SCI — Interim / Quarterly Report 2020

Dec 2, 2020

Stock Code:4119

$\mathbf 1$

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Financial Statements

With Independent Auditors' Review Report For the Three Months Ended March 31, 2020 and 2019

No.61, LN. 309, HAIHUN.RD., LUZHU DIST., TAOYUAN CITY 33856, Address: TAIWAN (R.O.C) Telephone: $(03)354 - 3133$

The independent auditors' review report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' review report and consolidated financial statements, the Chinese version shall prevail.

Table of contents

Contents	Page
1. Cover Page	1
2. Table of Contents	$\overline{2}$
3. Independent Auditors' Review Report	3
4. Consolidated Balance Sheets	4
5. Consolidated Statements of Comprehensive Income	5
6. Consolidated Statements of Changes in Equity	6
7. Consolidated Statements of Cash Flows	7
8. Notes to the Consolidated Financial Statements
Company history (1)	8
Approval date and procedures of the consolidated financial statements (2)	8
New standards, amendments and interpretations adopted (3)	$8\sim9$
Summary of significant accounting policies (4)	$9 - 10$
Significant accounting assumptions and judgments, and major sources (5) of estimation uncertainty	10
Explanation of significant accounts (6)	$10 - 31$
(7) Related-party transactions	31
Pledged assets (8)	31
(9) Commitments and contingencies	32
(10) Losses Due to Major Disasters	32
(11) Subsequent Events	32
$(12)$ Other	32
(13) Other disclosures
(a) Information on significant transactions	$33 - 34$
(b) Information on investees	34
(c) Information on investment in mainland China	34
(d) Major shareholders	34
(14) Segment information	34

KPMG

台北市110615信義路5段7號68樓(台北101大樓) 68F., TAIPEI 101 TOWER, No. 7, Sec. 5, Xinyi Road, Taipei City 110615, Taiwan (R.O.C.)

Telephone 電話 + 886 (2) 8101 6666 Fax 傳真 + 886 (2) 8101 6667 Internet 網址 kpmg.com/tw

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects, the consolidated financial position of SCI Pharmtech, Inc. and its subsidiaries as of March 31, 2020 and 2019, and of its consolidated financial performance and its consolidated cash flows for the three months ended March 31, 2020 and 2019 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, "Interim Financial Reporting" endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

The engagement partners on the review resulting in this independent auditors' report are Kuan-Ying Kuo and Shu-Min Hsu.

KPMG

Taipei, Taiwan (Republic of China) May 8, 2020

Notes to Readers

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

The independent auditors' review report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors' review report and consolidated financial statements, the Chinese version shall prevail.

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)
Reviewed only, not audited in accordance with generally accepted auditing standards as of March 31, 2020 and 2019

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

March 31, 2020, December 31, 2019, and March 31, 2019 (expressed in thousands of New Taiwan dollars)

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		March 31, 2020		December 31, 2019		March 31, 2019				March 31, 2020		December 31, 2019		March 31, 2019
	Assets	Amount	১€	Amount	Š	Amount	℅		Liabilities and Equity	Amount	℅	Amount	Š,	Amount	≿
	Current assets:								Current liabilities:
1100	Cash and cash equivalents (note 6(a))	656,467 Ø	$\frac{5}{2}$	553,555	$\mathbf{r}$	576,686	$\overline{15}$	2170	Notes and accounts payable	70,115 ₩		94,302		102,251
1110	Financial assets at fair value through profit or							2130	Current contract liabilities (note 6(p))	61,726		59,092		48,631
	$loss (note 6(b))$	557,168	$\mathbf{r}$	466,025	Ξ	434,873	Ξ	2200	Other payables (note (6)(i))	226,079		229,830		185,222
1170	Notes and accounts receivable, net (notes 6(d) and 6(p)	504,456	$\overline{12}$	352,404	۰	332,843	$\infty$	2213	Payables on contractors and equipment	27,758		16,605		48,079
1310	Inventories, net (note 6(e))	423,545	$\mathsf{P}$	527,081	ഇ		Ξ	2230	Current tax liabilities	154,014		96,671		112,883
1470	Other current assets	40,744		36,953		26,969 517,593		2250	Current provisions (note (6)(k))	86,081		83,957	Z	83,244
		2.182.380	5	936.018	47	888,964	48	2280	Current lease liabilities (note 6(j))	1,681		1,795		1,878
	Non-current assets:							2300	Other current liabilities	12,522		2,012		55
1518	Non-current financial assets at fair value									639,976	$\overline{a}$	584,264	$\overline{a}$	582,243	$\frac{5}{2}$
	through other comprehensive income (note								Non-Current liabilities:
	6(c))	102,728	2	137,329	3	68,219	2	2570	Deferred tax liabilities					47
1600	Property, plant and equipment (notes 6(f) and							2580	Non-current lease liabilities (note 6(j))	815		1,197		1,770
		1,884,571	$\frac{4}{4}$	,876,999	46	880,130 $\tilde{a}$	47	2640	Provisions for employee benefits, non-current	21.173		21,376		21,950
1755	Right-of-use assets (note 6(g))	2,477		2,974		3,641				21,988		22,573		23,767
1780	Intangible assets	46,206		47,661		48,865			Total liabilities	661,964		606,837	의	606,010	$\frac{5}{2}$
1840	Deferred tax assets	57,243		57,243		51,232			Equity attributable to owners of parent
1900	Other non-current assets	34,729		23,253		32,159			$(note(0))$ :
		2,127,954	49	2,145,459	53	2,084,246	52	3100	Ordinary Share	794,853	$\tilde{=}$	794,853	$\overline{2}$	794,853	$\overline{c}$
								3200	Capital surplus	1,348,339	51	1,348,339	$\mathfrak{L}$	,348,339	24
								3310	Legal reserve	332,971		332,971	$\infty$	288,248
								3320	Special reserve	4,788		4,788		7,727
								3350	Unappropriated retained earnings	1,179,766	27	971,435	24	939,898	$\overline{\mathcal{Z}}$
								3400	Other components of equity	(12, 347)		22,254		(11,865)
									Total equity	3,648,370	$\frac{85}{5}$	3,474,640	$\frac{5}{2}$	3,367,200	$\frac{85}{2}$
	Total assets	4,310,334	$\frac{8}{10}$	4,081,477	$\frac{8}{1}$	3,973,210	$\frac{5}{10}$		Total liabilities and equity	4,310,334 ΘĄ	뤠	4,081,477	휇	3,973,210	뤠

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the three months ended March 31, 2020 and 2019

(expressed in Thousands of New Taiwan Dollars, except for earnings per common share)

				ended March 31	For the three months
			2020		2019
			Amount	$\frac{0}{6}$	Amount	%
4110	Sales revenue (note $6(p)$ )	S	784,328	100	603,687	100
5110	Cost of sales (notes $6(e)$ , $6(1)$ and 12)		425,911	54	338,373	56
5900	Gross profit		358,417	46	265,314	44
	Operating expenses (notes 6(l) and 12):
6100	Selling expenses		30,355	4	32,566	5
6200	Administrative expenses		37,628	5	29,231	5
6300	Research and development expenses		10,232	1	9.749	$\overline{2}$
			78,215	10	71,546	12
6900	Net operating income		280,202	36	193,768	32
	Non-operating income and expenses:
7190	Other income		1,230		2,135
7101	Interest income from bank deposits		1,463		814
7235	Gains on financial assets (liabilities) at fair value through profit or loss		(21,606)	(3)	4,767	-1
7510	Interest expense (note $6(i)$ )		(10)		(15)
7590	Miscellaneous disbursements		(128)		(93)
7630	Foreign exchange gains (losses)		4,664	1	2,490	-1
			(14, 387)	(2)	10.098	$\overline{2}$
7900	Profit before tax		265,815	34	203,866	34
7950	Less: Income tax expenses (note $6(m)$ )		57,484	7	39,820	-7
	Profit		208,331	27	164,046	27
8300	Other comprehensive income:
8310	Items that may not be reclassified subsequently to profit or loss:
8316	Unrealized gains (losses) from investments in equity instruments measured at fair value through other comprehensive income		(34, 601)	(5)	(7,077)	(1)
8349	Less: Income tax related to components of other comprehensive income that will not be reclassified to profit or loss (note $6(m)$ )
8300	Other comprehensive income, net		(34, 601)	(5)	(7,077)	(1)
8500	Total comprehensive income		173,730	22	156,969	-26
	Earnings per share (note $6(0)$ ):
9750	Basic earnings per share	S		2.62		2.06
9850	Diluted earnings per share			2.60		2.05

				Equity attributable to owners of parent
							Other equity interest
							Unrealized
							gains (losses) on financial assets
							measured at fair
					Retained earnings		through other value
		Ordinary	Capital	Legal	Special	Unappropriated	comprehensive
		shares	surplus	reserve	reserve	retained earnings	income	Total equity
Balance at January 1, 2019	⊷	794,853	348.339	288,248	7,727	775,852	(4,788)	3,210,23
Profit for the three months ended March 31, 2019						164,046		164,046
Other comprehensive income for the three months ended March 31, 2019							(7,077)	(7,077
Total comprehensive income for the three months ended March 31, 2019						164,046	(7.077)	156,969
Balance at March 31, 2019		794,853	1,348,339	288,248	7,727	939,898	11,865)	3,367,200
Balance at January 1,2020	s,	794.853	1.348,339	332,97	4.788	971,435		3,474,640
Profit for the three months ended March 31, 2020						208,331	22,254	208,33
Other comprehensive income for the three months ended March 31, 2020							(34, 601)	(34, 601)
Total comprehensive income for the three months ended March 31, 2020						208,33	(34, 601)	173,730
Balance at March 31, 2020	ΨĤ,	794,853	1,348,339	332,97	4,788	1,179,766	(12, 347)	3,648,370

Reviewed only, not audited in accordance with generally accepted auditing standards

(English Translation of Consolidated Financial Statements Originally Issued in Chinese)

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the three months ended March 31, 2020 and 2019

(expressed in Thousands of New Taiwan Dollars)

See accompanying notes to consolidated financial statements.

$\bullet$

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the three months ended March 31, 2020 and 2019

(expressed in Thousands of New Taiwan Dollars)

	For the three months ended March 31
	2020	2019
Cash flows from (used in) operating activities:
Profit before tax	\$ 265,815	203,866
Adjustments for:
Adjustments to reconcile profit (loss):
Depreciation expense	33,070	32,537
Amortization expense	1,470	1,318
Net loss (gain) on financial assets or liabilities at fair value through profit or loss	21,606	(4,767)
Interest expense	10	15
Interest income	(1, 463)	(814)
	54,693	28,289
Changes in operating assets and liabilities:
Decrease (increase) in notes and accounts receivable	(152, 052)	58,074
Decrease (increase) in inventories	103,536	(14, 521)
Decrease (increase) in other current assets	(3,791)	(5,326)
Increase (decrease) in notes and accounts payable	(24, 187)	13,095
Increase (decrease) in contract liabilities	2,634	18,228
Increase (decrease) in other payable	(3,751)	(11, 347)
Increase (decrease) in provisions	2,124	6,743
Increase (decrease) in other current liabilities	10,510	(2,917)
Increase (decrease) in provision for employee benefits, non-current	(203)	(140)
	(10, 487)	90,178
Cash flow from (used in) operations	255,328	294,044
Interest received	1,463	814
Interest paid	(10)	(15)
Income taxes paid	(141)
Net cash flows from (used in) operating activities	256,640	294,843
Cash flows from (used in) investing activities:
Acquisition of financial assets at fair value through profit or loss	(112,749)
Acquisition of property, plant and equipment	(17,667)	(67, 835)
Acquisition of intangible assets		(2,800)
Decrease (increase) in prepayments of property, plant and equipment	(24, 541)	(8,238)
Decrease in refunded deposits	1,725
Net cash flows from (used in) investing activities	(153, 232)	(78, 873)
Cash flows from (used in) financing activities:
Payment of lease liabilities	(496)	(465)
Net cash flows from (used in) financing activities	(496)	(465)
Net increase in cash and cash equivalents	102,912	215,505
Cash and cash equivalents at beginning of period	553,555	361,181
Cash and cash equivalents at end of period	\$ 656,467	576,686

(English Translation of Consolidated Financial Statements Originally Issued in Chinese) Reviewed only, not audited in accordance with generally accepted auditing standards

SCI PHARMTECH, INC. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

March 31, 2020 and 2019

(Expressed in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

(1) Company history

$\bar{z}$

SCI Pharmtech, Inc. (the "Company") was incorporated in September 18, 1987 as a company limited by shares and registered under the Ministry of Economic Affairs, R.O.C. The major business activities of the Company are the research and development, manufacture and sale of Active Pharmaceutical Ingredients ("API"), Intermediates, specialty chemicals. The consolidated financial statements of the Company comprise the Company and its subsidiaries (together referred to as the "Group" and individually as the "Group entities"). Please refer to note 4(b) for related information of the Group primarily business activities. Mercuries & Associates, Holding Ltd. is the parent company of the Company.

(2) Approval date and procedures of the consolidated financial statements

These consolidated financial statements were authorized for issuance by the Board of Directors on May 8, 2020.

(3) New standards, amendments and interpretations adopted:

The impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial $(a)$ Supervisory Commission, R.O.C. ("FSC") which have already been adopted.

The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2020.

New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendments to IFRS 3 "Definition of a Business"	January 1, 2020
Amendments to IFRS 9, IAS 39 and IFRS 7 "Interest Rate Benchmark Reform"	January 1, 2020
Amendments to IAS 1 and IAS 8 "Definition of Material"	January 1, 2020

The Group assesses that the adoption of the abovementioned standards would not have any material impact on its consolidated financial statements.

The impact of IFRS issued by IASB but not yet endorsed by the FSC $(b)$

As of the date, the following IFRSs that have been issued by the International Accounting Standards Board (IASB), but have yet to be endorsed by the FSC:

New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"	Effective date to be determined by IASB
IFRS 17 "Insurance Contracts" Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"	January 1, 2021 January 1, 2022

The Group assessed that the above IFRSs may not be relevant to the Group.

$(4)$ Summary of significant accounting policies:

Statement of compliance $(a)$

These consolidated financial statements have been prepared in accordance with the preparation and guidelines of IAS 34 "Interim Financial Reporting" which are endorsed and issued into effect by FSC, and do not include all of the information required by the Regulations and International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC Interpretations endorsed and issued into effect by the FSC (hereinafter referred to IFRS endorsed by the FSC) for a complete set of the annual consolidated financial statements.

Except the following accounting policies mentioned below, the significant accounting policies adopted in the consolidated financial statements are the same as those in the consolidated financial statement for the year ended December 31, 2019. For the related information, please refer to note 4 of the consolidated financial statements for the year ended December 31, 2019.

• Basis of Consolidation (b)
• (ii) List of subsidiaries in the consolidated financial statements.

					энагеноции г
Name of investor	Name of subsidiary	Principal activity	March 31, 2020		December 31, 2019		March 31. 2019	Note
The Company	Yushan Holding Universal Ltd.	Investment	$\overline{\phantom{0}}$	$\%$		$\frac{0}{0}$	100.00 % Note 1
The Company	Yushan Pharmaceuticals The research and Inc. (Yushan)	development, manufacture and sale of API	$100.00\%$		$100.00 \%$		$\overline{\phantom{a}}$	$%$ Note 2
Yushan Holding Yushan Universal Ltd.		The research and development, manufacture and sale of API		$\frac{0}{2}$	$\overline{\phantom{0}}$	$\%$	100.00 % Note 2

Note 1: Yushan Holding Universal Ltd. completed liquidation procedure in May 2019.

Note 2: Yushan was a subsidiary of Yushan Holding Universal Ltd., Since April 2019, Yushan has become a subsidiary of the Company due to the Group's adjustment of organization structure.

$0.111111111111111111111111111111111111$

$(c)$ Income taxes

The income tax expenses have been prepared and disclosed in accordance with paragraph B12 of International Financial Reporting Standards 34, Interim Reporting.

Income tax expenses for the period are best estimated by multiplying pre-tax income for the interim reporting period by the effective annual tax rate as forecasted by the management. This should be recognized fully as tax expense for the current period.

Temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases shall be measured based on the tax rates that have been enacted or substantively enacted at the time of the asset or liability is recovered or settled, and be recognized directly in equity or other comprehensive income as tax expense.

$(d)$ Employee benefits

The pension cost in the interim period was calculated and disclosed on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior fiscal year.

$(5)$ Significant accounting assumptions and judgments, and major sources of estimation uncertainty:

The preparation of the consolidated financial statements in conformity with the Regulations and IFRSs (in accordance with IAS 34 "Interim Financial Reporting" and endorsed by the FSC) requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

The preparation of the consolidated interim financial statements, estimates and underlying assumptions are reviewed on an ongoing basis which are in conformity with the consolidated financial statements for the year ended December 31, 2019. For the related information, please refer to note 5 of the consolidated financial statements for the year ended December 31, 2019.

(6) Explanation of significant accounts:

Expect for the following disclosures, there is no significant difference as compared with those disclosed in the consolidated financial statements for the year ended December 31, 2019. Please refer to note 6 of the 2019 annual consolidated financial statements.

$(a)$ Cash and cash equivalents

		March 31, 2020	December 31, 2019	March 31, 2019
Cash on hand	\$	506	535	358
Checking accounts and demand deposits		192,137	223,273	229,248
Time deposits		254,312	207,580	203,080
Bills sold under repurchase agreements		209,512	122,167	144,000
	S	656,467	553,555	576,686

• The Group did not provide cash and cash equivalents as collateral for its loans. $(i)$
• Please refer to note $6(r)$ for the interest rate risk and sensitivity analysis of the financial assets $(ii)$ and liabilities of the Group.
• Financial assets and liabilities at fair value through profit or loss $(b)$

		March 31, 2020	December 31, 2019	March 31, 2019
Mandatorily measured at fair value through profit or loss:
Non-derivative financial assets
Beneficiary certificate	S	326,033	237,529	278,749
Stocks listed on domestic markets		231,135	228,496	156,124
Total	S	557,168	466,025	434,873

The Group did not provide any aforementioned financial assets as collateral for its loans as of March 31, 2020, December 31, 2019 and March 31, 2019, respectively.

Financial asset at fair value through other comprehensive income, non-current: $(c)$

	March 31, 2020	December 31, 2019	March 31, 2019
Financial assets at fair value through other comprehensive income:
Unlisted stocks on domestic markets	102.728	137,329	68.219

Except for the following disclosure, there was no significant change for non-current financial assets at fair value through other comprehensive income for the three months ended March 31, 2020 and 2019. For the related information, please refer to note $6(c)$ of the consolidated financial statements for the year ended December 31, 2019.

The Group designated the investments shown above as equity securities as at fair value through other comprehensive income because these equity securities represent those investments that the Group intends to hold for long-term for strategic purposes.

No strategic investments wee disposed as of March 31, 2020 and 2019, and there were no transfers of any cumulative gain or loss within equity relating to these investments.

Please refer to note $6(r)$ for market risk of the Group.

As of March 31, 2020, December 31, 2019 and March 31, 2019, the Group did not provide any aforementioned financial assets as collateral for its loans.

(d) Notes and accounts receivable

		March 31, 2020	December 31, 2019	March 31, 2019
Notes receivable		1.532	19	175
Accounts receivable		504,103	353,564	333,847
Less: Loss allowance		(1,179)	(1,179)	(1.179)
	S	504,456	352,404	332,843

The Group applies the simplified approach to provide for its expected credit losses, i.e. the use of lifetime expected loss provision for all receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due, as well as incorporated forward looking information, including the reasonable prediction of historical credit loss experience and future economic situation (macroeconomic and relevant industry information). The loss allowance provision was determined as follows:

		March 31, 2020
	Gross carrying amount	Rate of loss allowance provision	Loss allowance provision
Current	\$ 378,463
1 to 30 days past due	108,043
31 to 60 days past due	11,630
61 to 90 days past due	6,307
91 to 180 days past due
181 to 270 days past due
271 to 360 days past due	13
More than 360 days past due	1,179	100 %	1,179
	505,635		1,179

			December 31, 2019
		Gross carrying amount	Rate of loss allowance provision	Loss allowance provision
Current	S	306,855
1 to 30 days past due		38,822
31 to 60 days past due		6,714
61 to 90 days past due
91 to 180 days past due
181 to 270 days past due		13
More than 360 days past due		1,179	100 %	1.179
	S	353,583		1,179

(Continued)

		March 31, 2019
	Gross carrying amount	Rate of loss allowance provision	Loss allowance provision
Current	\$ 302,249
1 to 30 days past due	28,628
31 to 60 days past due	33
61 to 90 days past due	1,933
91 to 180 days past due
181 to 270 days past due
271 to 360 days past due
More than 360 days past due	1,179	100 %	1,179
	334,022		1,179

The movement in the allowance for notes and trade receivable was as follows:

	For the three months ended March 31,
		2020	2019
Balance on January 1 (Balance on March 31)			179

As of March 31, 2020, December 31, 2019 and March 31, 2019, the Group did not provide any aforementioned notes and accounts receivable as collaterals for its loans.

(e) Inventories

		March 31, 2020	December 31, 2019	March 31, 2019
Raw materials		96,008	106,971	156,248
Work in progress		65,774	103,055	119,475
Finished goods		261,763	317,055	241,870
	S	423,545	527,081	517,593

For the three months ended March 31, 2020 and 2019, inventory cost recognized as cost of sales amounting to \$425,911 and \$338,373, respectively.

The write-down of inventories to net realizable value were recorded as cost of sales. Furthermore, the Group reversed the allowance for inventory valuation loss and obsolescence because the net realizable value was no longer lower than the cost after the disposal of obsolete inventories. The details are as following:

	For the three months ended March 31,
	2020	2019
The write-downs (reversals)	(639)	2.333

As of March 31, 2020, December 31, 2019 and March 31, 2019, the Group did not provide any inventories as collaterals for its loans.

Property, plant and equipment $(f)$

	Land	Buildings and construction equipment equipment	Machinery and	Office	Others equipment	Prepayment for equipment and construction in progress	Total
Cost:
Balance on January 1, 2020	\$ 825,680	737,842	1,667,500	40,656	18,720	168,428	3,458,826
Additions			1,752	367		26,701	28,820
Transferred (out) in			16,325			(5,000)	11,325
Disposal and derecognitions		(1,051)	(6, 568)	(24)			(7, 643)
Balance on March 31, 2020	825,680	736,791	1,679,009	40,999	18,720	190,129	3,491,328
Balance on January 1, 2019	\$ 825,680	700,219	1,683,172	42,658	16,149	138,178	3,406,056
Additions			5,011	142		22,714	27,867
Transferred (out) in			164				164
Disposal and derecognitions			(2, 240)				(2,240)
Balance on March 31, 2019	825,680	700,219	1,686,107	42,800	16,149	160,892	3,431,847
Depreciation and impairments loss:
Balance on January 1, 2020	\$	334,054	1,219,926	20,099	7.748		1,581,827
Depreciation for the period		7,997	23,185	993	398		32,573
Disposals and derecognitions		(1,051)	(6, 568)	(24)			(7,643)
Balance on March 31, 2020	\$	341,000	1,236,543	21,068	8,146		1,606,757
Balance on January 1, 2019	\$	314,702	1,182,640	18,474	6,076		1,521,892
Depreciation for the period		7,414	23,243	1,002	406		32,065
Disposals and derecognitions			(2, 240)				(2, 240)
Balance on March 31, 2019		322,116	1,203,643	19,476	6,482		1,551,717

	Land	Buildings and construction	Machinery and equipment	Office equipment	Others equipment	Prepayment for equipment and construction in progress	Total
Carrying amounts:
Balance on January 1, 2020	825,680	403,788	447,574	20,557	10,972	168,428	1,876,999
Balance on March 31, 2020	825,680	395,791	442,466	19,931	10,574	190,129	1.884,571
Balance on January 1, 2019	825,680	385,517	500,532	24,184	10,073	138,178	1,884,164
Balance on March 31, 2019	825,680	378.103	482,464	23,324	9,667	160.892	1,880,130

In May 2013, the Group purchased a piece of land for the construction of its factory in Taoyuan Luzhu that was auctioned by the court at a price of \$211,184. The amount had been paid in full, and the transfer procedures have been completed. The title deed of a certain portion of the land, measuring 2.259 square meters, was given to Mr. Weichyun Wong due to certain legal requirements. However, both parties agreed that the Group is the actual owner of the land.

As of March 31, 2020, December 31, 2019 and March 31, 2019, part of the property, plant and equipment the Group had provided at collateral for its loans. Please refer to note 8 for details.

Right-of-use assets $(g)$

The Group leases many assets including company cars and copy machines. Information about leases for which the Group as a lessee is presented below:

Right-of-use assets
4,747
4,113 S
\$ 1,773
497
2,270
\$
472
472 S
S 2,974
2,477
4,113
3,641 S

(Continued)

$(h)$ Short-term borrowings

The details of short-term borrowings were as following:

	March 31, 2020	December 31, 2019	March 31, 2019
Unsecured bank loans
Unused credit line for short-term borrowings	338,038	341,212	340,673
Range of interest rates	-		$\overline{\phantom{a}}$

Please refer to note 8 for the details of property, plant and equipment as collateral for its loans.

Please refer to note 6(r) for the information of interest risk, foreign currency risk and liquidity risk.

$(i)$ Other payables

	March 31, 2020	December 31, 2019	March 31, 2019
Salaries payable	142,365	152,767	125,234
Others	83,714	77,063	59,988
	226.079	229,830	185,222

$(j)$ Lease liabilities

$\bar{\omega}$

The carrying amount of lease liabilities was as follows:

	March 31, 2020	December 31, 2019	March 31, 2019
Current	1.681	.795	.878
Non-current	815	1.197	,770

Please refer to note $6(r)$ , for maturity analysis.

	For the three months ended March 31,
	2020	2019
The amounts recognized in profit or loss were as follows:
Interest on lease liabilities		15
Expenses relating to short-term leases	540
Variable lease payments not included in the measurement of lease liabilities	153
Expense relating to leases of low-value assets, excluding short-term leases of low-value assets

The amounts recognized in the statement of cash flows for the Group was as follows:

Total cash outflow for leases

$\frac{1,267}{ }$ 947

The Group leases company cars and copy machines: The leases typically run for a period of three to six years.

The Group also leases vehicles and office equipment with contract terms of less than one year. These leases are short-term or leases of low-value items. The Group has elected not to recognize right-ofuse assets and lease liabilities for these leases.

$(k)$ Provisions

There were no significant changes in provisions for the three months ended March 31, 2020 and 2019. Please refer to note $6(k)$ of the consolidated financial statements for the year ended December 31, 2019 for other related information.

• Employee benefits $(1)$
• Defined benefit plans $(i)$

Management believes that there was no material volatility of the market, no material reimbursement and settlement or other material one-time events since prior fiscal year. As a result, the pension cost in the accompanying interim period was measured and disclosed according to the actuarial report as of December 31, 2019 and 2018.

The expenses recognized in profit or loss for the Group were as follows:

	For the three months ended March 31,
	2020	2019
Operating cost	387	385
Operating expenses		h
	330	391

Defined contribution plans $(ii)$

The Group's expenses under the pension plan cost to the Bureau of Labor Insurance for the three months ended March 31, $2020$ and $2019$ were as follows:

		For the three months ended March 31,
		2020	2019
Operating cost	S	1,305	1,248
Selling expenses		65	66
Administration expenses		161	157
Research expenses		190	181
		1,721	1,652

(Continued)

(m) Income taxes

• $(i)$ The income tax expense in the interim financial statements is measured and disclosed accordance to paragraph B12 of IAS 34 "International Financial Reporting".
• The income tax expenses for the three months ended March 31, 2020 and 2019 were calculated $(ii)$ as follows:

		For the three months ended March 31,
		2020	2019
Current income tax expense	57.484		39.820

(iii) The amount of income tax recognized in other comprehensive income for the three months ended March 31, 2020 and 2019 were as follows:

		For the three months ended March 31,
	2020	2019
Items that will not be reclassified subsequently to profit or loss:
Remeasurement from defined benefit plans

(iv) Examination and approval

The ROC tax authorities have examined the Company's and Yushan Pharmaceuticals Inc.'s income tax returns through 2018.

$(n)$ Capital and other equity

Except for the following disclosure, there was no significant change for capital and other equity for the periods from January 1 to March 31, 2020 and 2019. For the related information, please refer to note $6(n)$ of the consolidated financial statements for the vear ended December 31, 2019.

$(i)$ Retained Earnings

The Company's article of incorporation stipulates that Company's net earnings should first be used to offset the prior years' deficits, if any, before paying any income taxes. Of the remaining balance, 10% is to be appropriated as legal reserve, and special reserves are supposed to set aside in accordance with the relevant regulations or as required by the government. And then any undistributed retained earnings shall be distributed according to the distribution plan proposed by the Board of Directors and submitted to the stockholders' meeting for approval.

According to the Company's dividend policy, the type of dividends should be determined after considering the Company's capital and financial structure, operating conditions, operating surplus, industrial characteristics and cycle. The distribution of net earnings should not be lower than 50% of the current profit before tax. Cash dividends to stockholders should not be lower than 10% of the total dividends.

(ii) Earnings distribution

On March 13, 2020, the Company's Board of Directors resolved to appropriate the 2019 earnings. On June 21, 2019, the shareholder's meeting resolved to distribute the 2018 earnings. These earnings were appropriated as follows:

	2019			2018
		Amount per share (dollars)	Total amount	Amount per share (dollars)	Total amount
Dividends distributed to ordinary shareholders: Cash		5.80	461,015	4.20	333,838

(iii) Other equity (net of tax)

		Financial assets measured at fair value through other comprehensive income
Balance at January 1, 2020	S	22,254
Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income		(34, 601)
Balance at March 31, 2020	S	(12, 347)
Balance at January 1, 2019	\$	(4,788)
Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income		(7,077)
Balance at March 31, 2019		(11, 865)

(o) Earnings per share

For the three months ended March 31, 2020 and 2019, the Company's earnings per share were calculated as follows:

	For the three months ended March 31,
	2020	2019
Basic earnings per share
Profit attributable to ordinary shareholders of the Company	208,331	164,046
Weighted-average number of ordinary shares (thousand shares)	79,485	79,485
	2.62	2.06
Diluted earnings per share
Profit attributable to ordinary shareholders of the Company	208,331	164,046
		(Continued)

	For the three months ended March 31,
	2020	2019
Weighted-average number of ordinary shares (thousand shares)	79,485	79,485
Effect of potentially dilutive ordinary shares:
Effect of employee compensation	710	669
Weighted-average number of ordinary shares (thousand shares)
(diluted)	80,195	80,154
	2.60	2.05

(p) Revenue from contracts with customers

Disaggregation of revenue $(i)$

	For the three months ended March 31,
		2020	2019
Primary geographical markets:
Spain	\$	153,942	129,840
Italy		150,051	78,643
United States		117,724	78,869
Japan		66,950	68,901
Netherlands		64,441	33,931
Taiwan		46,076	47,706
Switzerland		22,051	74,238
Others		163,093	91,559
	\$	784,328	603,687
Major products
Active Pharmaceutical Ingredients	\$	534,543	383,766
Intermediates		219,521	178,972
Specialty Chemical		30,264	40,949
	\$	784,328	603,687

(ii) Contract balances

	March 31, 2020		December 31, 2019	March 31, 2019
Notes and accounts receivable		505,635	353,583	334,022
Less: allowance for impairment		(1.179)	(1,179)	(1.179)
Total		504,456	352,404	332,843
Contract liabilities (sales received in advance)		61,726	59,092	48,631

Please refer to note $6(d)$ for the information of accounts receivable and the impairment.

The changes of contract liabilities are arising from the difference of time point, which the Group transfers the ownership of goods and which customers do the payment.

Remuneration to employees and directors $(q)$

In accordance with the Articles of incorporation, the Company should contribute no less than 3% of the profit as employee remuneration and less than 2% as directors' remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit. The aforementioned employees' compensation will be distributed in shares or cash. The recipients may include the employees of the subordinate of the Company who meet certain specific requirements.

For the three months ended March 31, 2020 and 2019, the remunerations to employees amounted to \$26,220 and \$19,915, respectively, and the remunerations to directors amounted to \$3,575 and \$2,716, respectively. These amounts were calculated using the Company's net income before tax without the remunerations to employees and directors for each period, multiplied by the proposed percentage which is stated under the Company's proposed Article of Incorporation. These remunerations were expensed under operating costs or expenses for each period. Shares distributed to employees as employees' remuneration are calculated based on the closing price of the Company' s shares on the day before the approval by the Board of Directors.

For the year ended December 31, 2019 and 2018, the remunerations to employees amounted to \$69,459 and \$53,166, respectively, and the remunerations to directors amounted to \$9,301 and \$7,204, respectively. The remunerations above are identical to those of the actual distributions. The information is available on the Market Observation Post System website.

Financial Instruments $(r)$

Except for the contention mentioned below, there was no significant change in the fair value of the Group's financial instruments and degree of exposure to credit risk, liquidity risk and market risk arising from financial instruments. For the related information, please refer to note 6(s) of the consolidated financial statements for the year ended December 31, 2019.

Credit risk $(i)$

$\left| \right|$ Credit risk exposure

The carrying amount of financial assets and contract assets represents the maximum amount exposed to credit risk.

Concentration of credit risk $2)$

The Group's customers are mainly from the pharmaceutical industry; therefore, the Group does not concentrate on a specific customer and the sales regions are widely spread, thus, there should be no concern on the significant concentrations of accounts receivable credit risk. And in order to mitigate accounts receivable credit risk, the Group constantly assesses the financial status of its customers, wherein it does not require its customers to provide any collateral.

• $3)$ Receivables and debt securities
• For credit risk exposure of notes and trade receivables, please refer to note $6(d)$ . a)
• Other financial assets at amortized cost include other receivables and time deposits. $b)$ The counterparties of the time deposits held by the Group are the financial institutions with investment grade credit ratings. Therefore, the credit risk is considered to be low.
• Liquidity Risk $(ii)$

The following table shows the contractual maturities of financial liabilities, excluding estimated interest payments:

	Carrying Amount	Contractual cash flows	Within a vear	$1\sim 2$ vears	Over 2 vears
March 31, 2020
Non-derivative financial liabilities:
Notes and accounts payable \$	70,115	(70, 115)	(70, 115)
Lease liabilities (including) current and non-current)	2,496	(2,566)	(1, 731)	(531)	(304)
Other payables	73,699	(73, 699)	(73, 699)
Payables on contractors and equipment	27,758	(27, 758)	(27,758)
	174,068	(174, 138)	(173, 303)	(531)	(304)

		Carrying Amount	Contractual cash flows	Within a year	$1\sim2$ vears	Over 2 years
December 31, 2019
Non-derivative financial liabilities:
Notes and accounts payable \$		94,302	(94,302)	(94, 302)
Lease liabilities (including current and non-current)		2,992	(3,038)	(1,826)	(801)	(411)
Other payables		67,732	(67, 732)	(67, 732)
Payables on contractors and equipment	S	16,605 181,631	(16,605) (181, 677)	(16, 605) (180, 465)	(801)	(411)
March 31, 2019
Non-derivative financial liabilities:
Notes and accounts payable \$		102,251	(102, 251)	(102, 251)
Lease liabilities (including current and non-current)		3,648	(3,711)	(1,920)	(1,410)	(381)
Other payables		50,602	(50,602)	(50, 602)
Payables on contractors and equipment		48,079	(48,079)	(48,079)
	S	204,580	(204, 643)	(202, 852)	(1, 410)	(381)

The Group is not expecting that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amount.

(iii) Currency risk

$1)$ Exposure to foreign currency risk

The Group's significant exposure to foreign currency risk was as follow:

Foreign currency: in thousands of dollars

		March 31, 2020 December 31, 2019 March 31, 2019
	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD
Financial assets
Monetary items
USD to TWD	\$ 23,772	30.175	717,320	19,088	29.93	571,304	17,255	30.770	530,936
EUR to TWD	2,867	33.04	94,726	2,124	33.39	70.920	1,720	34.410	59,185
Financial liabilities
Monetary items
USD to TWD	1.514	30.175	45,685	1,830	29.93	54,772	2.145	30.770	66,002

$(2)$ Sensitivity analysis

The Group's exposure to foreign currency risk arises from the translation of the foreign currency exchange gains and losses on cash and cash equivalents, accounts receivable, loans and borrowings, accounts payable, accrued expenses and other payables that are denominated in foreign currency.

The analysis assumes that all other variables remain constant. A strengthening (weakening) 1% of the functional currency against each foreign currency for the three months ended March 31, 2020 and 2019 would have affected the net profit before tax increased or decreased \$7,664 and \$5,241, respectively. The analysis is performed on the same basis for both periods.

$3)$ Foreign exchange gain and loss on monetary items

The exchange gains and losses of monetary items, including realized and unrealized, are changed into functional currency, which is the Group's presentation currency. For the three months ended March 31, 2020 and 2019, the exchange gains (losses), including realized and unrealized, are \$4,664 and \$2,490, respectively.

(iv) Interest rate analysis

For the details of financial assets and liabilities exposed to interest rate risk, please refer to note $6(r)$ liquidity risk.

The details of financial assets and liabilities exposed to interest rate risk were as follows:

		Carrying amount
			March 31, 2020 March 31, 2019
Variable rate instruments:
Financial assets	S.	191.855	228,542
Financial liabilities

The following sensitivity analysis is based on the exposure to the interest rate risk of derivative and non-derivative financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is based on the assumption that the amount of assets outstanding at the reporting date was outstanding throughout the year. The rate of change is expressed as the interest rate increases or decreases by 0.25% when reporting to management internally, which also represents the Group management's assessment of the reasonably possible interest rate change.

If the interest rate had increased or decreased by 0.25%, the Group's net profit before tax would have increased or decreased by \$120 and \$143, respectively, for the three months ended March 31, 2020 and 2019, with all other variable factors remaining constant. This is mainly due to the Group's bank savings with variable interest rates.

(v) Fair value

$1)$ Fair value hierarchy

The fair value of financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income are measured on a recurring basis. The carrying amount and fair value of the Group's financial assets and liabilities, including the information on fair value hierarchy were as follows; however, except as described in the following paragraphs, for financial instruments not measured at fair value whose carrying amount is reasonably close to the fair value, and lease liabilities, disclosure of fair value information is not required:

			March 31, 2020
			Fair Value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or loss
Non-derivative financial assets mandatorily measured at fair value through profit or loss	S. 557,168	557,168			557,168
Financial assets at fair value through other comprehensive income
Unlisted stocks on domestic market	102,728	19,682		83,046	102,728
Financial assets measured at amortized cost
Cash and cash equivalents	656,467
Notes and accounts receivable	504,456
Other receivables	4.887
Refunded deposits (recognized as other non-current assets)	5,758
Subtotal	1,171,568
Total	1,831,464
Financial liabilities measured at amortized cost
Notes and accounts payable	\$ 70,115
Lease liabilities (including current and non-current)	2,496
Other payables	73,699
Payables on contractors and equipment	27,758
Total	174,068 S

			December 31, 2019
			Fair Value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets at fair value through
profit or loss
Non-derivative financial assets mandatorily measured at fair value through profit or loss	\$ 466,025	466,025			466,025
Financial assets at fair value through other comprehensive income
Unlisted stocks on domestic market	137,329	28,710		108,619	137,329
Financial assets measured at amortized
cost
Cash and cash equivalents	553,555
Notes and accounts receivable	352,404
Other receivables	4,516
Refunded deposits (recognized as
other non-current assets)	7,483
Subtotal Total	917,958
Financial liabilities measured at	1,521,312
amortized cost
Notes and accounts payable	\$ 94,302
Lease liabilities (including current and
non-current)	2,992
Other payables	67,732
Payables on contractors and
equipment	16,605
Total	181,631
			March 31, 2019
			Fair Value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets at fair value through profit or loss
Non-derivative financial assets
mandatorily measured at fair value
through profit or loss	\$ 434,873	434,873			434,873
Financial assets at fair value through other comprehensive income
Unlisted stocks on domestic market	68,219			68,219	68,219
Financial assets measured at amortized cost
Cash and cash equivalents	576,686
Notes and accounts receivable	332,843
Other receivables	304
Refunded deposits (recognized as other
non-current assets)	11,771
Subtotal	921,604
Total	1,424,696 S

		March 31, 2019
				Fair Value
		Book value	Level 1	Level 2	Level 3	Total
Financial liabilities measured at amortized cost
Notes and accounts payable	S	102,251			$\blacksquare$
Lease liabilities (including current and non-current)		3,648			-
Other payables		50,602			۰
Payables on contractors and equipment		48,079			$\overline{\phantom{0}}$
Total		204,580

Valuation techniques for financial instruments not measured at fair value $2)$

The Group's valuation techniques and assumptions used for financial instruments not measured at fair value are as follows:

Financial assets and liabilities measured at amortized cost $a)$

If there is quoted price generated by transactions, the recent transaction price and quoted price data is used as the basis for fair value measurement. However, if no quoted prices are available, the discounted cash flows are used to estimate fair values.

• $3)$ Valuation techniques for financial instruments measured at fair value
• Non-derivative financial instruments a)

Financial instruments trade in active markets is based on quoted market prices. The quoted price of a financial instrument obtained from main exchanges and on-therun bonds from Taipei Exchange can be used as a base to determine the fair value of the listed companies' equity instrument and debt instrument of the quoted price in an active market.

If a quoted price of a financial instrument can be obtained in time and often from exchanges, brokers, underwriters, industrial union, pricing institute, or authorities and such price can reflect those actual trading and frequently happen in the market, then the financial instrument is considered to have a quoted price in an active market. If a financial instrument is not in accord with the definition mentioned above, then it is considered to be without a quoted price in an active market. In general, market with low trading volume or high bid-ask spreads is an indication of a non-active market.

Measurements of fair value of financial instruments without an active market are based on a valuation technique or quoted price from a competitor. Fair value measured by a valuation technique can be extrapolated from similar financial instruments, the discounted cash flow method, or other valuation technique including a model using observable market data at the reporting date.

The measurement of fair value of a non-active market financial instruments held by the Group which do not have quoted market prices are based on the comparable market approach, with the use of key assumptions of price-book ratio multiple or earnings multiple of comparable listed companies as its basic measurement. These assumptions have been adjusted for the effect of discount without the marketability of the equity securities.

Transfer from one level to another $4)$

For the three months ended March 31, 2020 and 2019, there was no transfer from one level to another.

$5)$ Reconciliation of Level 3 fair values

	Fair value through other comprehensive income
	Unquoted equity instruments
January 1, 2020	\$ 108,619
Total gains and losses recognized:
In other comprehensive income	(25, 573)
March 31, 2020	83,046
January 1, 2019	\$ 75,296
Total gains and losses recognized:
In other comprehensive income	(7,077)
March 31, 2019	68,2

For the three months ended March 31, 2020 and 2019, total gains and losses that were included in unrealized gains and losses from financial assets at fair value through other comprehensive income were as follows:

	For the three months ended March 31,
	2020	2019
Total gains and losses recognized: In other comprehensive income, and presented in "unrealized gains and losses from financial assets at
fair value through other comprehensive income"	(25,573)	(7,077)

$6)$ Quantified information on significant unobservable inputs (Level 3) used in fair value measurement

The Group's financial instruments that use Level 3 inputs to measure fair value include "financial assets measured at fair value through other comprehensive income - debt investments". Financial assets at fair value through other comprehensive income – equity investments without an active market have more than one significant unobservable inputs. The significant unobservable inputs of financial assets at fair value through other comprehensive income – equity investments without an active market are individually independent, and there is no correlation between them.

Ouantified information of significant unobservable inputs was as follows:

Item	Valuation technique	Significant unobservable inputs	between significant unobservable inputs and fair value measurement
Fair value through other comprehensive income- equity investments without an active market	Price-Book ratio method	· The multiplier of Price- Book Ratio (As of March 31, 2020, December 31, 2019 and March 31, 2019 were 1.98, 1.91 and 1.69, respectively)	The higher the fair value is, the higher the multiplier will be.
$\eta$	$^{\prime\prime}$	· Lack-of-Marketability discount rate (As of March 31, 2020, December 31, 2019 and March 31, 2019 were 50%)	The higher the Lack-of- Marketability discount rate is, the lower the fair value will be.
Fair value through other comprehensive $income-$ equity investments without an active market	Comparable transaction method	· Lack-of-Marketability discount rate (As of March 31, 2020, December 31, 2019 and March 31, 2019 were 24.31%~30.65%, 19.03%~23.38% and 22.89%, respectively)	The higher the Lack-of- Marketability discount rate is, the lower the fair value will be.

Fair value measurements in Level $3$ – sensitivity analysis of reasonably possible $7)$ alternative assumptions

The Group's measurement on the fair value of financial instruments is deemed reasonable despite different valuation models or assumptions that may lead to various results. For fair value measurements in Level 3, changing one or more of the assumptions would have the following effects on profit or loss and other comprehensive income:

Inter-relationship

			Other comprehensive
		Move up or		income
	Inputs	downs	Favorable		Unfavorable
March 31, 2020
Financial assets at fair value through other comprehensive income	Price-Book ratio multiples	5%	S	1,911	1,911
Financial assets at fair value through other comprehensive income December 31, 2019	Lack-of Marketability discount rate	5%		2,705	2,705
Financial assets at fair value through other comprehensive income	Price-Book ratio multiples	5%		1,902	1,902
Financial assets at fair value through other comprehensive income	Lack-of Marketability discount rate	5%		2,801	2,801
March 31, 2019
Financial assets at fair value through other comprehensive income	Price-Book ratio multiples	5%	\$	1,895	1,909
Financial assets at fair value through other comprehensive income	Lack-of Marketability discount rate	5%	S	3,404	3,418

The favorable and unfavorable effects represent the changes in fair value, and fair value is based on a variety of unobservable inputs calculated using a valuation technique. The analysis above only reflects the effects of changes in a single input, and it does not include the interrelationships with another input.

Financial risk management $(s)$

There were no significant changes in the Group's financial risk management and policies as disclosed in note $6(t)$ of the consolidated financial statements for the year ended December 31, 2019.

$(t)$ Capital management

Management believes that the objectives, policies and processes of capital management of the Group has been applied consistently with those described in the consolidated financial statements for the year ended December 31, 2019. Also, management believes that there were no significant changes in the Group's capital management information as disclosed for the year ended December 31, 2019. Please refer to note $6(u)$ of the consolidated financial statements for the year ended December 31, 2019.

Investing and financing activities not affecting current cash flow $(u)$

The Group's investing and financing activities which did not affect the current cash flow for the three months ended March 31, 2020 and 2019, were as follows:

• $(i)$ There were no non-cash investing activities for the three months ended March 31, 2020 and 2019.
• Reconciliation of liabilities arising from financing activities for the three months ended March $(ii)$ 31, 2020 and 2019, was as follows:

Lease liabilities	January 1, 2020 2,992	Cash flows (496)	Non-cash changes Foreign exchange movement	March 31, 2020 2,496
Lease liabilities	January 1, 2019 S 4,113	Cash flows (465)	Non-cash changes Foreign exchange movement	March 31, 2019 3,648

(7) Related-party transactions:

• $(a)$ Names and relationship with related parties: None.
• $(b)$ Significant transaction with related parties: None.
• $(c)$ Key management personnel compensation

		For the three months ended March 31,
	2020	2019
Salary and short-term employee benefits		11.392

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Assets	Subject	March 31, 2020	December 31, 2019	March 31, 2019
Land	Pledged as collaterals	\$ 42,736	42,736	42,736
Building	Ħ.	4,673	4,842	5,545
		47,409	47,578	48,281

(9) Commitments and contingencies:

• $(a)$ As of March 31, 2020, December 31, 2019 and March 31, 2019, the unused balance of the Group's outstanding standby letters of credit amounted to \$11,962, \$8,788 and \$9,327, respectively.
• $(b)$ The significant outstanding purchase commitments for property, plant and equipment was as follows:

	March 31.	December 31.	March 31.
	2020	2019	2019
Acquisitions of property, plant and equipment \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \	47.317	41,087	89,862

(10) Losses Due to Major Disasters: None.

(11) Subsequent Events:

At a meeting of the Board of Directors held on April 10, 2020, the board members approved a resolution to incorporate an investee company in Taiwan with Veolia Environment, wherein the Group will hold 40% shares of the investee company, which engages in circular economy by purifying and utilizing used solvents.

$(12)$ Other:

$(a)$ The followings are the summary statement of current period employee benefits, depreciation and amortization expenses by function:

By function	For the three months ended March 31, 2020			For the three months ended March 31, 2019
By item	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits
Salary	53,884	40,307	94,191	51,761	31,682	83,443
Labor and health insurance	3,875	1,216	5,091	3,743	1,209	4,952
Pension	1,692	359	2,051	1,633	410	2,043
Remuneration of directors		3,575	3,575		2,716	2,716
Others	824	2,324	3,148	771	2,131	2,902
Depreciation	28,084	4,986	33,070	27,587	4,950	32,537
Amortization	468	1,002	1,470	374	944	1,318

$(b)$ Seasonality of operations

The Group's operations were not affected by seasonality or cyclicality factors.

(13) Other disclosures:

Information on significant transactions: $(a)$

The following is the information on significant transactions required by the "Regulations Governing the Preparation of Financial Reports by Securities Issuers" for the Group for the three months ended March 31, 2020:

• Loans to other parties: None. $(i)$
• $(ii)$ Guarantees and endorsements for other parties: None.
• (iii) Securities held as of March 31, 2020 (excluding investment in subsidiaries, associates and joint ventures):

Category and Ending balance Name of holder Shares/Units Percentage of name of Relationship Account Fair value Carrying ownership (%) security with title (thousands) value company The Company Beneficiary Certificate (UPAMC James Current Financial asset at fair 46,360 2,760 46,360 Bond Money Market Fund) value through profit or loss Beneficiary Certificate (Cathay Taiwan 4,093 51,172 51,172 $\boldsymbol{\eta}$ Money Market Fund) Beneficiary Certificate (Nomura Taiwan 1,273 20,884 20,884 $\boldsymbol{H}$ $\boldsymbol{\eta}$ Money Market) Beneficiary Certificate (Taishin 1699 Money 3,592 48,864 48,864 $\boldsymbol{H}$ $\boldsymbol{\mu}$ Market Fund) Beneficiary Certificate (Jih Sun Money 3.022 45,018 45,018 $\boldsymbol{\mathit{H}}$ $^{\prime\prime}$ Market Fund) Beneficiary Certificate (Yuanta USD Money 99 31,859 31,859 $\boldsymbol{\eta}$ $^{\prime\prime}$ Market Fund-USD) Beneficiary Certificate (Nomura Global 2,840 28,586 28,586 $\boldsymbol{\mathcal{U}}$ $\boldsymbol{\mathcal{H}}$ Short Duration Bond Fund) Beneficiary Certificate (CTBC Hua Win 45,020 4,064 45,020 $^{\prime\prime}$ $\boldsymbol{\eta}$ Money Market Fund) Beneficiary Certificate (Fubon China Policy 8,270 420 8,270 $\prime\prime$ $^{\prime\prime}$ Bank Bond ETF) Stock (Fubon S&P Preferred Shares A) 49,166 793 49,166 $\boldsymbol{n}$ $\boldsymbol{\eta}$ Stock (Fubon S&P Preferred Shares B) 2,189 2,189 36 $\boldsymbol{\eta}$ Stock (TAISHIN FINANCIAL HOLDING 400 20,760 20,760 $\boldsymbol{\mu}$ CO., LTD. Preferred Stock E) Stock (Cathay Financial Holding Co., Ltd. 790 48,032 48,032 $\boldsymbol{\mathit{H}}$ $^{\prime\prime}$ Preferred Stock A) Stock (Cathay Financial Holding Co., Ltd. 33 2,018 2,018 $^{\prime\prime}$ $^{\prime\prime}$ Preferred Stock B) Stock (Cathay Financial Holding Co., Ltd. 999 999 28 $\boldsymbol{\prime}$ $\boldsymbol{\mu}$ Common Stock) Stock (Fubon S&P US Preferred Stock) 2,350 36,589 36,589 $\boldsymbol{\eta}$ $\boldsymbol{\eta}$ Stock (CTBC Financial Holding Co., Ltd. 685 43,840 43,840 $\prime$ Preferred Shares B) Stock (Shin Kong Financial Holding Co., 642 27,542 27,542 $^{\prime\prime}$ $\boldsymbol{\mathcal{H}}$ Ltd. Preferred Shares A) Stock (Energenesis Biomedical Co., Ltd.,) Financial assets at fair value 64,499 64,499 1,458 2.47% $\boldsymbol{n}$ through other comprehensive income							Unit: thousand dollars
								Note
	$^{\prime\prime}$	Stock (Sunny Pharmtech Inc.)	$\boldsymbol{\mu}$	4.497	38,229	3.47%	38,229

• (iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of \$300 million or 20% of the capital stock: None.

• $(v)$ Acquisition of individual real estate with amount exceeding the lower of \$300 million or 20% of the capital stock: None.

• (vi) Disposal of individual real estate with amount exceeding the lower of \$300 million or 20% of the capital stock: None.

• (vii) Related-party transactions for purchases and sales with amounts exceeding the lower of \$100 million or 20% of the capital stock: None.
• (viii) Receivables from related parties with amounts exceeding the lower of \$100 million or 20% of the capital stock: None.
• (ix) Trading in derivative instruments: None.
• $(x)$ Business relationships and significant intercompany transactions: None.
• Information on investees: $(b)$

The following is the information on investees for the three months ended March 31, 2020 (excluding information on investees in Mainland China):

Unit: thousand dollars/ thousand shares

			Main	Original investment amount			Balance as of March 31, 2020		Net income	Share of
Name of	Name of		businesses and products	March 31.	December 31.	Shares	Percentage of Carrying		(losses)	profits/losses
investor	investee	Location		2020	2019	(thousands)	ownership	value	of investee	of investee	Note
SCI	Yushan	R.O.C.	The research and	351.761	351.761	35.190	100%	349.641	(82)		$(82)$ Note 1
	PHARMTEC Pharmaceuticals I		Idevelopment, manufacture
H, INC.	Inc.		land sale of API

Note 1: The transactions had been eliminated in the consolidated financial statements.

• $(c)$ Information on investment in mainland China: None
• $(a)$ Major shareholders:

Shareholder's Name	Shareholding	Shares	Percentage
Mercuries & Associates Holding Ltd.		25, 236, 132	31.74 %

(14) Segment information:

The Group only uses one segment to assess its performance and allocate resources. Hence, there is no need to disclose the information.