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 Six Months Ended June 30, 2020 and 2019

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

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	$\overline{c}$
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
(1) Company history	8
(2) Approval date and procedures of the consolidated financial statements	8
(3) New standards, amendments and interpretations adopted	$8\sim9$
(4) Summary of significant accounting policies	$9 - 10$
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty	10
Explanation of significant accounts (6)	$10 - 31$
Related-party transactions (7)	31
(8) Pledged assets	31
(9) Commitments and contingencies	32
(10) Losses Due to Major Disasters	32
(11) Subsequent Events	32
$(12)$ Other	$32 - 33$
(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 the SCI Pharmtech, Inc. and its subsidiaries as of June 30, 2020 and 2019, and of its consolidated financial performance for the three months and six months ended June 30, 2020 and 2019, and its consolidated cash flows for the six months ended June 30, 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) August 6, 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.

$\frac{1}{2}$ Ï ١ j	$\ddot{\bm{\delta}}$ $\blacksquare$ $\overline{\phantom{a}}$ ļ
	$\cdots$ , which is a set of $\cdots$ $\overline{\phantom{a}}$

SCI PHARMTECH, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

June 30, 2020, December 31, 2019, and June 30, 2019 (expressed in thousands of New Taiwan dollars)

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		June 30, 2020			December 31, 2019		June 30, 2019				June 30, 2020		December 31, 2019		June 30, 2019
	Assets	Amount	℅		Amount	℅	Amount	≿		Liabilities and Equity	Amount	℅	Amount	℅	Amount	℅
	Current assets:									Current liabilities:
1100	Cash and cash equivalents (note 6(a))	778,055 G)	$\overline{17}$		553,555	$\overline{13}$	571,922	$\overline{4}$	2170	Notes and accounts payable	119,258 s		94,302		105,081
$\frac{1}{2}$	Financial assets at fair value through profit or								2130	Current contract liabilities (note 6(p))	57,371		59,092		41,606
	loss (note 6(b))	661,063	$\vec{z}$		466,025	$\equiv$	173,979	$\equiv$	2200	Other payables (note 6(i))	741,232	ڡ	229,830	c	557,391	Ŝ
1170	Notes and accounts receivable, net (notes 6(d)								2213	Payables on contractors and equipment	48,654		16,605		46,806
	and 6(p))	494,115			352,404	۰	159,668	$\Box$
1310	Inventories, net (note 6(e))	523,808			527,081	≌	519,388	$\mathbf{r}$	2230	Current tax liabilities	13,886		96,671		83,479
1470	Other current assets	24,712	ı		36,953		18,319	٠۱	2250	Current provisions (note 6(k))	91,720	2	83,957	$\mathbf{\hat{c}}$	83,664	$\mathbf{\sim}$
		2,481,753	53		.936,018	47	043,276 $\tilde{c}$	$\frac{3}{2}$	2280	Current lease liabilities (note 6(j))	1,378		1,795		1,838
	Non-current assets:								2300	Other current liabilities	3,903	ı	2,012		2,151
											1,177,402	26	584,264	$\overline{4}$	922,016	$\mathfrak{z}$
1518	through other comprehensive income (note Non-current financial assets at fair value									Non-Current liabilities:
	6(c))	113,534		3	137,329	$\mathfrak{c}$	85,312	2	2570	Deferred tax liabilities					47
1600	Property, plant and equipment (notes 6(f) and								2580	Non-current lease liabilities (note 6(j))	620		1,197		1,343
		1,896,374	╤		,876,999	$\frac{4}{6}$	372,843	$\frac{4}{6}$	2640	Provisions for employee benefits, non-current	20,963		21,376		21,802
1755	Right-of-use assets (note 6(g))	1,980			2,974		3,169				21,583		22,573		23,192
1780	Intangible assets	44,179			47,661		49,541			Total liabilities	1,198,985	$\frac{26}{5}$	606,837	$\overline{5}$	945,208	$\overline{c}$
1840	Deferred tax assets	55,752			57,243		51,232			Equity attributable to owners of parent
1900	Other non-current assets	45,245			23,253		33,025			$(note(6(n))$ :
		2,157,064	47		2,145,459	53	2,095,122	$\overline{5}$	3100	Ordinary Share	794,853	$\Box$	794,853	$\overline{0}$	794,853	$\tilde{e}$
									3200	Capital surplus	1,348,339	29	1,348,339	33	,348,339	33
									3310	Legal reserve	390,081	œ	332,971	$\infty$	332,971	∞
									3320	Special reserve			4,788		4,788
									3350	Unappropriated retained earnings	908,100	$\boldsymbol{\mathcal{Z}}$	971,435	Z4	722,005	Ξ
									3400	Other components of equity	(1,541)		22,254		(9,766)
										Total equity	3,439,832	$\mathcal{F}_{\mathcal{A}}$	3,474,640	2	3,193,190
	Total assets	4,638,817	훽		4,081,477	뤠	138,398 $\frac{41}{1}$	뤠		Total liabilities and equity	4,638,817 ĠĄ,	$\frac{50}{100}$	4,081,477	릐	4,138,398	릐

(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 and six months ended June 30, 2020 and 2019

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

			ended June 30	For the three months			ended June 30	For the six months
		2020		2019		2020		2019
		Amount	%	Amount	℅	Amount	$\%$	Amount	%
4110	Sales revenue (note $6(p)$ )	\$ 727,922	100	604,287	100	1,512,250	100	1,207,974	100
5110	Cost of sales (notes $6(e)$ , $6(1)$ and 12)	346,449	48	359,053	59	772,360	51	697,426	58
5900	Gross profit	381,473	52	245,234	41	739.890	49	510,548	42
	Operating expenses (notes 6(l) and 12):
6100	Selling expenses	37,624	5	23,828	4	67,979	5	56,394	5
6200	Administrative expenses	38,039	5	23,502	$\overline{4}$	75,667	5	52,733	$\overline{4}$
6300	Research and development expenses	10,610	-1	9,761	$\overline{2}$	20,842	1	19,510	1
		86,273	11	57,091	10	164,488	11	128,637	10
6900	Net operating income	295,200	41	188,143	31	575,402	38	381,911	32
	Non-operating income and expenses:
7190	Other income	847		1,908		2,077		4,043
7101	Interest income from bank deposits	1,648		1,753		3,111		2,567
7235	Gains on financial assets (liabilities) at fair value through profit or loss	13,896	$\overline{2}$	1,471		(7,710)		6,238	1
7510	Interest expense (note $6(j)$ )	(9)		(13)		(19)		(28)
7590	Miscellaneous disbursements	(129)		(133)		(257)		(226)
7610	Gains (losses) on disposals of property, plant and equipment	29		(1,623)		29		(1,623)
7630	Foreign exchange gains (losses)	(14, 108)	(2)	10,096	2	(9, 444)	(1)	12,586
		2,174	$\blacksquare$	13,459	$\overline{c}$	(12, 213)	(1)	23,557	$\overline{2}$
7900	Profit before tax	297,374	41	201,602	33	563,189	37	405,468	34
7950	Less: Income tax expenses (note $6(m)$ )	55,704	8	43,873	6	113,188	$\tau$	83,693	7
8200	Profit	241,670	33	157,729	27	450,001	30	321,775	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	10,806	$\overline{c}$	2,099		(23, 795)	(2)	(4,978)
8349	Less: Income tax related to components of other comprehensive income that will not be reclassified
8300	to profit or loss Other comprehensive income, net	10,806	$\overline{2}$	2,099		(23, 795)	(2)	(4,978)
8500	Total comprehensive income	252,476	35	159,828	27	426,206	28	316,797	27
	Earnings per share (note $6(0)$ ):
9750	Basic earnings per share		3.04		1,98		5.66		4.05
9850	Diluted earnings per share		3.03		1.97		5.62		4.02

						Unrealized
						gains (losses) on
						financial assets
						measured at fair value
				Retained earnings		through other
	Ordinary	Capital	Legal	Special	Unappropriated	comprehensive
	shares	surplus	reserve	reserve	retained earnings	income	Total equity
Balance at January 1, 2019	794,853 $\overline{\mathbf{e}}$	1,348,339	288,248	7,727	775,852	(4,788)	3,210,23
Profit for the six months ended June 30, 2019					321,775		321,775
Other comprehensive income for the six months ended June 30, 2019						(4,978)	(4.978)
Total comprehensive income for the six months ended June 30, 2019					321,775	(4,978)	316,797
Appropriation and distribution of retained earnings:
Legal reserve appropriated			44,723		(44, 723)
Reversal of special reserve				(2,939)	2,939
Cash dividends of ordinary share					(333, 838)		(333, 838)
Balance at June 30, 2019	794,853 ∽"	1,348,339	332,97	4,788	722,005	(9,766)	3,193,190
Balance at January 1, 2020	794,853	,348,339	332,97	4.788	971,435	22,254	3,474,640
Profit for the six months ended June 30, 2020					450,001		450,001
Other comprehensive income for the six months ended June 30, 2020						(23, 795)	(23, 795)
Total comprehensive income for the six months ended June 30, 2020					450,00	(23, 795)	426,206
Appropriation and distribution of retained earnings:
Legal reserve appropriated			57,110		(57, 110)
Reversal of special reserve				(4,788)	4,788
Cash dividends of ordinary share					(461, 014)		(461, 014)
Balance at June 30, 2020	794,853	1,348,339	390,081		908,100	(1,541)	3,439,832

Equity attributable to owners of parent

Other equity interest

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 six months ended June 30, 2020 and 2019

(expressed in Thousands of New Taiwan Dollars)

$\ddot{\bullet}$

See accompanying notes to consolidated financial statements.

(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 six months ended June 30, 2020 and 2019

(expressed in Thousands of New Taiwan Dollars)

	For the six months ended June 30
	2020	2019
Cash flows from (used in) operating activities:
Profit before tax	\$ 563,189	405,468
Adjustments for:
Adjustments to reconcile profit (loss):
Depreciation expense	66,338	65,122
Amortization expense	2,905	2,733
Net loss (gain) on financial assets or liabilities at fair value through profit or loss	7,710	(6,238)
Interest expense	19	28
Interest income	(3,111)	(2, 567)
Others	(29)	1,674
	73,832	60,752
Changes in operating assets and liabilities:
Decrease (increase) in notes and accounts receivable Decrease (increase) in inventories	(141, 711)	(68, 751)
Decrease (increase) in other current assets	3,273	(16,316)
Increase (decrease) in notes and accounts payable	12,241	3,324
Increase (decrease) in contract liabilities	24,956 (1, 721)	15,925 11,203
Increase (decrease) in other payable	50,388	26,984
Increase (decrease) in provisions	7,763	7,163
Increase (decrease) in other current liabilities	1,891	(821)
Increase (decrease) in provision for employee benefits, non-current	(413)	(288)
	30,499	39,175
Cash flow from (used in) operations	593,688	444,643
Interest received	3,111	2,567
Interest paid	(19)	(28)
Income taxes paid	(94, 482)	(73, 277)
Net cash flows from (used in) operating activities	502,298	373,905
Cash flows from (used in) investing activities:
Acquisition of financial assets at fair value through other comprehensive income		(14,994)
Acquisition of financial assets at fair value through profit or loss	(202, 748)	(37, 635)
Acquisition of property, plant and equipment	(39, 688)	(95, 168)
Proceeds from disposal of property, plant and equipment	29
Acquisition of intangible assets		(4, 877)
Increase in prepayments of property, plant and equipment	(40, 670)	(15, 571)
Decrease (increase) in refunded deposits	6,273	6,013
Net cash flows from (used in) investing activities	(276, 804)	(162, 232)
Cash flows from (used in) financing activities:
Payment of lease liabilities	(994)	(932)
Net cash flows from (used in) financing activities	(994)	(932)
Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period	224,500	210,741
Cash and cash equivalents at end of period	553,555	361,181
	778,055	571,922

(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

June 30, 2020 and 2019

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

(1) Company history

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 August 6, 2020.

(3) New standards, amendments and interpretations adopted:

$(a)$ The impact of the International Financial Reporting Standards ("IFRSs") endorsed by the Financial 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, IAS39 and IFRS7 "Interest Rate Benchmark Reform"	January 1, 2020
Amendments to IAS 1 and IAS 8 "Definition of Material"	January 1, 2020
Amendments to IFRS 16 "Covid-19-Related Rent Concessions"	June 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"	January 1, 2023

New, Revised or Amended Standards and Interpretations	Effective date per IASB
Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"	January 1, 2023
Amendments to IAS 16 "Property, Plant and Equipment-Proceeds before Intended Use"	January 1, 2022
Amendments to IAS 37 "Onerous Contracts – Cost of Fulfilling a Contract"	January 1, 2022
Annual Improvements to IFRS Standards 2018-2020	January 1, 2022
Amendments to IFRS 17 "Insurance Contracts"	January 1, 2023

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

$(4)$ Summary of significant accounting policies:

$(a)$ Statement of compliance

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.

$(b)$ Basis of Consolidation

(ii) List of subsidiaries in the consolidated financial statements.

					Shareholding
Name of investor	Name of subsidiary	Principal activity	June 30. 2020		December 31, 2019		June 30. 2019	Note
The Company	Yushan Holding Universal Ltd.	Investment		$\%$	-	$\%$	۰	$%$ Note 1
The Company	Yushan Pharmaceuticals The research and Inc. (Yushan)	development, manufacture and sale of API	100.00 %		$100.00 \%$		100.00 % Note 2
Yushan Holding Yushan Universal Ltd.		The research and development, manufacture and sale of API	$\blacksquare$	$\frac{0}{0}$	$\rightarrow$	$\frac{0}{2}$	$\sim$	$%$ 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.

$(c)$ 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.

Employee benefits $(d)$

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

		June 30, 2020	December 31, 2019	June 30, 2019
Cash on hand	\$	531	535	429
Checking accounts and demand deposits		186,500	223,273	145,087
Time deposits		220,270	207,580	111,010
Bills sold under repurchase agreements		370,754	122,167	315,396
	S	778,055	553,555	571,922

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

	June 30, 2020	December 31, 2019	June 30, 2019
Mandatorily measured at fair value through profit or loss:
Non-derivative financial assets
Beneficiary certificate	\$ 416,788	237,529	279,995
Stocks listed on domestic markets	244,275	228,496	193,984
Total	661,063	466,025	473,979

The Group did not provide any aforementioned financial assets as collateral for its loans as of June 30, 2020, December 31, 2019 and June 30, 2019, respectively.

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

	June 30, 2020	December 31, 2019	June 30, 2019
Financial assets at fair value through other comprehensive income:
Unlisted stocks on domestic markets	113,534	137,329	85,312

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.

In June 2019, the Group participated in the capital increase by cash of Energenesis Biomedical Co., Ltd. (Energenesis) with the amount of \$14,994. Furthermore, the Group purchased Energenesis' privately placed common shares amounting to \$19,997 in November 2019, resulting in the Group to obtain Energenesis' ownership interest of 2.48% as of December 31, 2019.

No strategic investments were disposed as of June 30, 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 June 30, 2020, December 31, 2019 and June 30, 2019, the Group did not provide any aforementioned financial assets as collateral for its loans.

(d) Notes and accounts receivable

$\overline{C}$ $\mathbf{1}$ 3 6 $\mathsf{Q}$

		June 30, 2020	December 31, 2019	June 30, 2019
Notes receivable	S	1.956	19	359
Accounts receivable		493,338	353,564	460,488
Less: Loss allowance		(1.179)	(1.179)	(1.179)
		494,115	352,404	459,668

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:

			June 30, 2020
		Gross carrying amount	Rate of loss allowance provision	Loss allowance provision
Current	S	348,892
1 to 30 days past due		133,007
31 to 60 days past due		7,242
61 to 90 days past due		2,383
91 to 180 days past due		2,591
181 to 270 days past due
271 to 360 days past due
More than 360 days past due		1,179	100 %	1,179
	\$	495,294		1,179

	December 31, 2019
	Gross carrying amount	Rate of loss allowance provision	Loss allowance provision
Current	\$ 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		$\overline{\phantom{a}}$
More than 360 days past due	1,179	100 %	1,179
	353,583		1,179

	June 30, 2019
	Gross carrying amount	Rate of loss allowance provision	Loss allowance provision
\$ Current	369,485
1 to 30 days past due	54,247
31 to 60 days past due	35,903
61 to 90 days past due
91 to 180 days past due	33
181 to 270 days past due
271 to 360 days past due
More than 360 days past due	1,179	100 %	1,179
	460,847		1,179

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

	For the six months ended June 30,
		2020	2019
Balance on January 1 (Balance on June 30)		1.179	1,179

As of June 30, 2020, December 31, 2019 and June 30, 2019, the Group did not provide any aforementioned notes and accounts receivable as collaterals for its loans.

(e) Inventories

		June 30, 2020	December 31, 2019	June 30, 2019
Raw materials	S	143,287	106,971	137,739
Work in progress		95,988	103,055	70,587
Finished goods		284,533	317,055	311,062
	S	523,808	527,081	519,388

For the three months ended June 30, 2020 and 2019 and the six months ended June 30, 2020 and 2019, inventory cost recognized as cost of sales amounting to \$357,309, \$353,393, \$783,859 and \$689,433, 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 June 30.		For the six months ended June 30,
	2020	2019	2020	2019
The write-downs (reversals)	(10.860)	5.660	(11.499)	7.993

As of June 30, 2020, December 31, 2019 and June 30, 2019, the Group did not provide any inventories as collaterals for its loans.

$(f)$ Property, plant and equipment

		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	S.	825,680	737,842	1,667,500	40,656	18,720	168,428	3,458,826
Additions				10,916	519		60,302	71,737
Transferred (out) in				17,374	(1, 444)		(5,000)	10,930
Disposal and derecognitions			(1,051)	(8, 179)	(24)			(9, 254)
Balance on June 30, 2020		825,680	736,791	1,687,611	39,707	18,720	223,730	3,532,239
Balance on January 1, 2019		825,680	700,219	1,683,172	42,658	16,149	138,178	3,406,056
Additions			2,520	16,548	142		34,717	53,927
Transferred (out) in			3,780	604			(3, 831)	553
Disposal and derecognitions			(10, 897)	(57, 590)	(2, 353)			(70, 840)
Balance on June 30, 2019		825,680	695,622	1,642,734	40,447	16,149	169,064	3,389,696
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			15,923	46,602	2,023	796		65,344
Transferred (out) in					(2,052)			(2,052)
Disposals and derecognitions			(1,051)	(8, 179)	(24)			(9, 254)
Balance on June 30, 2020			348,926	1,258,349	20,046	8,544		1,635,865
Balance on January 1, 2019	\$		314,702	1,182,640	18,474	6,076		1,521,892
Depreciation for the period			14,871	46,495	2,000	812		64,178
Disposals and derecognitions			(10, 897)	(55, 967)	(2, 353)			(69, 217)
Balance on June 30, 2019	\$		318,676	1,173,168	18,121	6,888		1,516,853

	Land	Buildings and construction equipment equipment	Machinery and	Office	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 June 30, 2020	825,680	387,865	429,262	19,661	10,176	223,730	1,896,374
Balance on January 1, 2019	825,680	385,517	500,532	24,184	10,073	138,178	1,884,164
Balance on June 30, 2019	825,680	376,946	469,566	22,326	9,261	169,064	1,872,843

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 June 30, 2020, December 31, 2019 and June 30, 2019, part of the property, plant and equipment the Group had provided at collateral for its loans. Please refer to note 8 for details.

$(g)$ Right-of-use assets

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
Cost:
Balance on January 1, 2020 (Balance on June 30, 2020)	S 4,747
Balance on January 1, 2019 (Balance on June 30, 2019)	4,113 S
Accumulated depreciation:
Balance on January 1, 2020	\$ 1,773
Depreciation for the period	994
Balance on June 30, 2020	2,767
Balance on January 1, 2019	S
Depreciation for the period	944
Balance on June 30, 2019	944
Carrying amount:
Balance on January 1, 2020	ፍ 2,974
Balance on June 30, 2020	1,980
Balance on January 1, 2019	4,113 S
Balance on June 30, 2019	3,169 S

$(h)$ Short-term borrowings

The details of short-term borrowings were as following:

$\hat{\boldsymbol{\epsilon}}$

		June 30, 2020	December 31, 2019	June 30, 2019
Unsecured bank loans			-	$\blacksquare$
Unused credit line for short-term borrowings		337,439	341,212	339,966
Range of interest rates		-	-

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

		June 30, 2020	December 31, 2019	June 30, 2019
Salaries payable	\$	195,652	152,767	165,369
Dividend payable		461,014	$\overline{\phantom{a}}$	333,838
Others		84,566	77.063	58,184
	S	741,232	229,830	557,391

$(i)$ Lease liabilities

The carrying amount of lease liabilities was as follows:

	June 30, 2020	December 31, 2019	June 30, 2019
Current	1.378 ۱IJ	.795	.,838
Non-current	620	1.197	1,343

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

	For the three months ended June 30,			For the six months ended June 30,
		2020	2019	2020	2019
The amounts recognized in profit or loss were as follows:
Interest on lease liabilities		q	13	19	28
Expenses relating to short-term leases	S	252	424	792	830
Variable lease payments not included in the measurement of lease liabilities		96	92	249	143

	For the three months ended June 30,			For the six months ended June 30,
		2020	2019	2020	2019
Expense relating to leases of low-value assets, excluding short-term leases of low-value assets		76		144	10
The amounts recognized in the statement of cash flows for the Group was as follows:
Total cash outflow for leases				2,198	1,943

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

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 six months ended June 30, 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.

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

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 June 30,		For the six months ended June 30,
		2020	2019	2020	2019
Operating cost		393	394	780	779
Operating expenses		(63)		120)
	S	330	391	660	782

(ii) Defined contribution plans

The Group's expenses under the pension plan cost to the Bureau of Labor Insurance for the three months ended June 30, 2020 and 2019 and the six months ended June 30, 2020 and 2019 were as follows:

		For the three months ended June 30,		For the six months ended June 30,
		2020	2019	2020	2019
Operating cost	\$	1,325	1,266	2,630	2,514
Selling expenses		66	66	131	132
Administration expenses		166	160	327	317
Research expenses		194	195	384	376
	S	1.751	1,687	3,472	3,339

(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 June 30, 2020 and 2019 and the six $(ii)$ months ended June 30, 2020 and 2019 were calculated as follows:

	June 30,	For the three months ended	For the six months ended June 30,
	2020	2019	2020	2019
Current income tax expense
Recognized during the
period	\$ 56,696	43,873	114,180	83,693
Adjustment for prior periods	(2, 483)		(2, 483)
	54,213	43,873	111,697	83,693
Deferred income tax expense
Income tax overestimate
(underestimate) for prior
periods	1,491		1,491
Income tax expense	55,704	43,873	113,188	83,693

(iii) Examination and approval

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

Capital and other equity $(n)$

Except for the following disclosure, there was no significant change for capital and other equity for the periods from January 1 to June 30, 2020 and 2019. For the related information, please refer to note 6(n) of the consolidated financial statements for the year 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.

Earnings distribution $(ii)$

(iii)

Based on the resolutions of annual stockholders' meetings held on June 19, 2020 and June 21, 2019, the appropriations of dividends from the distributable retained earnings of 2019 and 2018 were as follows:

	2019		2018
	Amount per share (dollars)	Total amount	Amount per share (dollars)	Total amount
Dividends distributed to ordinary shareholders: Cash	\$ 5.80	461,014	4.20	333,838
Other equity (net of tax)
				Financial assets measured at fair value through other comprehensive income
Balance at January 1, 2020				22,254 S
Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income				(23, 795)
Balance at June 30, 2020				(1, 541)

	Financial assets measured at fair value through other comprehensive income
Balance at January 1, 2019	\$ (4,788)
Unrealized gains (losses) from financial assets measured at fair value through other comprehensive income	(4,978)
Balance at June 30, 2019	(9,766)

(o) Earnings per share

For the three months ended June 30, 2020 and 2019 and the six months ended June 30, 2020 and 2019, the Company's earnings per share were calculated as follows:

	For the three months ended June 30,		For the six months ended June 30,
	2020	2019	2020	2019
Basic earnings per share
Profit attributable to ordinary shareholders of the Company	\$ 241,670	157,729	450,001	321,775
Weighted-average number of ordinary shares (thousand
shares)	79,485	79,485	79,485	79,485
	3.04 S	1.98	5.66	4.05
Diluted earnings per share
Profit attributable to ordinary shareholders of the Company	241,670 S	157,729	450,001	321,775
Weighted-average number of ordinary shares (thousand shares)	79,485	79,485	79,485	79,485
Effect of potentially dilutive ordinary shares:
Effect of employee compensation	390	409	650	636
Weighted-average number of ordinary shares (thousand
shares) (diluted)	79,875	79,894	80,135	80,121
	\$ 3.03	1.97	5.62	4.02

(p) Revenue from contracts with customers

Disaggregation of revenue $(i)$

		For the three months ended June 30,		For the six months ended June 30,
		2020	2019	2020	2019
Primary geographical markets:
United States	\$	136,986	132,776	254,710	211,645
Italy		100,357	110,265	250,408	188,908
Spain		68,613	74,187	222,555	204,027
Japan		75,592	98,338	142,542	167,239
Taiwan		84,574	57,167	130,650	104,873
India		57,488	2,311	89,529	24,650
Netherlands		14,941	16,189	79,382	50,120
Switzerland		37,214	39,063	59,265	113,301
Others		152,157	73,991	283,209	143,211
	S	727,922	604,287	1,512,250	1,207,974
Major products
Active Pharmaceutical Ingredients	\$	555,831	383,058	1,090,374	766,824
Intermediates		138,452	153,150	357,973	332,122
Specialty Chemical		33,639	68,079	63,903	109,028
	\$	727,922	604,287	1,512,250	1,207,974

(ii) Contract balances

	June 30, 2020		December 31, 2019	June 30, 2019
Notes and accounts receivable		495.294	353,583	460,847
Less: allowance for impairment		(1.179)	(1.179)	(1,179)
Total		494,115	352,404	459,668
Contract liabilities (sales received in advance)		57,371	59,092	41,606

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 and six months ended June 30, 2020 and 2019, the remunerations to employees amounted to \$29,130, \$19,922, \$55,350 and \$39,837, respectively, and the remunerations to directors amounted to \$3,966, \$2,688, \$7,541 and \$5,404, 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 years 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.

$(r)$ Financial Instruments

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 $(i)$
• $1)$ Credit risk exposure

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

$2)$ Concentration of credit risk

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.
• (ii) Liquidity Risk

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

		Carrying Amount	Contractual cash flows	Within a vear	$1 - 2$ vears	Over 2 vears
June 30, 2020
Non-derivative financial liabilities:
Notes and accounts payable Lease liabilities (including	\$	119,258	(119,258)	(119,258)
current and non-current)		1,998	(2,025)	(1, 397)	(434)	(194)
Other payables		537,274	(537, 274)	(537, 274)
Payables on contractors and equipment		48,654	(48, 654)	(48, 654)
	S	707,184	(707, 211)	(706, 583)	(434)	(194)
December 31, 2019
Non-derivative financial liabilities:
Notes and accounts payable	-S	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		16,605	(16, 605)	(16, 605)
	\$	181,631	(181, 677)	(180, 465)	(801)	(411)
June 30, 2019
Non-derivative financial liabilities:
Notes and accounts payable \$		105,081	(105, 081)	(105, 081)
Lease liabilities (including
current and non-current)		3,181	(3,231)	(1, 873)	(1,101)	(257)
Other payables		383,550	(383, 550)	(383, 550)
Payables on contractors and
equipment		46,806	(46, 806)	(46, 806)
	\$	538,618	(538, 668)	(537,310)	(1, 101)	(257)

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

	June 30, 2020				December 31, 2019			June 30, 2019
		Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD	Foreign currency	Exchange rate	TWD
Financial assets
Monetary items
USD to TWD	\$	22.974	29.58	679.571	19,088	29.93	571,304	17,982	31.01	557,622
EUR to TWD		2.126	33.07	70,307	2.124	33.39	70,920	606	35.18	21,319
Financial liabilities
Monetary items
USD to TWD		2.976	29.58	88.030	1,830	29.93	54,772	2,221	31.01	68,873

$2)$ 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 six months ended June 30, 2020 and 2019 would have affected the net profit before tax increased or decreased \$6,618 and \$5,101, 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 and six months ended June 30, 2020 and 2019, the exchange gains (losses), including realized and unrealized, are $\frac{1}{14,108}$ , $\frac{10,096}{10,096}$ , $\frac{1}{14,404}$ and \$12,586, 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
		June 30, 2020 June 30, 2019
Variable rate instruments:
Financial assets	S.	186.192	144.840
Financial liabilities		$\qquad \qquad$	$\overline{\phantom{0}}$

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 \$233 and \$181, respectively, for the six months ended June 30, 2020 and 2019, with all other variable factors remaining constant. This is mainly due to the Group's bank savings with variable interest rates.

• Fair value $(v)$
• $1)$ 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:

			June 30, 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	661,063	661,063			661,063
Financial assets at fair value through other comprehensive income
Unlisted stocks on domestic market	113,534	25,968	$\blacksquare$	87,566	113,534

			June 30, 2020
			Fair Value
	Book value	Level 1	Level 2	Level 3	Total
Financial assets measured at amortized cost
Cash and cash equivalents	778,055
Notes and accounts receivable	494,115
Other receivables	599
Refunded deposits (recognized as other non-current assets)	1,210
Subtotal	1,273,979
Total	2,048,576
Financial liabilities measured at amortized cost
Notes and accounts payable	\$ 119,258
Lease liabilities (including current and non-current)	1,998
Other payables	537,274
Payables on contractors and equipment	48,654
Total	\$ 707,184
			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 Refunded deposits (recognized as	4,516
other non-current assets)	7,483
Subtotal	917,958
Total	1,521,312
Financial liabilities measured at 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 \$

	June 30, 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	\$ 473,979	473,979			473,979
Financial assets at fair value through other comprehensive income
Unlisted stocks on domestic market	85,312	15,340		69,972	85,312
Financial assets measured at amortized cost
Cash and cash equivalents	571,922
Notes and accounts receivable	459,668
Other receivables	3,891
Refunded deposits (recognized as other non-current assets)	5,758
Subtotal	1,041,239
Total	1,600,530
Financial liabilities measured at
amortized cost
Notes and accounts payable	\$ 105,081
Lease liabilities (including current and non-current)	3,181
Other payables	383,550
Payables on contractors and equipment	46,806
Total	538,618 S

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

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.

• Valuation techniques for financial instruments measured at fair value $3)$
• 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.

$4)$ Transfer from one level to another

For the six months ended June 30, 2020 and 2019, there was no transfer from one level to another.

Reconciliation of Level 3 fair values $5)$

	Fair value through other comprehensive income Unquoted equity instruments
January 1, 2020	\$	108,619
Total gains and losses recognized:
In other comprehensive income		(21, 053)
June 30, 2020		87,566
January 1, 2019	\$	75,296
Total gains and losses recognized:
In other comprehensive income		(5,324)
June 30, 2019		69.9

For the three months and six months ended June 30, 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 June 30,		For the six months ended June 30,
		2020	2019	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"	S	4.520	1,753	(21, 053)

$6)$ 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.

Quantified information of significant unobservable inputs was as follows:

Item	Valuation technique	Significant unobservable inputs	Inter-relationship between significant unobservable inputs and fair value measurement
Fair value through other comprehensive income- equity investments without an active market	Price-Book ratio method	$\cdot$ The multiplier of Price- Book Ratio (As of June 30, 2020, December 31, 2019 and June 30, 2019 were 1.52, 1.91 and 2.09, respectively)	The higher the fair value is, the higher the multiplier will be.
$\prime$	$^{\prime\prime}$	· Lack-of-Marketability discount rate (As of June 30, 2020, December 31, 2019 and June 30, 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 June 30, 2020, December 31, 2019 and June 30, 2019 were $24.47\% \sim 31.76\%$ , 19.03%~23.38% and $23.04\%$ , respectively)	The higher the Lack-of- Marketability discount rate is, the lower the fair value will be.

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

		Move up or		Other comprehensive income
	Inputs	downs	Favorable	Unfavorable
June 30, 2020
Financial assets at fair value through other comprehensive income	Price-Book ratio multiples	5%	1,439 S.	1,439
Financial assets at fair value through other comprehensive income December 31, 2019	Lack-of Marketability discount rate	5%	2,504	2,504
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
June 30, 2019 Financial assets at fair value through other comprehensive income	Price-Book ratio multiples	$5\%$	S 2,227	2,196
Financial assets at fair value through other comprehensive income	Lack-of Marketability discount rate	5%	3,515	3,484

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.

$(s)$ Financial risk management

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.

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

The Group's investing and financing activities which did not affect the current cash flow for the six months ended June 30, 2020 and 2019, were as follows:

• $(i)$ There were no non-cash investing activities for the six months ended June 30, 2020 and 2019.
• $(ii)$ Reconciliation of liabilities arising from financing activities for the six months ended June 30, 2020 and 2019, was as follows:

Lease liabilities	January 1, 2020 2,992 œ	Cash flows (994)	Non-cash changes Foreign exchange movement	June 30, 2020 1,998
Lease liabilities	January 1, 2019 4,113	Cash flows (932)	Non-cash changes Foreign exchange movement	June 30, 2019 3,181

(7) Related-party transactions:

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

	For the three months ended June 30,		For the six months ended June 30,
	2020	2019	2020	2019
Salary and short-term employee benefits	15.197	11,825	29,275	23.217

(8) Pledged assets:

The carrying values of pledged assets were as follows:

Assets	Subject	June 30, 2020	December 31, 2019	June 30, 2019
Land	Pledged as collaterals	42,736	42,736	42,736
Building	11	4.504	4,842	5,294
		47,240	47,578	48,030

(9) Commitments and contingencies:

• As of June 30, 2020, December 31, 2019 and June 30, 2019, the unused balance of the Group's $(a)$ outstanding standby letters of credit amounted to \$12,561, \$8,788 and \$10,034, respectively.
• The significant outstanding purchase commitments for property, plant and equipment was as $(b)$ follows:

	June 30.	December 31,	June 30.
	2020	2019	2019
Acquisitions of property, plant and equipment \$	40.573	41.087	77,514

(10) Losses Due to Major Disasters: None.

Labor and health insurance

Remuneration of directors

Pension

Others

Depreciation

Amortization

(11) Subsequent Events: None.

$(12)$ 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			For the three months ended
	June 30, 2020		June 30, 2019
		Operating			Operating
By item	Cost of sales	expenses	Total	Cost of sales	expenses	Total
Employee benefits
Salary	55,573	36,863	92,436	54,621	27,080	81,701
Labor and health insurance	3,298	961	4,259	3,183	948	4,131
Pension	1,718	363	2,081	1,660	418	2,078
Remuneration of directors		3,966	3,966		2,688	2,688
Others	972	2,318	3,290	814	2,423	3,237
Depreciation	28,289	4,979	33,268	27,803	4,782	32,585
Amortization	420	1,015	1,435	427	988	1,415
By function		For the six months ended			For the six months ended
	June 30, 2020		June 30, 2019
By item	Cost of sales	Operating expenses	Total	Cost of sales	Operating expenses	Total
Employee benefits
Salary	109,457	77,170	186,627	106,382	58,762	165,144

2,177

7,541

4,642

9,965

2,017

722

7,173

3,410

1,796

56,373

888

9,350

4,132

7,541

6,438

66,338

2,905

6,926

3.293

1,585

55,390

801

2,157

5,404

4,554

9,732

1,932

828

9,083

4,121

5,404

6,139

65,122

2,733

Seasonality of operations $(b)$

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

(13) Other disclosures:

$(a)$ Information on significant transactions:

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 six months ended June 30, 2020:

• $(i)$ Loans to other parties: None.
• $(ii)$ Guarantees and endorsements for other parties: None.
• (iii) Securities held as of June 30, 2020 (excluding investment in subsidiaries, associates and joint ventures):

							Unit: thousand dollars
	Category and					Ending balance
Name of holder	name of security	Relationship with company	Account title	Shares/Units (thousands)	Carrying value	Percentage of ownership (%)	Fair value	Note
he Company	Beneficiary Certificate (UPAMC James		Current Financial asset at fair	2,760	46,407		46,407
	Bond Money Market Fund)		value through profit or loss
$\boldsymbol{\mathcal{H}}$	Beneficiary Certificate (Cathay Taiwan			4,093	51,223		51,223
	Money Market Fund)
$\boldsymbol{\eta}$	Beneficiary Certificate (Nomura Taiwan		$\boldsymbol{\eta}$	1,273	20,906		20,906
	Money Market)
$\boldsymbol{n}$	Beneficiary Certificate (Taishin 1699 Money		$\theta$	3,592	48,923		48,923
	Market Fund)
$\eta$	Beneficiary Certificate (Jih Sun Money		$\boldsymbol{\eta}$	3,022	45,076		45,076
	Market Fund)
$^{\prime\prime}$	Beneficiary Certificate (Yuanta USD Money			99	31,317		31,317
	Market Fund-USD)
$\boldsymbol{\prime\prime}$	Beneficiary Certificate (Nomura Global		$\boldsymbol{\eta}$	2,840	29,696		29,696
	Short Duration Bond Fund)
$^{\prime\prime}$	Beneficiary Certificate (CTBC Hua Win		n	4,064	45,071		45,071
	Money Market Fund)
$\mu$	Beneficiary Certificate (Fubon China Policy		$\overline{u}$	420	8,093		8,093
	Bank Bond ETF)
$^{\prime\prime}$	Beneficiary Certificate (Yuanta De-Li		$\boldsymbol{u}$	2,744	45,036		45,036
	Money Market Fund)
$^{\prime\prime}$	Beneficiary Certificate (Mega Diamond		$\mathcal{U}$	3,568	45,040		45,040
	Money Market Fund)
$\prime$	Stock (Fubon S&P Preferred Shares A)			793	51,941		51,941
$\boldsymbol{\eta}$	Stock (Fubon S&P Preferred Shares B)			36	2,333		2,333
$^{\prime\prime}$	Stock (TAISHIN FINANCIAL HOLDING			400	22,520		22,520
	CO., LTD. Preferred Stock E)
$\prime\prime$	Stock (Cathay Financial Holding Co., Ltd.		H	790	51,034		51,034
	Preferred Stock A)
$\boldsymbol{H}$	Stock (Cathay Financial Holding Co., Ltd. Preferred Stock B)		n	33	2,117		2,117
$\boldsymbol{\mathit{II}}$	Stock (Cathay Financial Holding Co., Ltd.		$\mu$	28
	Common Stock)				1,184		1,184
$\boldsymbol{H}$	Stock (Fubon S&P US Preferred Stock)		$^{\prime\prime}$	2,350	38,352		38,352
$\boldsymbol{\eta}$	Stock (CTBC Financial Holding Co., Ltd.			685	46,032		46,032
	Preferred Shares B)
$\boldsymbol{\mu}$	Stock (Shin Kong Financial Holding Co.,		$\theta$	642	28,762		28,762
	Ltd. Preferred Shares A)
$^{\prime\prime}$	Stock (Energenesis Biomedical Co., Ltd)		Financial assets at fair value	1,458	84,750	2.48 %	84,750
			through other comprehensive
			income
	Renale Community Dhammaragh			4.407	20.70

• (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.
• $(b)$ Information on investees:

The following is the information on investees for the six months ended June 30, 2020 (excluding information on investees in Mainland China):

Unit: thousand dollars/ thousand shares

			Main	Original investment amount!		Balance as of June 30, 2020			Net incomel	Share of
Name of	Name of		businesses and products	June 30, 2020 December 31.		Shares	Percentage of Carrying I		(losses)	profits/losses
investor	investee	Location			2019	l (thousands)	ownership	value	l of investee l	of investee	Note
SCI	Yushan	R.O.C.	The research and	351,761	351,761	35,190	100 %	349.507	(216)		$(216)$ Note 1
	PHARMTEC Pharmaceuticals		development, manufacture
H, INC.	Inc.		and sale of API

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

• $(c)$ Information on investment in mainland China: None.
• $(d)$ 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.