S.C.P.C — Audit Report / Information 2016

Nov 10, 2016

STANDARD CHEM. & PHARM. CO., LTD.

PARENT COMPANY ONLY FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2016 AND 2015

-----------------------------------------------------------------------------------------------------------------------------------For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Shareholders of STANDARD CHEM. & PHARM. CO., LTD.

Opinion

We have audited the accompanying parent company only balance sheets of STANDARD CHEM. & PHARM. CO., LTD. (the “Company”) as of December 31, 2016 and 2015, and the related parent company only statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, based on our audits and the reports of other independent accountants, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2016 and 2015, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Parent Company Only Financial Statements section of our report. We are independent of the Company in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

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

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Evaluation of inventories

Description

Please refer to Note 4(8) for accounting policies on the evaluation of inventories, Note 5(2) for the uncertainty of significant accounting estimations and assumptions relating to evaluation of inventories, and Note 6(5) for the details of allowance for inventory valuation loss. As of December 31, 2016, the carrying amount of inventories and allowance for inventory valuation loss are $467,138 thousand and $18,505 thousand, respectively.

The Company is primarily engaged in the manufacture and sales of human medicine. Due to the influence of market demand, expiration date of medicine, etc., there is a risk in market price decline and obsolescence of inventories. The Company evaluates inventories at the lower of cost and net realisable value. The net realisable values of the aged and obsolete inventories are evaluated based on the historical information of the selling rate and discount rate.

Given that the evaluation of inventories is subject to management’s judgement and the accounting estimations will have significant influence on the inventory values, we consider the evaluation of inventories a key audit matter.

How our audit addressed the matter

Our audit procedures performed for the above matter are summarised below:

1. Assessed the reasonableness of policies on allowance for inventory valuation loss, based on our understanding of the inventory classification and historical information of the selling rate and discount rate, etc.

2. Assessed the effectiveness of the management’s inventory control, based on our understanding of the operation of the warehouse management, inspected the annual inventory taking plan and performed our observation.

3. Tested whether the basis of inventory aging used in calculating the net realisable value of inventory is consistent with the Company’s policy.

4. Validated the net realisable value of inventories and the adequacy of allowance for inventory valuation loss.

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Existence of domestic sales revenue in human medicine

Description

Please refer to Note 4(25) for accounting policies on revenue recognition. Revenue is measured at the fair value of the consideration received or receivable taking into account value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Company’s activities. Revenue arising from the sales of goods is recognised when the Company has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity.

The Company is primarily engaged in the manufacturing and sales of human medicine, which amounted to $2,044,720 thousand for the year ended December 31, 2016. The Company’s sales is mainly domesticbased and its customers are numerous, including hospitals, clinics, pharmacies and drug administrations all over the country. Since the sales transactions are numerous and need longer period to be verified, we consider the existence of domestic sales revenue in human medicine a key audit matter.

How our audit addressed the matter

Our audit procedures performed for the above matter are summarised below:

1. Assessed the consistency and effectiveness of sales recognition, taking into consideration customer credit, sales supporting documentation, approval and cash collection procedures.

2. Assessed the reasonableness of sales price and nature, based on the basic information of the major customers, including the details of chairman and major shareholders, registered address, principal plan of business, capital and main business activities, etc.

3. Selected samples of sales transactions and checked against related supporting documentation, including customer orders, delivery orders and subsequent cash collection.

4. Tested the supporting documentation and verified the nature of the manual journal entries of sales revenues.

Other matter –Reference to the audits of other independent accountants

We did not audit the financial statements of certain investments accounted for under the equity method. Those investments amounted to $149,226 thousand and $180,586 thousand, constituting 2.90% and 3.69% of total assets as of December 31, 2016 and 2015, respectively, and the share of loss and other comprehensive income of associates accounted for under the equity method was ($31,089) thousand and ($34,096) thousand, constituting (7.73%) and (8.16%) of total comprehensive income for the years

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then ended, respectively. The financial statements of these investee companies were audited by other independent accountants whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included in the parent company only financial statements and information disclosed relative to these investments, is based solely on the reports of other independent accountants.

Responsibilities of management and those charged with governance for the parent company only financial statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, and for such internal control as management determines is necessary to enable the preparation of parent company only financial statements that are free from material misstatement, whether due to fraud or error.

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

Those charged with governance, including supervisors, are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the parent company only financial statements

Our objectives are to obtain reasonable assurance about whether the parent company only financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these parent company only financial statements.

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

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

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

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

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

5. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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

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

We also provide those charged with governance with a statement that we have complied with relevant

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ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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

Lin, Tzu-Shu

Independent Accountants

Liu, Tzu-Meng

PricewaterhouseCoopers, Taiwan Republic of China March 24, 2017

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The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

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STANDARD CHEM. & PHARM. CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Assets	Notes 6(1) 6(2) 6(3) and 7 6(4) and 7 7 5(2) and 6(5) 6(1) 5(2) and 6(2) 5(2) and 6(6) 6(7), 7 and 8 6(8) and 8 6(9) 6(10) 6(24) 6(8)	December 31, 2016 AMOUNT % $ 438,306 8 2,469 - 133,416 3 484,330 9 6,883 - 97,466 2 448,633 9 39,932 1 64,500 1 1,715,935 33 413,953 8 17,085 - 1,605,339 31 1,170,949 23 46,772 1 18,863 1 73,014 2 68,041 1 12,477 - 6,202 - 3,432,695 67 $ 5,148,630 100	December 31, 2015	December 31, 2015
		AMOUNT $ 438,306 2,469 133,416 484,330 6,883 97,466 448,633 39,932 64,500 1,715,935 413,953 17,085 1,605,339 1,170,949 46,772 18,863 73,014 68,041 12,477 6,202 3,432,695 $ 5,148,630	AMOUNT $ 302,033 10,200 146,359 477,513 5,252 98,695 410,466 60,752 - 1,511,270 362,159 17,085 1,559,839 1,235,025 46,885 21,246 94,283 13,868 16,642 9,962 3,376,994 $ 4,888,264	%
Current assets 1100 Cash and cash equivalents 1125 Available-for-sale financial assets - current 1150 Notes receivable, net 1170 Accounts receivable, net 1200 Other receivables 1210 Other receivables - related parties 130X Inventories 1410 Prepayments 1476 Other financial assets - current 11XX Total current assets Non-current assets 1523 Available-for-sale financial assets - non-current 1543 Financial assets carried at cost - non-current 1550 Investments accounted for under the equity method 1600 Property, plant and equipment 1760 Investment property, net 1780 Intangible assets 1840 Deferred income tax assets 1915 Prepayments for equipment 1920 Guarantee deposits paid 1990 Other non-current assets 15XX Total non-current assets 1XXX TOTALASSETS				6 - 3 10 - 2 9 1 -
				31
				8 - 32 25 1 1 2 - - -
				69
				100

(Continued)

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STANDARD CHEM. & PHARM. CO., LTD. PARENT COMPANY ONLY BALANCE SHEETS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

Liabilities and Equity	Notes 6(11) and 8 6(12) 7 7 6(24) 6(13) and 8 6(13) and 8 6(24) 5(2) and 6(14) 6(15) 6(16) 6(17)(18)(24) 6(2)(7)(14)(18) 7 and 9	December 31, 2016 AMOUNT % $ 370,000 7 200,000 4 142,389 3 30,021 1 72,101 1 189,601 4 12,966 - 49,507 1 - - 1,066,585 21 30,000 1 61,992 1 265,415 5 5,286 - 362,693 7 1,429,278 28 1,786,961 35 286,763 5 514,579 10 844,876 16 286,173 6 3,719,352 72 $ 5,148,630 100	December 31, 2015	December 31, 2015
		AMOUNT $ 370,000 200,000 142,389 30,021 72,101 189,601 12,966 49,507 - 1,066,585 30,000 61,992 265,415 5,286 362,693 1,429,278 1,786,961 286,763 514,579 844,876 286,173 3,719,352 $ 5,148,630	AMOUNT $ 80,000 100,000 137,483 32,683 62,635 202,405 50,610 63,111 100,000 828,927 - 62,607 446,814 5,293 514,714 1,343,641 1,786,961 335,467 479,790 691,487 250,918 3,544,623 $ 4,888,264	%
Current liabilities 2100 Short-term borrowings 2110 Short-term notes and bills payable 2150 Notes payable 2160 Notes payable - related parties 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2310 Receipts in advance 2320 Current portion of long-term borrowings 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2640 Net defined benefit liability - non-current 2645 Guarantee deposits received 25XX Total non-current liabilities 2XXX Total liabilities Equity Share capital 3110 Common stock 3200 Capital surplus Retained earnings 3310 Legal reserve 3350 Unappropriated retained earnings 3400 Other equity interest Significant contingent liabilities and unrecognised contract commitments 3XXX Total equity 3X2X TOTAL LIABILITIES AND EQUITY				2 2 3 1 1 4 1 1 2
				17
				- 1 9 -
				10
				27
				37 7 10 14 5
				73
				100

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

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STANDARD CHEM. & PHARM. CO., LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT EARNINGS PER SHARE DATA)

Items

YearendedDecember31 2016 2015 Notes AMOUNT % AMOUNT % 7 $ 2,357,528 100 $ 2,205,463 100 6(5)(10)(14)(22)(23), 7 and 9 ( 1,308,075) ( 56) ( 1,199,627) ( 54) 1,049,453 44 1,005,836 46 6(10)(14)(22)(23), 7 and 9 ( 397,896) ( 17) ( 351,920) ( 16) ( 161,460) ( 7) ( 160,918) ( 7) ( 182,911) ( 7) ( 174,730) ( 8) ( 742,267) ( 31) ( 687,568) ( 31) 307,186 13 318,268 15 6(9)(19) and 7 83,840 3 91,465 4 6(20) and 12 ( 7,729) - 17,093 1 6(8)(21) ( 2,688) - ( 2,338) - 6(7) 15,199 1 ( 14,075) ( 1) 88,622 4 92,145 4 395,808 17 410,413 19 6(24) ( 55,592) ( 3) ( 62,519) ( 3) $ 340,216 14 $ 347,894 16 6(14)(18) $ 32,483 2 $ 40,407 2 6(7)(18) ( 303) - ( 317) - 6(24) ( 5,522) - ( 6,869) - 6(7)(18) ( 16,190) ( 1) ( 19) - 6(2)(7)(18) 44,063 2 29,661 1 6(7)(18) 7,382 - 7,121 - $ 61,913 3 $ 69,984 3 $ 402,129 17 $ 417,878 19 6(25) $ 1.90 $ 1.95 $ 1.90 $ 1.95

4000 Operating revenue 5000 Operating costs 5900 Gross profit Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7070 Share of profit (loss) of subsidiaries, associates and joint ventures accounted for under the equity method, net 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Net income for the year Other comprehensive income Components of other comprehensive income that will not be reclassified to profit or loss 8311 Remeasurement of defined benifit plan 8330 Share of other comprehensive loss of associates and joint ventures accounted for under the equity method 8349 Income tax related to components of other comprehensive income Components of other comprehensive income that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations 8362 Unrealised gain on valuation of available-for-sale financial assets 8380 Share of other comprehensive income of associates and joint ventures accounted for under the equity method 8300 Total other comprehensive income for the year 8500 Total comprehensive income for the year Earnings per share (in dollars) 9750 Basic 9850 Diluted

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

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STANDARD CHEM. & PHARM. CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CHANGES IN EQUITY

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

For the year ended December 31, 2015 Balance at January 1, 2015 Cash dividends from capital surplus Appropriations of 2014 earnings (Note): Legal reserve Cash dividends Difference between proceeds frrom acquisition or disposal of subsidiaries and book value Net income for the year Other comprehensive income for the year Balance at December 31, 2015 For the year ended December 31, 2016 Balance at January 1, 2016 Cash dividends from capital surplus Appropriations of 2015 earnings (Note): Legal reserve Cash dividends Difference between proceeds form acquisition or disposal of subsidiaries and book value Net income for the year Other comprehensive income for the year Balance at December 31, 2016	Notes		Common stock			Capital Surplus			Retai	ned earnings	ned earnings
				Additional paid-in capital		Difference between proceeds from acquisition or disposal of subsidiaries and book value		Change in net equity of associates and joint ventures accounted for using the equity method	Legal reserve	Unappropriated retained earnings	Financial statements translation differences of foreign operations va
	6(16) 6(17) 6(7) 6(18) 6(16) 6(17) 6(7) 6(18)		$ 1,786,961 - - - - - - $ 1,786,961 $ 1,786,961 - - - - - - $ 1,786,961	$ 411,397 ( 89,348 ) - - - - - $ 322,049 $ 322,049 ( 89,348 ) - - - - - $ 232,701		$ 9,045 - - - 913 - - $ 9,958 $ 9,958 - - - 40,644 - - $ 50,602		$ 3,460 - - - - - - $ 3,460 $ 3,460 - - - - - - $ 3,460	$ 442,366 - 37,424 - - - - $479,790 $ 479,790 - 34,789 - - - - $ 514,579	$ 437,144 $ 15,647 - - ( 37,424 ) - ( 89,348 ) - - - 347,894 - 33,221 ( 19 ) $ 691,487 $ 15,628 $ 691,487 $ 15,628 - - ( 34,789 ) - ( 178,696 ) - - - 340,216 - 26,658 ( 16,190 ) $ 844,876 ($ 562 )

(Note) The employees' compensation were $3,292 and $4,233, and the directors' and supervisors' remuneration were $9,877 and $8,466 in 2014 and 2015, respectively, which had been deducted from net income for the years.

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

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STANDARD CHEM. & PHARM. CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) Provision for doubtful accounts Reversal of allowance for doubtful accounts (Reversal of allowance) provision for loss on inventory market price decline Share of (profit) loss of subsidiaries, associates and joint ventures accounted for under the equity method Depreciation Net loss on disposal of property, plant and equipment Amortisation Dividend income Interest income Interest expense Changes in operating assets and liabilities Changes in operating assets Notes receivable Accounts receivable Other receivables Other receivables - related parties Inventories Prepayments Changes in operating liabilities Notes payable Notes payable - related parties Accounts payable Other payables Receipts in advance Net defined benefit liability - non-current Cash inflow generated from operations Dividend received Interest received Interest paid Income tax paid Net cash flows from operating activities

Forthe years endedDecember31, Notes 2016 2015 $ 395,808 $ 410,413 6(3)(4) 7,220 - 6(4) - ( 105 ) 6(5) ( 2,696 ) 6,918 6(7) ( 15,199 ) 14,075 6(8)(9) 129,005 115,008 6(20) 460 534 6(10)(22) 4,013 3,924 6(19) ( 14,853 ) ( 10,539 ) 6(19) ( 3,012 ) ( 2,861 ) 6(21) 2,688 2,338 13,292 37,945 ( 14,386 ) ( 73,959 ) ( 1,631 ) ( 4,139 ) ( 511 ) 454 ( 35,471 ) 43,542 20,820 ( 11,230 ) 5,267 ( 31,010 ) ( 2,662 ) ( 3,797 ) 9,466 6,281 ( 764 ) 14,837 ( 13,604 ) 6,101 ( 148,916) 20,977 334,334 545,707 59,495 28,576 3,012 2,861 ( 2,626 ) ( 2,338 ) ( 78,104) ( 61,605) 316,111 513,201

(Continued)

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STANDARD CHEM. & PHARM. CO., LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)

CASH FLOWS FROM INVESTING ACTIVITIES Decrease (increase) in other receivables - related parties Increase in other financial assets - current Acquisition of available-for-sale financial assets - non- current Acquisition of investments accounted for under the equity method Proceeds from disposal of investments accounted for under the equity method Cash paid for acquisition of property, plant and equipment Interest paid for acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in prepayments for equipment Decrease (increase) in guarantee deposits paid Decrease (increase) in other non-current assets Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Increase in short-term notes and bills payable Increase in long-term borrowings Redemption of long-term borrowings (Decrease) increase in guarantee deposit received Cash dividends from capital surplus Payment of cash dividends Net cash flows from (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Forthe years endedDecember31, Notes 2016 2015 $ 1,740 ($ 3,540 ) ( 64,500 ) - - ( 35,910 ) 6(7) and 7 ( 53,669 ) ( 139,282 ) 7 10,259 - 6(26) ( 51,185 ) ( 49,225 ) 6(8)(21)(26) ( 267 ) ( 244 ) 305 35 6(10) ( 1,630 ) - ( 80,765 ) ( 26,833 ) 4,165 ( 8,637 ) 3,760 ( 3,214 ) ( 231,787 ) ( 266,850 ) 290,000 30,000 100,000 - 30,000 - ( 100,000 ) - ( 7 ) 4,236 6(16) ( 89,348 ) ( 89,348 ) 6(17) ( 178,696 ) ( 89,348 ) 51,949 ( 144,460 ) 136,273 101,891 6(1) 302,033 200,142 6(1) $ 438,306 $ 302,033

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

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STANDARD CHEM. & PHARM. CO., LTD. NOTES TO THE PARENT COMPANY ONLY FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

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

1. HISTORY AND ORGANIZATION

• (1) The Company was incorporated on June 30, 1967 under the provisions of the Company Act of the Republic of China (R.O.C.) and other regulations. The Company is primarily engaged in the manufacturing and sales of Chinese and western medicine, cosmetics, beverage, normal instruments and medical instruments. Furthermore, the Company is engaged in developing new cities and neighbourhoods, international trading and consulting.

• (2) The Company has been listed on the Taiwan Stock Exchange starting from December 1995.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE PARENT COMPANY ONLY

FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These parent company only financial statements were authorised for issuance by the Board of Directors on March 24, 2017.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”) None.

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

New standards, interpretations and amendments as endorsed by FSC effective from 2017 are as follows:

the Company New standards, interpretations and amendments as endorsed by FSC follows:	effective from 2017 are
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board ("IASB")
Recoverable amount disclosures for non-financial assets (amendments to IAS 36) Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) IFRIC 21, ‘Levies’ Defined benefit plans: employee contributions (amendments to IAS 19R) Improvements to IFRSs 2010-2012 Improvements to IFRSs 2011-2013 Investment entities: applying the consolidation exception (amendments to IFRS 10, IFRS 12 and IAS 28) Accounting for acquisition of interests in joint operations (amendments to IFRS 11)	January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016 January 1, 2016

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New Standards,Interpretations and Amendments	Effective date by IASB
IFRS 14, ‘Regulatory deferral accounts’ Disclosure initiative (amendments to IAS 1) Clarification of acceptable methods of depreciation and amortisation (amendments to IAS 16 and IAS 38) Agriculture: bearer plants (amendments to IAS 16 and IAS 41) Equity method in separate financial statements (amendments to IAS 27) Improvements to IFRSs 2012-2014	January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016

Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment. Amendments to IAS 1, ‘Disclosure initiative’

This amendment clarifies the presentation of materiality, aggregation and subtotals, the framework of financial report, and the guide for accounting disclosure.

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

New standards, interpretations and amendments issued by IASB but not yet included in the 2017 version of IFRSs as endorsed by the FSC are as follows:

version of IFRSs as endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by IASB
Disclosure initiative (amendments to IAS 7) Recognition of deferred tax assets for unrealised losses (amendments to IAS 12) Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Classification and measurement of share-based payment transactions (amendments to IFRS 2) Applying IFRS 9, ‘Financial instruments’ with IFRS 4 ‘Insurance contracts’ (amendments to IFRS 4) IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Clarifications to IFRS 15, ‘Revenue from contracts with customers’ (amendments to IFRS 15) Transfers of investment property (amendments to IAS 40) IFRIC 22, ‘Foreign currency transactions and advance consideration’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS 28, ‘Investments in associates and joint ventures’ IFRS 16, ‘Leases’ Sale or contribution of assets between an investor and its associate or joint venture (amendments to IFRS 10 and IAS 28)	January 1, 2017 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2019 To be determined by IASB

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Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment. The quantitative impact will be disclosed when the assessment is complete.

• A. Amendments to IAS 7, ‘Disclosure initiative’

• This amendment requires that an entity shall provide more disclosures related to changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes.

• B. IFRS 9, ‘Financial instruments’

• (a) Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

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

• C. IFRS 15, ‘Revenue from contracts with customers’

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

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

• Step 1: Identify contracts with customer.

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

• Step 3: Determine the transaction price.

• Step 4: Allocate the transaction price.

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

• Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature,

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• amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

• D. IFRS 16, ‘Leases’

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

• The parent company only financial statements of the Company have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

• (2) Basis of preparation

• A. Except for the following items, the parent company only financial statements have been prepared under the historical cost convention:

  • (a) Available-for-sale financial assets measured at fair value.

  • (b) Defined benefit liabilities recognised based on the net amount of pension fund assets less present value of defined benefit obligation.

• B. The preparation of financial statements in conformity with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5. Critical accounting judgements, estimates and key sources of assumption uncertainty.

• (3) Foreign currency translation

• Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The parent company only financial statements are presented in New Taiwan dollars, which is the Company’s functional and presentation currency.

• A. Foreign currency transactions and balances

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

~16~

recognised in profit or loss in the period in which they arise.

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

• (c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, nonmonetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• (d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within other gains and losses.

• B. Translation of foreign operations

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

  • i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;

  • ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

  • iii. All resulting exchange differences are recognised in other comprehensive income.

• (b) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Company retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

(4) Classification of current and non-current items

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

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

• (b) Assets held mainly for trading purposes;

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

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

~17~

date.

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

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

  • (b) Liabilities arising mainly from trading activities;

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

  • (d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

• (5) Cash equivalents

• A. Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

• B. Time deposits and repurchase bonds that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

• (6) Available-for-sale financial assets

• A. Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories.

• B. On a regular way purchase or sale basis, available-for-sale financial assets are recognised and derecognised using trade date accounting.

• C. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognised in other comprehensive income. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets carried at cost’.

(7) Loans and receivables

• Accounts receivable are receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(8) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted-average method. The cost of finished goods and work in process comprises raw materials, direct labour, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the

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lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses. If the cost exceeds net realisable value, valuation loss is accrued and recognised in operating costs. If the net realisable value reverses, valuation is eliminated within credit balance and is recognised as deduction of operating costs.

(9) Impairment of financial assets

• A. The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

• B. The criteria that the Company uses to determine whether there is objective evidence of an impairment loss is as follows:

• (a) Significant financial difficulty of the issuer or debtor;

• (b) The disappearance of an active market for that financial asset because of financial difficulties;

• (c) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;

• (d) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;

• (e) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.

• C. When the Company assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

• (a) Available-for-sale financial assets

  • The amount of the impairment loss is measured as the difference between the asset’s acquisition cost (less any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in profit or loss, and is reclassified from ‘other comprehensive income’ to ‘profit or loss’. If, in a subsequent period, the fair value of an investment in a debt instrument increases, and the increase can be related objectively to an event occurring after the impairment loss was recognised, then such impairment loss is reversed through profit or loss. Impairment loss of an investment in an equity instrument recognised in profit or loss shall not be reversed through profit or loss. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset

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through the use of an impairment allowance account.

• (b) Financial assets carried at cost

• The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset through the use of an impairment allowance account.

• (c) Financial assets carried at amortised cost The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.

(10) Derecognition of financial assets

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

(11) Investments accounted for under the equity method / subsidiaries and associates

• A. Subsidiaries are all entities controlled by the Company. The Company controls an entity when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

• B. Unrealised profit (loss) occurred from the transactions between the Company and subsidiaries have been offset. The accounting policies of the subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Company.

• C. The Company’s share of its subsidiaries’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Company’s share of losses in a subsidiary equals or exceeds its interest in the subsidiary, the Company continues to recognise losses proportionate to its ownership.

• D. If changes in the Company’s shares in subsidiaries do not result in loss in control (transactions with non-controlling interest), transactions shall be considered as equity transactions, which are transactions between owners. Difference of adjustment of non-controlling interest and fair value of consideration paid or received is recognised in equity.

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

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

• G.When changes in an associate’s equity are not recognised in profit or loss or other comprehensive income of the associate and such changes do not affect the Company’s ownership percentage of the associate, the Company recognises the Company’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

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

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

• J. Pursuant to the “Regulations Governing the Preparation of Financial Reports by Securities Issuers,” profit (loss) of the current period and other comprehensive income in the parent company only financial statements shall equal to the amount attributable to owners of the parent in the financial statements prepared with basis for consolidation. Owners’ equity in the parent company only financial statements shall equal to equity attributable to owners of the parent in the financial statements prepared with basis for consolidation.

• (12) Operating leases (lessor)

• Lease income from an operating lease (net of any incentives given to the lessee) is recognised in profit or loss on a straight-line basis over the lease term.

• (13) Property, plant and equipment

• A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.

• B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as

~21~

appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change. The estimated useful lives of property, plant and equipment are as follows:

are as follows:
Assets	Useful Life
Buildings	2 ～	60 years
Machinery and equipment	2 ～	15 years
Utility equipment	2 ～	15 years
Other equipment	2 ～	15 years

(14) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 60 years.

(15) Intangible assets

• A. Patents

Patents is stated at cost and amortised on a straight-line basis over its estimated useful life of 5 to 10 years.

• B. Computer software

Computer software is stated at cost and amortised on a straight-line basis over its estimated useful life of 5 to 10 years.

(16) Operating leases (lessee)

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(17) Impairment of non-financial assets

• A. The Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is

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the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

• B. The recoverable amounts of goodwill has not yet been available for use are evaluated periodically. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Impairment loss of goodwill previously recognised in profit or loss shall not be reversed in the following years.

• C. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units, that is/are expected to benefit from the synergies of the business combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

• (18) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.

• (19) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(20) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability specified in the contract is discharged or cancelled or expires.

(21) Employee benefits

• A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plan

For defined contribution plan, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent

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of a cash refund or a reduction in the future payments.

  - (b) Defined benefit plan

     - i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plan is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.

     - ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.

     - iii. Past service costs are recognised immediately in profit or loss.

• C. Employees’ compensation and directors’ and supervisors’ remuneration

  • Employees’ remuneration and directors’ and supervisors’ remuneration are recognised as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the amounts as resolved by the stockholders at the stockholders’meeting and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is distributed by shares, the Company calculates the number of shares based on the closing price at the previous day of the board meeting resolution.

• (22) Income tax

• A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.

• C. Deferred tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the parent company only balance sheet. However, the deferred tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or

~24~

loss. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

• D. Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred tax assets are reassessed.

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously

• F. A deferred tax asset shall be recognised for the carryforward of unused tax credits resulting from research and development expenditures, etc., to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

• (23) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

(24) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are approved by the Company’s shareholders. Cash dividends are recorded as liabilities; stock dividends are recorded as stock dividends to be distributed and are reclassified to ordinary shares on the effective date of new shares issuance.

(25) Revenue recognition

• A. Sales of goods

The Company manufactures and sells human pharmaceuticals, etc. Revenue is measured at the fair value of the consideration received or receivable taking into account business tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Company’s activities. Revenue arising from the sales of goods is recognised when the Company has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control

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over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

• B. Rendering of services

• The Company provides processing services. Revenue from delivering services is recognised under the percentage-of-completion method when the outcome of services provided can be estimated reliably.

5. CRITICALACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

The preparation of these parent company only financial statements requires management to make critical judgements in applying the Company’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

• (1) Critical judgements in applying the Company’s accounting policies

• A. Financial assets—impairment of equity investments

  • The Company follows the guidance of IAS 39 to determine whether a financial asset—equity investment is impaired. This determination requires significant judgement. In making this judgement, the Company evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

  • If the decline of the fair value of an individual equity investment below cost was considered significant or prolonged, the Company would suffer a loss in its financial statements, being the transfer of the accumulated fair value adjustments recognised in other comprehensive income on the impaired available-for-sale financial assets to profit or loss or being the recognition of the impairment loss on the impaired financial assets carried at cost in profit or loss.

• B. Investment property

  • The Company uses a portion of the property for its own use and another portion to earn rentals or for capital appreciation. When these portions cannot be sold separately and cannot be leased out separately under a finance lease, the property is classified as investment property only if the Company has certain property leased.

(2) Critical accounting estimates and assumptions

• A. Evaluation of inventories

• (a) As inventories are stated at the lower of cost and net realisable value, the Company must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the influence of market demand, expiration date of medicine, etc., the Company evaluates the amounts of normal inventory consumption, obsolete inventories or

~26~

inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

• (b) As of December 31, 2016, the carrying amount of inventories was $448,633.

• B. Financial assets—fair value measurement of unlisted stocks without active market

• (a) The fair value of unlisted stocks held by the Company that are not traded in an active market is determined considering those companies’ recent fund raising activities and technical development status, fair value assessment of other companies of the same type, market conditions and other economic indicators existing on balance sheet date. Any changes in these judgements and estimates will impact the fair value measurement of these unlisted stocks. Please refer to Note 12(3) for the fair value estimation for the financial instruments fair value information.

• (b) As of December 31, 2016, the carrying amount of unlisted stocks without active market was $146,875.

• C. Calculation of net defined benefit liabilities – non-current

• (a) When calculating the present value of defined pension obligations, the Company must apply judgements and estimates to determine the actuarial assumptions on balance sheet date, including discount rates and future salary growth rate. Any changes in these assumptions could significantly impact the carrying amount of defined pension obligations.

• (b) As of December 31, 2016, the carrying amount of net defined benefit liabilities was $265,415.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
Cash: Revolving funds and petty cash Checking accounts and demand deposits Cash equivalents: Time deposits Repurchase bonds	December31,2016 4,100 $ 224,125 228,225 193,867 16,214 210,081 438,306 $	December31,2015
		4,108 $ 253,997
		258,105
		43,928 -
		43,928
		302,033 $

• A. The Company associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.

• B. As of December 31, 2016 and 2015, the carrying amount of more than 3-month time deposits

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－ (shown as “Other financial assets – current”) was $64,500 and $ , respectively.

• C. As of December 31, 2016 and 2015, the Company has no cash and cash equivalents pledged to others.

(2) Available-for-sale financial assets

others. Available-for-sale financial assets
	December	31,2016	December	31,2015
Current items:
Unlisted stocks	$	12,000	$	12,000
Valuation adjustment of available-for-sale financial
assets	(	9,531)	(	1,800)
	$	2,469	$	10,200
Non-current items:
Listed stocks	$	89,569	$	89,569
Unlisted stocks		48,526		48,526
		138,095		138,095
Valuation adjustment of available-for-sale financial
assets		275,858		224,064
	$	413,953	$	362,159

• A. The Company recognised $44,063 and $29,661 in other comprehensive income for fair value change for the years ended December 31, 2016 and 2015, respectively.

• B. As of December 31, 2016 and 2015, the Company has no available-for-sale financial assets pledged to others.

(3) Notes receivable, net

to others. Notes receivable, net
	December	31,2016	December	31,2015
Notes receivable	$	133,546	$	147,878
Less: allowance for bad debts	(	130)	(	1,519)
	$	133,416	$	146,359

• A. The Company has no significant past due but not impaired notes receivable as of December 31, 2016 and 2015.

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B. Movement analysis of financial assets that were impaired is as follows:

For the years ended December 31,

2016 Group provision Beginning balance 1,519 $ Reversal of impairment 349) ( Write-offs during the year 1,040) ( Ending balance 130 $	2015 Group provision 1,519 $ - - 1,519 $

• C. As of December 31, 2016 and 2015, the notes receivable that were neither past due nor impaired have good credit quality.

• D. As of December 31, 2016 and 2015, the Company has no notes receivable pledged to others.

• (4) Accounts receivable, net

Accounts receivable, net
	December	31,2016	December	31,2015
Accounts receivable	$	501,293	$	486,907
Less: allowance for bad debts	(	16,963)	(	9,394)
	$	484,330	$	477,513

• A. The Company has no significant past due but not impaired accounts receivable as of December 31, 2016 and 2015.

• B. Movement analysis of financial assets that were impaired is as follows:

Beginning balance Provision of impairment Reversal of impairment Write-offs during the year Ending balance	2016 2015 Group provision Group provision 9,394 $ 9,699 $ 7,569 - - 105) ( - 200) ( 16,963 $ 9,394 $ For theyears ended December31,

• C. As of December 31, 2016 and 2015, the accounts receivable that were neither past due nor impaired have good credit quality.

• D. As of December 31, 2016 and 2015, the Company has no accounts receivable pledged to others.

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(5) Inventories

Inventories
Merchandise Raw materials Supplies Work in process Finished goods Merchandise Raw materials Supplies Work in process Finished goods		December31,2016	Bookvalue 34,700 $ 141,116 30,035 52,567 190,215 448,633 $
	Allowance for Cost valuation loss 35,155 $ 455) ($ 145,590 4,474) ( 30,584 549) ( 59,976 7,409) ( 195,833 5,618) ( 467,138 $ 18,505) ($ December31,2015
	Cost 39,274 $ 99,959 28,845 67,072 196,517 431,667 $	Allowance for valuation loss 393) ($ 5,930) ( 2,426) ( 9,522) ( 2,930) ( 21,201) ($	Bookvalue 38,881 $ 94,029 26,419 57,550 193,587 410,466 $

The cost of inventories recognised as expenses for the year:

For the years ended December 31,

		2016			2015
Cost of goods sold	$	1,295,267	$		1,165,751
Loss on scrapped inventory		15,885			22,498
Reversal of allowance for loss on inventory
market price decline (Note)	(	2,696)			-
Provision for loss on inventory market price decline		-			6,918
Gain on physical inventory	(	381)	(		275)
Under-applied fixed manufacturing overhead		-			4,735
Total operating costs	$	1,308,075		$	1,199,627

(Note) The Company reversed a previous inventory write-down which was accounted for as reduction of operating costs as these items were subsequently sold.

(6) Financial assets carried at cost － non-current

Financial assets carried at cost－non-current
Unlisted stocks	December31,2016 17,085 $	December31,2015
		17,085 $

A. According to the Company’s intention, its investment in other company stocks should be classified as ‘available-for-sale financial assets’. However, as the other company stocks are not traded in active market, and sufficient industry information of companies similar to the other company or

~30~

the other company’s financial information cannot be obtained, the fair value of the investment in other company stocks cannot be measured reliably. Accordingly, the Company classified those stocks as ‘financial assets carried at cost’.

• B. As of December 31, 2016 and 2015, the Company has no financial assets carried at cost pledged to others.

• (7) Investments accounted for under the equity method

• A. Movements of investments accounted for under the equity method:

			For theyears ended	For theyears ended	December31,	December31,
			2016			2015
At January 1	$		1,559,839	$		1,444,971
Acquisition of investments accounted for under
the equity method			53,669			139,282
Disposal of investments accounted for under the
equity method	(		10,259)			-
Share of profit or loss of investments accounted
for under the equity method			15,199	(		14,075)
Earnings distribution of investments accounted
for under the equity method	(		44,642)	(		18,037)
Capital surplus－Difference between
the price for acquisition or disposal of
subsidiaries and carrying amount			40,644			913
Other equity interest－Financial statements
translation differences of foreign operations	(		16,190)	(		19)
Other equity interest－Unrealised gain or loss
on valuation of available-for-sale financial assets			7,382			7,121
Other equity interest－Actuarial losses of defined
benefit plan	(		303)	(		317)
At December 31	$		1,605,339		$	1,559,839
	December31,2016				December31,2015
Subsidiaries		$	1,456,113		$	1,379,253
Associates			149,226			180,586
		$	1,605,339		$	1,559,839

~31~

B. Details of investments accounted for under the equity method are as follows:

Standard Pharmaceutical Co., Ltd. Chia Scheng Investment Co., Ltd. STANDARD CHEM. & PHARM. PHILIPPINES, INC. Inforight Technology Co., Ltd. Souriree Biotech & Pharm. Co., Ltd. Multipower Enterprise Corp. Advpharma Inc. Syngen Biotech Co., Ltd. WE CAN MEDICINES CO., LTD.	December31,2016 187,384 $ 159,780 5,031 4,288 27,386 492,676 294,623 284,945 149,226 1,605,339 $	December31,2015
		219,517 $ 158,942 6,037 4,366 18,427 480,534 293,495 197,935 180,586
		1,559,839 $

• C. Information on the Company's subsidiaries is provided in Note 4(3) of the Company's 2016 consolidated financial statements.

• D. The subsidiary, Souriree Biotech & Pharm. Co., Ltd., conducted a capital reduction amounting to $79,366 to cover accumulated deficit based on the board meeting resolution on September 13, 2016. The amendment to registration was completed on November 16, 2016.

• E. The subsidiary, Chia Scheng Investment Co., Ltd., conducted a capital reduction amounting to $81,870 to cover accumulated deficit based on the board meeting resolution on November 20, 2015. The amendment to registration was completed on December 14, 2015.

• F. Associate:

• (a)The basic information of the associate that is material to the Company is as follows:

Company name WE CAN MEDICINES CO., LTD.	Principal place ofbusiness Taiwan	Shareholdingratio	Shareholdingratio
		December31,
		2016 33.10%	2015
			33.10%

• (b) The summarised financial information of the associate that is material to the Company is as follows:

• i. Balance sheet

lows: Balance sheet
	December	31,2016	December	31,2015
Current assets	$	633,884	$	641,755
Non-current assets		199,691		263,384
Current liabilities	(	351,937)	(	344,317)
Non-current liabilities	(	30,983)	(	15,423)
Total net assets	$	450,655	$	545,399
Share in associate's net assets	$	149,167	$	180,527
Carrying amount of the associate	$	149,226	$	180,586

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ii. Statement of comprehensive income

Statement of comprehensive income
		Forthe years endedDecember31,
		2016		2015
Revenue	$	2,305,504	$	2,400,337
Net loss for the year	($	93,926)	($	103,008)
Total comprehensive loss for the year	($	94,743)	($	103,182)

F. As of December 31, 2016 and 2015, the Company pledged subsidiaries’stocks as collateral. Details are provided in Note 8 for the pledged assets.

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(8) Property, plant and equipment

AtJanuary1,2016 Cost Accumulated depreciation 2016 At January 1 Additions－cost Transferred－cost (Note) Transferred－accumulated depreciation Transferred upon completion Depreciation Disposals－cost Disposals－accumulated depreciation At December 31 At December31,2016 Cost Accumulated depreciation

Construction in progress and Utility Other equipment to Land Buildings Machinery equipment equipment be inspected Total 314,060 $ 548,601 $ 542,033 $ 131,877 $ 785,318 $ 680 $ 2,322,569 $ - 177,045) ( 366,996) ( 71,942) ( 471,561) ( - 1,087,544) ( 314,060 $ 371,556 $ 175,037 $ 59,935 $ 313,757 $ 680 $ 1,235,025 $ 314,060 $ 371,556 $ 175,037 $ 59,935 $ 313,757 $ 680 $ 1,235,025 $ - 4,358 4,934 290 29,144 263 38,989 - 138 8,720 - 17,734 - 26,592 - 780 - - 780) ( - - - 320 - - 623 943) ( - - 15,746) ( 35,919) ( 6,728) ( 70,499) ( - 128,892) ( - - - - 9,001) ( - 9,001) ( - - - - 8,236 - 8,236 314,060 $ 361,406 $ 152,772 $ 53,497 $ 289,214 $ - $ 1,170,949 $ 314,060 $ 553,417 $ 555,687 $ 132,167 $ 823,818 $ - $ 2,379,149 $ - 192,011) ( 402,915) ( 78,670) ( 534,604) ( - 1,208,200) ( 314,060 $ 361,406 $ 152,772 $ 53,497 $ 289,214 $ - $ 1,170,949 $

~34~

AtJanuary1,2015 Cost Accumulated depreciation 2015 At January 1 Additions－cost Transferred－cost (Note) Transferred－accumulated depreciation Transferred upon completion Depreciation Disposals－cost Disposals－accumulated depreciation At December 31 At December31,2015 Cost Accumulated depreciation

Construction in progress and Utility Other equipment to Land Buildings Machinery equipment equipment be inspected Total 298,547 $ 541,531 $ 513,628 $ 130,707 $ 783,433 $ - $ 2,267,846 $ - 162,235) ( 361,686) ( 65,567) ( 430,949) ( - 1,020,437) ( 298,547 $ 379,296 $ 151,942 $ 65,140 $ 352,484 $ - $ 1,247,409 $ 298,547 $ 379,296 $ 151,942 $ 65,140 $ 352,484 $ - $ 1,247,409 $ 11,515 6,158 16,222 1,247 18,582 4,248 57,972 3,998 2,561) ( 41,067 - 2,605 - 45,109 - - 4,054) ( - 4,054 - - - 3,568 - - - 3,568) ( - - 14,903) ( 30,044) ( 6,452) ( 63,497) ( - 114,896) ( - 95) ( 28,884) ( 77) ( 19,302) ( - 48,358) ( - 93 28,788 77 18,831 - 47,789 314,060 $ 371,556 $ 175,037 $ 59,935 $ 313,757 $ 680 $ 1,235,025 $ 314,060 $ 548,601 $ 542,033 $ 131,877 $ 785,318 $ 680 $ 2,322,569 $ - 177,045) ( 366,996) ( 71,942) ( 471,561) ( - 1,087,544) ( 314,060 $ 371,556 $ 175,037 $ 59,935 $ 313,757 $ 680 $ 1,235,025 $

(Note) Transfer from 'prepayments for equipment'.

~35~

• A. Amount of borrowing costs capitalised as part of property, plant and equipment and the interest rates for such capitalisation for the years ended December 31, 2016 and 2015 are as follows:

For the years ended December 31,

	For theyears ended	December31,
Capitalised interest payments Interest rate	2016 267 $ 0.79%	2015
		244 $
		1.62%

• B. Information about the property, plant and equipment that were pledged to others as collateral as of December 31, 2016 and 2015 is provided in Note 8 for the pledged assets.

(9) Investment property, net

AtJanuary1,2016 Cost Accumulated depreciation 2016 At January 1 Depreciation At December 31 At December31,2016 Cost Accumulated depreciation AtJanuary1,2015 Cost Accumulated depreciation 2015 At January 1 Depreciation At December 31 At December31,2015 Cost Accumulated depreciation

Land Buildings Total 43,295 $ 6,776 $ 50,071 $ - 3,186) ( 3,186) ( 43,295 $ 3,590 $ 46,885 $ 43,295 $ 3,590 $ 46,885 $ - 113) ( 113) ( 43,295 $ 3,477 $ 46,772 $ 43,295 $ 6,776 $ 50,071 $ - 3,299) ( 3,299) ( 43,295 $ 3,477 $ 46,772 $ Land Buildings Total 43,295 $ 6,776 $ 50,071 $ - 3,074) ( 3,074) ( 43,295 $ 3,702 $ 46,997 $ 43,295 $ 3,702 $ 46,997 $ - 112) ( 112) ( 43,295 $ 3,590 $ 46,885 $ 43,295 $ 6,776 $ 50,071 $ - 3,186) ( 3,186) ( 43,295 $ 3,590 $ 46,885 $

~36~

• A. Rental income from investment property (shown as “Other income”) and direct operating expenses arising from investment property are as follows:

Rental income from investment property Direct operating expenses of investment properties with rental income Direct operating expenses of investment properties without rental income	For theyears ended	December31,
	2016 4,727 $ 113 $ - $	2015
		4,424 $
		112 $
		- $

• B. The fair value of the investment property held by the Company as at December 31, 2016 and 2015 was $67,685 and $66,024, respectively, which was valued in consideration of the current land value, nearby negotiated price from real estate company and government assessed value, etc.

• C. No borrowing costs were capitalised as part of investment property for the years ended December 31, 2016 and 2015.

• D. As of December 31, 2016 and 2015, the Company has no investment property pledged to others.

• (10) Intangible assets

Intangible assets
		Patents		Software		Total
AtJanuary1,2016
Cost	$	11,602	$	30,345	$	41,947
Accumulated amortisation	(	2,891)	(	17,810)	(	20,701)
	$	8,711	$	12,535	$	21,246
2016
At January 1	$	8,711	$	12,535	$	21,246
Additions - acquired separately		-		1,630		1,630
Amortisation	(	1,454)	(	2,559)	(	4,013)
At December 31	$	7,257	$	11,606	$	18,863
At December31,2016
Cost	$	11,602	$	31,975	$	43,577
Accumulated amortisation	(	4,345)	(	20,369)	(	24,714)
	$	7,257	$	11,606	$	18,863

~37~

		Patents		Software		Total
AtJanuary1,2015
Cost	$	11,602	$	30,393	$	41,995
Accumulated amortisation	(	1,437)	(	15,388)	(	16,825)
	$	10,165	$	15,005	$	25,170
2015
At January 1	$	10,165	$	15,005	$	25,170
Amortisation	(	1,454)	(	2,470)	(	3,924)
Disposals - cost		-	(	48)	(	48)
Disposals - accumulated amortisation		-		48		48
At December 31	$	8,711	$	12,535	$	21,246
At December31,2015
Cost	$	11,602	$	30,345	$	41,947
Accumulated amortisation	(	2,891)	(	17,810)	(	20,701)
	$	8,711	$	12,535	$	21,246

A. No borrowing costs were capitalised as part of intangible assets for the years ended December 31, 2016 and 2015.

B. Details of amortisation on intangible assets are as follows:

Operating costs Selling expenses General and administrative expenses Research and development expenses	For theyears ended	December31,
	2016 722 $ 892 2,209 190 4,013 $	2015
		715 $ 891 2,191 127
		3,924 $

C. As of December 31, 2016 and 2015, the Company has no intangible assets pledged to others. (11) Short-term borrowings

Bank secured borrowings Unsecured bank borrowings Bank secured borrowings Unsecured bank borrowings	December31,2016 270,000 $ 100,000 370,000 $ December31,2015 50,000 $ 30,000 80,000 $	Interest rate range Collateral 0.99%～1.08% Land and buildings 0.99%～1.02% None Interest rate range Collateral 1.08% Land and buildings 1.08% None

~38~

(12) Short-term notes and bills payable

Short-term notes and bills payable
Commercial papers payable Commercial papers payable	December31,2016 200,000 $ December31,2015 100,000 $	Interest rate range 0.50%～0.66% Interest rate range 0.712%～0.87%	Collateral
			None Collateral
			None

The above commercial papers payable are issued and secured by International Bills Finance Corporation and other financial institutions.

- (13) Long term borrowings

Type of borrowings Maturitydate Interest rate Unsecured bank borrowings 2019.10.17 1.17% Type of borrowings Maturitydate Interest rate Unsecured bank borrowings 2016.09.15 0.952% Less: current portion of long-term borrowings	Collateral None Collateral None	December 31,2016 30,000 $ December31,2015 100,000 $ 100,000) ( - $

(14) Pensions

• A. (a) The Company has a defined benefit pension plan in accordance with the Labour Standards Law, covering all regular employees’ service years prior to the enforcement of the Labour Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Law. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 5% of the employees’monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labour pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by next year.

• (b) The amounts recognised in the balance sheet are as follows:

	December	31,2016	December	31,2015
Present value of defined benefit obligations	($	446,950)	($	496,033)
Fair value of plan assets		181,535		49,219
Net defined benefit liability–non current	($	265,415)	($	446,814)

~39~

(c) Movements in defined benefit liabilities are as follows:

Present value of

	Present value of	Present value of
	defined benefit			Fair value of		Net defined
		obligation		plan assets	benefit liability
2016
At January 1	($	496,033)	$	49,219	($	446,814)
Current service cost	(	5,752)		-	(	5,752)
Interest (expense) income	(	6,141)		620	(	5,521)
	(	507,926)		49,839	(	458,087)
Remeasurements:
Return on plan assets		-		41		41
Change in demographic
assumptions	(	32)		-	(	32)
Change in financial assumptions		26,969		-		26,969
Experience adjustments		5,505		-		5,505
		32,442		41		32,483
Pension fund contribution		-		156,201		156,201
Paid pension		28,534	(	24,546)		3,988
At December 31	($	446,950)	$	181,535	($	265,415)
	Present value of
	defined benefit			Fair value of		Net defined
		obligation		plan assets	benefit liability
2015
At January 1	($	522,211)	$	55,967	($	466,244)
Current service cost	(	7,262)		-	(	7,262)
Past service cost	(	14,365)		-	(	14,365)
Interest (expense) income	(	10,365)		1,150	(	9,215)
	(	554,203)		57,117	(	497,086)
Remeasurements:
Return on plan assets		-		375		375
Change in demographic
assumptions	(	2,444)		-	(	2,444)
Change in financial assumptions	(	14,802)		-	(	14,802)
Experience adjustments		57,278		-		57,278
		40,032		375		40,407
Pension fund contribution		-		9,865		9,865
Paid pension		18,138	(	18,138)		-
At December 31	($	496,033)	$	49,219	($	446,814)

~40~

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labour Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitisation products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorised by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The fair value of plan assets as of December 31, 2016 and 2015 is given in the Annual Labour Retirement Fund Utilisation Report announced by the government.

• (e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	For theyears ended December31,	For theyears ended December31,
	2016 1.25% 2.00%	2015
		1.25%
		2.50%

Assumptions regarding future mortality rate are set based on the 5th Taiwan Standard Ordinary Experience Mortality Table.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

December31,2016 Effect on present value of defined benefit obligation December31,2015 Effect on present value of defined benefit obligation	Increase0.25% Decrease0.25% Increase0.25% Decrease0.25% 12,848) ($ 13,380 $ 13,246 $ 12,786) ($ 15,008) ($ 15,654 $ 15,420 $ 14,864) ($ Discount rate Future salaryincreases

The sensitivity analysis above was arrived at based on one assumption which changed while the other conditions remain unchanged. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

~41~

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

• (f) Expected contributions to the defined benefit pension plan of the Company for the year ended December 31, 2017 will be $9,998.

• (g) As of December 31, 2016, the weighted average duration of that retirement plan is 11 years. The analysis of timing of the future pension payment was as follows:

The analysis of timing of the future pension payment was as follows:
Within 1 year 2-5 years Over 5 years	8,075 $ 69,895 468,306
	546,276 $

• B. Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labour Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’monthly salaries and wages to the employees’individual pension accounts at the Bureau of Labour Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. The pension costs under the defined contribution pension plan of the Company for the years ended December 31, 2016 and 2015 were $19,280 and $18,270, respectively.

(15) Share capital – common stock

• A. Movements in the number of the Company’s ordinary shares outstanding are as follows (in thousands of shares):

thousands of shares):
Beginning and ending balance	For theyears ended December31,
	2016 178,696	2015
		178,696

• B. As of December 31, 2016, the Company’s authorised capital was $2,000,000, and the paid-in capital was $1,786,961, consisting of 178,696 thousand shares of ordinary share, with a par value of $10 (in dollars) per share. Shares can be issued several times. All proceeds from shares issued have been collected.

(16) Capital surplus

• A. Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Law requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

• B. On June 17, 2016 and June 16, 2015, the shareholders have resolved to distribute cash of $89,348

• ($ 0.5 (in dollars) per share) using capital surplus for both years.

~42~

• C. On March 24, 2017, the Board of Directors have proposed to distribute cash of $89,348 ($ 0.5 (in dollars) per share) using capital surplus.

• (17) Retained earnings

• A. In accordance with the Company Act, the Company should use profit after tax to appropriate 10% as legal reserve until the legal reserve equals to the paid-in capital. Within the limit, except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the distribution of the reserve is limited to the portion in excess of 25% of the Company’s paid-in capital.

• B. Under the Company’s Articles of Incorporation, as the Company operates in a volatile business environment and is in the stable growth stage, the Board of Directors takes into consideration the Company’s future capital needs, long-term financial planning and shareholders’ needs for cash inflow. The Company’s earnings, if any, are distributed in the following order:

  • (a) Pay all taxes.

  • (b) Cover accumulated deficit.

  • (c) Appropriate 10% as legal reserve.

  • (d) Appropriate or reverse special reserve in accordance with regulations.

  • (e) At least 10% of the remainder and previous unappropriated retained earnings as stockholders’ bonus and cash dividends shall account for at least 20% of total dividends distributed. If the cash dividend is below $0.5 (in dollars) per share, the Company can distribute stock dividends instead of cash dividends upon resolution of the shareholders.

• C. In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

• D. As resolved by the shareholders on June 17, 2016 and June 16, 2015, the Company recognised cash dividends distributed to owners amounting to $178,696 ($1 (in dollars) per share) and $89,348 ($0.5 (in dollars) per share) for the appropriation of 2015 and 2014 earnings, respectively. On March 24, 2017, the Board of Directors proposed for the distribution of dividends from 2016 earnings of $178,696 ($1 (in dollars) per share).

~43~

(18) Other equity

For the year ended December 31, 2016

Other income At January 1 Currency translation differences - the Group Valuation adjustment - the Group At December 31 At January 1 Currency translation differences - the Group Valuation adjustment - the Group At December 31 Dividend income Interest income Rental income Research income Other income	Currency translation		Unrealised gain on valuation of available-for-sale financial assets	Total

(19) Other income

(20) Other gains and losses

Other gains and losses
		For theyears ended December			31,
		2016		2015
Net currency exchange (loss) gain	($	6,140)	$	18,104
Net loss on disposal of property, plant and
equipment	(	460)	(		534)
Other losses	(	1,129)	(		477)
	($	7,729)	$	17,093

~44~

(21) Finance costs

For the years ended December 31,

		2016				2015
Interest expense
Bank borrowings	$		2,955		$		2,582
Less: capitalisation of qualifying assets	(		267)	(			244)
	$		2,688	$			2,338

~45~

(22) Expenses by nature

For the years ended December 31,

			For theyears ended December 31,	ed December 31,
Employee benefit expenses Employee benefit expenses Depreciation on property, plant and equipment Amortisation on intangible assets Wages and salaries Labour and health insurance expenses Pension costs Other personnel expenses		2016	Recognised in Total operatingcosts 594,093 $ 251,079 $ 128,892 92,155 4,013 715 726,998 $ 343,949 $ For theyears ended December 31,		2015
	Recognised in operatingcosts 257,775 $ 103,647 722 362,144 $	Recognised in operatingexpenses 336,318 $ 25,245 3,291 364,854 $			Recognised in operatingexpenses 349,829 $ 22,741 3,209 375,779 $	Total
						600,908 $ 114,896 3,924
						719,728 $
		2016	Total 499,437 $ 41,528 30,553 22,575 594,093 $		2015
	Recognised in operatingcosts 211,766 $ 19,137 15,086 11,786 257,775 $	Recognised in operatingexpenses 287,671 $ 22,391 15,467 10,789 336,318 $		Recognised in operatingcosts 198,367 $ 19,490 21,952 11,270 251,079 $	Recognised in operatingexpenses 289,573 $ 23,510 27,160 9,586 349,829 $	Total
						487,940 $ 43,000 49,112 20,856
						600,908 $

(23) Employee benefit expenses

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• A. As of December 31, 2016 and 2015, the Company had 780 and 755 employees, respectively.

• B. According to the Articles of Incorporation of the Company, a ratio of profit of the current year distributable (pre-tax profit before deducting employees’ compensation and directors’ and supervisors’remuneration), after covering accumulated losses, shall be distributed as employees' compensation and directors’ and supervisors’ remuneration. The ratio shall be 1%~10% for employees’ compensation and shall not be higher than 3% for directors’ and supervisors’ remuneration. Employees’ compensation will be distributed in the form of shares or cash. Qualification requirements of employees, including the employees of subsidiaries of the company meeting certain specific requirements, are entitled to receive aforementioned stock or cash. The Company may, by a resolution adopted by a majority vote at a meeting of board of directors attended by two-thirds of the total number of directors, have the profit distributable as employees’ compensation distributed in the form of shares or in cash; and in addition thereto a report of such distribution shall be submitted to the shareholders during their meeting.

• C. For the years ended December 31, 2016 and 2015, employees’ compensation was accrued at $4,060 and $4,291, respectively; while directors’ and supervisors’ remuneration was accrued at $8,121 and $8,581, respectively. The aforementioned amounts were recognised in salary expenses that were estimated and accrued based on the distributable net profit of current year calculated by the percentage prescribed under the Company’s Articles of Incorporation. The employees’ compensation and directors’ and supervisors’ remuneration for 2015 as resolved by the Board of Directors was $12,699, and the employees’ compensation will be distributed in the form of cash. The difference between the aforementioned amount and the amount of $12,872 recognised in the 2015 financial statements by ($173), mainly caused by estimation differences, had been adjusted in the profit or loss for 2016. Information about employees’compensation and directors’ and supervisors’ remuneration of the Company as resolved by the Board of Directors and shareholders will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

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(24) Income tax

A. Income tax expense:

(a) Components of income tax expense:

e tax ome tax expense: Components of income tax expense:
Current tax: Current tax on profits for the year Additional 10% tax on undistributed earnings Under (over) provision of prior year's income tax Total current tax Deferred tax: Origination and reversal of temporary differences Total income tax expense	For theyears ended December31,
	2016 2015 23,672 $ 54,317 $ 16,763 23,987 25 1,175) ( 40,460 77,129 15,132 14,610) ( 55,592 $ 62,519 $	2015

• (b) The income tax relating to components of other comprehensive income is as follows:

For the years ended December 31,

Remeasurement of defined benefit obligation	2016 5,522 $	2015
		6,869 $

• B. Reconciliation between income tax expense and accounting profit:

For the years ended December 31,

		2016		2015
Tax calculated based on profit before tax and
statutory tax rate	$	67,287	$	69,770
Effect of amount not allowed to recognise under
regulations	(	27,479)	(	21,960)
Effect from tax-exempt income	(	1,004)	(	8,103)
Additional 10% tax on undistributed earnings		16,763		23,987
Under (over) provision of prior year's income tax		25	(	1,175)
Income tax expense	$	55,592	$	62,519

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C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:

For the year ended December 31, 2016

								Recognised	Recognised
									in other
				Recognised in			comprehensive
		January1		profit or loss					income	December31
Deferred tax assets
Temporary differences:
Bad debts	$		3,137	$		937	$		-	$	4,074
Unrealised loss on inventories
from market value decline			3,604	(		458)			-		3,146
Unrealised exchange loss			-			943			-		943
Investment loss			12,235			8,380			-		20,615
Unrealised sales discount			1,589	(		436)			-		1,153
Unused compensated absences			3,702			203			-		3,905
Pensions			70,016	(		25,316)	(		5,522)		39,178
	$		94,283	($		15,747)	($		5,522)	$	73,014
Deferred tax liabilities
Temporary differences:
Provision for land value
increment tax	($		61,992)	$		-	$		-	($	61,992)
Unrealised exchange gain	(		615)			615			-		-
	($		62,607)		$	615		$	-	($	61,992)
	$		31,676	($		15,132)	($		5,522)	$	11,022

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For the year ended December 31, 2015

							Recognised	Recognised
								in other
				Recognised in		comprehensive
		January1		profit or loss				income	December31
Deferred tax assets
Temporary differences:
Bad debts	$		3,137	$	-	$		-	$	3,137
Unrealised loss on inventories
from market value decline			2,428		1,176			-		3,604
Investment loss			4,209		8,026			-		12,235
Unrealised sales discount			1,460		129			-		1,589
Unused compensated absences			3,361		341			-		3,702
Pensions			73,319		3,566	(		6,869)		70,016
	$		87,914	$	13,238	($		6,869)	$	94,283
Deferred tax liabilities
Temporary differences:
Provision for land value
increment tax	($		61,992)	$	-	$		-	($	61,992)
Unrealised exchange gain	(		1,987)		1,372			-	(	615)
	($		63,979)	$	1,372		$	-	($	62,607)
	$		23,935	$	14,610	($		6,869)	$	31,676

• D. The Company qualifies for “Regulations for Encouraging Manufacturing Enterprises and Technical Service Enterprises in the Newly Emerging, Important and Strategic Industries” and is entitled to the income tax exemption for 5 consecutive years starting from 2015.

• E. The Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority. The Company does not have any administrative remedy as of March 24, 2017.

• F. Unappropriated retained earnings:

Unappropriated retained earnings:
Earnings generated in and before 1997 Earnings generated in and after 1998	December31,2016 5,177 $ 839,699 844,876 $	December31,2015
		5,177 $ 686,310
		691,487 $

• G. As of December 31, 2016 and 2015, the balance of the imputation tax credit account was $129,107 and $83,371, respectively. As dividends were approved at the shareholders’ meeting on June 17, 2016 and June 16, 2015 and with the dividend distribution date set on August 8, 2016 and August 8, 2015 by the Board of Directors, the creditable tax rates for the unappropriated retained earnings of 2015 and 2014 are 21.5% and 17.41%, respectively. The creditable tax rate is estimated to be 16.92% for 2016. The creditable tax rate will be based on the actual imputation tax credit account on the distribution date for the earnings of 2016; thus, the credit account may

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be subject to appropriate adjustments according to tax regulations.

(25) Earnings per share

Earnings per share
Basic earnings per share Profit attributable to ordinary shareholders of the Company Diluted earnings per share Profit attributable to ordinary shareholders of the Company Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the Company plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary shareholders of the Company Diluted earnings per share Profit attributable to ordinary shareholders of the Company Assumed conversion of all dilutive potential ordinary shares Employees’ compensation Profit attributable to ordinary shareholders of the Company plus assumed conversion of all dilutive potential ordinary shares	Weighted average number of ordinary shares outstanding Earnings per Amount after tax (shares in thousands) share(in dollars) 340,216 $ 178,696 1.90 $ 340,216 $ 178,696 - 209 340,216 $ 178,905 1.90 $ For theyear ended December31,2016 Weighted average number of ordinary shares outstanding Earnings per Amount after tax (shares in thousands) share(in dollars) 347,894 $ 178,696 1.95 $ 347,894 $ 178,696 - 151 347,894 $ 178,847 1.95 $ For theyear ended December 31,2015
	Amount after tax 340,216 $ 340,216 $ - 340,216 $ Amount after tax 347,894 $ 347,894 $ - 347,894 $ For the
		Amount after tax 347,894 $ 347,894 $ - 347,894 $

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(26) Supplemental cash flow information

A. Investing activities with partial cash payments:

For the years ended December 31,

		2016			2015
Purchases of property, plant and equipment	$	38,989	$		57,972
Add: Opening balance of notes payable		863			3,846
Opening balance of payable on equipment
(shown as “Other payables”)		15,414			3,928
Less: Ending balance of notes payable	(	502)	(		863)
Ending balance of payable on equipment
(shown as “Other payables”)	(	3,312)	(		15,414)
Capitalised interest	(	267)	(		244)
Cash paid for acquisition of property, plant
and equipment	$	51,185		$	49,225

B. Operating and investing activities with no cash flow effects:

(1) Elimination of allowance for bad debts (2) Prepayments for equipment transferred to property, plant and equipment	For theyears ended December31,	For theyears ended December31,
	2016 1,040 $ 26,592 $	2015
		200 $ 45,109 $

7. RELATED PARTY TRANSACTIONS

(1) Significant related party transactions

A. Sales of goods

For the years ended December 31,

Subsidiaries Associates Other related parties	2016 5,056 $ 7,416 21,420 33,892 $	2015
		4,897 $ 11,361 8,264 24,522 $

Prices of goods sold to related parties are determined each time when delivering goods. The payment term of the subsidiaries is to obtain cheques due in 3~4 months. For other related parties, terms of transactions are similar with those to third parties, which is cash payment in 2 months after billing, or to obtain cheques with a maturity of 6 months upon billing.

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B. Purchases of goods

For the years ended December 31,

Subsidiaries Otherrelated parties	2016 93,903 $ 56,757 150,660 $	2015
		77,344 $ 54,552
		131,896 $

Goods are purchased based on the price lists in force and terms that would be available to regular suppliers. Payment terms are cheques with a maturity of 3~4 months after inspection has passed. C. Other expenses

C.	Other expenses
D. E.	Rental income Other income Advertisement expenses: Subsidiaries Associates Other related parties Research and development expenses: Subsidiaries Associates Other related parties Miscellaneous expenses: Subsidiaries Leased assets Rent collection Subsidiaries Land, Buildings Monthly Subsidiaries Other related parties	For theyears ended December31,
		2016 2015 295 $ 22,455 $ 465 4,125 11,893 546 12,653 $ 27,126 $ 2,539 $ 3,112 $ 92 - 1,368 333 3,999 $ 3,445 $ 285 $ 1,866 $ For theyears ended December31,	2015
			22,455 $ 4,125 546
			27,126 $
			3,112 $ - 333
			3,445 $
			1,866 $
		2016 2015 4,515 $ 4,422 $ Forthe years endedDecember31,	2015
			4,422 $
		2016 4,474 $ 661 5,135 $	2015
			2,428 $ 578
			3,006 $

F. Equity transactions

• (a) The Company participated in the cash capital increase of the subsidiary, Standard Pharmaceutical Co., Ltd., by investing $31,790 in January 2015.

• (b) The Company participated in the cash capital increase of the subsidiary, Syngen Biotech Co.,

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Ltd., by investing $24,387 in June 2015.

• (c) The Company participated in the cash capital increase of the subsidiary, Chia Scheng Investment Co., Ltd., by investing $83,000 in December 2015.

• (d) The Company participated in cash capital increase of the subsidiary, Standard Pharmaceutical Co., Ltd., by investing $33,085 in January 2016.

• (e) The Company participated in cash capital increase of the subsidiary, Syngen Biotech Co., Ltd., by investing $10,584 in September 2016.

• (f) In September 2016, the subsidiary, Syngen Biotech Co., Ltd., filed for an initial public offering with Taipei Exchange. As part of the public trading process, the Company partially disposed its shares through public market for a total cash consideration of $10,259.

• (g) The Company participated in cash capital increase of the subsidiary, Souriree Biotech & Pharm. Co., Ltd., by investing $10,000 in October 2016.

G. Ending balance of goods sold

Ending balance of goods sold
Receivables from related parties: Subsidiaries Associates Other related parties	December31,2016 1,058 $ 652 18,370 20,080 $	December31,2015
		1,923 $ 721 4,187
		6,831 $

The receivables from related parties arise mainly from sale transactions. The receivables are unsecured in nature and bear no interest. There are no provisions held against receivables from related parties.

－ H. Ending balance of payment on behalf of others (Shown as ‘Other receivables related parties’)

I.	Ending balance of goods purchased Receivables from related parties: Subsidiaries Payables to related parties: Subsidiaries Other related parties	December31,2016 716 $ December31,2016 22,494 $ 18,682 41,176 $	December31,2015 205 $ December31,2015 22,586 $ 18,642 41,228 $

The payables to related parties arise mainly from purchase transactions. The payables bear no interest.

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－ J. Financing (Shown as ‘Other receivables related parties’)

For the year ended December 31, 2016

Standard Pharmaceutical Co., Ltd.	Date of maximum balance 2016.12.31	Maximum balance 96,750 $	Ending balance 96,750 $	Annual rate 2.5%	Interest income
					2,417 $

For the year ended December 31, 2015

Standard Pharmaceutical Co., Ltd.	Date of maximum balance 2015.12.31	Maximum balance 98,490 $	Ending balance 98,490 $	Annual rate 2.5%	Interest income
					2,374 $

K. Endorsements and guarantees provided to related parties

Endorser/ guarantor	Endorsee/guarantee Syngen Biotech Co., Ltd. Standard Pharmaceutical Co., Ltd.	December31,2016 - $ 96,750 96,750 $	December31,2015 200,000 $ 98,490 298,490 $	Purpose
Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd.				Secured borrowings Secured borrowings

As of December 31, 2016 and 2015, the actual endorsement/guarantee amount provided by the Company for its subsidiaries – Syngen Biotech Co., Ltd. and Standard Pharmaceutical Co., Ltd. both amounted to $ － .

(2) Key management compensation

For the years ended December 31,

Salaries and other short-term employee benefits

2016 22,586 $	2015
	23,898 $

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8. PLEDGED ASSETS

The Company’s assets pledged as collateral are as follows:

Pledged asset Investment accounted for under the equity method (Note 1) Land (Note 2) Buildings－net (Note 2)	December31,2016 December31,2015 133,416 $ 132,905 $ 288,489 288,489 120,726 126,392 542,631 $ 547,786 $ Bookvalue	Purposes
	December31,2016 133,416 $ 288,489 120,726 542,631 $
		Short-term borrowings Short-term and long-term borrowings Short-term and long-term borrowings

(Note 1) As of December 31, 2016 and 2015, the Company provided 22,980 thousand shares in its subsidiary – Advpharma Inc. as collateral for short-term borrowings for both years with the carrying value of $133,416 and $132,905, respectively.

(Note 2) Shown as ‘Property, plant and equipment’.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

As of December 31, 2016 and 2015, except for the information provided in Note 7 for the related party transactions, the Company’s significant contingent liabilities and unrecognised contract commitments are as follows:

• (1) The balances for contracts that the Company entered into for the purchase of property, plant and equipment, but not yet due were $33,184 and $21,415, respectively.

• (2) The Company has signed a transfer of technical skill contract ‘Antiviral drug acyclovir and New transdermal absorption external gel preparation’ for 7 years with National Science Council of R.O.C. and professor You-Pu Hu in June 1998. The Company should complete production of all products using the technical skill and consulting provided by professor You-Pu Hu within 4 years after the effectiveness of the contract. Except for paying a fixed royalty to National Science Council of R.O.C. and professor You-Pu Hu, the Company should pay 5% of the total sales from the product using the technical skill as royalty for technical skill transfer. The Company started to sell the product from April 2000. As of December 31, 2016 and 2015, the royalty for technical skill transfer paid was $4,245 and $5,994, respectively.

• SIGNIFICANT DISASTER LOSS

• None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

• None.

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12. OTHERS

(1) Capital management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

(2) Financial instruments

• A. For the financial instruments fair value information

The carrying amounts of the Company’s financial instruments not measured at fair value (including cash and cash equivalents, notes receivable, accounts receivable, other receivables (including related parties), guarantee deposits paid, short-term borrowings, short-term notes and bills payable, notes payable (including related parties), accounts payable, other payables, longterm borrowings (including current portion) and guarantee deposits received) are approximate to their fair values. The fair value information of financial instruments measured at fair value is provided in Note 12(3) for the fair value estimation for the financial instruments fair value information.

• B. Financial risk management policies

• (a) The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company’s financial position and financial performance.

• (b) Risk management is carried out by a central treasury department (Company treasury) under policies approved by the board of directors. Company treasury identifies, evaluates and hedges financial risks in close cooperation with the Company’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments.

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

Foreign exchange risk

• i. The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD, JPY and PHP. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

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• ii. The Company has certain sales and purchases denominated in USD and other foreign currencies. Changes in market exchange rates would affect the fair value. However, the payment and collection periods of asset and liability positions in foreign currencies are close, market risk can be offset. The Company does not expect significant interest rate risk.

• iii.The Company has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. However, the net investments of foreign operations are strategic investments, thus the Company does not hedge the investments.

• iv. The Company’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD: NTD JPY: NTD Investments accounted for under the equity method USD: NTD PHP: NTD Financial liabilities Monetary items USD: NTD		December31,2016	December31,2016
		Foreign currency amount (In thousands) 19,609 $ 84,997 5,810 7,527 198	Exchange rate 32.25 0.2756 32.25 0.6648 32.25	Bookvalue
				632,399 $ 23,425 187,373 5,004 6,397

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(Foreign currency: functional currency) Financial assets Monetary items USD: NTD Investments accounted for under the equity method USD: NTD PHP: NTD Financial liabilities Monetary items USD: NTD		December31,2015	December31,2015
		Foreign currency amount (In thousands) 10,597 $ 6,687 8,417 155	Exchange rate 32.83 32.83 0.7172 32.83	Book value
				347,900 $ 219,534 6,037 5,089

With regard to sensitivity analysis of foreign currency exchange rate risk, if the exchange rates of NTD to all foreign currencies had appreciated/depreciated by 1%, with all other factors remaining constant, the Company’s net income for the years ended December 31, 2016 and 2015 would have increased/decreased by $6,926 and $5,537, respectively.

• v. Total exchange (loss) gain, including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Company for the years ended December 31, 2016 and 2015 amounted to ($6,140) and $18,104, respectively.

Price risk

• i. The Company is exposed to equity securities price risk because of investments held by the Company and classified on the parent company only balance sheet as available-for-sale. To manage its price risk arising from investments in equity securities, the Company has set various stop-loss points to ensure not to be exposed to significant risks. Accordingly, no material market risk was expected.

• ii. The Company’s investments in equity securities comprise domestic listed and unlisted stocks. The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 1% with all other variables held constant, other components of equity, as of December 31, 2016 and 2015, would have increased/decreased by $1,501 for both years, as a result of gains/losses on equity securities classified as available-for-sale.

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Interest rate risk

• i. The Company’s interest rate risk arises from long-term and short-term borrowings. Borrowings issued at variable rates expose the Company to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. During the years ended December 31, 2016 and 2015, the Company’s borrowings at variable rate were denominated in the NTD.

• ii.With regard to sensitivity analysis of interest rate risk, if interest rates on borrowings at that date had been 1% higher/lower with all other variables held constant, post-tax profit for the years ended December 31, 2016 and 2015 would have been $22 and $26 lower/higher, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.

• (b) Credit risk

• i. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Company’s credit policy, each local entity in the Company is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board of directors. The utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents and outstanding receivables.

• ii. For the years ended December 31, 2016 and 2015, no credit limits were exceeded during the reporting periods, and management does not expect any significant losses from non-performance by these counterparties.

• iii. The Company provides endorsements and guarantees based on the Company’s policies and procedures on endorsements and guarantees. The Company only provides endorsement or guarantee for subsidiaries that the Company directly holds more than 50% ownership, or for entities that the Company holds more than 50% ownership, either directly or indirectly, as well as the power to govern the policies. No collateral is requested for the endorsements and guarantees as the Company can control the credit risk of the subsidiary. The maximum credit risk is the guaranteed amount.

• iv. The credit quality information of financial assets that are neither past due nor impaired is provided in the statement for each type of financial assets in Note 6.

• v. The ageing analysis of financial assets that were past due but not impaired is provided in the statement for each type of financial assets in Note 6.

• vi. The individual analysis of financial assets that had been impaired is provided in the statement for each type of financial assets in Note 6.

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(c) Liquidity risk

• i. Cash flow forecasting is performed in the operating entities of the Company and aggregated by Company treasury. Company treasury monitors rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants on any of its borrowing facilities.

• ii. Surplus cash held by the Company over and above balance required for working capital management are transferred to the Company treasury. Company treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient headroom as determined by the abovementioned forecasts.

• iii. The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date:

maturity date:
December31,2016 Short-term borrowings Short-term notes and bills payable Notes payable Notes payable-related parties Accounts payable Other payables Long-term borrowings (including current portion) Guarantee deposits received	Within 1year 370,321 $ 200,000 142,389 30,021 72,101 189,601 - -	Between 1 and 2years - $ - - - - - - 5,286	Between 2 and5 years - $ - - - - - 30,279 -	Over 5 years
				- $ - - - - - - -

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December31,2015 Short-term borrowings Short-term notes and bills payable Notes payable Notes payable-related parties Accounts payable Other payables Long-term borrowings (including current portion) Guarantee deposits received	Within 1year 80,073 $ 100,000 137,483 32,683 62,635 202,405 100,771 -	Between 1 and 2years - $ - - - - - - 5,293	Between 2 and5 years - $ - - - - - - -	Over 5 years
				- $ - - - - - - -

• iv. For non-derivative financial liabilities, the Company’s non-derivative financial liabilities that do not expect the timing of occurrence of the cash flows estimated through the maturity date analysis will be significantly earlier, nor expect the actual cash flow amount will be significantly different.

• (3) Fair value estimation for the financial instruments fair value information

• A. Details of the fair value of the Company’s financial assets and financial liabilities not measured at fair value are provided in Note 12(2) for the financial instruments.

• B. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:

  • Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed stocks, emerging stocks with active market and beneficiary certificates is included.

  • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly.

  • Level 3:Unobservable inputs for the asset or liability. The Company’s investment in equity instruments without active market is included.

• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities at December 31, 2016 and 2015 is as follows:

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December31,2016 Recurring fair value measurements Available-for-sale financial assets Equity securities December31,2015 Recurring fair value measurements Available-for-sale financial assets Equity securities	Level 1 286,632 $ Level 1 264,251 $	Level 2 - $ Level 2 - $	Level3 129,790 $ Level3 108,108 $	Total
				416,422 $
				Total
				372,359 $

• D.The methods and assumptions the Company used to measure fair value are as follows:

• (a) The instruments that the Company used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Listed stocks Unlisted stocks Market quoted price Closing price Latest closing price on the balance sheet date

• (b) Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the parent company only balance sheet date.

• (c) The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Company’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs, for example, model risk or liquidity risk and etc. In accordance with the Company’s management policies and relevant control procedures relating to the valuation models used for fair value measurement, management believes adjustment to valuation is necessary in order to reasonably represent the fair value of financial and non-financial instruments at the parent company only balance sheet. The inputs and pricing information used during valuation are carefully assessed and adjusted based on current market conditions.

• E. For the years ended December 31, 2016 and 2015, there was no transfer between Level 1 and Level 2.

• F. The following table presents the changes in Level 3 instruments in 2016 and 2015:

For the years ended December 31,

At January 1 Recognised in other comprehensive income (Note) At December 31	2016 2015 108,108 $ 122,568 $ 21,682 14,460) ( 129,790 $ 108,108 $

(Note) Shown as “Unrealised gain or loss on valuation of available-for-sale financial assets”.

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• G. For the years ended December 31, 2016 and 2015, there was no transfer from or to Level 3.

• H. Financial segment is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently calibrating valuation model, performing back-testing, updating inputs used to the valuation model and making any other necessary adjustments to the fair value.

• I. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Non-derivative equity instrument： Unlisted stocks Non-derivative equity instrument： Unlisted stocks	Fair value at Valuation Significant December31,2016 technique unobservableinput 52,077 $ Market comparable companies Discount for lack of marketability 77,713 Discounted cash flow Discount rate Fair value at Valuation Significant December31,2015 technique unobservable input 24,461 $ Market comparable companies Discount for lack of marketability 83,647 Discounted cash flow Discount rate	Range Relationship of (weighted average) inputs tofairvalue 20% The higher the discount for lack of marketability, the lower the fair value 1.97% The higher the discount rate, the lower the fair value Range Relationship of (weighted average) inputs to fairvalue 20% The higher the discount for lack of marketability, the lower the fair value 1.79% The higher the discount rate, the lower the fair value	Relationship of inputs tofairvalue

• J. The Company has carefully assessed the valuation models and assumptions used to measure fair value; therefore, the fair value measurement is reasonable. However, use of different valuation models or assumptions may result in different measurement. The following is the effect of profit or loss or of other comprehensive income from financial assets categorised within Level 3 if the inputs used to valuation models have changed:

~64~

December 31, 2016

			December 31,2016
Financial assets Equity instrument Financial assets Equity instrument	Input Discount for lack of marketability Discount rate Input Discount for lack of marketability Discount rate	Change ± 10% ± 10% Change ± 10% ± 10%	Favourable Unfavourable Favourable Unfavourable change change change change - $ - $ 1,302 $ 1,302) ($ - - 244 244) ( - $ - $ 1,546 $ 1,546) ($ Recognised inprofit or loss Recognised in other comprehensive income Favourable Unfavourable Favourable Unfavourable change change change change - $ - $ 655 $ 655) ($ - - 190 190) ( - $ - $ 845 $ 845) ($ December 31,2015 Recognised inprofit or loss Recognised in other comprehensive income
			Favourable change - $ - - $
			Favourable Unfavourable change change - $ - $ - - - $ - $ Recognised inprofit or loss
			Favourable change - $ - - $

13. SUPPLEMENTARY DISCLOSURES

• (Only 2016 information is disclosed in accordance with the current regulatory requirements.)

• (1) Significant transactions information

• A. Loans to others: Please refer to table 1.

• B. Provision of endorsements and guarantees to others: Please refer to table 2.

• C. Holding of marketable securities at the end of the year (not including subsidiaries, associates and joint ventures): Please refer to table 3.

• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: None.

• E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.

• F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: None.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: None.

• I. Trading in derivative instruments undertaken during the reporting periods: None.

• J. Significant inter-company transactions during the reporting periods: Please refer to table 4.

• (2) Information on investees

• Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 5.

~65~

• (3) Information on investments in Mainland China

• A. Basic information: Please refer to table 6.

• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: None.

14. SEGMENT INFORMATION

Not applicable.

~66~

For the year ended December 31, 2016

Table 1

Expressed in thousands of NTD

STANDARD CHEM & PHARM. CO., LTD.

Loans to others

Number	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance	Ending balance (Note 2)	Actual amount drawn down	Interest rate	Nature of loan (Note 1)	Amount of transactions with the borrower	Reason for short-term financing	Allowance for doubtful accounts	Collateral	Collateral	Limit on loans granted to a singleparty	Ceiling on total loans granted	Note
													Item	Value
0 1 2	Standard Chem & Pharm. Co., Ltd. Standard Pharmaceutical Co., Ltd. Multipower Enterprise Corp.	Standard Pharmaceutical Co., Ltd. Jiangsu Standard Biotech Pharmaceutical Souriree Biotech & Pharm. Co., Ltd.	Other receivables Yes Other receivables Yes Other receivables Yes		96,750 $ 96,750 9,000	96,750 $ 96,750 -	96,750 $ 96,750 -	2.5% 2.5% -	2 2 2	- $ - -	Operating capital - $ Operating capital - Operating capital -		－ － －	- $ - -	185,968 $ 374,769 10,935	371,935 $ 374,769 43,740	(Notes 3) (Notes 3) (Notes 3)

Note 1: The code represents the nature of financing activities as follows:

• (1) Trading partner.

• (2) Short-term financing.

Note 2: The ending balance is the credit limit approved by the Board of Directors. Note 3: Calculation of limit on loans granted to a single party and ceiling on total loans granted:

• (1) Limit on loans granted to a single party:

• (a) For the companies having business relationship with the Company, limit on loans granted to a single party is the higher value of purchasing and selling during current or latest year on the year of financing.

(b) For short-term financing, limit on loans granted to a single party is 5% of the Company’s net assets based on the latest audited consolidated financial statements.

• (c) Limit on loans granted by Standard Pharmaceutical Co., Ltd. to a single party is 200% of the creditor’s net assets based on the latest audited or reviewed consolidated financial statements.

(d) Limit on loans granted by Multipower Enterprise Corp. to a single party is 5% of the creditor’s paid-in capital.

• (2) Ceiling on total loans granted to a single party:

• (a) Ceiling on total loans granted by the Company to single party is 10% of the Company’s net assets.

• (b) Ceiling on total loans granted by Standard Pharmaceutical Co., Ltd. to single party is 200% of the creditor’s net assets.

• (c) Ceiling on total loans granted by Multipower Enterprise Corp. to a single party is 20% of the creditor’s paid-in capital.

(3) For short-term financing, ceiling on total loans granted to all direct or indirect wholly-owned domestic and foreign subsidiaries of the Company is not limited to 40% of the creditors’ net assets. Note 4: Foreign currencies were translated into New Taiwan Dollars with exchange rate as of December 31, 2016 as follows: USD: NTD 1:32.25.

Table 1 page 1

STANDARD CHEM & PHARM. CO., LTD. Provision of endorsements and guarantees to others

Table 2

Expressed in thousands of NTD

For the year ended December 31, 2016

Number	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party (Note 1)	Maximum outstanding endorsement/ guarantee amount	Outstanding endorsement/ guarantee amount	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/guarantor company	Ceiling on total amount of endorsements/ guarantees provided (Note 1)	Provision of endorsements/ guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Note
		Companyname	Relationship with the endorser/guarantor
0 0	Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd.	Standard Pharmaceutical. Co., Ltd. Syngen Biotech Co,. Ltd.	Subsidiary Subsidiary	743,870 $ 743,870	96,750 $ 200,000	96,750 $ -	- $ -	- $ -	3% -	1,859,676 $ 1,859,676	Y Y	N N	N N	- -

Note 1: Under “Procedures for Provision of Endorsements and Guarantees”, the total endorsement and guarantee provided shall not exceed 50% of the Company’s net assets; the amount provided for each counterparty shall not exceed 20% of the Company's net assets.

Note 2: Foreign currencies were translated into New Taiwan Dollars with exchange rate as of December 31, 2016 as follows: USD: NTD 1:32.25.

Table 2 page 1

Table 3

Expressed in thousands of NTD

STANDARD CHEM & PHARM. CO., LTD. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2016

Securities held by Marketable securities Relationship with the securities issuer General ledger account	Number of shares	As	of December 31,2016	Note
		Book value	Ownership (%) Fair value
Standard Chem & Pharm. Co., Ltd Bonds with repurchase agreement: Mega Bills Finance Co., Ltd － 1 Stocks (investment certificate): Original BioMedicals Co., Ltd. － 3 SUN YOU BIOTECH PHARM CO., LTD. － 4 HER-SING CO., LTD. The Company is HER-SING Co., Ltd.'s corporate director 4 SYN-TECH CHEM & PHARM CO., LTD. The Company is SYN-TECH CHEM & PHARM Co., Ltd.'s corporate director 4 Green Management International Co., Ltd. － 5 NCKU Venture Capital Co., Ltd. The Company is NCKU Venture Capital Co., Ltd.'s corporate director. 5 NTU Innovation & Incubation Co., Ltd. － 5 JENKEN BIOSCIENCES, INC. － 5 Chia Scheng Investment Co., Ltd. Beneficiary certificates: Taishin Ta-Chong Money Market Fund － 2 Taishin 1699 Money Market Fund － 2 Stocks: SUN YOU BIOTECH PHARM CO., LTD. － 4 Stason Pharmaceuticals, Inc. － 5 Inforight Technology Co., Ltd. Beneficiary certificates: Capital Money Market Fund － 2 Advpharma Inc. Beneficiary certificates: Taiwan Cooperative Bank Money Market Fund － 2 Mega Diamond Money Market Fund － 2 Eastspring Inv Well Pool Money Market Fund － 2 Shin Kong Global ETF Fund of Funds － 2 Eastspring Investments Asian Income Balanced Fund A TWD － 2 FSITC Taiwan Money Market Fund － 2 Mega USD Money Market Fund － 2	- 200 2,863 3,055 2,923 70 1,000 480 198 368 50 204 4,000 122 4,000 3,167 1,529 485 300 1,783 293	16,214 $ 2,469 52,077 77,713 284,163 800 10,000 4,800 1,485 5,180 670 4,100 131,421 1,949 40,256 39,324 20,597 4,781 3,058 27,001 2,997	- 16,214 $ 0.81% 2,469 18.43% 52,077 17.71% 77,713 9.73% 284,163 5.14% - 4.17% - 3.76% - 4.76% - - 5,180 - 670 1.30% 4,100 13.02% - - 1,949 - 40,256 - 39,324 - 20,597 - 4,781 - 3,058 - 27,001 - 2,997	- - - - - - - - - - - - - - - - - - - - -

Table 3 page 1

Securities held by Marketable securities Relationship with the securities issuer General ledger account	Number of shares	As	of December 31,2016	Note
		Book value	Ownership (%) Fair value
Advpharma Inc. Stocks: SYN-TECH CHEM & PHARM CO., Ltd. The Company is SYN-TECH CHEM & PHARM Co., Ltd.'s corporate director 4 Der Yang Biotechnology Venture Capital Co., Ltd. － 5 JENKEN BIOSCIENCES, INC. － 5 China Chemical & Pharmaceutical Co., Ltd. － 3 YungShin Global Holding Corporation － 3 Syngen Biotech Co,. Ltd. Beneficiary certificates: FSITC Taiwan Money Market Fund － 2 Stocks: NCKU Venture Capital Co., Ltd. The Company is NCKU Venture Capital Co., Ltd.'s corporate director. 5	577 350 18 100 50 4,230 1,000	56,084 $ 3,496 70 1,820 2,283 70,041 10,000	1.92% 56,084 $ 3.70% - 0.44% - 0.03% 1,820 0.02% 2,283 - 70,041 4.17% -	- - - - - -

Note 1: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.

Note 2: The general ledger account is classified into the following five categories:

1. Cash and cash equivalents

2. Financial assets at fair value through profit or loss - current

3. Available-for-sale financial assets - current

4. Available-for-sale financial assets - non-current

5. Financial assets measured at cost - non-current

Note 3: Foreign currencies were translated into New Taiwan Dollars with exchange rate as of December 31, 2016 as follows: USD: NTD 1:32.25 .

Table 3 page 2

Table 4

Expressed in thousands of NTD

STANDARD CHEM & PHARM. CO., LTD.

• Significant inter company transactions during the reporting period

For the year ended December 31, 2016

Transaction

Number (Note 2)	Companyname	Counterparty	Relationship (Note 3)	General ledger account	Amount	Transaction terms	Percentage of consolidated total operatingrevenues or total assets(Note 4)
0 1	Standard Chem & Pharm. Co., Ltd. Standard Pharmaceutical Co., Ltd.	Standard Pharmaceutical Co., Ltd. Souriree Biotech & Pharm. Co., Ltd. Syngen Biotech Co,. Ltd. Jiangsu Standard Biotech Pharmaceutical Co., Ltd.	1 1 1 1 1 3	Other receivables $ 96,952 Endorsements and guarantee 96,750 Purchases 27,726 Purchases 66,177 Notes payable ( 15,935) Other receivables 96,999		－ － Pay cheques with a maturity of 3~4 months after inspection had passed Pay cheques with a maturity of 3~4 months after inspection had passed － －	2% 2% 1% 2% － 2%

Note 1: As the amounts and counterparties of significant inter-company transactions are the same from the opposite transaction sides, no disclosure is required. Only transactions amounting to more than $10,000 are disclosed. Note 2: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

• (1) Parent company is ‘0’.

• (2) The subsidiaries are numbered in order starting from ‘1’.

Note 3: Relationship between transaction company and counterparty is classified into the following three categories:

• (1) Parent company to subsidiary.

• (2) Subsidiary to parent company.

• (3) Subsidiary to subsidiary.

Note 4: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 5: Foreign currencies were translated into New Taiwan Dollars with exchange rate as of December 31, 2016 as follows: USD: NTD 1:32.25.

Table 4 page 1

Table 5

Expressed in thousands of NTD

STANDARD CHEM & PHARM. CO., LTD.

Information on investees

For the year ended December 31, 2016

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held	as at December31,2016	as at December31,2016	Net profit (loss) of the investee for the year ended December31,2016	Investment income (loss) recognised for the year ended December31,2016	Note
				Balance as at December 31, 2016	Balance as at December 31, 2015	Number of shares	Ownership (%)	Bookvalue
Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd. Standard Chem & Pharm. Co., Ltd.	Standard Pharmaceutical Co., Ltd. Chia Scheng Investment Co., Ltd. STANDARD CHEM. & PHARM. PHILIPPINES, INC. Inforight Technology Co., Ltd. Souriree Biotech & Pharm. Co., Ltd Multipower Enterprise Corp. Advpharma Inc. Syngen Biotech Co., Ltd	Samoa Taiwan Philippines Taiwan Taiwan Taiwan Taiwan Taiwan	Research and development, trading, investment and other business of medical products General investment Import and export of various medical products, medicine, supplements Wholesale of multi-function printers and information software Manufacturing of western medicine and retail and wholesale of various medicine Import and export of western medicine, nourishment and function food, processing, manufacturing and sale of food Research and development, manufacturing and sale of various medicine Research and development, manufacturing and sale of APIs, biopesticide, fertiliser and biochemical nutrition, sale of preventive medicine	304,875 $ 242,726 6,802 5,000 72,889 293,057 507,332 122,458	271,790 $ 242,726 6,802 5,000 62,889 293,057 507,332 113,883	10,000,000 16,103,000 192,195 500,000 5,649,126 19,840,600 50,746,706 9,927,146	100.00 100.00 100.00 100.00 93.17 90.72 84.58 47.27	187,384 $ 159,780 5,031 4,288 27,386 492,676 294,623 284,945	49,293) ($ 1,200) ( 620) ( 78) ( 85 54,408 5,256) ( 90,206	49,293) ($ 1,200) ( 620) ( 78) ( 1,024) ( 51,823 4,381) ( 51,061	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary (Note 1) Subsidiary (Note 2)

Table 5 page 1

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held	as at December31,2016	as at December31,2016	Net profit (loss) of the investee for the year ended December31,2016	Investment income (loss) recognised for the year ended December31,2016	Note
				Balance as at December 31, 2016	Balance as at December 31, 2015	Number of shares	Ownership (%)	Bookvalue
Standard Chem & Pharm. Co., Ltd. Chia Scheng Investment Co., Ltd. Advpharma Inc.	WE CAN MEDICINES CO., LTD SANTOS BIOTECH INDUSTRIES, INC. CNH TECHNOLOGIES INC.	Taiwan America America	Wholesale of various medicine Research and development, trading, investment and other business of medical products Research and development of various medicine	177,201 $ 96,040 13,011	177,201 $ 95,713 13,011	10,273,272 3,111,500 400,000	33.10 100.00 35.60	149,226 $ 15,694 13,336	93,926) ($ 1,569) ( 83	31,089) ($ - -	- Subsidiary (Note 3) (Note 3)

Note 1: Including 22,980 thousand shares with amount of $133,416 are pledged as collateral for short-term borrowings.

Note 2: In September 2016, the subsidiary, Syngen Biotech Co., Ltd. ("Syngen"), filed for an initial public offering with Taipei Exchange. As part of the public trading process, the Company allowed its underwriter to exercise the overallotment option, which decrease the Group's ownership percentage in Syngen down to below 50%, yet the Company did not lose control over Syngen.

Note 3: Not required to disclose income (loss) recognised.

Note 4: Foreign currencies were translated into New Taiwan Dollars with exchange rate as of December 31, 2016 as follows: USD: NTD 1:32.25 .

Table 5 page 2

STANDARD CHEM & PHARM. CO., LTD. Information on investments in Mainland China

For the year ended December 31, 2016

Table 6

Expressed in thousands of NTD

Investee in MainlandChina	Main business activities	Paid-in capita	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of January1,2016	Amount remitted Mainland China/ back to Taiwan f December	from Taiwan to Amount remitted or the year ended 31,2016	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2016	Net income (loss) of investee for the year ended December 31, 2016	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised for the year ended December 31, 2016	Book value of investments in Mainland China as of December31,2016	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2016	Note
					Remitted to MainlandChina	Remitted back to Taiwan
Jiangsu Standard Biotech Pharmaceutical Co., Ltd. Jiangsu Standard-Dia Biopharma Co., Ltd. Companyname	Research and development, technical consulting and technical services of medicine Research and development, manufacturing and sale of various medicine Accumulated amount of remittance from Taiwan to Mainland China as of December31,2016	290,250 $ 195,738 Investment amount approved by the Investment Commission of the Ministry of Economic Affairs(MOEA)	(Note 1) (Note 2) Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA (Note 4)	257,403 $ -	32,526 $ -	- $ -	289,929 $ -	48,228) ($ 25,221) (	100.00 55.00	48,228) ($ 13,872) (	151,633 $ 51,684	- $ -	(Note 3) (Note 3)
Standard Chem & Pharm. Co., Ltd.	289,929 $	290,250 $	2,517,998 $

Note 1: Indirect investment in Mainland China through an existing company (Standard Pharmaceutical Co., Ltd.) located in the third area. Note 2: Indirect investment in Mainland China through an existing company (Jiangsu Standard Biotech Pharmaceutical Co., Ltd.) located in Mainland China. Note 3: Recognition is based on investees ’ financial statements audited and attested by independent accountants. Note 4: Ceiling is the higher of net assets or 60% of consolidated equity. Note 5: Foreign currencies were translated into New Taiwan Dollars with exchange rate as of December 31, 2016 as follows: USD: NTD 1:32.25 and RMB: NTD 1:4.617.

Table 6 page 1