borrower is set as follows:

• A. For borrowers with which the Company has a business relationship, the individual loan amount cannot exceed the total transaction amount with the Company in the most recent year.

• B. For borrowers with short-term financing needs, the individual loan amount cannot exceend 10% of the Company's net assets according to the most recent financial statements.

• (2) In accordance with the lending policies and procedures of the Company's subsidiary, the credit limit for each type of borrower is set as follows:

• A. For borrowers with which the subsidiary has a business relationship, the individual loan amount cannot exceed the total transaction amount with the subsidiary in the most recent year.

• B. The total loan amount granted to a single party cannot exceed 20% of the subsidiary's net assets according to the most recent financial statements.

• Note 3: (1) Limit on total loans granted by the Company: Total loan amount cannot exceed 40% of the Company's net assets according to the most recent financial statements.

• (2) Limit on total loans granted by the Company's subsidiary: Total loan amount cannot exceed 40% of the subsidiary's net assets according to the most recent financial statements.

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CHC Healthcare Group and Subsidiaries

Table 2

Expressed in thousands of NTD (Except as otherwise indicated)

Provision of endorsements and guarantees to others

For the year ended December 31, 2018

No. （Note 1）	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party （Note 3）	Maximum outstanding endorsement/ guarantee amount as of December 31,2018	Outstanding endorsement/ guarantee amount at December 31,2018	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided （Note 4）	Provision of endorsements/ guarantees by parent company to subsidiary （Note 5）	Provision of endorsements/ guarantees by subsidiary to parent company （Note 5）	Provision of endorsements/ guarantees to the party in Mainland China （Note 5）	Footnote
		Companyname	Relationship with the endorser/ guarantor （Note 2）
0 0 0 0 0 0 0 0 0 1 1 1	The Company The Company The Company The Company The Company The Company The Company The Company The Company Hsing-Yeh Biotechnology Co., Ltd. Hsing-Yeh Biotechnology Co., Ltd. Hsing-Yeh Biotechnology Co., Ltd.	Chiu Ho Medical System Co., Ltd. Tomorrow Medical System CO., Ltd. Chiu Ho Scientific Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. E Century Healthcare Corporation Guangzhou Chiuho Medical System Co.,Ltd. Medlink Healthcare Limited CHC Healthcare (HK) Limited The Company Chiu Ho Medical System Co., Ltd. Tomorrow Medical System Co., Ltd.	2 2 2 2 2 2 3 3 3 4 4 4	9,944,726 $ 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 1,990,142 1,990,142 1,990,142	2,772,390 $ 1,852,401 251,960 250,000 130,000 120,000 103,268 305,000 245,720 1,189,718 933,474 575,164	1,917,145 $ 1,460,000 251,715 - - 57,000 98,384 50,000 - 828,236 - 575,164	595,822 $ 525,036 67,111 - - 46,261 85,398 40,000 - 828,236 - 225,464	- $ - - - - - - - - 828,236 - 575,164	38.56% 29.36% 5.06% 0.00% 0.00% 1.15% 1.98% 1.01% 0.00% 83.23% 0.00% 57.80%	14,917,089 $ 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 2,985,213 2,985,213 2,985,213	Y Y Y Y Y Y Y Y Y N N N	N N N N N N N N N Y N N	N N N N N N Y N N N N N

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No. （Note 1）	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party （Note 3）	Maximum outstanding endorsement/ guarantee amount as of December 31,2018	Outstanding endorsement/ guarantee amount at December 31,2018	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided （Note 4）	Provision of endorsements/ guarantees by parent company to subsidiary （Note 5）	Provision of endorsements/ guarantees by subsidiary to parent company （Note 5）	Provision of endorsements/ guarantees to the party in Mainland China （Note 5）	Footnote
		Companyname	Relationship with the endorser/ guarantor （Note 2）
1	Hsing-Yeh Biotechnology Co., Ltd.	Medlink Healthcare Limited	4	1,990,142 $	108,444 $	- $ 5,237,644 $	- $ 2,413,328 $	- $	0.00%	2,985,213 $	N	N	N
								1,403,400 $

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

• (1) The Company is ‘0’.

• (2) The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following seven categories; fill in the number of category each case belongs to:

• (1) Having business relationship.

• (2) The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/guaranteed subsidiary.

• (3) The endorsed/guaranteed company owns directly and indirectly more than 50% voting shares of the endorser/guarantor parent company.

• (4) The endorser/guarantor parent company owns directly and indirectly more than 90% voting shares of the endorsed/guaranteed company.

• (5) Mutual guarantee of the trade made by the endorsed/guaranteed company or joint contractor as required under the construction contract.

• (6) Due to joint venture, all shareholders provide endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership.

• (7) Joint guarantee of the performance guarantee for pre-sold home sales contract as required under the Consumer Protection Act.

• Note 3: (1) In accordance with the Company's policies and procedures on endorsements and guarantees, the endorsement or guarantee amount for a single party cannot exceed 200% of the Company's net assets according to the most recent financial statements.

(2) In accordance with the policies and procedures on endorsements and guarantees provided by the Company's subsidiary, the endorsement or guarantee amount for a single party cannot exceed 200% of the subsidiary's net assets according to the most recent financial statements.

(3) In accordance with the Company's policies and procedures on endorsements and guarantees, the total endorsement or guarantee amount for a single party provided by the Company and its subsidiaries cannot exceed 200% of the Company's net assets according to the most recent financial statements.

• Note 4: (1) In accordance with the Company's policies and procedures on endorsements and guarantees, the total endorsement and guarantee amount provided to external parties cannot exceed 300% of the Company's net assets according to the most recent financial statemetns.

(2) In accordance with policies and procedures on endorsements and guarantees provided by Company's subsidiary, the total endorsement and guarantee amount provided to external partines cannot exceed 300% of the subsidiary's net assets according to the most recent financial statements.

• (3) In accordance with the Company's policies and procedures on endorsements and guarantees, the total endorsement and guarantee amount provided to external parties by the Company and its subsidiaries cannot exceed 300% of the net assets of the Company according to the most recent financial statements.

Note 5: Fill in ‘Y’ for those cases of provision of endorsements/guarantees by listed parent company to subsidiary and provision by subsidiary to listed parent company, and provision to the party in Mainland China.

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CHC Healthcare Group and Subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

December 31, 2018

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Securitiesheld by	Marketable securities	Relationship with the securitiesissuer	General ledgeraccount		As of December31,2018	As of December31,2018		Footnote
				Numberofshares	Bookvalue	Ownership (%)	Fairvalue
The Company The Company Chiu Ho Medical System Co., Ltd. Chiu Ho Medical System Co., Ltd.	Stocks–China Isotope & Radiation Corporation Stocks–Swissray Global Healthcare Holding Ltd. Stocks–Huede Healthtech Co., Ltd. Stocks–AESolution Biomedical Co., Ltd.	- The Company's chairman and the investee's chairman are the same person - The Company's chairman and the investee's chairman are the same person	Financial asset at fair value through profit or loss-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current	880,000 1,988,100 200,000 855,400	53,482 $ 14,394 674 32,163	1.10% 4.67% 7.41% 6.69%	53,482 $ 14,394 674 32,163

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CHC Healthcare Group and Subsidiaries

Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more

For the year ended December 31, 2018

Table 4 Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions （Note 1）	Differences in transaction terms compared to third party transactions （Note 1）	Percentage of total notes/accounts Footnote Balance receivable(payable) （Note 2） Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Percentage of total notes/accounts Footnote Balance receivable(payable) （Note 2） Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Percentage of total notes/accounts Footnote Balance receivable(payable) （Note 2） Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Hsing-Yeh Biotechnology Co., Ltd.	Yeezen General Hospital	Substantive related party	Sale of goods	222,800 $	97%	6 months	-	-	240,432 $	81%	Note

Note 1: Sales amount includes rental revenue.

Note 2: Notes and accounts receivable include lease payments receivable.

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CHC Healthcare Group and Subsidiaries

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

December 31, 2018

Table 5 Creditor	Counterparty	Relationship with the counterparty	Balanceasat December 31,2018	Turnover rate	Overduereceivables	Overduereceivables	Amount collected subsequent to the Allowance for balance sheetdate doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)	Amount collected subsequent to the Allowance for balance sheetdate doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)
					Amount	Action taken
Hsing-Yeh Biotechnology Co., Ltd.	Yeezen General Hospital	Substantive related party	Notes and accounts receivable (including lease payments receivable): $240,432	0.92	77,985 $	In collection	33,930 $	- $

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Table 6

CHC Healthcare Group and Subsidiaries

Information on investees

For the year ended December 31, 2018

Expressed in thousands of NTD

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shareshe	ldasat December 31,2018	ldasat December 31,2018	Net profit (loss) of the investee for the year endedDecember 31,2018	Investment income (loss) recognised by the Company for the year ended December 31,2018	Footnote
				Balance asat December 31,2018	Balance asat December 31,2017	Numberofshares	Ownership (%)	Bookvalue
The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company	Chiu Ho Medical System Co., Ltd. Tomorrow Medical System CO., Ltd. Chiu Ho Scientific Co., Ltd. Chiu Ho Biotech Co., Ltd. Ho-Shin Instruments Co.,Ltd. Shin-Ho Instruments Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. Hsin Lin Biotech Co., Ltd. E Century Healthcare Corporation J. Ab Beauty Co., Ltd.	Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan	Medical instrument sale, leasing and services Medical instrument sale, leasing and services Ophthalmic equipment sale, leasing and services Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument sale, leasing and services	2,380,988 $ 163,484 151,422 357,182 - 9,171 371,183 521,815 105,929 556,151 -	1,743,488 $ 163,484 115,164 407,182 86,258 9,171 371,183 661,815 105,929 661,151 27,300	299,340,000 43,200,000 9,853,841 37,000,000 - 300,000 40,000,000 55,600,000 10,000,000 60,000,000 -	100.00% 100.00% 100.00% 100.00% - 100.00% 100.00% 100.00% 100.00% 100.00% -	3,395,576 $ 522,515 133,829 378,298 - 15,068 497,563 696,442 110,487 838,041 -	108,424 $ 40,638 11,004 3,375 - 7,250 28,970 40,895 431 57,900 3,037) (	109,233 $ 40,638 11,004 3,396 - 7,250 29,013 40,895 431 57,900 2,126) (	Subsidiary Subsidiary Subsidiary (Note 1) Subsidiary Subsidiary (Note 1) Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary (Note 2)

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Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shareshe	ldasat December 31,2018	ldasat December 31,2018	Net profit (loss) of the investee for the year endedDecember 31,2018	Investment income (loss) recognised by the Company for the year ended December 31,2018	Footnote
				Balance asat December 31,2018	Balance asat December 31,2017	Numberofshares	Ownership (%)	Bookvalue
The Company CHC Healthcare (BVI) Limited Chiu Ho Medical System Co., Ltd. Chiu Ho Medical System Co., Ltd. Medlink Healthcare Limited Hsing-Yeh Biotechnology Co., Ltd.	CHC Healthcare (BVI) Limited CHC Healthcare (HK) Limited Medlink Healthcare Limited SenCare Healthcare Company Hsing-Yeh Biotechnology Co., Ltd CHENG-HSIN Biotechnology Co., Ltd	British Virgin Islands Hong Kong Taiwan Taiwan Taiwan Taiwan	Holdings and indirect investments Medical instrument sale, leasing and services Medical instrument sale Consulting service and elderly residence Medical instrument sale and leasing ; drug sale Medical instrument leasing	522,432 3,987 1,545,300 194,000 1,513,464 12,000	451,860 3,863 1,354,050 - 1,513,464 12,000	940 100,000 154,125,000 19,400,000 93,600,000 1,200,000	100.00% 100.00% 100.00% 65.99% 100.00% 40.00%	422,621 40,534 1,587,637 191,825 1,623,149 1,309	28,791 207 36,981 3,296) ( 43,637 20,619) (	28,791 249 36,981 2,175) ( 39,094 3,867) (	Subsidiary (Note 3) Subsidiary Subsidiary Subsidiary Subsidiary Associate

Note 1: To restructure organisation, Ho-Shin Instruments Co., Ltd. was merged into Chiu Ho Scientific Co., Ltd. , and Chiu Ho Scientific Co., Ltd. was the surviving company. Note 2: On April 20, 2018, the shareholders have resolved to dissolve the company and the Company lost its control over J. Ab Beauty Co., Ltd. on the same day. Note 3: Indirect investment company is organised as a limited liability company

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CHC Healthcare Group and Subsidiaries

Information on investments in Mainland China

For the year ended December 31, 2018

Table 7

Expressed in thousands of NTD (Except as otherwise indicated)

Accumulated Amount remitted from Taiwan Accumulated Investment income Accumulated amount of to Mainland China/ amount Ownership (loss) recognised amount remittance from Amount remitted back of remittance held by by the Company Book value of of investment Taiwan to to Taiwan for the year from Taiwan to Net income of the for the year investments in income Investment Mainland China ended December 31, 2018 Mainland China investee for the Company ended December Mainland China remitted back to Investee in Main business method as of January 1, Remitted to Remitted back as of December 31, year ended (direct or 31, 2018 as of December 31, Taiwan as of Mainland China activities Paid-in capital （ Note 1 ） 2018 Mainland China to Taiwan 2018 December 31, 2018 indirect) （ Note 2 ） 2018 December 31, 2018 Footnote Guangzhou Medical instrument $ 291,925 (2) Indirect $ 219,486 $ 72,439 $ - $ 291,925 $ 1,660 100% $ 1,660 $ 237,824 $ - Chiuho Medical sale, leasing and investment through System Co., Ltd. services CHC(BVI), a whollyowned subsidiary of the Company Chiu Ho Medical instrument 231,765 (2) Indirect 231,765 - - 231,765 19,550 100% 26,882 135,297 - (CHINA) sale, leasing and investment through Medical services CHC(BVI), a whollyTechnology Co., owned subsidiary of Ltd. the Company Accumulated amount of Investment amount approved Ceiling on remittance from Taiwan by the Investment investments in Mainland China to Mainland China as of Commission of the Ministry of imposed by the Investment Company name December 31, 2018 Economic affairs (MOEA) Commission of MOEA (Note 3) CHC Healthcare (BVI) Limited $ 523,690 $ 675,858 $ 3,080,111

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1) Directly invest in a company in Mainland China..

(2) Through investing in an existing company in the third area, which then invested in the investee in Mainland China.

(3) Others

Note 2: Income (loss) recognised based on financial statements was audited by independent auditors Note 3: Disclosed in accordance with the investment limits set forth in Jin-Shen-Zi No. 09704604680, issued by the Investment Comission of MOEA on August 29, 2008

Note 4: The Company invested in the investees in Mainland China, including Neusoft CHC Medical Service Co., Ltd., Neusoft-CHC Office of Medical Intelligence & Services, Shenyang, and Dalian Neusoft Kangrui Jiuhe Medical Management Co., Ltd. through an existing company in Mainland China. Due to the existing company in Mainland China is a holding company, therefore it shall first submit an application for approval from Investment Commission of the Ministry of Economic Affairs (MOEA) for its reinvestments, but the approval from MOEA are not required for other investments.

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of CHC Healthcare Group

Opinion

We have audited the accompanying parent company only balance sheets of CHC Healthcare Group (the “Company”) as at December 31, 2018 and 2017, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other independent accountants, the accompanying parent company only financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended, in accordance with 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 generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with this Code. We believe 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 the parent company only financial statements of the current period. These matters were addressed in the context of our audit of the parent company only financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

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Key audit matters on the parent company only financial statements for the year ended December 31, 2018 were as follows:

Assessment of investments accounted for using equity method

Refer to Note 4(11) for accounting policy on investments accounted for using equity method, Note 5(2) for uncertainty of accounting estimates and assumptions in relation to impairment assessment of investments accounted for using equity method, and Note 6(4) for details of investments accounted for using equity method.

As of December 31, 2018, the Company’s subsidiary, Chiu Ho Medical System Co., Ltd. and its subsidiaries (“Chiu Ho Medical System Group”), recognised investments accounted for using equity method and investment income amounting to NT$3,395,576 thousand and NT$109,233 thousand, respectively. Because Chiu Ho Medical System Group’s investments accounted for using equity method constituted 44% of the Company’s total assets as of December 31, 2018, and investment income constituted 40% of the Company’s profit before tax for the year ended December 31, 2018, which are significant to the Company’s financial statements, we identified assessment of investments accounted for using equity method as a key audit matter as well as the key audit matters, impairment assessment of goodwill and property, plant and equipment included in Chiu Ho Medical System Group’s financial statements. The key audit matters in relation to Chiu Ho Medical System Group’s financial statements for the year ended December 31, 2018 are stated as follows:

Impairment assessment of goodwill

Description

As of December 31, 2018, Chiu Ho Medical System Group’s goodwill arising from business combination amounted to NT$150,617 thousand. After identifying the smallest cash generating unit which can generate independent cash flows, Chiu Ho Medical System Group used the recoverable amount of each cash generating unit to assess whether goodwill may be impaired. Since the assumptions that management used to assess whether goodwill is impaired involve subjective judgement and have high uncertainty, we considered the impairment assessment of goodwill as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures in respect of the above key audit matter:

A. Obtained an understanding of whether the management identifies the objective evidence of

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goodwill impairment by following the procedure and taking into account certain factors in a consistent manner and confirmed whether the management uses reliable information.

• B. Obtained the report on the valuation of the subsidiary issued by an expert as per the management’s request and performed the following:

• (1) Assessed the independence, objectiveness and competence by reviewing the expert’s qualification.

• (2) Assessed whether the valuation model is reasonable based on our knowledge of the Chiu Ho Medical System Group’s businesses and industry.

• (3) Confirmed whether the expert uses the same future cash flows relative to the budget for the next five years provided by the management.

• (4) Checked whether the comparable assets adopted in appraisal report are consistent with the actual operation.

• (5) Assessed whether the significant assumptions applied by the expert are relevant and reasonable and tested the mathematical accuracy.

Impairment assessment of property, plant and equipment

Description

Some of Chiu Ho Medical System Group’s leasing businesses were not as profitable as expected due to fierce competition in healthcare industry. The Chiu Ho Medical System Group assesses the impairment based on the estimated recoverable amounts of leasing assets (shown as property, plant and equipment) where there is an indication that they are impaired. Given that the calculation of recoverable amounts requires significant accounting estimates relying upon subjective judgement and uncertainty, we consider the impairment assessment of leasehold assets using the cash-generating units as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

• A. Obtained an understanding of whether the management identifies the objective evidence of impairment by following the procedure and taking into account certain factors in a consistent manner and confirmed whether the management uses reliable information.

• B. Acquired the asset appraisal report issued by an expert as per the management’s request and

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performed the following:

• (1) Assessed the expert’s independence, objectiveness and competence by reviewing the expert’s qualification.

• (2) Assessed whether the valuation method is widely adopted and appropriate based on our knowledge of the Chiu Ho Medical System Group’s businesses and industry.

• (3) Confirmed whether the replacement cost, comparative objects and the assets’ use indicated on the appraisal report truthfully reflect the actual operation.

• (4) Assessed whether the significant assumptions applied by the expert is relevant and reasonable and tested the mathematical accuracy.

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 “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, and for such internal controls as management determines is necessary to enable the preparation of 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 Company’s ability to continue as a going concern, 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.

Those charged with governance, including the audit committee, are responsible for overseeing the Company’s financial reporting process.

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 it is not a guarantee that an audit conducted in accordance with ROC GAAS 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

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of users taken on the basis of these parent company only financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• A. 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 controls.

• B. Obtain an understanding of internal controls 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 Company’s internal controls.

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

• D. 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 Company’s ability to continue as a going concern. 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 financial 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.

• E. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the 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 controls that we identify during our audit.

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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 the parent company only financial statements for the current period and are therefore the key audit matters. We describe these matters in our report unless the 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.

For and on behalf of PricewaterhouseCoopers, Taiwan March 22, 2019

---

The accompanying parent company only financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than 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, PricewaterhouseCoopers 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.

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CHC HEALTHCARE GROUP PARENT COMPANY ONLY BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

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December 31, 2018 December 31, 2017
Assets Notes Amount % Amount %
Current assets
1100 Cash and cash equivalents 6(1) $ 50,008 - $ 549,051 8
1110 Financial assets at fair value 6(2)(15)
through profit or loss - current 53,482 1 - -
1180 Accounts receivable - related 7
parties 3,370 - 1,011 -
1200 Other receivables - - 446 -
1210 Other receivables due from 7
related parties 541,975 7 121,223 2
1220 Current tax assets 2,576 - 2,185 -
1410 Prepayments 6,514 - 4,204 -
1470 Other current assets 8 - - 30,000 -
11XX Total current assets 657,925 8 708,120 10
Non-current assets
1510 Financial assets at fair value 6(2)(15)
through profit or loss - non-
current 492 - 660 -
1517 Financial assets at fair value 6(3)
through other comprehensive
income - non-current 14,394 - - -
1523 Available-for-sale financial assets
- non-current - - 62,890 1
1550 Investments accounted for using 6(4)
equity method 7,010,440 90 6,350,651 88
1600 Property, plant and equipment 1,832 - 2,996 -
1840 Deferred tax assets 6(18) 49,516 1 2,172 -
1980 Other financial assets - 8
non-current 57,053 1 53,802 1
1990 Other non-current assets 1,438 - 1,912 -
15XX Total non-current assets 7,135,165 92 6,475,083 90
1XXX Total assets $ 7,793,090 100 $ 7,183,203 100
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CHC HEALTHCARE GROUP PARENT COMPANY ONLY BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

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December 31, 2018 December 31, 2017
Liabilities and Equity Notes Amount % Amount %
Current liabilities
2100 Short-term borrowings 6(5) $ 180,000 3 $ - -
2150 Notes payable 1,464 - 892 -
2170 Accounts payable - - 31 -
2200 Other payables 20,565 - 7,532 -
2220 Other payables - related parties 7 - - 13,560 -
2300 Other current liabilities 6(6)(7) 929 - 487,502 7
21XX Total current liabilities 202,958 3 509,517 7
Non-current liabilities
2530 Bonds payable 6(6) 1,177,035 15 1,164,693 16
2540 Long-term borrowings 6(7) and 8 1,440,000 18 595,000 9
2570 Deferred tax liabilities 6(18) 734 - 625 -
25XX Total non-current liabilities 2,617,769 33 1,760,318 25
2XXX Total liabilities 2,820,727 36 2,269,835 32
Equity
Share capital 6(10)
3110 Share capital - common stock 1,399,136 18 1,399,136 19
Capital surplus 6(6)(9)(11)
3200 Capital surplus 2,930,253 38 2,927,016 41
Retained earnings 6(12)
3310 Legal reserve 245,206 3 245,206 3
3320 Special reserve 33,211 - 171,995 2
3350 Unappropriated retained earnings 763,134 10 203,226 3
Other equity 6(3)
3400 Other equity ( 363,621) ( 4) ( 33,211) -
3500 Treasury shares 6(10) ( 34,956) ( 1) - -
3XXX Total equity 4,972,363 64 4,913,368 68
Significant contingent liabilities 9
and unrecognised contract
commitments
3X2X Total liabilities and equity $ 7,793,090 100 $ 7,183,203 100
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The accompanying notes are an integral part of these parent company only financial statements.

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CHC HEALTHCARE GROUP

PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT FOR EARNINGS (LOSS) PER SHARE AMOUNTS)

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2018 2017
Items Notes Amount % Amount %
4000 Operating revenue 6(13) and 7 $ 435,545 100 $ 326,640 100
5000 Operating costs 6(8)(9)(17) and 7 ( 101,775) ( 23) ( 89,709) ( 28)
5900 Gross profit 333,770 77 236,931 72
Non-operating income and expenses
7010 Other income 6(14) and 7 3,986 1 2,988 1
7020 Other gains and losses 6(2)(15) ( 21,469) ( 5) ( 286,938) ( 88)
7050 Finance costs 6(16) ( 42,188) ( 10) ( 39,643) ( 12)
7000 Total non-operating income and
expenses ( 59,671) ( 14) ( 323,593) ( 99)
7900 Profit (loss) before income tax 274,099 63 ( 86,662) ( 27)
7950 Income tax benefit (expense) 6(18) 49,323 11 ( 33) -
8000 Profit (loss) from continuing operation 323,422 74 ( 86,695) ( 27)
Other comprehensive income
Components of other comprehensive
income that will not be reclassified to
profit or loss
8316 Unrealised gains (losses) from 6(3)
investments in equity instruments
measured at fair value through other
comprehensive income ( 48,496) ( 11) - -
8330 Share of other comprehensive income of
subsidiary, associates and joint
ventures accounted for using the equity
method, components of other
comprehensive income that will not be
reclassified to profit or loss 5,890 1 - -
Components of other comprehensive
income that will be reclassified to profit
or loss
8361 Financial statements translation
differences of foreign operations ( 8,676) ( 2) ( 8,487) ( 3)
8362 Unrealised gains (losses) on valuation of
available-for-sale financial assets - - 153,996 47
8380 Share of other comprehensive income
(loss) of associates and joint ventures
accounted for using equity method ,
components of other comprehensive
income that will be reclassified to
profit or loss 347 - ( 8,168) ( 2)
8399 Income tax related to components of
other comprehensive income that will
be reclassified to profit or loss ( 2,150) - 1,443 1
8300 Other comprehensive (loss) income for
the year ($ 53,085) ( 12) $ 138,784 43
8500 Total comprehensive income for the year $ 270,337 62 $ 52,089 16
Earnings (loss) per share
9750 Basic earnings (loss) per share $ 2.32 ($ 0.62)
9850 Diluted earnings (loss) per share $ 2.02 ($ 0.62)
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The accompanying notes are an integral part of these parent company only financial statements.

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CHC HEALTHCARE GROUP

PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

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Capital Reserves Retained Earnings Other Equity Interest
Unrealised gains
Financial (loss) on financial
statements assets at fair value Unrealised gains
translation through other (losses) on
Treasury share Employee share Unappropriated differences of comprehensive available-for-sale
Notes Ordinary share Share premium transactions options Others Legal reserve Special reserve retained earnings foreign operations income financial assets Treasury shares Total equity
2017
Balance at January 1, 2017 $ 1,398,478 $ 2,806,521 $ 173 $ 57,416 $ 27,600 $ 229,313 $ 93,146 $ 526,742 ($ 11,320) $ - ($ 160,675) $ - $ 4,967,394
Loss for the year - - - - - - - ( 86,695 ) - - - - ( 86,695)
Other comprehensive income (loss) - - - - - - - - ( 7,438) - 146,222 - 138,784
Total comprehensive income (loss) - - - - - - - ( 86,695 ) ( 7,438) - 146,222 - 52,089
Appropriations of 2016 earnings 6(12)
Legal reserve - - - - - 15,893 - ( 15,893 ) - - - - -
Special reserve - - - - - - 78,849 ( 78,849 ) - - - - -
Cash dividends - - - - - - - ( 140,490) - - - - ( 140,490)
Redemption of convertible bonds - 18,765 - - ( 18,765 ) - - - - - - - -
Conversion of convertible bonds - - - - 30,842 - - - - - - - 30,842
Exercise of employee stock options 6(10) 658 5,104 - ( 3,277) - - - - - - - - 2,485
Compensation cost of employee stock options 6(9) - - - 1,279 - - - - - - - - 1,279
Compensation cost of employee stock options of
subsidiaries - - - 1,358 - - - - - - - - 1,358
Difference between consideration and carrying
amount of subsidiaries acquired or disposed - - - - - - - ( 1,589) - - - - ( 1,589)
Balance at December 31, 2017 $ 1,399,136 $ 2,830,390 $ 173 $ 56,776 $ 39,677 $ 245,206 $ 171,995 $ 203,226 ($ 18,758) $ - ($ 14,453 ) $ - $ 4,913,368
2018
Balance at January 1, 2018 $ 1,399,136 $ 2,830,390 $ 173 $ 56,776 $ 39,677 $ 245,206 $ 171,995 $ 203,226 ($ 18,758) $ - ($ 14,453 ) $ - $ 4,913,368
Effects of retrospective application and restatement - - - - - - - 251,607 - ( 291,778) 14,453 - ( 25,718)
Balance at January 1 after adjustments 1,399,136 2,830,390 173 56,776 39,677 245,206 171,995 454,833 ( 18,758) ( 291,778) - - 4,887,650
Profit for the year - - - - - - - 323,422 - - - - 323,422
Other comprehensive loss - - - - - - - - ( 10,479) ( 42,606) - - ( 53,085)
Total comprehensive income (loss) - - - - - - - 323,422 ( 10,479) ( 42,606) - - 270,337
Appropriations of 2017 earnings 6(12)
Cash dividends - - - - - - - ( 153,905) - - - - ( 153,905)
Reversal of special reserve - - - - - - ( 138,784) 138,784 - - - - -
Compensation cost of employee stock options 6(9) - - - 1,207 - - - - - - - - 1,207
Compensation cost of employee stock options of
subsidiaries - - - 2,030 - - - - - - - - 2,030
Expired employee stock warrants - - - ( 7,372) 7,372 - - - - - - - -
Purchase of treasury shares 6(10) - - - - - - - - - - - ( 34,956 ) ( 34,956)
Balance at December 31, 2018 $ 1,399,136 $ 2,830,390 $ 173 $ 52,641 $ 47,049 $ 245,206 $ 33,211 $ 763,134 ($ 29,237) ($ 334,384) $ - ($ 34,956 ) $ 4,972,363
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Note: The employees’ compensation were $170 and $0, and the directors’ and supervisors’ remuneration were $4,800 and $0 in 2016 and 2017, respectively, which had been deducted from net income for the years.

The accompanying notes are an integral part of these parent company only financial statements.

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CHC HEALTHCARE GROUP

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM OPERATING ACTIVITIES Profit (loss) before tax Adjustments Adjustments to reconcile profit (loss) Depreciation charge Amortisation expense Net loss on financial assets or liabilities at fair value through profit or loss Interest expense Interest income Compensation cost of employee stock options Share of profit of associates and joint ventures accounted for using equity method Amortisation of discount on bonds payable Impairment loss on financial assets Changes in operating assets and liabilities Changes in operating assets Financial assetsat fair value through profit or loss-current Accounts receivable due from related parties, net Other receivables Prepayments Other non-current assets Changes in operating liabilities Notes payable Accounts payable Other payables Other payables to related parties Other current liabilities Cash (outflow) inflow generated from operations Interest received during the year Dividends received during the year Interest paid during the year Income tax paid Net cash flows (used in) from operating activities

Notes 2018 2017 $ 274,099 ( $ 86,662 ) 6(17) 1,164 1,148 6(17) 583 611 6(2)(15) 21,586 9,242 6(16) 26,333 26,070 6(14) ( 3,984 ) ( 2,980 ) 6(9) 1,207 1,279 6(13) ( 326,425 ) ( 220,080 ) 6(16) 15,855 13,573 6(15) - 277,325 ( 74,900 ) - ( 2,359 ) 1,362 446 ( 13 ) ( 2,310 ) 579 ( 109 ) - 572 ( 574 ) ( 31 ) ( 85 ) 12,891 ( 5,687 ) ( 13,560 ) 13,560 14 ( 167 ) ( 68,928 ) 28,501 3,232 3,133 3,152 157,808 ( 26,191 ) ( 26,042 ) ( 393 ) ( 4,133 ) ( 89,128 ) 159,267

(Continued)

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CHC HEALTHCARE GROUP

PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM INVESTING ACTIVITIES Increase in other receivable due from related parties Decrease in other current assets Acquisition of investments accounted for using equity method Proceeds from capital reduction of investments accounted for using equity method Acquisition of property, plant and equipment Increase in other financial assets - non-current Net cash flows (used in) from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term loans Proceeds from issuing bonds Bonds issue cost Repayments of bonds Proceeds from long-term debt Repayments of long-term debt Payment of cash dividends Exercise of employee stock options Payments to acquire treasury shares Net cash flows from financing activities (Decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Notes 2018 2017 ( $ 420,000 ) ( $ 30,000 ) 30,000 70,000 7 ( 739,503 ) ( 259,670 ) 7 376,800 319,000 - ( 233 ) ( 3,251 ) ( 50,000 ) ( 755,954 ) 49,097 6(20) 180,000 - 6(6) - 1,200,000 - ( 6,800 ) ( 320,100 ) ( 693,566 ) 6(20) 1,440,000 - 6(20) ( 765,000 ) ( 85,000 ) 6(12) ( 153,905 ) ( 140,490 ) - 2,485 6(10) ( 34,956 ) - 346,039 276,629 ( 499,043 ) 484,993 549,051 64,058 $ 50,008 $ 549,051

The accompanying notes are an integral part of these parent company only financial statements.

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CHC HEALTHCARE GROUP

NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)

1. HISTORY AND ORGANISATION

CHC Healthcare Group (“CHC” or the “Company”) was establihsed in November 2009. The Company was established for the purpose of enhancing the comprehensive performance in Greater China and implementing organisational restructuring with Chiu Ho Medical System Co., Ltd. and other affliates. The Company was listed on the Taiwan Stock Exchange on October 24, 2012. The Company is primarily engaged in investment in various businesses.

2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE PARENT COMPANY ONLY FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These parent company only financial statements were authorised for issuance by the Board of Directors on March 22, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by the FSC effective from 2018 are as follows:

follows:
New Standards, Interpretations and Amendments Amendments to IFRS 2, ‘Classification and measurement of share- based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9, Financial instruments with IFRS 4, Insurance contracts’ IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers’ Amendments to IAS 7, ‘Disclosure initiative’ Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised losses’ Amendments to IAS 40, ‘Transfers of investment property’ IFRIC 22, ‘Foreign currency transactions and advance consideration’	Effective date by International Accounting Standards Board
	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018

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Effective date by International Accounting New Standards, Interpretations and Amendments Standards Board Annual improvements to IFRSs 2014-2016 cycle - Amendments to January 1, 2018 IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ January 1, 2017 Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 12, ‘Disclosure of interests in other entities’ January 1, 2018 Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS 28, ‘Investments in associates and joint ventures

Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

• A. IFRS 9, ‘Financial instruments’

• (a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present subsequent changes in the fair value of an investment in an equity instrument that is not held for trading in other comprehensive income.

• (b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognise 12month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

• (c) The Company has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Notes 12(4) B and C.

• B. IFRS 15, ‘Revenue from contracts with customers’ and amendments

• (a) IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction contracts’, IAS 18, ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.

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The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps:

Step 1: Identify contracts with customer.

Step 2: Identify separate performance obligations in the contract(s).

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

Step 5: Recognise revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

• (b) The Company has elected not to restate prior period financial statements and recognised the cumulative effect of initial application as retained earnings at January 1, 2018, using the modified retrospective approach under IFRS 15. The significant effects of adopting the modified transition as of January 1, 2018 are summarised below:

The company’s subsidiary certain sales contracts of medical instruments contain provisions for advance sales receipts, wherein the period between advance collection and the transfer of control of goods is longer than one year. The committed price is adjusted and interest expense is recognised on advance sales receipts if the Company considers that the contract contains a significant financing component under IFRS 15, but is not regulated in previous revenue standards. Due to this difference, retained earnings was reduced by $8,093 and investments accounted for using equity method reduced by $8,093.

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by

the Company

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

the Company New standards, interpretations and amendments endorsed by the FSC follows:	effective from 2019 are as
New Standards, Interpretations and Amendments Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	Effective date by International Accounting Standards Board
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

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Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
New Standards, Interpretations and Amendments Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’	Effective date by International Accounting Standards Board
	January 1, 2020 January 1, 2020 To be determined by International Accounting Standards Board January 1, 2021

The above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The parent company only financial statements of the Company have been prepared in accordance with the “ Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

(2) Basis of preparation

• A. Except for the following items, these parent company only financial statements have been prepared under the historical cost convention:

• (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

• (b) Financial assets at fair value through other comprehensive income / Available-for-sale financial assets measured at fair value.

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Company has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was

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recognised as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.

• (3) Foreign currency translation

Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The parent company only financial statements are presented in New Taiwan Dollars, which is the Company’s functional and The Company’s presentation currency.

• A. Foreign currency transactions and balances

• (a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.

• (b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.

• (c) All foreign exchange gains and losses are presented in the statement of comprehensive income within “other gains or losses”.

• B. Translation of foreign operations

The operating results and financial position of all the Company entities and associates that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• (a) Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

• (b) Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

• (c) All resulting exchange differences are recognised in other comprehensive income.

(4) Classification of current and non-current items

• A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:

• (a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;

• (b) Assets held mainly for trading purposes;

• (c) Assets that are expected to be realised within twelve months from the balance sheet date;

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  - (d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

• B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:

  • (a) Liabilities that are expected to be paid off within the normal operating cycle;

  • (b) Liabilities arising mainly from trading activities;

  • (c) Liabilities that are to be paid off within twelve months from the balance sheet date;

  • (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. 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.

• (5) Cash equivalents

• Cash equivalents refer to short-term highly liquid investments that are readily convertible to known amount of cash and subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitment in operations are classified as cash equivalents.

(6) Financial assets at fair value through profit or loss

Effective 2018

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using settlement date accounting.

• C. At initial recognition, the Company measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Company subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.

• D. The Company recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

(7) Financial assets at fair value through other comprehensive income

Effective 2018

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which The Company has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using settlement date accounting.

• C. At initial recognition, The Company measures the financial assets at fair value plus transaction

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costs. The Company subsequently measures the financial assets at fair value:

The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings. When the equity instruments are derecognised the cumulative gain or loss previously recognised in other comprehensive income is not reclassified from equity to profit or loss. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably.

(8) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(9) Impairment of financial assets

For financial assets at amortised cost including accounts receivable that have a significant financing component, at each reporting date, the Company recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Company recognises the impairment provision for lifetime ECLs.

(10) Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

(11) Investments accounted for using equity method – subsidiaries

• A. Subsidiaries are all entities controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

• B. Unrealized gains or losses occurred from the transactions between the Company and subsidiaries have been offset. The accounting policies of the subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

• C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise loss proportionately to its ownership.

• D. If changes in as do not result in loss control the Company’s shares in subsidiaries (transactions with non-controlling interests) transactions shall be considered as equity transactions, which

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are transactions between owners. Difference of adjustment of non-controlling interests and fair value of the consideration paid or received is recognised directly in equity.

• E. According to “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, profit and other comprehensive income in the parent company only financial statements should be the same as profit and other comprehensive income attributable to shareholders of the parent in the consolidated financial statements, and the equity in the parent company only financial statements should be the same as the equity attributable to shareholders of the parent in the consolidated financial statements.

(12) Property , plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. 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 must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change.

The estimated useful lives of property, plant and equipment are as follows:

Transportation equipment 5 years Other equipment 2 ~ 5 years

(13) Leased assets/ operating leases (lessee)

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(14) Impairment of non-financial assets

The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the

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impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(15) Borrowings

Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

(16) Notes and accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(17) Convertible bonds

Convertible bonds issued by the Company contain conversion options (that is, the bondholders have the right to convert the bonds into the Company’s common shares by exchanging a fixed amount of cash for a fixed number of common shares), call options and put options. The Company classifies the bonds payable upon issuance as a financial asset, a financial liability or an equity instrument in accordance with the contract terms. They are accounted for as follows:

• A. The embedded call options and put options are recognised initially at net fair value as ‘financial assets or financial liabilities at fair value through profit or loss’. They are subsequently remeasured and stated at fair value on each balance sheet date; the gain or loss is recognised as ‘gain or loss on valuation of financial assets or financial liabilities at fair value through profit or loss’.

• B. The host contracts of bonds are initially recognised at fair value. Any difference between the initial recognition and the redemption value is accounted for as the premium or discount on bonds payable and subsequently is amortised in profit or loss as an adjustment to ‘finance costs’ over the period of circulation using the effective interest method.

• C. The embedded conversion options which meet the definition of an equity instrument are initially recognised in ‘capital surplus-share options’ at the residual amount of total issue price less the amount of financial assets or financial liabilities at fair value through profit or loss and bonds payable as stated above. Conversion options are not subsequently remeasured.

• D. Any transaction costs directly attributable to the issuance are allocated to each liability or equity component in proportion to the initial carrying amount of each abovementioned item.

• E. When bondholders exercise conversion options, the liability component of the bonds (including bonds payable and ‘financial assets or financial liabilities at fair value through profit or loss’) shall be remeasured on the conversion date. The issuance cost of converted common shares is

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the total book value of the abovementioned liability component and ‘capital surplus - share options’.

(18) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires.

(19) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(20) Employee benefits

• A. Short-term employee benefits

Short - term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

• B. Pensions

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

• C. Employees’ compensation and directors’ and supervisors’ remuneration

Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

- (21) Employee share based payment

For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.

(22) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit

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or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

(23) Treasury share

Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.

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(24) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(25) Revenue recognition

• A. Investment revenue

The Company recognises share of profit or loss of subsidiaries and associates generated after acquisition in revenue or cost.

• B. Sales of services

• (a) The Company provides administrative resource and management service to subsidiaries. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined based on the actual cost spent relative to the total expected cost. The customer pays at the time specified in the payment schedule. If the services rendered exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

• (b) The Company’s estimate about revenue, costs and progress towards complete satisfaction of a performance obligation is subject to a revision whenever there is a change in circumstances. Any increase or decrease in revenue or costs due to an estimate revision is reflected in profit or loss during the period when the management become aware of the changes in circumstances.

• (c) Revenue from a service contract in which the Company bills a fixed amount based on the period of service provided is recognised at the amount to which the Company has the right to invoice.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The related information is addressed below:

• (1) Critical judgements in applying the Company’s accounting policies

Except for the accounting estimations (detailed in (2) below, the management does not make any judgement that significant affect the recognised amounts in parent company only financial statements when applying the Company’s accounting polices.

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(2) Critical accounting estimates and assumptions

• The Company makes accounting estimates in applying reasonable expectation concerning future events. However, assumptions and estimates may differ from the actual results. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below: Impairment assessment of investments accounted for using equity method

The Company assesses the impairment of an investment accounted for using equity method as soon as there is any indication that it might have been impaired and its carrying amount cannot be recovered. The Company assesses the recoverable amount of an investment accounted for under the equity method based on the present value of the Company’s share of expected future cash flows of the investee, and analyses the reasonableness of related assumptions.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash on hand Checking accounts Demand deposits Time deposits	December 31, 2018 $ 3 1,464 48,541 - $ 50,008		December 31, 2017 $ 9 892 447,726 100,424 $ 549,051

• A. The Company transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. The Company classified restricted cash and cash equivalents pledged to others as other current assets and other non-current financial assets. Please refer to Note 8 for details.

(2) Financial assets and liabilities at fair value through profit or loss

Effective 2018

Items Current items: Financial assets mandatorily measured at fair value through profit or loss Listed stocks ( Valuation adjustment Non-current items: Financial assets mandatorily measured at fair value through profit or loss Non-hedging derivatives (Redemption rights to the third domestic issuance of secured convertible corporate bonds) Valuation adjustment	December 31, 2018 $ 74,900 21,418) $ 53,482 $ 292 200 $ 492

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• A. For the year ended December 31, 2018, net loss on financial assets at fair value through profit or loss was ($21,586) shown as ‘other gains and losses’.

• B. Information on financial assets and liabilities at fair value through profit or loss as of December 31, 2017 is provided in Note 12(4).

(3) Financial assets at fair value through other comprehensive income

Effective 2018 Items Non-current items: Listed stocks Swissray Global Healthcare Holding Ltd. Valuation adjustment (	December 31, 2018 $ 340,215 325,821) $ 14,394

• A. The Company recognised ($48,496) in other comprehensive loss for fair value change for the year ended December 31, 2018.

• B. Information on available-for-sale financial assets and financial assets at cost as of December 31, 2017 is provided in Note 12(4).

(4) Investments accounted for using equity method

Chiu Ho Medical System Co., Ltd. Tomorrow Medical System Co., Ltd. Chiu Ho Scientific Co., Ltd. Chiu Ho Biotech Co., Ltd. Ho-Shin Instruments Co., Ltd. Shin-Ho Instruments Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. Hsin Lin Biotech Co., Ltd. E Century Healthcare Corporation J. Ab Beauty Co., Ltd. CHC Healthcare (BVI) Limited	December 31, 2018 $ 3,395,576 522,515 133,829 378,298 - 15,068 497,563 696,442 110,487 838,041 - 422,621 $ 7,010,440	December 31, 2017 $ 2,652,673 481,716 142,610 424,902 31,432 9,095 468,550 795,547 111,930 881,359 2,494 348,343 $ 6,350,651

Details of the Company’s subsidiaries are provided in Note 4(3) of the Company’s consolidated financial statements as of and for the year ended December 31, 2018.

(5) Short-term borrowings

Type of borrowings Bank borrowings Credit borrowings Interest rate range	December 31, 2018 $ 180,000 1.05%~1.13%	December 31, 2017 $ - -

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For the year ended December 31, 2018, the Company has no collateral pledged for short-term borrowings.

(6) Bonds payable

Bonds payable Less: Discount on bonds payable ( Less: Current portion or exercise of put options (shown as 'other current liabilities’)	December 31, 2018 $ 1,200,000 22,965) ( 1,177,035 - ( $ 1,177,035	December 31, 2017 $ 1,520,100 38,820) 1,481,280 316,587) $ 1,164,693

• A. The terms of the second domestic secured convertible bonds issued by the Company are as follows:

• (a) The Company issued the second domestic secured convertible bonds totalling $1,000,000 with zero coupon rate as approved by the regulatory authority. The bonds mature three years from the issue date (November 10, 2015 ~ November 10, 2018) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on November 10, 2015.

• (b) The bondholders have the right to request Taiwan Depository & Clearing Corporation (“TDCC”) through the security dealers for conversion of the bonds into common shares of the Company during the period from the date after one month of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares converted from the bonds are the same as the issued and outstanding common shares.

• (c) The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price on the issue date is NT$58.8 (in dollars). On December 21, 2015, July 16, 2016, July 16, 2017, and July 15, 2018, the Company adjusted the conversion price per share to NT $58.4, NT $56.2, NT $54.9, and NT $53.1 (in dollars), respectively, according to the rules described above.

• (d) The bondholders have the right to require the Company to redeem any bonds at the price of the bonds’ face value plus 1% of the face value as interests upon two years from the issue date.

• (e) The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company’s common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after one month of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one months of the bonds issue to 40 days before the

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maturity date.

• (f) Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

• (g) The Company signed a corporate bond issuance agreement with Chinatrust Commercial Bank. Under the terms of the agreement, the Company will periodically issue a financial assurance letter to Chinatrust Commerical Bank, stating that the financial ratios on the annual and semi-annual consolidated financial statements issued after November 10, 2015, will meet the following requirements:

• a. Current ratio must be 120% or higher.

• b. Debt ratio must equal to or less than 100%.

• The Company negationated with Chinatrust Commercial Bank for credit term on Augest 17 2018, They will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

• a. Current ratio must be 100% or higher.

• b. Debt ratio must equal to or less than 150%.

• c. Interest coverage ratio must be 3 or higher.

• d. Tangible net assets must be $4,000,000 or higher.

If the Company fails to meet any of the requirements stated above, Chinatrust Commercial Bank will determine whether there has been a breach of contract.

• (h) On November 10, 2017, holders of convertible corporate bonds exercised their redemption rights under the issuance terms, requiring the Company to buy back $679,900 of the aforementioned bonds. The Company incurred a loss of $5,953, which was included in ‘other gains and losses’.

• (i) The convertible bonds matured on November 10, 2018, and were redeemed in the amount of $320,100 by cash. The Company transferred the forfeited stock options $8,835 to capital surplus-forfeited stock options (shown as capital surplus-others).

• B. The terms of the third domestic secured convertible bonds issued by the Company are as follows:

• (a) The Company issued the third domestic secured convertible bonds totalling $1,200,000 with zero coupon rate as approved by the regulatory authority. The bonds mature three years from the issue date (November 2, 2017 ~ November 2, 2020) and will be redeemed in cash at face value at the maturity date. The bonds were listed on the Taipei Exchange on November 2, 2017.

• (b) The bondholders have the right to request TDCC through the security dealers for conversion of the bonds into common shares of the Company during the period from the date after three month of the bonds issue to the maturity date, except for the stop transfer period as specified in the terms of the bonds or the laws/regulations. The rights and obligations of the new shares

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converted from the bonds are the same as the issued and outstanding common shares.

• (c) The conversion price of the bonds is set up based on the pricing model in the terms of the bonds, and is subject to adjustments if the condition of the anti-dilution provisions occurs subsequently. The conversion price on the issue date is NT$42 (in dollars). On July 15, 2018, the Company adjusted the conversion price per share to NT$40.6 (in dollars) according to the rules described above.

• (d) The Company may repurchase all the bonds outstanding in cash at the bonds’ face value at any time after the following events occur: (i) the closing price of the Company’s common shares is above the then conversion price by 30% for 30 consecutive trading days during the period from the date after three months of the bonds issue to 40 days before the maturity date, or (ii) the outstanding balance of the bonds is less than 10% of total initial issue amount during the period from the date after one month of the bonds issue to 40 days before the maturity date.

• (e) Under the terms of the bonds, all bonds redeemed (including bonds repurchased from the Taipei Exchange), matured and converted are retired and not to be re-issued; all rights and obligations attached to the bonds are also extinguished.

• (f) The Company signed a corporate bond issuance agreement with Chinatrust Commercial Bank. Under the terms of the agreement, the Company will periodically issue a financial assurance letter to Chinatrust Commerical Bank, stating that the financial ratios on the annual and semi-annual consolidated financial statements issued after November 2, 2017, will meet the following requirements:

• a. Current ratio must be 120% or higher.

• b. Debt ratio must equal to or less than 120%.

• The Company negationated with Chinatrust Commercial Bank for credit term on August 17, 2018, They will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

• a. Current ratio must be 100% or higher.

• b. Debt ratio must equal to or less than 150%.

• c. Interest coverage ratio must be 3 or higher.

• d. Tangible net assets must be $4,000,000 or higher.

If the Company fails to meet any of the requirements stated above, Chinatrust Commercial Bank will determine whether there has been a breach of contract.

• C. Regarding the third issuance of secured convertible bonds, the equity conversion options amounting to $30,842 were separated from the liability component and were recognised in ‘capital surplus - others’ in accordance with IAS 32 as of December 31, 2018, respectively. The call options and put options embedded in bonds payable were separated from their host contracts and were recognised in ‘financial assets or liabilities at fair value through profit or loss’ in net

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amount in accordance with IAS 39 because the economic characteristics and risks of the embedded derivatives were not closely related to those of the host contracts. The effective interest rates of the bonds payable after such separation ranged between 0.7784%~0.8489%.

• D. Information about corporate bonds that were pledged to others as collateral is provided in Note 8.

- (7) Long term borrowings

Borrowing Type of borrowings period Repayment term Bank borrowings Secured borrowings 2018.11.29~ 2023.11.29 The first day of the repayment of principalis the day after 24 months from the initial date of borrowing. Principal is payable in7 installments semi-annually Secured borrowings 2015.8.5~ 2018.11.29 Interest is payable monthly, and principalis payablein 7 installments based on an amortised ratio, starting from July 29, 2017 Less: Current portion (shown as 'other current liabilities') Interest rate range	December 31, 2018 $ 1,440,000 - 1,440,000 - ( $ 1,440,000 1.797%	December 31, 2017 $ - 765,000 765,000 170,000) $ 595,000 1.699%

Interest rate range

• A. In July 2015, the Company, Chiu Ho Medical System Co., Ltd., and Medlink Healthcare Limited signed a syndicated loan agreement in the amount of $3,300,000 with a group of lenders led by First Commercial Bank and agreed to the following terms:

• (a) Before each credit line expires, the borrower is required to draw down at least 80% of the available credit limit. If this required amount is not fully drawn down, the borrower must pay a fee, equal to 0.15% of the difference between the actual drawdown amount and the required amount, to the agency bank after the expiration of all credit lines. The agency bank will then distribute this fee among the syndicate lenders according to the share of credit risk each lender bears.

• (b) Loan funds must be used for a specified purpose.

• (c) The Company will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

  • i. Current ratio must be 100% or higher.

  • ii. Debt ratio must equal to or less than 150%.

  • iii. Interest coverage ratio must be 3 or higher.

  • iv. Tangible net assets must be $3,800,000 or higher.

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If the Company fails to meet any of the requirements stated above, remedial measures, such as capital increase, must be taken to address the issue before the financial reporting date of the next annual or half-year consolidated financial statements. If the issue is resolved with the remedial measures, it is not considered a breach of contract. However, the Company is required to pay a fee, equal to 0.1% of the unpaid principal balance on the audit date, to the agency bank, who will distribute this fee among the syndicate lenders.

The financial ratios derived from the aforementioned consolidated financial statements of the Company meet the requirements specified in the syndicated loan agreement.

• (d) The Company’s direct and/or indirect ownership percentage of Chiu Ho Medical System Co., Ltd., Hua Lin Instruments Co., Ltd., Tong-Lin Instruments Co., Ltd., E Century Healthcare Corporation, Chiu Ho Biotech Co., Ltd. and Chiu Ho Scientific Co., Ltd. must be at least 66.67%, and the Company must maintain control over the operations of these subsidiaries. The shares of the aforementioned subsidiaries necessary to maintain the required minimum ownership percentage cannot be pledged or transferred to a third party, nor can they be placed in a trust.

• (e) The Company’s direct and/or indirect ownership percentage of its investment holding company in Myanmar and Medlink Healthcare Limited must be at least 70%, and the Company must maintain control over the operations of these subsidiaries. The shares of the aforementioned subsidiaries necessary to maintain the required minimum ownership percentage cannot be pledged or transferred to a third party, nor can they be placed in a trust.

• (f) The Company’s direct and/or indirect ownership percentage of Hsing-Yeh Biotechnology Co., Ltd must be 100%, and the Company must maintain control over the operations of the subsidiary. The shares of the aforementioned subsidiary necessary to maintain the required ownership percentage cannot be pledged or transferred to a third party, nor can they be placed in a trust. However, these restrictions do not apply if Hsing-Yeh Biotechnology Co., Ltd. merges with the Company and is dissolved.

If the Company fails to meet this requirement, First Commercial Bank will determine whether there has been a breach of contract and, if necessary, call a meeting with all the syndicate lenders to discuss the matter.

The financial ratios derived from the aforementioned consolidated financial statements of the Company meet the requirements specified in the syndicated loan agreement.

In July 2017, the Company cancelled an unused credit line of $1,600,000, which was part of the syndicated loan agreement led by First Commercial Bank.

In November 2018, the Company fully paid in advance the outstanding principal.

• B In November 2018, the Company and Tomorrow Medical System Co., Ltd. signed a syndicated loan agreement in the amount of $2,440,000 with a group of lenders led by First Commercial Bank and agreed to the following terms:

• (a) If the actual drawn amount is less than 80% of each available borrowing facility, the

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difference shall be imposed at a rate of 0.15% as a commitment fee at the end of the limit on borrowing facilities. The commitment fee shall be paid in full to the lead boank within 5 trading days after the end of the limit on borrowing facilities. Subsequently, the lead bank shall pay the commitment fee to syndicated banks based on its committed ratio.

• (b) Loan funds must be used for a specified purpose.

• (c) The Company will periodically issue a financial assurance letter to the banks, stating that the financial ratios on the annual and semi-annual consolidated financial statements will meet the following requirements:

• i. Current ratio must be 100% or higher.

• ii. Debt ratio must equal to or less than 150%.

• iii. Interest coverage ratio must be 3 or higher.

• iv. Tangible net assets must be $4,000,000 or higher.

• If the Company fails to meet any of the requirements stated above, remedial measures, such as capital increase, must be taken to address the issue before the financial reporting date of the next annual or half-year consolidated financial statements. If the issue is resolved with the remedial measures, it is not considered a breach of contract. However, the Company is required to pay a fee, equal to 0.1% of the unpaid principal balance on the audit date, to the agency bank, who will distribute this fee among the syndicate lenders.

• (d) The Company shall directly/ indirectly hold a 100% equity interest in Tomorrow Medical System Co., Ltd., Hsing-Yeh Biotechnology Co., Ltd., Medlink Healthcare Limited and Chiu Ho Medical System Co., Ltd., and directly/indirectly hold at least a 66.67% equity interest in Hua Lin Instruments Co., Ltd., Tong-Lin Instruments Co., Ltd., E Century Healthcare Corporation, Chiu Ho Biotech Co., Ltd. and Chiu Ho Scientific Co., Ltd., respectively, and the Company has control over those companies’ operations. Above equity interests can not be pledged or transferred to the third party in any assumption or method as well as trust.

If the Company fails to meet this requirement, First Commercial Bank will determine whether there has been a breach of contract and, if necessary, call a meeting with all the syndicate lenders to discuss the matter.

• C. In August 2018, Guangzhou Chiuho Medical System Co., Ltd. entered into a borrowing contract with CTBC Bank Co., Ltd. amounting to RMB 22 million. The Company is required to hold a 100% equity interest directly/indirectly in Guangzhou Chiuho Medical System Co., Ltd. until settlement of the borrowing, or the borrowing will be deemed as matured.

• D. Information about long-term borrowings that were pledged to others as collateral is provided in Note 8.

(8) Pensions

• A. The Company has established a defined contribution pension plan (the “New Plan”) under the

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Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment.

• B. The pension costs under the defined contribution pension plan of the Company for the years ended December 31, 2018 and 2017 were $1,853 and $1,917, respectively.

(9) Share-based payment

• A. As of December 31, 2018, the Company’s share-based payment transactions are as follows:

					Quantity granted	Quantity granted
					(in thousands				Vesting
	Type of arrangement		Grant	date	of shares)		Contract period		conditions
	Employee stock options-101		2012.8.31			1,280	7	years	Note
	Employee stock options-106		2018.4.13			738	7	years	Note
	Note: After two years	from the grant date,			employees are allowed		to exercise their stock options
	according to the vesting schedule and proportion specified in the plan.
	Details of the share-based payment arrangements are as follows:
			2018				2017
		No. of	options	Weighted-average		No. of	options	Weighted-average
		(in thousands		exercise price		(in thousands		exercise price
	Stock options	of shares)			(in dollars)	of shares)		(in dollars)
	Optionsoutstanding at
	January 1		333	$	37.40		341	$	38.30
	Options granted		738		34.50		-		-
	Options exercised		-		-	(	8)		37.71
	Options outstanding at
	December 31		1,071		34.32		333		37.40
	Options exercisable at
	December 31		333				333

Note: After two years from the grant date, employees are allowed to exercise their stock options according to the vesting schedule and proportion specified in the plan.

• B. Details of the share-based payment arrangements are as follows:

• C. For the year ended December 31, 2018, no stock options were exercised. For the year ended December 31, 2017, the weighted-average stock price of stock options on exercise dates was NT$41.66 (in dollars).

• D. The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:

follows:
Issue date Expiry approved date 2012.8.31 2019.8.30 2018.4.13 2025.4.12	December 31, 2018 No. o f shares (in thousands Exercise price of shares) (in dollars) 333 36.2 738 33.4	December 31, 2017 No. o f shares (in thousands Exercise price of shares) (in dollars) 333 37.4 - -
		No. o f shares (in thousands of shares) 333 -

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• E. The fair value of stock options is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Relevant information is as follows:
Type of arrangement Grant date Stock price (in dollars) Exercise price (in dollars) Expected price volatility Expected option life Expected dividends Risk-free interest rate Employee stock options-101 2012.8.31 $ 85.06 $ 44.0 40.44% 5.25 years 0% 1.00% (Note 1) (Note 2) Employee stock options-106 2018.4.13 $ 34.50 $ 34.5 30.02% 5.25 years 0% 0.75%	Fair value per unit (in dollars)
	$48.23~ $51.29 $8.46~ $10.91

• Note 1: Estimated using the market approach with necessary adjustments, the price of the common shares of the Company that have no controlling rights and cannot be traded in the open market was NT$85.06 (in dollars) on the grant date.

• Note 2: Expected price volatility is estimated based on the historical stock prices of comparable companies.

• F. Expenses incurred on the Company’s share-based payment transactions are shown below:

Equity-settled	Years ended December 31, 2018 2017 $ 1,207 $ 1,279
	2018 $ 1,207

• G. On July 15, 2018, the exercise prices of employee stock options-101 and employee stock options106 were adjusted to NT$36.2 and NT$33.4 (in dollars), respectively, according to the rules of the employee stock option plan. The adjustment of exercise prices had no significant impact on the fair value of the aforementioned stock options.

(10) Share capital

• A. As of December 31, 2018, the Company’s authorised capital was $2,000,000, consisting of 200 million shares of ordinary stock, and the paid-in capital was $1,399,136 with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

Movements in the number of the Company’s ordinary shares outstanding are as follows:

At January 1 Employee stock options exercised Shares retired ( At December 31	2018 139,914 - 1,000) 138,914	(In thousands of shares) 2017 139,848 66 - 139,914

• B. For the year ended December 31, 2017, 66,000 common shares were issued as a result of employees exercising their stock options under the stock option plan. All shares had par value of $10 (in dollars), with total capital raised amounting to $658.

• C. Treasury shares

• (a) Reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

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Name of company holding the shares The Company	Reason for reacquisition To be reissued to employees	December 31,2018	December 31,2018
		Number of shares 1,000,000	Carrying amount
			$ 34,956

• (b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.

• (c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.

• (d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.

(11) Capital surplus

• A. Pursuant to Paragraph 4, Article 30 of the Business Mergers and Acquisitions Act, if a company becomes a wholly-owned subsidiary of another company through a share exchange, its undistributed earnings become part of the capital surplus of the acquiring company (parent company). Therefore, if the increase in the investment holding company’s capital surplus is from the undistributed earnings of the subsidiary before the share exchange, this amount can be distributed as cash dividends or capitalised. Moreover, the proportion that can be capitalised is not subject to the restrictions set forth in Article 8 of the Securities and Exchange Act Enforcement Rules. In addition, according to Tai-Cai-Rong-Yi-Zi No. 0910016280, such increase in capital surplus was not generated by the holding company’s business operations and thus will not affect the remuneration of directors and supervisors and bonuses of employees. As of December 31, 2018, capital surplus that is attributable to the undistributed earnings of Chiu Ho Medical System Co., Ltd. and other associates before share exchanges amounted to $44,390.

• B. Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. However, capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

• C. Please refer to Note 6(9) for information on capital surplus - employee stock options.

(12) Retained earnings

• A. Under the Company’s Articles of Incorporation, the current year’s earnings, if any, shall first be

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used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve unless legal reserve equals the authorised share capital. Special reserve is then appropriated or reversed in accordance with related regulations. At least 50% of the remainder, if any, and accumulated undistributed earnings from prior years is distributable under the stockholders’ resolution at their meeting as proposed by the Board of Directors.

• B. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

• C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• D. The proposal on reversal of special reserve and 2017 earnings appropriation and the proposal on 2016 earnings appropriation which were resolved at the shareholders’ meeting on June 11, 2018 and June 13, 2017, respectively, are as follows:

2018 and June 13, 2017, respectively, are as follows:	2018 and June 13, 2017, respectively, are as follows:	2018 and June 13, 2017, respectively, are as follows:
Years ended December 31, 2017 2016 Dividends per Dividends per Amount share (in dollars) Amount share (in dollars) Legal reserve $ - $ 15,893 Special reserve - 78,849 Reversal of special reserve ( 138,784) - Cash dividends 153,905 $ 1.1000 140,490 $ 1.0046 $ 15,121 $ 235,232
	Amount $ 15,893 78,849 - 140,490 $ 235,232
		$ 1.0046

The aforementioned earnings appropriations for the years ended December 31, 2017 and 2016 were in agreement with the amounts resolved by the Board of Directors during its meetings held on March 21, 2018 and March 24, 2017, respectively, and the ex-dividend dates resolved in the same meetings were July 15, 2018 and July 16, 2017, respectively. For more information on the aforementioned earnings appropriations proposed by the Board of Directors and resolved by the shareholders, please go to the Market Observation Post System website maintained by the Taiwan Stock Exchange.

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• E. The appropriations for 2018 as resolved by the Board of Directors on March 22, 2019 are as follows:

follows:
Legal reserve Special reserve Cash dividends	Year ended December 31, 2018 Dividends per Amount share (in dollars) $ 32,342 330,410 250,045 $ 1.8000 $ 612,797
	Amount $ 32,342 330,410 250,045 $ 612,797

• F. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(17).

(13) Operating revenue

Operating revenue
Investment revenue Revenue from customer contracts Timing of revenue recognition-over time - internal customers - management service revenue	Year ended December 31, 2018
	$ 326,425 109,120 $ 435,545

Related disclosures on operating revenue for 2017 are provided in Note 12(5)B.

(14) Other income

Other income
Interest income: Interest income Other interest income Other income	Years ended December 31, 2018 2017 $ 409 $ 637 3,575 2,343 2 8 $ 3,986 $ 2,988
	2018 $ 409 3,575 2 $ 3,986

(15) Other gains and losses

Other gains and losses
		Years ended	December 31,
		2018		2017
Foreign exchange gains (losses)	$	117	($	325)
Netlosses on financial assets and
liabilities at fair value through profit or loss	(	21,586)	(	9,242)
Impairment loss on financial assets		-	(	277,325)
Other loss		-	(	46)
	($	21,469)	($	286,938)

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(16) Finance costs

Finance costs
Interest expense Bank borrowings Convertible bonds Others	Years ended December 31, 2018 2017 $ 14,437 $ 14,438 15,855 13,573 11,896 11,632 $ 42,188 $ 39,643
	2018 $ 14,437 15,855 11,896 $ 42,188

(17) Expenses by nature

Expenses by nature
Employee benefit expense Wages and salaries Employee stock options Labour and health insurance fees Pension costs Directors’ remuneration Other personnel expenses Depreciation charge Amortisation expense	Years ended December 31, 2018 2017 Operating Cost Operating Expense Operating Cost Operating Expense $ 59,120 $ - $ 56,133 $ - 1,207 - 1,279 - 3,839 - 3,937 - 1,853 - 1,917 - 6,273 - 608 - 1,496 - 1,309 - 1,164 - 1,148 - 583 - 611 - $ 75,535 $ - $ 66,942 $ -
	2018 Operating Cost Operating Expense $ 59,120 $ - 1,207 - 3,839 - 1,853 - 6,273 - 1,496 - 1,164 - 583 - $ 75,535 $ -
	Operating Cost $ 59,120 1,207 3,839 1,853 6,273 1,496 1,164 583 $ 75,535	Operating Cost $ 56,133 1,279 3,937 1,917 608 1,309 1,148 611 $ 66,942
			$ - - - - - - - - $ -

As of December 31, 2018 and 2017, the Company had 49 and 51 employees, excluding 5 and 5 directors, respectively.

• A. In accordance with the Articles of Incorporation of the Company, a ratio of distributable profit of the current year (i.e. profit before tax less profit margin before the appropriation of employees’ compensation and directors’ and supervisors’ remuneration), after covering accumulated losses, shall be distributed as employees’ compensation and directors’ and supervisors’ remuneration. The ratio shall not be lower than 0.05% for employees’ compensation and shall not be higher than 5% for directors’ and supervisors’ remuneration.

The aforementioned employees’ compensation and directors’ and supervisors’ remuneration requires the approval from the majority of the directors attending a board meeting, with more than two thirds of all directors in attendance, and must be reported to the shareholders.

Employees’ compensation is distributed in the form of shares or cash, and the recipients may include employees of affiliates who meet certain conditions. The distribution plan is set by the Chairman.

• B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $140 and $0, respectively; directors’ and supervisors’ remuneration was accrued at $5,600 and $0, respectively. The aforementioned amounts were recognised in salary expenses.

For the year ended December 31, 2017, the Company did not recognise the employees’

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compensation and directors’ and supervisors’ remuneration due to the net loss.

Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved at the meeting of Board of Directors and approved by shareholders at their meeting will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(18) Income tax

• A. Income tax (benefit) expense

• (a) Components of income tax (benefit) expense:

		Years ended	December 31,	December 31,
		2018		2017
Current tax
Current tax on profits for the year	$	-	$	-
Prior year income tax overestimation		-	(	68)
Total current tax		-	(	68)
Deferred tax
Origination and reversal of temporary
differences	(	49,419)		101
Impact of change in tax rate		96		-
Income tax (benefit) expense	($	49,323)	$	33

(b) Reconciliation between income tax expense and accounting profit

		Years ended	December 31,	December 31,
		2018		2017
Tax calculated based on profit before
tax and statutory tax rate	$	54,820	($	14,732)
Expenses disallowed by tax regulation		8,046		52,229
Tax exempt income by tax regulation	(	59,527)	(	46,731)
Prior year income tax overestimation		-		(68)
Temporary differences not recognised
as deferred tax assets	(	5,758)		9,335
Taxable loss not recognised as deferred
tax assets		630		-
Change in assessment of realisation of
deferred tax assets	(	47,630)		-
Impact of change in tax rate		96		-
Income tax (benefit) expense	($	49,323)	$	33

• (c) The income tax (charge)/credit relating to components of other comprehensive income is as follows:

is as follows:
Currency translation differences (	Years ended December 31, 2018 2017 $ 2,091) $ 1,443
	2018 $ 2,091)

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• B. Amounts of deferred tax assets or liabilities as a result of temporary differences and tax losses are as follows:

losses are as follows:
					Year ended December 31,				2018
								Recognised
						Recognised		in other
						in profit		comprehensive
			January 1			or loss		income				December 31
Temporary differences
- Deferred tax assets:
Unrealised exchange loss	$		63	($		16)	$			-	$		47
Unused compensated absences			18			37				-			55
Currency translation
differences			2,091			-	(		2,091)				-
Taxable loss			-			49,414				-			49,414
			2,172			49,435	(		2,091)				49,516
Temporary differences
- Deferred tax liabilities:
Effects of business
combination	(		625)	(		109)				-	(		734)
	$		1,547	$		49,326	($		2,091)		($		48,782)
					Year ended December 31,				2017
								Recognised
						Recognised		in other
						in profit		comprehensive
			January 1			or loss		income				December 31
Temporary differences
- Deferred tax assets:
Unrealised exchange loss	$		8	$		55	$			-	$		63
Unused compensated absences			174	(		156)				-			18
Currency translation
differences			648			-			1,443				2,091
			830	(		101)			1,443				2,172
Temporary differences
- Deferred tax liabilities:
Effects of business
combination	(		625)			-				-	(		625)
		$	205	($		101)	$		1,443			$	1,547
The amounts of deductible temporary differences that were								not recognised			as deferred ta
assets are as follows:
					December 31, 2018				December 31, 2017
Deductible temporary differences					$		83,505		$				91,227

• C. The amounts of deductible temporary differences that were not recognised as deferred tax assets are as follows:

• D. The Company’s income tax returns through 2016 have been assessed and approved by the Tax Authority.

• E. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China on February 7, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Company has assessed the impact of the change in income tax rate.

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(19) Earnings (loss) per share

Earnings (loss) per share
Year ended December 31, 2018 Amount Weighted average number of ordinary shares outstanding Earnings per share after tax (shares in thousands) (in dollars) Basic earnings per share Profit attributable to ordinary shareholders of the parent $ 323,422 139,651 $ 2.32 Diluted earnings per share Profit attributable to ordinary shareholders of the parent $ 323,422 139,651 Assumed conversion of all dilutive potential ordinary shares Employee stock options (Note) - - Employees’ compensation - 5 Convertible bonds 27,919 34,679 Profit attributable to ordinary shareholders of the parent plus assumed conversion of alldilutive potential ordinary shares $ 351,341 174,335 $ 2.02 Year ended December 31, 2017 Amount Weighted average number of ordinary shares outstanding Loss per share after tax (shares in thousands) (in dollars) Basic loss per share Loss attributable to ordinary shareholders of the parent ($ 86,695) 139,872 ($ 0.62) Diluted loss per share Loss attributable to ordinary shareholders of the parent ($ 86,695) 139,872 Assumed conversion of all dilutive potential ordinary shares Employee stock options (Note) - - Employees’ compensation(Note) - - Convertible bonds(Note) - - Loss attributable to ordinary shareholders of the parent plus assumed conversion of all dilutive potential ordinary shares ($ 86,695) 139,872 ($ 0.62)	Year ended December 31, 2018
	Amount Weighted average number of ordinary shares outstanding Earnings per share after tax (shares in thousands) (in dollars) $ 323,422 139,651 $ 2.32 $ 323,422 139,651 - - - 5 27,919 34,679 $ 351,341 174,335 $ 2.02 Year ended December 31, 2017
		Weighted average number of ordinary shares outstanding (shares in thousands) 139,872 ( 139,872 - - - 139,872 (	Loss per share (in dollars) $ 0.62) $ 0.62)

Note: Not included due to antidilutive effect.

Because employees’ compensation may be distributed in the form of shares, the calculation of diluted earnings per share assumes that employees’ compensation would be distributed entirely in shares. These dilutive potential common shares are included in the weighted average number of

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outstanding shares when calculating diluted earnings per share. When calculating basic earnings per share, shares issued as part of employees’ compensation are included in the weighted average number of outstanding shares only if the number of such shares have been confirmed and resolved by the shareholders. Shares issued as part of employees’ compensation are not considered bonus shares, therefore no retrospective adjustment is applied when calculating basic and diluted earnings per share.

(20) Changes in liabilities from financing activities

January 1, 2018 Changes in cash flow from financing activities December 31, 2018	Short-term borrowings $ - 180,000 $ 180,000	Long-term borrowings $ 765,000 675,000 $ 1,440,000	Total liabilities from financing activities $ 765,000 855,000 $ 1,620,000

7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party

The Company’s stock are held by the public, so it has neither an ultimate parent company nor ultimate controlling party.

(2) Names of related parties and relationship

Names of related parties and relationship
Names of related parties Chiu Ho Medical System Co., Ltd Tomorrow Medical System Co., Ltd. Chiu Ho Scientific Co., Ltd. (Note 2) Chiu Ho Biotech Co., Ltd. Ho-Shin Instruments Co., Ltd. (Note 2) Shin-Ho Instruments Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. Hsin Lin Biotech Co., Ltd. E Century Healthcare Corporation J. Ab Beauty Co., Ltd. (Note 1) CHC Healthcare (BVI) Limited Medlink Healthcare Limited Hsing-Yeh Biotechnology Co., Ltd. SenCare Healthcare Company CHC Healthcare (HK) Limited	Relationship with the Company
	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary

Note 1: The shareholders resolved to dissolve the Company’s subsidiary, J. Ab Beauty Co., Ltd., at their meeting on April 20, 2018. Consequently, the Company no longer controls J. Ab Beauty Co., Ltd. thereafter.

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• Note 2: The Company’s subsidiary, Ho-Shin Instruments Co., Ltd., was merged into Chiu Ho Scientific Co., Ltd. on December 12, 2018, and with Chiu Ho Scientific Co., Ltd. as the surviving company. Under the merger, the Company held a 100% equity interest in Chiu Ho Scientific Co., Ltd. As this merger was made in line with the group restructuring, there is no significant impact to the parent company’s shareholder’s equity.

(3) Significant transactions and balances with related parties

A. Management service revenues (shown as ' Service revenue ')

Sales of services Chiu Ho Medical System Co., Ltd. Tomorrow Medical System Co., Ltd. Hua Lin Instruments Co., Ltd. E Century Healthcare Corporation Hsing-Yeh Biotechnology Co., Ltd. Others	Years ended December 31, 2018 2017 $ 39,600 $ 38,400 12,360 11,880 11,880 11,280 13,320 13,320 12,720 12,000 19,240 19,680 $ 109,120 $ 106,560	Years ended December 31, 2018 2017 $ 39,600 $ 38,400 12,360 11,880 11,880 11,280 13,320 13,320 12,720 12,000 19,240 19,680 $ 109,120 $ 106,560
	2018 $ 39,600 12,360 11,880 13,320 12,720 19,240 $ 109,120

Management service revenue is revenue arising from administrative resources, technical consultation on medical practices and management services rendered by the Company to related parties and the prices and payment terms are decided by the both parties.

B. Rent expenses (shown as ' Operating costs ')

							Years	ended	December 31,	December 31,
	Lease objects	Lessors	Leasing	period			2018			2017
	Land and	Chiu Ho Medical
	Buildings	System Co., Ltd.	2018.1.1~2018.12.31			$		1,080	$	1,080
		Chiu Ho Scientific
		Co., Ltd.	2017.1.1~2017.12.31					390		480
						$		1,470	$	1,560
	The Company paid rent monthly.
	Accounts receivable from related parties
					December		31, 2018	December 31, 2017
	Accounts receivable
	Chiu Ho Medical System Co.,		Ltd.	$			3,370	$		-
	Hsing-Yeh	Biotechnology Co., Ltd.					-			1,011
				$			3,370	$		1,011

C. Accounts receivable from related parties

• (a) The Company’s accounts receivable were neither past due nor impaired so the counterparties of the Company’s accounts receivable has good credit quality.

• (b) As of December 31, 2018 and 2017, financial assets were not past due.

• (c) As of December 31, 2018 and 2017, the maximum exposure to credit risk of accounts receivable is the carrying amount.

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D. Other receivables due from related parties

• (a) Loans to related parties

Tomorrow Medical System Co., Ltd. Chiu Ho Medical System Co., Ltd. Others Interest income Tomorrow Medical System Co., Ltd. Chiu Ho Scientific Co., Ltd. Others	December 31, 2018 December 31, 2017 $ 301,189 $ 121,223 180,059 - 60,358 - $ 541,606 $ 121,223 Years ended December 31, 2018 2017 $ 2,292 $ 2,203 233 89 1,050 51 $ 3,575 $ 2,343

The loans lent to subsidiaries are repayable within 1 year and the interest rate is at 2% per annum for both years ended December 31, 2018 and 2017.

• (b) Other receivables were reclassified because of the dissolution investees.

E.	Subsidiaries Other payables to related parties Chiu Ho Medical System Co., Ltd. Tomorrow Medical System Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd.	December 31, 2018 $ 369 December 31, 2018 $ - - - - $ -		December 31, 2017 $ - December 31, 2017 $ 3,600 6,240 2,280 1,440 $ 13,560

Other payables are returns of management services overpayments from the subsidiaries during the year.

F. Others

• (a) Capital increase of subsidiaries

Company name Chiu Ho Medical System Co., Ltd. Chiu Ho Scientific Co., Ltd. CHC Healthcare (BVI) Limited		Year ended December 31, 2018	Year ended December 31, 2018
	Capital increase price per share (in dollars) $ 10 10 415,127	Total transaction amount $ 637,500 31,431 70,572 $ 739,503	Percentage of ownership before capital increase Percentage of ownership after capital increase 100% 100% 100% 100% 100% 100%

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Company name Chiu Ho Medical System Co., Ltd. Tomorrow Medical System Co., Ltd. J. Ab Beauty Co., Ltd. CHC Healthcare (BVI) Limited		Year ended December 31, 2017	Year ended December 31, 2017
	Capital increase price per share (in dollars) $ 10 10 10 433,941	Total transaction amount $ 129,900 50,000 6,000 73,770 $ 259,670	Percentage of ownership before capital increase 100% 100% 64.55% 100%	Percentage of ownership after capital increase
				100% 100% 70% 100%

(b) Proceeds from capital reduction of subsidiaries

Year ended December 31, 2018 Company name Percentage of capital reduction Total transaction amount Chiu Ho Scientific Co., Ltd. 40.32% $ 50,000 Chiu Ho Biotech Co., Ltd. 11.90% 50,000 Ho-Shin Instruments Co., Ltd - - Shin-Ho Instruments Co., Ltd - - Hua LinInstruments Co., Ltd. 20.11% 140,000 Hsin Lin Biotech Co., Ltd. - - E Century Healthcare Corporation 14.89% 105,000 $ 345,000	Year ended December 31, 2017	Year ended December 31, 2017
	Percentage of capital reduction	Total transaction amount
	- 10.83% 23.47% 83.33% 20.55% 13.04% 4.73%	$ - 51,000 23,000 15,000 180,000 15,000 35,000
		$ 319,000

G. Endorsements and guarantees provided to related parties

(a) As of December 31, 2018 and 2017, the balances of financial guarantees provided by the Company to other subsidiaries as collateral for bank borrowings are as follows. Please refer to 13(1)B for the details.

to 13(1)B for the details.
Chiu Ho Medical System Co., Ltd. Tomorrow Medical System Co., Ltd. Subsidiaries	December 31, 2018 $ 1,917,145 1,460,000 457,099 $ 3,834,244	December 31, 2017 $ 2,774,280 1,110,000 1,340,270
		$ 5,224,550

• (b) In 2018, the Company and its subsidiary, Tomorrow Medical System Co., Ltd., signed a syndicated loan agreement with First Commercial Bank, and the total syndicated loan

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amounted to $2,440,000. This syndicated loan is jointly guaranteed by the Company and the Company’s chairman, Mr. Pei-Lin Lee, and pledged the land and buildings of the subsidiary, Hsing-Yeh Biotechnology Co., Ltd., as a collateral.

• (c) The Company signed a contract for a syndicated borrowing facility with its subsidiaries, Chiu Ho Medical System Co., Ltd., Medlink Healthcare Limited and First Commercial Bank, for a credit line of $3,300,000. It required the Company and the Company’s chairman Mr. Pei-Lin Lee to sign a joint guarantee and the subsidiary, Hsing-Yeh Biotechnology Co., Ltd., to pledge land and buildings as mortgages. In November 2018, the Company fully paid the outstanding principal in advance.

(4) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Share-based payments	Years ended December 31, 2018 2017 $ 31,696 $ 28,089 279 324 343 576 $ 32,318 $ 28,989
	2018 $ 31,696 279 343 $ 32,318

8. PLEDGED ASSETS

The Company’s assets pledged as collateral are as follows:

Asssets Time deposits (shown as ‘other current assets’) Time deposits (shown as ‘other financial assets-non-current’) Reserve account (shown as ‘other financial assets-non-current’)	Book	value December 31, 2017 $ 30,000 50,008 3,794 $ 83,802	Purpose
	December 31, 2018 $ - 50,053 7,000 $ 57,053
			Performance guarantee Performance guarantee Collateral for long-term borrowings

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

Except for significant commitment and guarantees and endorsements provided to related parties in Note 6(6)(7) and 7(3)G, the Company has no other significant commitments and contingencies.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal

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capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

• A. Financial instruments by category:

Financial assets Financial assets at fair value through profit or loss Financial assets mandatorily measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Designation of equity instrument Available-for-sale financial assets Available-for-sale financial assets Financial assets at amortised cost Cash and cash equivalents Accounts receivable (including related parties) Other receivables (including related parties) Other financial assets Financial liabilities Financial liabilities at amortised cost Short-term borrowings Notes payable Accounts payable Other payables (including related parties) Bonds payable (including current portion) Long-term borrowings (including current portion)	December 31, 2018 $ 53,974 $ 14,394 $ - $ 50,008 3,370 541,975 57,445 $ 652,798 $ 180,000 1,464 - 20,565 1,177,035 1,440,000 $ 2,819,064	December 31, 2017 $ 660 $ - $ 62,890 $ 549,051 1,011 121,669 84,194 $ 755,925 $ - 892 31 21,092 1,481,280 765,000 $ 2,268,295

B. Financial risk management policies

• (a) The Company’s activities expose it to a variety of financial risks, including market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial position and financial performance.

• (b) Risk management is carried out by the Company treasury department under policies approved by the Board of Directors. The Company treasury identifies, evaluates and hedges

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financial risks in close co-operation with the Company’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Company conducts business worldwide and imports state-of-the-art medical equipment and supplies from various countries and is therefore exposed to foreign exchange rate risk from multiple foreign currencies, primarily the US dollar. Foreign exchange rate risk arises from net investments in foreign operations.

• ii. The Company’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD	(Foreign currency: functional currency) Financial assets Monetary items USD:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD Non-monetary items USD:NTD	December 31, 2018 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 124 30.72 $ 3,809 December 31, 2017 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 129 29.76 $ 3,839 11,705 29.76 348,343	December 31, 2018 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 124 30.72 $ 3,809 December 31, 2017 Foreign currency amount Exchange Book value (in thousands) rate (NTD) $ 129 29.76 $ 3,839 11,705 29.76 348,343	Year ended December 31, 2018 Sensitivity analysis Effect on Extent of profit variation or loss 1% $ 38 Year ended December 31, 2017 Sensitivity analysis Effect on Extent of profit variation or loss 1% $ 38
		Foreign currency amount (in thousands) $ 129 11,705	Exchange rate 29.76 29.76
				Extent of variation 1%

iii. The Company’s unrealised exchange gain (loss) arising from significant foreign exchange variation:

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(Foreign currency: functional currency) Financial assets Monetary items USD:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD	Year ended December 31, 2018 Unrealised foreign exchange gain (loss) Foreign currency amount(in thousands) Exchange rate Book value $ - 30.72 $ 136 Year ended December 31, 2017 Unrealised foreign exchange gain (loss) Foreign currency amount(in thousands) Exchange rate Book value $ - 29.76 ($ 325)
	Unrealised foreign exchange gain
	Foreign currency amount(in thousands) $ -

Price risk

• i. The Company is exposed to equity price risk from its investments classified on the consolidated balance sheet either as financial assets measured at fair value through profit or loss, financial assets measured at fair value through other comprehensive income or available-for-sale financial assets. The Company is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Company has set stop-loss points and therefore does not expect to incur significant losses from equity price risk.

• ii. The Company’s investments in equity securities comprise domestic and foreign listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant, post-tax profit for the years ended December 31, 2018 and 2017 would have increased/decreased by $5,348 and $0, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $1,439 and $6,289, respectively, as a result of other comprehensive income classified as available-for-sale equity investment and equity investment at fair value through other comprehensive income.

Cash flow and fair value interest rate risk

• i. The Company’s interest rate risk arises from long-term borrowings. Long-term borrowings issued at variable rates expose the Company to cash flow interest rate risk, which is partially offset by cash and cash equivalents held at variable rates. The Company’s borrowings at variable rates are primarily denominated in NTD.

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• ii. If the borrowing interest rate had increased/decreased by 1% with all other variables held constant, profit, net of tax for the year ended December 31, 2018 and 2017 would have increased/decreased by $14,400 and $7,650, respectively. The main factor is that changes in interests expense result from floating rate borrowings.

• (b) Credit risk

• i. The Company provides endorsements and guarantees based on the Company policies and procedures on endorsements and guarantees, either to subsidiaries. No collateral is requested for the endorsements and guarantees as the Company can control the credit risk of the subsidiary. The maximum credit risk is the guaranteed amount.

• ii. All of the Company’s accounts receivable are from its subsidiaries, no loss allowance for accounts receivable was recognised by the Company.

• iii. On December 31, 2018, the provision matrix is as follows: December 31, 2018 Expected loss rate Total book value Loss allowance Not past due 0% $ 3,370 $ -

• iv. Credit risk information for 2017 is provided in Note 12(4).

• (c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company treasury. Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the Company’s debt financing plans, covenant compliance, compliance with internal balance sheet ratio targets.

• ii. The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the expected or contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities:

Non-derivative financial liabilities:
Less than December 31, 2018 1 year Short-term borrowings $ 180,037 Notes payable 1,464 Accounts payable - Other payables(including related parties) 20,315 Bonds payable and embedded derivative instruments - Long-term borrowings (including current portion) 25,735 Less than	Between 1 and 2 years $ - - - - 1,177,035 97,416 Between 1	Between 2 and 5 years $ - - - - - 1,429,147 Between 2	Over 5 years
			$ - - - - - - Over

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December 31, 2017 1 year Notes payable $ 892 Accounts payable 31 Other payables(including related parties) 20,985 Bonds payable and embedded derivative instruments 316,587 Long-term borrowings (including current portion) 181,074	and 2 years $ - - - - 178,185	and 5 years $ - - - 1,164,693 427,407	5 years
			$ - - - - -

(3) Fair value information

• A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Company’s investment in listed stocks is included in Level 1.

• 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. The fair value of the Company’s investment in equity investment without active market is included in Level 3.

• B. The carrying amount of a financial instrument not measured at fair value is a reasonable approximation of its fair value. Such financial instruments include cash and cash equivalents, accounts receivable (including those from related parties), other receivables (including those from related parties), guarantee deposits paid, other financial assets, short-term borrowings, notes payable, accounts payable (including those to related parties), other payables (including those to related parties), long-term borrowings (including the portion due within one year or one business cycle) and bonds payable.

• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities are as follows:

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(a) The related information of the nature of the assets and liabilities is as follows:

December 31, 2018 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Equity securities Derivative instruments Financial assets at fair value through other comprehensive income Equity securities December 31, 2017 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Derivative instruments Available-for-sale financial assets Equity securities	Level 1 $ 53,482 - 14,394 $ 67,876 Level 1 $ - 62,890 $ 62,890	Level 2 $ - - - $ - Level 2 $ - - $ -	Level 3 $ - 492 - $ 492 Level 3 $ 660 - $ 660	Total $ 53,482 492
				14,394
				$ 68,368 Total $ 660 62,890 $ 63,550

• (b) The methods and assumptions the Company used to measure fair value are as follows:

  • i. Listed stocks are instruments whose fair values are measured using quoted market prices (that is, Level 1). The quoted market prices used for these stocks are the closing prices on the balance sheet date.

  • ii. Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes.

• D. For the years ended December 31, 2018 and 2017, there was no transfer between Level 1 and Level 2.

• E. The following chart is the movement of Level 3 for the years ended December 31, 2018 and 2017.

At January 1 Current issue Gains and losses recognised in other comprehensive income ( At December 31	Derivative financial instruments 2018 2017 $ 660 $ - - 292 168) 368 $ 492 $ 660
	2018 $ 660 - 168) $ 492

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• F. For the years ended December 31, 2018 and 2017, there was no transfer into or out from Level 3.

• G. Financial accounting department is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions and performing reviews regularly.

• H. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Hybrid instrument: Convertible bond Hybrid instrument: Convertible bond	Fair value at December 31, 2018 $ 492 Fair value at December 31, 2017 $ 660	Valuation technique Binomial Model Valuation technique Binomial Model	Significant unobservable input Volatility Discount rate Significant unobservable input Volatility Discount rate	Range (weighted average) 23.27% 0.7839% Range (weighted average) 17.71% 0.8231%	Relationship of inputs to fair value The higher the volatility, the higher the fair value; The higher the discount rate, the lower the fair value Relationship of inputs to fair value The higher the volatility, the higher the fair value; The higher the discount rate, the lower the fair value

• I. The Company has carefully assessed the valuation models and assumptions used to measure fair value. However, use of different valuation models or assumptions may result in different measurement. For financial assets and financial liabilities classified as Level 3, an increase or decrease in their valuation parameter by 1% would have no material impact on gain or loss and other comprehensive income as at December 31, 2018 and 2017.

(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

• A. Summary of significant accounting policies adopted in 2017:

• (a) Financial assets and liabilities at fair value through profit or loss

  • i. It refers to financial assets and liabilities held for trading. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they

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are designated as hedges. Financial assets and liabilities that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

  - (i) Hybrid (combined) contracts; or

  - (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or

  - (iii) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management practice.

• ii. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognised and derecognised using settlement date accounting.

• iii. Financial assets and liabilities at fair value through profit or loss are initially recognised at fair value. Related transaction costs are expensed in profit or loss. These financial assets and liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets and liabilities are recognised in profit or loss.

• (b) Available-for-sale financial assets

• i. They are non-derivatives that are either designated in this category or not classified in any of the other categories.

• ii. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using settlement date accounting.

• iii. They are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income.

• (c) Loans and receivables

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (e) Impairment of financial assets

• i. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

• ii. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows:

  • (i) Significant financial difficulty of the issuer or debtor;

  • (ii) A breach of contract, such as a default or delinquency in interest or principal

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payments;

  - (iii) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

  - (iv) The disappearance of an active market for that financial asset because of financial difficulties;

  - (v) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

• iii. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, the amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from ‘other comprehensive income’ to ‘profit or loss’. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognised, such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• B. The reconciliation of carrying amount of financial assets transfered from December 31, 2017, IAS 39, to January 1, 2018, IFRS 9, were as follows:

IAS 39 Impairment loss adjustment IFRS 9	Available-for-sale-equity Measured at fair value through other comprehensive income-equity $ 62,890 - $ 62,890	Effects	Effects
		Retained earnings $ - 277,325 $ 277,325	Other equity $ - ( 277,325)
			($ 277,325)

Under IAS 39, because the equity instruments, which were classified as available-for-sale financial assets amounting to $62,890, were not held for the purpose of trading, they were reclassified as ‘financial assets at fair value through other comprehensive income (equity instruments)’, and accordingly, retained earnings was increased and other equity interest was decreased in the amounts of $277,325 and $277,325 on initial application of IFRS 9, respectively.

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• C. The significant accounts for the year ended December 31, 2017 are as follows:

• (a) Financial assets at fair value through profit or loss

Items Non-current items: Financial assets held for trading Non-hedging derivatives (Redemption rights to the third domestic issuance of secured convertible corporate bonds) Valuation adjustment of financial assets held for trading	December 31, 2017 $ 292 368 $ 660

For the year ended December 31, 2017, the Company recognised net gains (losses) on financial assets held for trading purposes in the amounts of $368, which were included in “other gains and losses”.

• (b) Available-for-sale financial assets

Available-for-sale financial assets
Items Non-current items: Listed stocks Swissray Global Healthcare Holding Ltd. Accumulated impairment		December 31, 2017 $ 340,215 277,325) $ 62,890
	(

For the year ended December 31, 2017, the Company recognised fair value changes in other comprehensive income in the amount of ($123,329).

For the year ended December 31, 2017, certain investments have been impaired under the Company’s assessment, and the Company recognised and reclassified impairment loss from equity to profit or loss amounting to $277,325, which was listed in ‘Other gains and losses’.

• D. Credit risk information for the year ended December 31, 2017 is as follows:

The credit quality information of financial assets that are neither past due nor impaired, please refer to Note7(3)C.

The Company provides endorsements and guarantees based on the Company’s policies and procedures on endorsements and guarantees, either to subsidiaries. No collateral is requested for the endorsements and guarantees as the Company can control the credit risk of the subsidiary. The maximum credit risk is the guarantee amount.

(4) Effects of initial application of IFRS 15 and information on application of IAS 11 and IAS 18 in

2017

• A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below.

• (a) Investment revenue

The Company recognises share of profit or loss of subsidiaries and associates generated after acquisition in revenue or cost.

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• (b) Sales of services

  • i.The Company provides administrative resource and management service to subsidiaries. The revenue will have to be recognised based on the stage of completion at the balance sheet date when the outcome of services provided can be estimated reliably.

  • ii. Revenue recognition must consider the possibility of recovering costs already incurred when the outcome of services provided cannot be reasonably estimated. If incurred costs are not likely to be recovered, no revenue should be recognised, and the incurred costs should still be recognised as expenses in the current period.

• B. The revenues recognised by using above accounting policies for the year ended December 31, 2017 are as follows:

2017 are as follows:
Profit or loss of associate and joint ventures accounted for using equity method Service revenue	Year ended December 31, 2017
	$ 220,080 106,560
	$ 326,640

• C. The effects and description of current balance sheet and comprehensive income statement if the Company continues adopting above accounting policies are as follows:

Balance sheet items Investments accounted for using equity method Retained earnings Comprehensive income statement items	Description (1) (1) Description (1) (1)	Year ended December 31, 2018	Year ended December 31, 2018
		Balance by using Balance by using previous Effects from changes in IFRS 15 accounting policies accounting policy $ 7,010,440 $ 7,023,635 ($ 13,195) 763,134 776,329 ( 13,195) Year ended December 31, 2018
		Balance by using IFRS 15 $ 435,545 323,422	Balance by using previous Effects from changes in accounting policies accounting policy $ 440,648 ($ 5,103) 328,525 ( 5,103)
Operating revenue Profit for the period

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: Please refer to table 2.

• C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures): Please refer to table 3.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or

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20% of the Company’s paid-in capital: None.

• E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.

• I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Notes 6(2)(6), and 12(3)(4).

• J. Significant inter-company transactions during the reporting periods: None exceeds 100 million.

(2) Information on investees

• Information of investee companies (not including investees in Mainland China) ： Please refer to table 6.

(3) Information on investments in Mainland China

• A. Basic information: Please refer to table 7.

• B. Limits on investments in Mainland China: Please refer to table 7.

• C. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None exceeds 100 million.

14. SEGMENT INFORMATION

None.

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CHC Healthcare Group

Expressed in thousands of NTD (Except as otherwise indicated)

Loans to others

For the year ended December 31, 2018

Table 1

No. (Note 1)	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2018	Balance at December 31, 2018	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a single party (Note 2)	Ceiling on total loans granted (Note 3)	Footnote
													Item Value
0 0 0 0 0 0 0 0 0 0 0 0 0 1 2	The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company Chiu Ho Scientific Co., Ltd. Hsing-Yeh Biotechnology Co., Ltd.	Chiu Ho Medical System Co., Ltd. Chiu Ho Scientific Co., Ltd. Shin-Ho Instruments Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. E Century Healthcare Corporation Tomorrow Medical System CO., Ltd. Hsin Lin Biotech Co., Ltd. Chiu Ho Biotech Co., Ltd. Ho-Shin Instruments Co., Ltd. Medlink Healthcare Limited Hsing-Yeh Biotechnology Co., Ltd. Chiu Ho (CHINA) Medical Technology Co., Ltd. High-End Vision Eye Center Yeezen General Hospital	Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables Other receivables	Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y	350,000 $ 80,000 10,000 60,000 20,000 40,000 380,000 5,000 10,000 10,000 60,000 80,000 30,960 5,000 155,000	350,000 $ 50,000 - 60,000 15,000 20,000 380,000 - 10,000 - 60,000 80,000 30,715 5,000 148,000	180,000 $ 50,000 - - - - 300,000 - - - - 10,000 - 5,000 148,000	2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2% 2.5% 2.5%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing Business transaction Business transaction	- $ - - - - - - - - - - - - 4,736 222,799	Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation Operation - -	- $ - - - - - - - - - - - - - -	None - $ None - None - None - None - None - None - None - None - None - None - None - None - None - None -	497,236 $ 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 497,236 4,736 199,014	1,988,945 $ 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 1,988,945 53,531 398,028

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No. (Note 1)	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year ended December 31, 2018	Balance at December 31, 2018	Actual amount drawn down	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Collateral	Limit on loans granted to a single party (Note 2)	Ceiling on total loans granted (Note 3)	Footnote
													Item Value
3 4	Medlink Healthcare Limited CHC Healthcare (HK) Limited	Hsing-Yeh Biotechnology Co., Ltd. Chiu Ho (CHINA) Medical Technology Co., Ltd.	Other receivables Other receivables	Y Y	15,000 $ 7,740	- $ 7,679 1,216,394 $	- $ - 693,000 $	2% 2%	Short-term financing Short-term financing	- $ -	Operation Operation	- $ -	None - $ None -	317,527 $ 8,130	635,054 $ 16,260

Note 1: The numbers filled in for the loans provided by the Company or subsidiaries are as follows:

• (1) The Company is ‘0’.

• (2) The subsidiaries are numbered in order starting from ‘1’.

• Note 2: (1) In accordance with the Company's lending policies and procedures, the credit limit for each type of borrower is set as follows:

• A. For borrowers with which the Company has a business relationship, the individual loan amount cannot exceed the total transaction amount with the Company in the most recent year.

• B. For borrowers with short-term financing needs, the individual loan amount cannot exceend 10% of the Company's net assets according to the most recent financial statements.

• (2) In accordance with the lending policies and procedures of the Company's subsidiary, the credit limit for each type of borrower is set as follows:

• A. For borrowers with which the subsidiary has a business relationship, the individual loan amount cannot exceed the total transaction amount with the subsidiary in the most recent year.

• B. The total loan amount granted to a single party cannot exceed 20% of the subsidiary's net assets according to the most recent financial statements.

• Note 3: (1) Limit on total loans granted by the Company: Total loan amount cannot exceed 40% of the Company's net assets according to the most recent financial statements.

• (2) Limit on total loans granted by the Company's subsidiary: Total loan amount cannot exceed 40% of the subsidiary's net assets according to the most recent financial statements.

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CHC Healthcare Group

Table 2

Expressed in thousands of NTD (Except as otherwise indicated)

Provision of endorsements and guarantees to others

For the year ended December 31, 2018

No. （Note 1）	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party （Note 3）	Maximum outstanding endorsement/ guarantee amount as of December 31,2018	Outstanding endorsement/ guarantee amount at December 31,2018	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided （Note 4）	Provision of endorsements/ guarantees by parent company to subsidiary （Note 5）	Provision of endorsements/ guarantees by subsidiary to parent company （Note 5）	Provision of endorsements/ guarantees to the party in Mainland China （Note 5）	Footnote
		Companyname	Relationship with the endorser/ guarantor （Note 2）
0 0 0 0 0 0 0 0 0 1 1 1	The Company The Company The Company The Company The Company The Company The Company The Company The Company Hsing-Yeh Biotechnology Co., Ltd. Hsing-Yeh Biotechnology Co., Ltd. Hsing-Yeh Biotechnology Co., Ltd.	Chiu Ho Medical System Co., Ltd. Tomorrow Medical System CO., Ltd. Chiu Ho Scientific Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. E Century Healthcare Corporation Guangzhou Chiuho Medical System Co.,Ltd. Medlink Healthcare Limited CHC Healthcare (HK) Limited The Company Chiu Ho Medical System Co., Ltd. Tomorrow Medical System Co., Ltd.	2 2 2 2 2 2 3 3 3 4 4 4	9,944,726 $ 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 9,944,726 1,990,142 1,990,142 1,990,142	2,772,390 $ 1,852,401 251,960 250,000 130,000 120,000 103,268 305,000 245,720 1,189,718 933,474 575,164	1,917,145 $ 1,460,000 251,715 - - 57,000 98,384 50,000 - 828,236 - 575,164	595,822 $ 525,036 67,111 - - 46,261 85,398 40,000 - 828,236 - 225,464	- $ - - - - - - - - 828,236 - 575,164	38.56% 29.36% 5.06% 0.00% 0.00% 1.15% 1.98% 1.01% 0.00% 83.23% 0.00% 57.80%	14,917,089 $ 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 14,917,089 2,985,213 2,985,213 2,985,213	Y Y Y Y Y Y Y Y Y N N N	N N N N N N N N N Y N N	N N N N N N Y N N N N N

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No. （Note 1）	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party （Note 3）	Maximum outstanding endorsement/ guarantee amount as of December 31,2018	Outstanding endorsement/ guarantee amount at December 31,2018	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided （Note 4）	Provision of endorsements/ guarantees by parent company to subsidiary （Note 5）	Provision of endorsements/ guarantees by subsidiary to parent company （Note 5）	Provision of endorsements/ guarantees to the party in Mainland China （Note 5）	Footnote
		Companyname	Relationship with the endorser/ guarantor （Note 2）
1	Hsing-Yeh Biotechnology Co., Ltd.	Medlink Healthcare Limited	4	1,990,142 $	108,444 $	- $ 5,237,644 $	- $ 2,413,328 $	- $	0.00%	2,985,213 $	N	N	N
								1,403,400 $

Note 1: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:

• (1) The Company is ‘0’.

• (2) The subsidiaries are numbered in order starting from ‘1’.

Note 2: Relationship between the endorser/guarantor and the party being endorsed/guaranteed is classified into the following seven categories; fill in the number of category each case belongs to:

• (1) Having business relationship.

• (2) The endorser/guarantor parent company owns directly and indirectly more than 50% voting shares of the endorsed/guaranteed subsidiary.

• (3) The endorsed/guaranteed company owns directly and indirectly more than 50% voting shares of the endorser/guarantor parent company.

• (4) The endorser/guarantor parent company owns directly and indirectly more than 90% voting shares of the endorsed/guaranteed company.

• (5) Mutual guarantee of the trade made by the endorsed/guaranteed company or joint contractor as required under the construction contract.

• (6) Due to joint venture, all shareholders provide endorsements/guarantees to the endorsed/guaranteed company in proportion to its ownership.

• (7) Joint guarantee of the performance guarantee for pre-sold home sales contract as required under the Consumer Protection Act.

• Note 3: (1) In accordance with the Company's policies and procedures on endorsements and guarantees, the endorsement or guarantee amount for a single party cannot exceed 200% of the Company's net assets according to the most recent financial statements.

(2) In accordance with the policies and procedures on endorsements and guarantees provided by the Company's subsidiary, the endorsement or guarantee amount for a single party cannot exceed 200% of the subsidiary's net assets according to the most recent financial statements.

(3) In accordance with the Company's policies and procedures on endorsements and guarantees, the total endorsement or guarantee amount for a single party provided by the Company and its subsidiaries cannot exceed 200% of the Company's net assets according to the most recent financial statements.

• Note 4: (1) In accordance with the Company's policies and procedures on endorsements and guarantees, the total endorsement and guarantee amount provided to external parties cannot exceed 300% of the Company's net assets according to the most recent financial statemetns.

(2) In accordance with policies and procedures on endorsements and guarantees provided by Company's subsidiary, the total endorsement and guarantee amount provided to external partines cannot exceed 300% of the subsidiary's net assets according to the most recent financial statements.

• (3) In accordance with the Company's policies and procedures on endorsements and guarantees, the total endorsement and guarantee amount provided to external parties by the Company and its subsidiaries cannot exceed 300% of the net assets of the Company according to the most recent financial statements.

Note 5: Fill in ‘Y’ for those cases of provision of endorsements/guarantees by listed parent company to subsidiary and provision by subsidiary to listed parent company, and provision to the party in Mainland China.

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CHC Healthcare Group

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

December 31, 2018

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Securitiesheld by	Marketable securities	Relationship with the securitiesissuer	General ledgeraccount		As of December31,2018	As of December31,2018		Footnote
				Numberofshares	Bookvalue	Ownership (%)	Fairvalue
The Company The Company Chiu Ho Medical System Co., Ltd. Chiu Ho Medical System Co., Ltd.	Stocks–China Isotope & Radiation Corporation Stocks–Swissray Global Healthcare Holding Ltd. Stocks–Huede Healthtech Co., Ltd. Stocks–AESolution Biomedical Co., Ltd.	- The Company's chairman and the investee's chairman are the same person - The Company's chairman and the investee's chairman are the same person	Financial asset at fair value through profit or loss-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current	880,000 1,988,100 200,000 855,400	53,482 $ 14,394 674 32,163	1.10% 4.67% 7.41% 6.69%	53,482 $ 14,394 674 32,163

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CHC Healthcare Group

Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more

For the year ended December 31, 2018

Table 4 Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions （Note 1）	Differences in transaction terms compared to third party transactions （Note 1）	Percentage of total notes/accounts Footnote Balance receivable(payable) （Note 2） Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Percentage of total notes/accounts Footnote Balance receivable(payable) （Note 2） Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)	Percentage of total notes/accounts Footnote Balance receivable(payable) （Note 2） Notes/accounts receivable(payable) Expressed in thousands of NTD (Except as otherwise indicated)
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Hsing-Yeh Biotechnology Co., Ltd.	Yeezen General Hospital	Substantive related party	Sale of goods	222,800 $	97%	6 months	-	-	240,432 $	81%	Note

Note 1: Sales amount includes rental revenue.

Note 2: Notes and accounts receivable include lease payments receivable.

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CHC Healthcare Group

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

December 31, 2018

Table 5 Creditor	Counterparty	Relationship with the counterparty	Balanceasat December 31,2018	Turnover rate	Overduereceivables	Overduereceivables	Amount collected subsequent to the Allowance for balance sheetdate doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)	Amount collected subsequent to the Allowance for balance sheetdate doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)
					Amount	Action taken
Hsing-Yeh Biotechnology Co., Ltd.	Yeezen General Hospital	Substantive related party	Notes and accounts receivable (including lease payments receivable): $240,432	0.92	77,985 $	In collection	33,930 $	- $

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Table 6

CHC Healthcare Group

Information on investees

For the year ended December 31, 2018

Expressed in thousands of NTD

(Except as otherwise indicated)

Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shareshe	ldasat December 31,2018	ldasat December 31,2018	Net profit (loss) of the investee for the year endedDecember 31,2018	Investment income (loss) recognised by the Company for the year ended December 31,2018	Footnote
				Balance asat December 31,2018	Balance asat December 31,2017	Numberofshares	Ownership (%)	Bookvalue
The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company The Company	Chiu Ho Medical System Co., Ltd. Tomorrow Medical System CO., Ltd. Chiu Ho Scientific Co., Ltd. Chiu Ho Biotech Co., Ltd. Ho-Shin Instruments Co.,Ltd. Shin-Ho Instruments Co., Ltd. Tong-Lin Instruments Co., Ltd. Hua Lin Instruments Co., Ltd. Hsin Lin Biotech Co., Ltd. E Century Healthcare Corporation J. Ab Beauty Co., Ltd.	Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan Taiwan	Medical instrument sale, leasing and services Medical instrument sale, leasing and services Ophthalmic equipment sale, leasing and services Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument leasing Medical instrument sale, leasing and services	2,380,988 $ 163,484 151,422 357,182 - 9,171 371,183 521,815 105,929 556,151 -	1,743,488 $ 163,484 115,164 407,182 86,258 9,171 371,183 661,815 105,929 661,151 27,300	299,340,000 43,200,000 9,853,841 37,000,000 - 300,000 40,000,000 55,600,000 10,000,000 60,000,000 -	100.00% 100.00% 100.00% 100.00% - 100.00% 100.00% 100.00% 100.00% 100.00% -	3,395,576 $ 522,515 133,829 378,298 - 15,068 497,563 696,442 110,487 838,041 -	108,424 $ 40,638 11,004 3,375 - 7,250 28,970 40,895 431 57,900 3,037) (	109,233 $ 40,638 11,004 3,396 - 7,250 29,013 40,895 431 57,900 2,126) (	Subsidiary Subsidiary Subsidiary (Note 1) Subsidiary Subsidiary (Note 1) Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary (Note 2)

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Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shareshe	ldasat December 31,2018	ldasat December 31,2018	Net profit (loss) of the investee for the year endedDecember 31,2018	Investment income (loss) recognised by the Company for the year ended December 31,2018	Footnote
				Balance asat December 31,2018	Balance asat December 31,2017	Numberofshares	Ownership (%)	Bookvalue
The Company CHC Healthcare (BVI) Limited Chiu Ho Medical System Co., Ltd. Chiu Ho Medical System Co., Ltd. Medlink Healthcare Limited Hsing-Yeh Biotechnology Co., Ltd.	CHC Healthcare (BVI) Limited CHC Healthcare (HK) Limited Medlink Healthcare Limited SenCare Healthcare Company Hsing-Yeh Biotechnology Co., Ltd CHENG-HSIN Biotechnology Co., Ltd	British Virgin Islands Hong Kong Taiwan Taiwan Taiwan Taiwan	Holdings and indirect investments Medical instrument sale, leasing and services Medical instrument sale Consulting service and elderly residence Medical instrument sale and leasing ; drug sale Medical instrument leasing	522,432 3,987 1,545,300 194,000 1,513,464 12,000	451,860 3,863 1,354,050 - 1,513,464 12,000	940 100,000 154,125,000 19,400,000 93,600,000 1,200,000	100.00% 100.00% 100.00% 65.99% 100.00% 40.00%	422,621 40,534 1,587,637 191,825 1,623,149 1,309	28,791 207 36,981 3,296) ( 43,637 20,619) (	28,791 249 36,981 2,175) ( 39,094 3,867) (	Subsidiary (Note 3) Subsidiary Subsidiary Subsidiary Subsidiary Associate

Note 1: To restructure organisation, Ho-Shin Instruments Co., Ltd. was merged into Chiu Ho Scientific Co., Ltd. , and Chiu Ho Scientific Co., Ltd. was the surviving company. Note 2: On April 20, 2018, the shareholders have resolved to dissolve the company and the Company lost its control over J. Ab Beauty Co., Ltd. on the same day. Note 3: Indirect investment company is organised as a limited liability company

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CHC Healthcare Group

Information on investments in Mainland China

For the year ended December 31, 2018

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Table 7
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Expressed in thousands of NTD (Except as otherwise indicated)

Accumulated Amount remitted from Taiwan Accumulated Investment income Accumulated amount of to Mainland China/ amount Ownership (loss) recognised amount remittance from Amount remitted back of remittance held by by the Company Book value of of investment Taiwan to to Taiwan for the year from Taiwan to Net income of the for the year investments in income Investment Mainland China ended December 31, 2018 Mainland China investee for the Company ended December Mainland China remitted back to Investee in Main business method as of January 1, Remitted to Remitted back as of December 31, year ended (direct or 31, 2018 as of December 31, Taiwan as of Mainland China activities Paid-in capital （ Note 1 ） 2018 Mainland China to Taiwan 2018 December 31, 2018 indirect) （ Note 2 ） 2018 December 31, 2018 Footnote Guangzhou Medical instrument $ 291,925 (2) Indirect $ 219,486 $ 72,439 $ - $ 291,925 $ 1,660 100% $ 1,660 $ 237,824 $ - Chiuho Medical sale, leasing and investment through System Co., Ltd. services CHC(BVI), a whollyowned subsidiary of the Company Chiu Ho Medical instrument 231,765 (2) Indirect 231,765 - - 231,765 19,550 100% 26,882 135,297 - (CHINA) sale, leasing and investment through Medical services CHC(BVI), a whollyTechnology Co., owned subsidiary of Ltd. the Company Accumulated amount of Investment amount approved Ceiling on remittance from Taiwan by the Investment investments in Mainland China to Mainland China as of Commission of the Ministry of imposed by the Investment Company name December 31, 2018 Economic affairs (MOEA) Commission of MOEA (Note 3) CHC Healthcare (BVI) Limited $ 523,690 $ 675,858 $ 3,080,111

Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to:

(1) Directly invest in a company in Mainland China..

(2) Through investing in an existing company in the third area, which then invested in the investee in Mainland China.

(3) Others

Note 2: Income (loss) recognised based on financial statements was audited by independent auditors Note 3: Disclosed in accordance with the investment limits set forth in Jin-Shen-Zi No. 09704604680, issued by the Investment Comission of MOEA on August 29, 2008

Note 4: The Company invested in the investees in Mainland China, including Neusoft CHC Medical Service Co., Ltd., Neusoft-CHC Office of Medical Intelligence & Services, Shenyang, and Dalian Neusoft Kangrui Jiuhe Medical Management Co., Ltd. through an existing company in Mainland China. Due to the existing company in Mainland China is a holding company, therefore it shall first submit an application for approval from Investment Commission of the Ministry of Economic Affairs (MOEA) for its reinvestments, but the approval from MOEA are not required for other investments.

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CHC Healthcare Group

Responsible person: Pei-Lin Lee