Skip to main content

AI assistant

Sign in to chat with this filing

The assistant answers questions, extracts KPIs, and summarises risk factors directly from the filing text.

Sign up Log in

SFC Annual Report 2018

Aug 7, 2019

51753_rns_2019-08-07_2948c9d8-7208-46f4-b4e2-bbf57a9c610a.pdf

Annual Report

Open in viewer

Opens in your device viewer

==> picture [596 x 110] intentionally omitted <==

==> picture [596 x 102] intentionally omitted <==

==> picture [596 x 61] intentionally omitted <==

==> picture [596 x 94] intentionally omitted <==

Table of Contents

Page

One. Letter to Shareholders............................................................................................................ 1
Two. Company Profile..................................................................................................................... 4
I.
Date of incorporation .........................................................................................................		 4
II.
Development history ..........................................................................................................		 4
Three. Corporate Governance Report........................................................................................... 9
I.
Organization of company ...................................................................................................		 9
II.
Directors, supervisors, president, vice president, assistant VP, and department heads ......		 12
III. Corporate governance ........................................................................................................ 22
IV. CPA’s fees .......................................................................................................................... 48
V.
CPA’s change information ..................................................................................................		 49
VI. The chairman, president, and financial or accounting managers of the Company who
worked for the CPA or its affiliates last year ..................................................................... 49
VII. Share transfer and share mortgage of directors, supervisors, executives, and
shareholders holding over 10% of shares in the last year and by the report publishing
date ..................................................................................................................................... 50
VIII. Relationships of the top ten shareholders .......................................................................... 51
IX. The shareholding of the same invested company by the Company, the directors, the
supervisors, the managers, or another business that is controlled by the Company
directly or indirectly ........................................................................................................... 56
Four. Stock Subscription............................................................................................................... 57
I.
Capital and shares ..............................................................................................................		 57
II.
Corporate bond ..................................................................................................................		 62
III. Preferred stock ................................................................................................................... 62
IV. Issuance of global depository receipts ............................................................................... 63
V.
Employee stock option certificates ....................................................................................		 63
VI. Restricted employee rights and new shares issue .............................................................. 63
VII. Mergers and acquisitions ................................................................................................... 63
VIII. Fund implementation plan ................................................................................................. 63
Five.
Overview of Business Operations.......................................................................................		 64
I.
Principal activities ..............................................................................................................		 64
II.
Market analysis and the conditions of sales and production ..............................................		 67
III. Status of employees over the past two years and up to the printing of the annual report .. 79
IV. Expenditures on environmental protection ........................................................................ 80
V.
Employee/Employer relations ............................................................................................		 81
VI. Important commitments ..................................................................................................... 85
Six. Financial Information......................................................................................................... 86
I. Condensed balance sheet, income statements, CPAs, and their opinions over the last
five years ............................................................................................................................ 86
II.
Financial analysis in the past five years .............................................................................		 90
III. Audit committee’s report in the most recent year .............................................................. 93
IV. Financial report and consolidated financial statements ..................................................... 94
V.
Financial report of standard foods corporation ..................................................................		 188
VI. Financial difficulties of the company and related parties in the current year and up to
the printing of the annual report......................................................................................... 280
Seven. Review of Financial Position, Financial Performance, and Risk Management............. 281
I. Financial position ............................................................................................................... 281
II.
Financial performance .......................................................................................................		 282
III. Analysis of cash flows ....................................................................................................... 283
IV. Impact of major capital expenditures on finance and business in the current year ............ 284
V.
Reasons and remedial plans for investment gain or loss occurring in the current year
and the investment plan for the next year .......................................................................... 285
VI. Risk management in the most recent year and up to the printing of the annual report ...... 286
VII. Other important matters ..................................................................................................... 289
Eight. Special Disclosures............................................................................................................... 290
I. Related parties .................................................................................................................... 290
II.
Private subscription of marketable securities in the most recent years and up to the
printing of the annual report .............................................................................................. 299
III. Stock shares of the company held or disposed of by subsidiaries in the most recent 299
years and up to the printing of the annual report ...............................................................
IV. Other disclosures ................................................................................................................ 301
V. Impacts to shareholders’ equity or securities prices due to events defined in paragraph
3(2) of article 36 of the securities and exchange act in the current year and up to the
date of publication of the annual report ............................................................................. 302

One. Letter to Shareholders

Dear Shareholders,

Both of our operating revenue and profit have grown in 2018 from 2017. The net income from our core business increased. In the meantime, we disposed of the idle factory offices in Wugu in the hopes of creating more value for our shareholders through activation of the assets. As always, we treasure “quality and food safety” as our foremost commitment to consumers. We establish the quality management standards in line with world trends and use our best efforts to pursue good quality and nutrition to serve our consumers earnestly. We strongly believe that the consumers’ satisfaction in products, as well as the reliance and recognition from consumers, are the key to our corporate sustainability

Looking forward to 2019, given the relationship between China and the USA reaching a deadlock caused by the Sino-US Trade War, the economic variables have increased domestically and overseas. Standard Foods in China and Taiwan will continue to adhere to our management philosophy. All of our staff will still use their best efforts to work together, continue developing new products, and stabilize development and growth.

Appreciate for the trust and support to the management team from all of you.

We hereby outline the consolidated business results of Standard Foods in 2018 and the business plan of 2019 as follows:

1. Business Performance 2018

1.1. Consolidated Revenue and Profit Overview

Unit: NT$ thousand

2018 % 2017 % +/-%
Sales Revenue 27,340,587 100.0 26,477,924 100.0 3.3
Cost of Goods
Sold		 19,086,242 69.8 19,077,969 72.1 0.0
Gross Profit 8,254,345 30.2 7,399,955 27.9 11.5
Net Income 3,149,836 11.5 2,794,878 10.6 12.7
Earnings Before
Tax		 3,676,232 13.4 2,745,403 10.4 33.9
Net Income of the
Year
2,968,307		 10.9 2,209,909 8.3 34.3
Total
Comprehensive
Profit and Loss		 2,829,558 10.3 1,995,281 7.5 41.8

In 2018, Standard Foods had consolidated operating revenue of NT$27.34 billion, which was 3.3% growth or an increase of NT$860 million from last year. The operating revenue of the separate entities in the same year amounted to NT$12.19 billion, which was 8.2% growth or an increase of NT$930 million from last year.

In 2018, the total comprehensive income amounted to NT$2.83 billion, which was 41.8% growth or an increase of NT$830 million from last year. The total comprehensive income attributable to the Company's owners amounted to NT$2.81 billion, which was 43.2% growth or an increase of NT$850 million from last year.

-1-

1.2. Status of Research and Development

In 2018, Standard Foods spent NT$168 million in research and development in order to provide consumers with nutritious, tasty, and healthy products. Standards Foods continued the research and development of various new products, clinical experiments, and technology research, and also upgraded and improved the formula of existing products, in the hopes of supplying consumers with more excellent products.

2. Summary of 2019 Business Plan and Future Development Strategies

  • 2.1. Operating Guidelines

  • (1) Get the certification of healthy food and development of nutritional supplements continuously for adults in response to the nation’s increasing awareness of healthcare and the trend of an aging society.

  • (2) Upgrade the ability to inspect raw materials, supplies, and finished goods to exercise strict control over “food safety” for consumers.

  • (3) Train the new generation management team members actively and deepen the development of colleagues’ expertise and inter-disciplinary adaptability through on-the-job training and job rotation to enhance the elasticity and flexibility of organizational operations.

  • 2.2. Expected Sales Volume and Important Marketing Policies

Based on the estimated sales of 438,257 tons in 2019, the future production-marketing policy is summarized as follows: 

  - (1) Production

     - In response to the upgrading sales volume of products and development of new products, plan the construction of various new production lines, replacement of old equipment with new, or upgrading of production capacity to satisfy the needs for sales and also upgrade the efficiency of production.

     - Implement the SQM system to systematize and digitalize the incoming inspection, supplier management, customer complaints management, and inspection instrument management.

     - Promote the online data collection and upgrade the yield by analyzing abnormalities and bottlenecks in the hopes of cutting production costs.

  - (2) Marketing

     - Uphold “Reassurance”, “Good Taste” and Health” as the brand appeal when communicating with consumers to upgrade consumers’ reliance and preference.

     - Increase the chances to contact different consumer groups via multimedia sources, so as to upgrade the exposure and brand awareness of products and expand the market share.

     - Optimize the official website - strengthen the e-shop interface to provide consumers with a more friendly consumer experience.

  1. Impacts of External Competition, the Legal Environment, and the Macro Environment

  2. 3.1.External Competitions

-2-

In consideration of the low market access threshold for the food production industry, the competition among multiple domestic and foreign suppliers in the same trade is intense without doubt. Therefore, only suppliers who provide “excellent quality” and “perfect service” can gain popularity among consumers and customers. Standard Foods upholds its original intention to develop products which may assure consumers and are also healthy. Meanwhile, it tries various marketing channels to expand the chances to communicate with different consumer groups, in the hopes of enhancing its brand and seeking support from consumers to maintain its brand leadership in the market.

3.2.Legal Environment

Standard Foods aims to become the most reliable brand in the Chinese world. “Food safety” for consumers is always our first priority concern. We comply with existing food safety laws and regulations. Meanwhile, we assign dedicated personnel to follow up on the movement and progress of laws and regulations under revision, assess the effects on us therefor, and discuss feasible policies in a timely manner to enable the Company to have sufficient time to respond to the changes of laws and regulations.

3.3.Macro Environment

The main raw materials of Standard Foods are primarily imported agricultural products or processed products thereof. Therefore, such factors as changes of climate, fluctuation in foreign exchange rate, and even fluctuation in the global petrol price, etc. would produce specific impacts on us. At the beginning of 2019, the Fed implied that it would reduce the number of interest escalations, the Sino-US Trade War is still going, and the global petrol price is increasing again. Academia Sinica forecasts that growth rates in private consumption might grow by 0.1% this year from 2018. Notwithstanding, the overall environment appears not so optimistic, and we still have to deal with the situation cautiously.

Chairman: Mr. Ter-Fung Tsao

General Manager: Mr. Ter-Fung Tsao

Chief Financial Officer: Chris Hong

-3-

Two. Company Profile

  • I. Date of incorporation: June 6, 1986

  • II. Development history 1986 � Standard Foods Taiwan Ltd. was invested and established by Standard International Foods Corp. The paid-in capital was NT$4,788,300.

  • � Quaker Products Taiwan Ltd. invested in Standard Foods Taiwan Ltd., the paid-in capital increased to NT$4,788,400.

  • � Standard Foods acquired the assets of Quaker Products Taiwan Ltd. and was granted its business license on August 8 to continue to manufacture and sell Quaker’s White Oats and Baby Cereal.

  • � Increased the paid-in capital to NT$15,000,000 by cash capitalization of NT$10,211,600.

  • 1987 � Quaker Products Taiwan Ltd. transferred all its shares in the Company to Quaker Oats Company.

  • � Expansion of Ta Yuan plant facilities at an expense of over NT$15 million.

  • 1988 � Increased the paid-in capital to NT$45,000,000 with retained earnings of NT$30,000,000 for expanding facilities and acquiring manufacturing equipment.

  • 1990 � Acquired land in Wugu Industrial Zone for an amount over NT$120 million.

  • � Grand opening of the first Pizza Inn Restaurant in Taiwan. � Increased the paid-in capital to NT$162,000,000 with retained earnings of NT$117,000,000. Par value of each share split from NT$100 to NT$10.

  • � Securities and Exchange Commission authorized the Company as a public company

  • 1991 � Expansion of Ta Yuan shipping warehouse at an expense of over NT$21 million.

  • � Increased the paid-in capital to NT$194,400,000 with retained earnings of NT$32,400,000

  • 1992 � Increased the paid-in capital to NT$307,152,000 with retained earnings of NT$64,152,000 and cash capitalization of NT$48,600,000.

  • 1993 � Invested in Standard Foods Singapore Pte Ltd. of US$2.32 million to re-invest an amount of US$2.25 million in Suzhou Standard Foods Co. to manufacture cereal products.

  • � Increased the paid-in capital to NT$430,012,800 with retained earnings of NT$122,860,800.

  • � Invested $79,999 thousand in Standard Friendship Taiwan Ltd. for 99.99% shareholdings

  • � Food and beverages operations transferred to Standard Friendship Taiwan Ltd. for professional management.

  • 1994 � Increased the paid-in capital to NT$602,017,920 with retained earnings of NT$172,005,120.

-4-

  • The Company became a listed company in the Taiwan Stock Exchange on April 9.

  • 1995 � Increased the paid-in capital to NT$848,338,570 with retained earnings of NT$246,320,650.

  • � Wired US$8.5 million, to repurchase the 51% equity interest of Standard Foods Singapore Pte Ltd. held by Quaker Oats Company for US$3.8 million and increased the investment in China by US$4.7 million.

  • 1996 � Increased the paid-in capital to NT$1,191,168,430 with retained earnings of NT$342,829,860.

  • 1997 � Increased the paid-in capital to NT$1,672,052,910 with retained earnings of NT$480,884,480.

  • As resolved in the shareholders' meeting, Standard Friendship ceased its operations and sold its operational assets in December 1996.

  • Invested in Charng-Li Investment Ltd. with an amount of NT$289,994 thousand for a shareholding of 99.9% to run investment business.

  • In June 1997, Mr. Ter-Fung Tsao (Chairman of the Company) and Ms. H.D. Mon (major shareholder of the Company) used part of their equity interest in the Company to issue 3,000,000 Global Depositary Receipts ("GDRs") in Asia, Europe, and the United States; each unit represents 5 common shares of the Company.

  • 1998 � Increased the paid-in capital to NT$2,094,702,360 with retained earnings of NT$422,649,450.

  • � Invested in Standard Beverage Ltd. with an amount of NT$99,999 thousand for a shareholding of 99.9% to produce bottled water.

  • � Increased investment in China by US$5 million.

  • 1999 � Increased the paid-in capital to NT$2,623,606,510 with retained earnings of NT$528,904,150.

  • � Invested NT$328 million to establish Standard Dairy Products Taiwan Ltd. for the production of yogurt with 75% shareholding acquired. The products are included in the “Yoplait” brand.

  • � Acquired the factory, machinery and trademark of Fresh Dairy with NT$350 million to launch Fresh Delight series products.

  • 2000 � Increased the paid-in capital to NT$3,022,645,060 with retained earnings of NT$399,038,550.

  • Invested NT$328 million to establish Standard Dairy Products Taiwan Ltd. for the production of yogurt with 75% shareholding acquired. The products are included in the “Yoplait” brand.

  • Invested additional NT$108 million in Standard Dairy Products Taiwan Ltd. with 99% shareholding acquired in total.

  • Increased the equity of Domex Technology Corporation to 49% by NT$214 million.

  • Disposed of 900,000 shares of Standard Beverage Ltd. The equity interest decreased to 91%.

  • Invested 100% equity in Accession Limited, based on BVI, with US$2 million. Then increased the equity by transferring assets as capital contribution and by cash total up to US$11.9 million.

-5-

2001 �Charng-Li Investment Ltd., our wholly-owned company, was renamed as
Charng Hui Ltd.
�Automated storage was completed.
�Accession Limited invested in Shanghai Standard Foods Co. to sell cereal
products.
�Increased the paid-in capital to NT$3,209,184,420 with retained earnings of
NT$186,539,360.
�Invested 56% equity in Renewable Resource Technology (Cayman) Co.,
Ltd. with US$2.8 million with the goal of re-investing in Hunan Jiage
Biotechnology Co., Ltd. with US$3.4 million to manufacture fermented
organism products.
2002 �Accession Limited increased the paid-in capital to US$20,344,080 with
US$5 million cash injection and US$1.42 million retained earnings.
�Accession Limited acquired the equity of Suzhou Standard Foods Co. from
Standard Foods Singapore Pte Ltd. and Standard Foods Singapore Pte Ltd.
went into liquidation.
�Changed the Company’s name from “Standard Foods Taiwan Ltd.” to
“Standard Foods Corporation”.
2003 �Shanghai Standard Foods Co., merged with Suzhou Standard Foods Co.,
Shanghai Standard Foods Co., is the continuing company. Suzhou Standard
Foods Co., became a branch company of Shanghai Standard Foods Co.
�Invested in Accession Limited by US$2.2 million.
�Charng Hui Ltd., our wholly-owned, decreased the paid-in capital to
NT$194 million by NT$96 million.
2004 �Liquidation of Singapore Standard Foods was completed.
�Accession Limited increased the paid-in capital to US$37,344,080 with
US$14.8 million cash injection. Accession Limited decreased the paid-in
capital to US$33,100,000 by US$4,244,080 in October 2004.
2005 �Accession Limited increased the paid-in capital to US$38,100,000 with
US$5,000,000 cash injection.
�Increased the equity of Standard Dairy Products Taiwan Ltd. from 99.9% to
100%.
2006 �Changed the fiscal year to calendar year on January 1.
�SAP ERP system officially online.
�Charng Hui Ltd., our wholly-owned, decreased the paid-in capital to
NT$150 million by NT$44 million.
2007 �Accession Limited increased the paid-in capital to US$43,100,000 with
US$5,000,000 cash injection.
2008 �Signed a distribution agreement with Fonterra Brands (Far East) Limited
(Hong Kong).
�Accession Limited increased the paid-in capital to US$50,600,000 with
US$7,500,000 cash injection.

-6-

  • 2009 � Accession Limited increased the paid-in capital to US$73,600,000 with US$23,000,000 cash injection.

  • Increased the paid-in capital to NT$3,225,230,340 with retained earnings of NT$16,045,920.

  • 2010 � The Company's tangible stock shares are converted to intangible stock shares.

  • Accession Limited increased the paid-in capital to US$123,600,000 with US$50,000,000 cash injection.

  • Increased the paid-in capital to NT$3,709,014,890 with retained earnings of NT$483,784,550.

  • 2011 � The Company invested in and established Standard Investment (Cayman) Limited, which reinvested in and established Standard Corporation (Hong Kong) Limited.

  • Standard Corporation (Hong Kong) Limited invested in and established Standard Investment (China) Limited.

  • Standard Investment (China) Limited made reinvestment to set up Standard Food (China) Limited.

  • � Increased the paid-in capital to NT$4,636,268,610 with retained earnings of NT$927,253,720.

  • 2012 � Increased the paid-in capital to NT$5,748,973,070 with retained earnings of NT$1,112,704,460.

  • Made a cash injection of US$ 30,010,000 to Standard Investment (Cayman)

  • Limited. Total paid-in capital of the Company increased to US$ 30,010,000.

  • 2013 � Increased the paid-in capital to NT$6,611,319,030 with retained earnings of NT$862,345,960.

  • Made a cash injection of US$ 15,035,000 to Standard Investment (Cayman) Limited. Total paid-in capital of the Company increased to US$ 45,045,000.

  • An increase in cash capital of NT$380,000,000 was invested in Charng Hui Ltd. for a total investment of NT$541,000,000.

  • 2014 � Increased the paid-in capital to NT$7,206,337,740 with retained earnings of NT$595,018,710.

  • Increased shareholding of Standard Beverage Ltd. from 97.1% to 100%.

  • Increased the paid-in capital of Standard Investment (Cayman) Limited to US$66,396,296 with retained earnings of CNY131,211,500 (equivalent to US$21,351,296).

  • Established Shanghai Dermalab Corporation with re-investments through Standard Investment (China) Ltd.

  • Established Le Bonta Wellness Co., Ltd. with re-investments through Standard Investment (China) Ltd.

-7-

  • 2015 � Transferred capital surplus at NT$720,633,770 to capital to increase paid-in capital to NT$7,926,971,510.

  • Increased capital to US$22,899,457 to Standard Investment (Cayman) Limited to increase paid-in capital to US$89,295,753. Standard Investment (Cayman) Limited then reinvested in Standard Foods (Xiamen) Co., Ltd. and Shanghai Dermalab Corporation through Standard Foods (Hong Kong) Ltd. and Standard Investment (China) Ltd.

  • Shanghai Standard Foods Co. established Shanghai Le Ben De Health Technology Co., Ltd. through asset partitioning at US$1,000,000.

  • Accession Limited acquired 80% shares of Dermalab S.A

  • Le Bonta Wellness Co., Ltd. acquired Beijing Yisheng Tong Kang Biotechnology Co., Ltd. via cash merger.

  • 2016 � Transferred capital surplus NT$871,966,860 to capital to increase paid-in capital to NT$8,798,938,370

  • � Increased capital US$45,040,101 to Standard Investment (Cayman) Limited to increase paid-in capital to US$134,335,854. Standard Investment (Cayman) Limited established Shanghai Le Ho Industrial Co., Ltd. and Shanghai Le Min Industrial Co., Ltd. with re-investments through Standard Foods (Hong Kong) Limited.

  • Acquired 100% share equity of Le Bonta Wellness International Co.

  • 2017 � Capitalization of undistributed earnings into new shares amounting to NT$351,957,540. The paid-in capital amounted to NT$9,150,895,910 after the capitalization

  • The Company’s Chairman and President, Mr. Ter-Fung Tsao, resigned from the position of the Company’s President on May 1, and Vice President of the Company, Yao Steven Yih-Chun, took over the office.

  • The Company established the position of Chief Executive Officer on May 5, assumed by the Chairman, Ter-Fung Tsao

  • Lebonata Health Technology (Shanghai) Limited increased its capital in cash amounting to CNY40,900,000, which made the paid-in capital of the company amounting to CNY80,100,000

  • Standard Investment (Cayman) Limited and Standard Foods (Hong Kong) increased capita in cash amounting to USD15,724,960, which made the paid-in capital amounting to USD 150,060,815 and USD 150,012,815, respectively.

  • 2018 � Accession Limited acquired 20% of the share equity of Dermalab S.A..

  • Disposed of the Company’s land in Wugu Industrial Zone in May. The total trading value was NT$508,620 thousand, and the gains from the disposition were NT$304,600 thousand.

  • Increased capital by US$64,000 to Standard Investment (Cayman) Limited and US$38,000 to Standards Foods (Hong Kong) to increase said companies’ paid-in capital to US$150,124,815 and US$150,050,815 respectively.

-8-

==> picture [464 x 689] intentionally omitted <==

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

Accounting Division
IT Division
Human Resources
Division
Production
Management Division
Factory Operation
Division
Engineering and
Maintenance Division
Procurement Division
Quality Assurance
Division
E-Commerce Division
Sales Division
Marketing Division
R&D Division
Department Department
Public Relations and Legal Affairs Channel Analysis
Center
Administration
Office
Internal Auditing Group Finance
CEO Center
President
Chairman Supply Chain
Board of Directors
shareholder meetings
Three. Corporate Governance Report
Office
President's
Audit
Committee Committee
Remuneration
Project
Department Department
Business Planning
Organization chart
Organization of company
I. I.1.
----- End of picture text -----

-9-

I.2. Department function description

Department Department Function Description
Audit Committee Help the Board of Directors perform its duty to supervise the
Company’s exercise of the duties imposed by the Company Act,
Securities and Exchange Act, and other related laws.
Remuneration Committee Help the Board of Directors review the remuneration to Directors
and managerial officers to enhance the Company's corporate
governance ability.
Internal Auditing Office Execute the Company's internal audit, provide the audit result to
the management, and assess the corporate risks.
Group Finance Responsible for the Group’s finance, shareholders service, and
investees’ accounts, et al.
President's Office Execute the resolutions made by the Board of Directors and
administer the Company’s affairs.
Project Department Responsible for promotion and management of the Company's
project business.
Business Planning Department Responsible for collecting information about operations and
management, and promotion and management of business
planning-related business.
R&D Division Responsible for R&D of innovative products and technology,
improvement of product quality, research on reduction of costs,
evaluation on new product business, and application for health
certification.
Marketing Division Responsible for brand marketing strategy planning and execution,
advertising planning, and consumer service, et al.
Sales Division Responsible for annual customer operation planning, channel sales
activity planning and execution, and dealer management.
E-Commerce Division Responsible for the operation of official e-shops, shop
advertisement planning and advertising, and management of the
shop members’ information, et al.
Supply Chain
Center		 Quality
Assurance
Division		 Responsible for controlling production system, conducting
analysis and testing, and managing quality system.
Procurement
Division		 Responsible for procurement of domestic/foreign raw materials
and supplies and packaging materials, and sub-contractor
management.
Engineering
and
Maintenance
Division		 Responsible for planning and execution of new production
equipment; procurement, contracting, and maintenance of
production equipment; new processes and process change and
improvement.

-10-

Department Department Function Description
Factory
Operation
Division		 Responsible for the management of production, manufacturing,
packaging, and occupational safety and health in factories.
Production
Management
Division		 Responsible for supply planning and execution, inventory
management, and warehousing and transportation.
Administration
Center		 Public
Relations and
Legal Affairs
Department		 Responsible for public relations, asset management, legal affairs,
and investors relations, et al.
Channel
Analysis
Department		 Responsible for operations, investment, and business analysis
related to channels.
Human
Resources
Division		 Responsible for the operations related to recruitment, employment,
training, salary and welfare, and general affairs.
IT Division Responsible for planning, management, and maintenance of
information and network systems.
Accounting
Division		 Responsible for compilation of accounts related to transactions,
taxation affairs, computation of costs, budgetary management, and
provision of accounting information, et al.

-11-

As of April 15 2019; Unit: Shares/NT$ thousands
Executives who are spouses or
within 2 degrees of consanguinity		 Relation Sibling Son None Sibling Father None
Name Wendy
Tsao		 Arthur
Tsao		 None Ter-Fung
Tsao		 Ter-Fung
Tsao		 None
Title Director None Chairman Chairman None
,
Current Position with Other Company		 Chairman of the Company
Chairman of Standard Dairy Products Taiwan
Ltd.
Chairman of Domex Technology Corporation
Chairman of Standard Beverage Ltd.
Director of Accession Ltd.
Institutional Directors’ Representative of
Polytronics Technology Corporation
Director of Green Wall Enterprise Co., Ltd.
Independent Director of PlexBio Co., Ltd.
Supervisor of Crosslink Semiconductor, Inc.
Director of Standard Investment (Cayman) Ltd.
Director of Standard Corp (HK) Ltd.
Director of Standard Investment (China) Ltd.
Chairman, Mu Te Investment Co., Ltd.
Director, Chia Yun Investment Co., Ltd.
Director, Chia Chieh Investment Co., Ltd.		 Chairman and Chief Executive Officer of TPV
Technology Limited
Independent Director of Array Inc.
Chairman of Shanghai Standard Foods Co.
Chairman of Standard Investment (China) Ltd.
Chairman of Standard Foods (China) Ltd.
Chairman of Standard Foods (Xiamen) Co., Ltd.
Chairman of Le Bonta Wellness Co., Ltd.
Chairman of Green Wall Enterprise Co., Ltd.
Chairman of Crosslink Semiconductor, Inc.
Chairman of SPARKLE Inc.
Director of Charng Hui Ltd.		 CEO of the Company
President of Standard Investment (China) Ltd.
President of Shanghai Standard Foods Co.
President of Standard Foods (China) Ltd.
President of Standard Foods (Xiamen) Co., Ltd.
President of Le Bonta Wellness Co., Ltd.
President of Shanghai Le Ben De Health
Technology Co., Ltd.
Chairman of Shanghai Dermalab Corporation
Chairman of Shanghai Le Ho Industrial Co.,
Ltd.
Chairman of Shanghai Le Min Industrial Co.,
Ltd.		 Institutional Directors’ Representative of
Polytronics Technology Corporation
Independent director of Pegatron Corporation
Independent director of Raydium
Semiconductor Corporation
Experience
(Education)		 Ph.D., Colorado
University, USA
R&D Director of
Quaker
Plant Manager of
Quaker(Taiwan)
General Manager
of Quaker(Taiwan)
President, Standard
Foods.		 Polytechnic
Institute of New
York University
Ph.D. of Systems
Engineering		 Soochow
University, R.O.C.		 MBA, Stanford
University, USA		 Master in
Statistics, National
Chengchi
University, R.O.C
Shares held by other
persons in their names		 Shareholding
ratio%		 2.48% 0 0 0 0
Shares 22,651,211 0 0 0 0
Shareholding of spouse
and minor		 Shareholding
ratio%		 0 0 0 0 0
Shares 0 0 0 0 0
Current shareholding of
representative		 Shareholding
ratio%		 4.46% 0.00% 0.54% 0.00% 0.00%
Shares 40,848,203 0 4,954,915 0 0
Current Shareholding Shareholding
ratio%		 2.48% 0.73% 0.00%
Shares 22,650,057 6,669,471 0
Shareholding when
elected		 Shareholding
ratio%		 2.48% 0.73% 0.00%
Shares 19,620,632 5,777,436
0
Date of First
Elected		 June 15, 2016 June 15, 2016 June 15, 2016
Term
(year)		 3 years 3 years 3 years
Date elected
(inaugurated)		 June 15,
2016		 June 15,
2016		 June 15,
2016
Gender Male Male Female
Male		 Male
Name Mu Te
Investment Co.
Ltd.
Representative:
Ter-Fung Tsao		 Mu Te
Investment Co.
Ltd.
Representative:
Jason Hsuan		 Mu Te
Investment Co.
Ltd.
Representative:
Wendy Tsao
Charng Hui Ltd.
Representative:
Arthur Tsao		 Ben Chang
Nationality
or
Residency		 ROC ROC ROC ROC ROC
Title Chairman Director Director Director Independent
Director

-12-

Executives who are spouses or
within 2 degrees of consanguinity		 Relation None None
Name None None
Title None None
Current Position with Other Company Independent Director of Yulon Motor Co., Ltd.
Independent Director of Taiwan Acceptance
Corporation
Independent Director, Fubon Life Insurance Co.,
Ltd.
Representative of Institutional Director, Kino
Biotech Co., Ltd.
Representative of Institutional Director,
Easycard Corp.
Chairman of Purestone Capital Group
Independent Director of TPK Holding Co., Ltd
Experience
(Education)		 Master in
Mathematics,
Colorado State
University		 Master in Political
Economics,
University of
Taxes
President, Trend
Micro;
CEO, Business
Engine;
Chairman, Sina
Net
Shares held by other
persons in their names		 Shareholding
ratio%		 0 0
Shares 0 0
Shareholding of spouse
and minor		 Shareholding
ratio%		 0 0
Shares 0 0
Current shareholding of
representative		 Shareholding
ratio%		 0.00% 0.00%
Shares 0 0
Current Shareholding Shareholding
ratio%		 0.00% 0.00%
Shares 0 0
Shareholding when
elected		 Shareholding
ratio%		 0.00% 0.00%
Shares
0
0
Date of First
Elected		 June 15, 2016 June 15, 2016
Term
(year)		 3 years 3 years
Date elected
(inaugurated)		 June 15,
2016		 June 15,
2016
Gender Male Male
Name George Chou Daniel Chiang
Nationality
or
Residency		 ROC ROC
Title Independent
Director		 Independent
Director

-13-

II.1.2. Major shareholders of institutional shareholders

II.1.2. Major shareho lders of institutional shareholders As of April 15,2019
Name of institutional
shareholders		 Major shareholders of institutional shareholders Shareholding (%)
Mu Te Investment
Co.,Ltd.		 Ter-Fung Tsao 99.99
CharngHui Ltd. Standard Foods Corporation 100.00

II.1.3. Major institutional shareholders of institutional shareholders, if available

As of April 15,2019
Name of Legal Person MajorShareholders of theLegal Persons Shareholding (%)
Standard Foods
Corporation		 Mu Te Investment Co.,Ltd. Trust PropertyAccount 17.16
Chia Yun Investment Co.,Ltd. Trust PropertyAccount 14.55
Chia Chieh Investment Co.,Ltd. Trust PropertyAccount 11.86
Ter-FungTsao 4.46
Bilai Investment Co.,Ltd. 3.61
HSBC as Trustee of RBC Emerging Markets Equity
Fund		 2.48
Mu Te Investment Co.,Ltd. 2.48
Nan Shan Life Insurance Co.,Ltd. 1.44
Chun-Yao Lin 1.33
Fubon Life Insurance Co.,Ltd. 1.17

-14-

As of April 15, 2019

II.1.4. Independence of directors and supervisors

As As As As As As As As As As of April 1
Conditions
Name		 With or without five years of work
experience or more and the following
professionalexperience		 Independence (Note 1) Also an independent director of another
public company
Teachers of
public or
private
colleges for
the subject
of
commerce,
law,
finance,
accounting,
or business		 Judge,
prosecutor,
attorney,
accountant,
or business
salesperson
who passed
national
exams &
certified
specialists or
technicians		 With job
experience in
commerce,
law, finance,
accounting,
or business
1		 2 3 4 5 6 7 8 9 10
Mu Te Investment
Co., Ltd.
Representative:
Ter-FungTsao		 V V V 1
Mu Te Investment
Co., Ltd.
Representative:
Jason Hsuan		 V V V V V V V V 1
Mu Te Investment
Co., Ltd.
Representative:
WendyTsao		 V V V V V V 0
Charng Hui Ltd.
Representative:
Arthur Tsao		 V V V V V 0
BenChang V V V V V V V V V V V 2
George Chou V V V V V V V V V V V 3
DanielChiang V V V V V V V V V V V 1

Note 1: Please tick the corresponding items when directors and supervisors comply with the following conditions two years before being elected and during their term.

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

(2) Not a Director or Supervisor of the affiliates of the Company (except the seats of Independent Directors established by the Company or its parent company, subsidiaries in accordance with local laws or applicable laws in the host countries of investment).

(3) Does not hold more than 1% of total stock issued directly or indirectly nor is a natural shareholder on the top-ten shareholdings list;

(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship in the preceding three subparagraphs;

(5) Not a director, supervisor or employee of the institutional shareholder that holds over 5% of total stock issued directly or indirectly; and is not on the top-five shareholdings list of the Company;

(6) Not a director, supervisor, manager or a shareholder with over 5% shareholdings of a Company or organization that is in business with the Company;

(7) Not an owner, partner, Director, Supervisor, manager of a partnership or institution or his/her spouse that provides commerce, law, finance, accounting and consulting service to the Company or related party; this does not include members from a remuneration committee who exercises his/her power based on Article 7 of Regulations Governing the Appointment and Exercise of Powers by the Remuneration Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded over the Counter.

(8) Not the spouse or a relative within two degrees of lineal consanguinity of an individual;

(9) Free of any of the behaviors as defined in Article 30 of Company Act;

(10) Not a governmental officer, juridical person or its representative as defined in Article 27 of Company Act.

-15-

As of May 15, 2019
Manager Who has Spouse or Second Cousin
Status		 Relation Father and
Son		 Father and
Son		 None
Name Arthur Tsao Ter-Fung Tsao None
Title CEO Chairman
None
Current Position With Other Company Chairman of Standard Foods Corporation
Chairman of Standard Dairy Products Taiwan
Ltd.
Chairman of Domex Technology Corporation
Chairman of Standard Beverage Ltd.
Director of Accession Ltd.
Director of Polytronics Technology Corporation
Director of Green Wall Enterprise Co., Ltd.
Independent Director of PlexBio Co., Ltd.
Supervisor of Crosslink Semiconductor, Inc.
Director of Standard Investment (Cayman) Ltd.
Director of Standard Corp (HK) Ltd.
Director of Standard Investment (China) Ltd.
Chairman, Mu Te Investment Co., Ltd.
Director, Chia Yun Investment Co., Ltd.
Director, Chia Chieh Investment Co., Ltd.		 President of Standard Investment (China) Ltd.
President of Shanghai Standard Foods Co.
President of Standard Foods (China) Ltd.
President of Standard Foods (Xiamen) Co., Ltd.
President of Le Bonta Wellness Co., Ltd.
President of Shanghai Le Ben De Health
Technology Co., Ltd.
Chairman of Shanghai Dermalab Corporation
Chairman of Shanghai Le Ho Industrial Co.,
Ltd.
Chairman of Shanghai Le Min Industrial Co.,
Ltd.
President of Standard Dairy Products Taiwan
Ltd.
Chairman, Charng hui Ltd.
Director, Le Bonta Wellness International Co.
Director, Dermalab S.A.
Experience (Education) Ph.D., Colorado University, USA
R&D Director of Quaker
Plant Manager of Quaker (Taiwan)
General Manager of Quaker (Taiwan)
President of Standard Foods Corporation		 MBA, Stanford University, USA Master’s From Northwestern University
U.S.A. Attorney
Partner of Bluefield Ventures
Partner of Dubuglo
Vice President of California Pacific Bank
Vice President of the Supply Chain of Standard
Foods Corporation
President of Standard Foods
Shares Held by Other Persons in
Their Names		 Shareholding
Ratio%		 2.48 0 0
Shares 22,651,211 0 0
Shareholding of Spouse
and Minor		 Shareholding
Ratio%		 0 0 0
Shares 0 0 0
Shareholding Shareholding Ratio% 4.46 0.73 0.00
Shares 40,848,203 6,669,471 20,000
Date Elected
(Inaugurated)		 May 5, 2017 March 22, 2019 May 1, 2017
Gender Male Male Male
Name Ter-Fung
Tsao		 Arthur
Tsao		 Yao
Steven
Yih Chun
Nationality
or
Residency		 ROC ROC USA
Title Chairman CEO President

-16-

Manager Who has Spouse or Second Cousin
Status		 Relation None
Name None
Title None
Current Position With Other Company

Director of Standard Dairy Products Taiwan
Ltd.
Director of Standard Beverage Ltd.
Director of Domex Technology Corporation
Representative of Institutional Director,
GeneFerm Biotechnology Co., Ltd.
Supervisor of Shanghai Standard Foods Co.
Supervisor of Standard Investment (China) Ltd.
Supervisor of Standard Foods (China) Ltd.
Supervisor of Shanghai Dermalab Corporation
Supervisor of Le Bonta Wellness Co., Ltd.
Supervisor of Shanghai Le Ho Industrial Co.,
Ltd.
Supervisor of Shanghai Le Min Industrial Ltd.
Supervisor of Standard Foods (Xiamen) Ltd.
Experience (Education) Master, National Cheng Chi University.
Vice President of PriceWaterhouseCoopers CPA
Firm
President of Standard Dairy Products Taiwan
Ltd.
Shares Held by Other Persons in
Their Names		 Shareholding
Ratio%		 0
Shares 0
Shareholding of Spouse
and Minor		 Shareholding
Ratio%		 0
Shares 0
Shareholding Shareholding Ratio% 0.00
Shares 1,000
Date Elected (Inaugurated) September 30,
2015
Gender Female
Name Chris
Hong
Nationality or
Residency		 ROC
Title Group
CFO

-17-

Unit: NT$1,000 Remuneration
From the
Invested
Company Other
Than the
Company's
Subsidiaries		 Remuneration
From the
Invested
Company Other
Than the
Company's
Subsidiaries		 None None None None None None None * Except as Disclosed Above, Compensation Paid to Directors for the Services Rendered (e.g. non-employee consultants) to all Consolidated Entities in This Report: 0 Note 1: Expenses incurred in 2018.
Note 2: Net income stated in the Separate Financial Statements in 2018.
Ratio of A+B+C+D+E+F+G
to Net Income (%) (Note 2)
From all
Consolidated
Entities in
This Report		 0.39 0.10 0.10 0.22 0.10 0.10 0.10

From the
Company		 0.39 0.10 0.10 0.22 0.10 0.10 0.10
Remuneration of Part-time Employees Compensations for Employees (G) From all
Consolidated
Entities in This
Report
Stock		 - - - - - - -

Cash		 - - - - - - -
From the
Company		 Stock - - - - - - -
Cash - - - - - - -
Pension
(F)		 From all
Consolidated
Entities in
This Report		 239 - - 122 - - -
From the Company 239 - - 122 - - -
Salary, Bonus, and
Compensation (E)
(Note 1)		 From all
Consolidated
Entities in
This Report		 8,300 - - 3,400 - - -
From the Company 8,300 - - 3,400 - - -
Ratio of A+B+C+D to
Net Income (%) (Note
2)		 From all
Consolidated
Entities in
This Report		 0.10 0.10 0.10 0.10 0.10 0.10 0.10
From the Company 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Remuneration of Directors Business Expenses
(D)
(Note 1)		 From all
Consolidated
Entities in
This Report		 60 60 60 60 60 60 60
From the Company 60 60 60 60 60 60 60
Remuneration for
Directors
(C)		 From all
Consolidated
Entities in
This Report		 3,020 2,990 2,990 2,990 2,990 2,990 2,990
From the Company 3,020 2,990 2,990 2,990 2,990 2,990 2,990
Pension
(B)		 From all
Consolidated
Entities in
This Report		 - - - - - - -
From the Company - - - - - - -
Remuneration
(A)		 From all
Consolidated
Entities in
This Report		 - - - - - - -
From the Company - - - - - - -
Name Ter-Fung
Tsao		 Jason
Hsuan		 Wendy
Tsao		 Arthur
Tsao		 Ben
Chang		 George
Chou		 Daniel
Chiang
Title Chairman Director Director Director Independent
Director		 Independent
Director		 Independent
Director

-18-

Name of Directors Total Amount of the First Seven Categories (A+B+C+D+E+F+G) From all Consolidated
Entities in This Report		 0 Ben Chang, George Chou,
Daniel Chiang, Wendy Tsao,
Jason Hsua		 Arthur Tsao Ter-Fung Tsao 0 0 0 0 7 persons II.3.2. Remuneration of president and vice presidentUnit: NT$ thousands President Yao Steven
Yih Chun
4,600
4,600
173
173
2,600
2,600
0
0
0
0
0.25
0.25
None
Note 1: Net income stated in the Separate Financial Statements in 2018.
Note 2: Expenses incurred in 2018.
Note 3: Appropriation of pension expense for the contracted management.
Remuneration From an Invested Company Other
Than the Company's
Subsidiary		 None
From the Company 0 Ben Chang, George Chou, Daniel
Chiang, Wendy Tsao, Jason Hsua		 Arthur Tsao Ter-Fung Tsao 0 0 0 0 7 persons

Ratio of A+B+C+D to Net income
(%) (Note 1)		 From all
Consolidated
Entities in This
Report		 0.25
From the
Company		 0.25
Total Amount of the First Four Categories (A+B+C+D) From all Consolidated Entities
in This Report		 0 Ben Chang, George Chou, Daniel
Chiang, Ter-Fung Tsao, Jason Hsua,
Wendy Tsao, Arthur Tsao		 0 0 0 0 0 0 7 persons

Compensation for Employees (D)		 From all
Consolidated
Entities in This
Report
Stock		 0

Cash		 0
From the
Company		 Stock 0
Cash 0
From the Company 0 Ben Chang, George Chou, Daniel
Chiang, Ter-Fung Tsao, Jason Hsua,
Wendy Tsao, Arthur Tsao		 0 0 0 0 0 0 7 persons

Bonuses and Allowance
(C)
(Note 2)		 From all
Consolidated
Entities in
This Report		 2,600
From the
Company
(Note 2)		 2,600

Pension (B) (Note 3)		 From all
Consolidate
d Entities in
This Report		 173
Remuneration to Directors Below $2,000,000 2,000,000 (inclusive) - 5,000,000 (non-inclusive) 5,000,000 (inclusive) - 10,000,000 (non-inclusive) 10,000,000 (inclusive) - 15,000,000 (non-inclusive) 15,000,000 (inclusive) - 30,000,000 (non-inclusive) 30,000,000 (inclusive) - 50,000,000 (non-inclusive) 50,000,000 (inclusive) - 100,000,000 (non-inclusive) $100,000,000 and above Total
From the
Company		 173

Salary (A)
(Note 2)		 From all
Consolidated
Entities in
This Report		 4,600
From the
Company		 4,600
Name Yao Steven
Yih Chun
Title President

-19-

Name of President and Vice President From all Consolidated Entities in
This Report		 0 0 Yao Steven Yih Chun 0 0 0 0 0 1 person II.3.3Employee Compensations for Management
As of April 15, 2019; Unit: NT$ thousand

R&D Division
Hsin-Chuan
Wang
Marketing Division
Director
Yen-Lin
Cheng
E-Commerce
Director
Yi-Ting
Huang
Note 1: Net income stated in the Separate Financial Statements in 2018.		 R&D Division
Hsin-Chuan
Wang
Marketing Division
Director
Yen-Lin
Cheng
E-Commerce
Director
Yi-Ting
Huang
Note 1: Net income stated in the Separate Financial Statements in 2018.		 R&D Division
Hsin-Chuan
Wang
Marketing Division
Director
Yen-Lin
Cheng
E-Commerce
Director
Yi-Ting
Huang
Note 1: Net income stated in the Separate Financial Statements in 2018.

Ratio of the Total Amount
of Net Income (%)
(Note 1)		 0%

Total		 0
From the Company 0 0 Yao Steven Yih Chun 0 0 0 0 0 1 person
Cash 0
Stock 0
Remuneration to President and Vice President Below $2,000,000 2,000,000 (inclusive) - 5,000,000 (non-inclusive) 5,000,000 (inclusive) - 10,000,000 (non-inclusive) 10,000,000 (inclusive) - 15,000,000 (non-inclusive) 15,000,000 (inclusive) - 30,000,000 (non-inclusive) 30,000,000 (inclusive) - 50,000,000 (non-inclusive) 50,000,000 (inclusive) - 100,000,000 (non-inclusive) $100,000,000 and above Total
Name Ter-Fung
Tsao		 Yao Steven Yih
Chun		 Hsiang-Jung
Huang
Chris Hong		 Hsin-Chuan
Wang

Yen-Lin
Cheng
Yi-Ting
Huang
Title CEO President Sales Division
Director
Group CFO		 R&D Division Marketing Division
Director		 E-Commerce
Director
Management

-20-

Unit: Shares/NT$1,000 Total
24,719
24,719
1.14
1.14
28,753
28,753
0.97
0.97
(1) Analysis of the Remuneration to the Directors, Supervisors, and Presidents of the Company in Proportion to the Net Income After Tax Stated in the Separate Financial Statements of the
Last Two Years:
The ratio of the remunerations to the Directors, Supervisors, and Presidents of the Company to net income after tax of all companies included in the Consolidated Financial Statements paid
in 2018 indicated a decrease from 2017 mainly because the net income after tax of the Company in 2018 was increased as compared with 2017.
(2) Please refer to Provision (VIII) on page 48 for the payment policy of bonus to employees and remuneration to directors
II.4.2. Remuneration policies, standards, portfolio, procedures, and the relevance of operating performance and future risks:
The performance evaluation and remuneration of the Company’s directors, supervisors, and managers is determined by referring to the payment
standard of the industry, individual performance, Company’s operating performance and the reasonableness of related risk.
2018 Ratio of Total Amount to Net
Income After Tax (%)		 Companies
in the
Consolidated
Financial
Statements		 0.72 - 0.25 0.97
From the
Company		 0.72 - 0.25 0.97
Total Amount of
Remuneration		 Companies
in the
Consolidated
Financial
Statements		 21,380 - 7,373 28,753
From the
Company		 21,380 - 7,373 28,753
2017 Ratio of Total Amount to
Net Income After Tax (%)		 Companies
in the
Consolidated
Financial
Statements		 0.73 - 0.41 1.14
From the
Company		 0.73 - 0.41 1.14
Total Amount of Remuneration Companies in the
Consolidated
Financial
Statements		 15,869 - 8,850 24,719
From the
Company		 15,869 - 8,850 24,719
Title Director Supervisor President Total

-21-

III. Corporate governance III.1. Operation of the Board of Directors

The Board of Directors held 5 board meetings (A) last years, director and supervisor attendances were as follows:

asfollows:
Title Name Number of
Attendances
(B)		 Proxy
Attendance		 Ratio of
Attendances
(%) [B/A]		 Remarks
Chairman Mu Te Investment
Co., Ltd.
Representative:
Ter-FungTsao		 5 0 100%
Director Mu Te Investment
Co., Ltd.
Representative:
Jason Hsuan		 3 2 60%
Mu Te Investment
Co., Ltd.
Representative:
WendyTsao		 5 0 100%
Charng Hui Ltd.
Representative:
Arthur Tsao		 2 3 40%
Independent
Director		 Ben Chang 4 1 80%
George Chou 5 0 100%
Daniel Chiang 5 0 100%
Supplementary information:
1.
For board of director meetings that meet any of the following descriptions, state the date, session, the
subject matter, independent directors' opinions and how the company has responded to such opinions:
(1)
The events statedin Article14-3 ofthe Securities andExchangeAct:
Date of the Board of
Directors’ Meeting
(series)
Subject Matter
Independent
Directors'
Opinions and the
Response of the
Company
March 22, 2018
(The 9th Regular Session
of the 12th Board)
1.
Amendment to the “Operating Procedure for
Making Endorsements/Guarantees” of the
Company.
2.
Amendment to the “Procedure for the Loaning of
Funds” of the Company.
3.
The Company's undertaking of
endorsement/guarantee for the application filed by
its subsidiary, Standard Beverage Co., Ltd., with
ANZ Bank (Taiwan) Limited for a rollover of the
creditlimit.
Passed
by
all
Independent
Directors.
May 08, 2018
(The 10th Regular Session
ofthe12th Board)
The Company's disposition of real property including
land and factory premises in Wugu.

-22-

Date of the Board of
Directors’ Meeting
(series)		 Subject Matter Independent
Directors'
Opinions and the
Response of the
Company
August 07, 2018
(The 12th Regular Session
ofthe12th Board)		 Assessment of independence and competence of the
CPAs.
November 07, 2018
(The 13th Regular Session
of the 12th Board)		 The Company's undertaking of endorsement/guarantee
for the application filed by the Company's BVI
subsidiary, Eike Information Co., Ltd., for a rollover of
the creditlimit.

(2) Any Other Documented Objections or Qualified Opinions Raised by Independent Directors Against Board Resolutions in Relation to Matters Other Than Those Described Above That Were Included in Records or Stated in Writing: None.

  1. Names of the Directors Who Excused Themselves From the Meeting Due to a Conflict of Interest (the content of the case, the reason for the conflict of interest, and the voting must be stated in detail): None.

  2. The Objective of Fortifying the Function of the Board in the Current Year and the Most Recent Year and Assessment on the State of Attainment: None.

-23-

III.2. The operation of the Auditing Committee:

A total of 5 Audit Committee meetings (A) were held in the last year, and attendance of independent directors is as follows:

Title Title Name Number of
Attendances
(B)		 Proxy
Attendance		 Ratio of
Attendances (%)
[B/A]		 Remarks
Independent
Director		 BenChang 4 1 80%
George Chou 5 0 100%
DanielChiang 5 0 100%
Supplementary information:
1. For Audit Committee meetings that meet any of the following descriptions, state the
date and session of board of directors meeting held, the subject matter, the Audit
Committee's resolution, and how the company has responded to Audit Committee's
opinions:
(1) Conditions describedin Article14-5 ofthe Securities andExchangeAct:
Date of the Board of
Directors’ Meeting
(Series)
Subject Matter
Opinions of the
Audit Committee
and the Response of
the Company
March 22, 2018
(The 8th Regular
Session of the 1st
Board)
1. Amendment to the “Operating Procedure for
Making Endorsements/Guarantees” of the
Company.
2. Amendment to the “Procedure for the Loaning
of Funds” of the Company.
3. The Company's undertaking of
endorsement/guarantee for the application filed
by its subsidiary, Standard Beverage Co., Ltd.,
with ANZ Bank (Taiwan) Limited for a
rolloverofthe creditlimit.
All members of the
Audit Committee
passed the motion
in common consent.
May 08, 2018
(The 9th Regular
Session of the 1st
Board)
The Company's disposition of real property
including land and factory premises in Wugu.
August 07, 2018
(The 10th Regular
Session of the 1st
Board)
Assessment of independence and competence of
the CPAs.
November 07, 2018
(The 11th Regular
Session of the 1st
Board)
The Company's undertaking of
endorsement/guarantee for the application filed by
the Company's BVI subsidiary, Eike Information
Co.,Ltd.,forarolloverofthe creditlimit.
(2) Other than the conditions described above, any resolutions unapproved by the Audit
Committee but passed by more than two-thirds of directors: None.
2.
Avoidance of involvements in interest-conflicting agendas by Independent Directors, including
details such as the names of Independent Directors, the agenda, the nature of conflicting interests,
and the voting process: None.
3.
The communications between the Independent Directors and Chief Internal Auditor and the
CPAs: The Independent Directors of the Company engaged in dialogue and similar means of
communications with the CPAs regularly. Further to topics on accounting principles and financial
statements, they also exchanged views onsignificant changesin financialpositionand the state

-24-

of operation, or operation risk. The Chief Internal Auditor reports to the Independent Directors at regular intervals on matters of the internal control of the Company and related risk managements.

III.3. Supervisors’ involvements in Board of Directors meetings:

The Company has established the Audit Committee in replace of the supervisors on June 15, 2016.

-25-

(CGBPP) Non-compliance with the CGBPP
and reasons		 Non-compliance with the CGBPP
and reasons		 The Company complies with Article
2 of the Corporate Governance
Best-Practice Principles for
TWSE/TPEx Listed Companies.		 The Company complies with
Articles 10, 13, 14, 19 and 30 of the
Corporate Governance Best-Practice
Principles for TWSE/TPEx Listed
Companies.
 Except for Article 27, the Company
complies with Articles 20, 28-1 and
37 of the Corporate Governance
Best-Practice Principles for
TWSE/TPEx Listed Companies.
Status of Implementation
Performance Summary		 The Company has established the “Corporate Governance Best Practice Principles”
with provision in regarding to shareholder right protection, board functionality
enhancement, stakeholders’ rights and information transparency improvement.		 1.
To protect the rights and benefits of shareholders, the Company has established
the spokesperson, stock service, and legal affairs departments to handle
shareholders’ suggestions and disputes.
2.
The Company requests the latest list of major shareholders from the stock agent
at regular planned intervals to substantively maintain a list of major
shareholders and their beneficial owners; maintains good interaction with major
shareholders; and reports and discloses on MOPS relevant changes with
reference to the Taiwan Stock Exchange Corporation Procedures for
Verification and Disclosure of Material Information of Companies with Listed
Securities.
3.
The Company and affiliates implement independent management over assets,
sales, and finance. We have also established relevant regulations, including the
“Subsidiaries Supervision Regulations”, “Procedures for Acquisition and
Disposition of Assets,” “Procedures for Loaning of Company Funds,” and
“Procedures for Endorsements and Guarantees” to manage the risk management
mechanism and firewall of affiliates.
4.
The Company has established the “Insider Trading Prevention Regulations to
prohibit employees from trading securities with insider information.		 1.
The Company has established 4 seats of directors and 3 seats of independent
directors. Board of Directors and supervisors perform their professed duties in
accordance with applicable legal rules, the Articles of Incorporation and the
resolutions of the Shareholders’ Meeting.
2.
Apart from establishing the Remuneration Committee and Audit Committee
with reference to the Company Act, the Company did not establish other
functional committees.
No. �
Yes � �
�
�
�		 �
Assessment Item 1.
Does the Company establish and disclose
own corporate practice principles with
reference to the “CGBPP”?		 2.
Shareholding structure & shareholders’
rights:
(1) Does the Company establish and
implement the internal operation
procedures to handle shareholders’
suggestions, concern, disputes and
litigation matters?
(2) Does the Company maintain a list of
major shareholders and their
beneficial owners?
(3) Has the Company established and
implemented a risk management
mechanism and “firewall” between
the Company and its affiliates?
(4) Has the Company established
internal rules prohibiting insider
trading on undisclosed information?
3.
Formation and responsibility of the board
of directors:
(1) Does the Company establish and
implement diversified policies with
reference to board formation?
(2) After establishing the compensations
committee and audit committee by
the law, does the Company
voluntarily establish other functional
committees?

-26-

Non-compliance with the CGBPP
and reasons		 Non-compliance with the CGBPP
and reasons		 The Company complies with Article
3-1 of the Corporate Governance
Best-Practice Principles for
TWSE/TPEx Listed Companies.



The Company complies with Article
51 of the Corporate Governance
Best-Practice Principles for
TWSE/TPEx Listed Companies.		 The Company complies with Article
7 of the CGBPP.		 The Company complies with
Articles 55-58 of the Corporate
Governance Best-Practice Principles
for TWSE/TPEx Listed Companies.


 The Company complies with
Articles 55-58 of the Corporate
Governance Best-Practice Principles
for TWSE/TPEx Listed Companies.
Status of Implementation
Performance Summary		 3.
Based on the Compensations Committee Charter, the Compensations
Committee establishes and regularly reviews the annual and long-term
performance targets, remuneration policy, system, standard, and structure of
directors, independent Director, and managers.
4.
The Company hires one of the leading domestic CPA firms as our certifying
accountant. This firm is not a related party of the Company. The Company also
assesses the independence of the CPA.
The Company delegates a team dedicated to corporate governance projects. The
Group CFO holds the position as the corporate governance officer responsible for
promoting corporate governance affairs. The Group Finance Department will
provide real-time information to shareholders on the MOPS and the Company's
website to help control the name list of major shareholders holding a larger
proportion of the Company's shares from time to time, provide the Directors and
Supervisors with the information needed to perform their duties, convene Board
Meetings and Shareholders’ Meetings under laws, complete Company registration
and registration of changes in the Company registration, produce
Board/Shareholders’ Meeting minutes, and evaluate the independence and
competence of CPAs periodically.
The Company establishes the spokesperson system and makes good use of the
public information system to help shareholders and stakeholders verify the overview
of the Company's finance and corporate governance.
The Company also sets up a stakeholder site on the Company's website. The
stakeholders may reflect to the Company's contact person various corporate social
responsibility issues of concern to them, via phone or email.		 The Company assigns Transfer Agency Department of CTBC Bank Co., Ltd. to
provide shareholder services.		 1.
The Company has set up the website in Chinese and English versions to
disclose the relevant information about finance and corporate governance in the
“investment information” section therein.
The Company’s Website:www.sfworldwide.com
Dedicated personnel are appointed to maintain the website to ensure accurate
and timely information.
No.
Yes �
�		 �
�		 � �
Assessment Item (3) Does the Company establish board
performance evaluation regulations
and methods to evaluate board
performance every year?
(4) Does the Company assess the
independency of its CPAs?		 4.
For TWSE/TPEx-listed financial holding
companies, is there any unit or personnel
that specializes (or is involved) in
corporate governance affairs (including
but not limited to providing directors and
supervisors with the information needed
to perform their duties, convening board
meetings and shareholder meetings,
changing company registration,
maintaining board/shareholder meeting
minutes etc.)?
5.
Does the Company establish mechanisms
for communicating with stakeholders
(including but not limited to shareholders,
employees, customers and suppliers) and
a stakeholder site on the corporate
website to appropriately respond to
material CSR topics they concern about?
6.
Does the Company assign professional
registers to handle shareholder meeting
affairs?		 7.
Information disclosure		 (1) Does the Company establish a
website to disclose financial and
corporate governance information?

-27-

Non-compliance with the CGBPP
and reasons		 Non-compliance with the CGBPP
and reasons





The Company complies with Article
59 of the Corporate Governance
Best-Practice Principles for
TWSE/TPEx Listed Companies.
Status of Implementation
Performance Summary		 2.
The Company has appointed a spokesperson and a deputy spokesperson and
assigned a dedicated unit to gather and disclose corporate information. For
material information requiring public disclosure, we proceed with reference to
the “Taiwan Stock Exchange Corporation Procedures for Verification and
Disclosure of Material Information of Companies With Listed Securities”. We
have disclosed the process and relevant information on our corporate website
for the shareholders’ reference.		 1.
Employees benefits and care
(1)
Given that employee capital is one of the most important corporate
assets, the Company has established the Employee Work Rules with
reference to the Labor Standards Law and relevant laws and regulations
to define the rights, benefits, and obligations of employees.
(2)
The Company continuously and systematically improves employee
quality. Apart from arranging employee education and training, we
provide opportunities and funds for external training and cultivate
excellent employees through job rotation, project participation, and
guidance of senior officers.
(3)
The Company has established an employee welfare committee. Apart
from issuing cash gifts on major festivals and employee birthdays, we
subsidize employee club activities and travels and provide allowances
for weddings, funerals, childbirth, and occupational injury and disease.
In addition, we arrange health examination, group accident insurance,
and healthcare insurance for employees all at the Company’s expense.
(4)
The Company advocates labor safety and health, and has established a
complete system of proposals to encourage employees to give
suggestions on continued improvement and innovation. In addition, the
corporate culture of the Company emphasizes on pragmatic team spirit,
mutual respect, and mutual support to tackle with the challenges from
works.
2.
Investor relations: The Company discloses different kinds of information over
MOPS to protect the rights and benefits of investors. In addition, we have
established the “investor information” site on the corporate website to keep
investors posted with relevant corporate information. We have also provided
stock service contact information to maintain virtuous and harmonious
relations between the Company and shareholders.
3.
Supplier relations: The Company maintains unobstructed communication with
suppliers through unimpeded channels and conduct business with suppliers in a
fair and ethical manner, so as to establish long-term, steady, and mutual trust
cooperation and pursue sustainable growth together. In addition, we evaluate
No.
Yes
�		 �
Assessment Item (2) Does the Company disclose such
information by other methods (e.g.
English website, assigning a staff to
gather and disclose relevant
information, implementing the
spokesperson system, and posting the
conference call on the corporate
website)?		 8.
Does the Company disclose other
information for investors better
understand its corporate governance
practices (including but not limited to
employee rights and benefits, employee
care, investor relations, supplier relations,
stakeholder rights and benefits, training
for directors and Audit Committee,
implementation of risk management
policies and risk assessment standards,
implementation of customer relations
policies, and insurance for directors and
Audit Committee)?

-28-

Non-compliance with the CGBPP
and reasons		 Non-compliance with the CGBPP
and reasons		 9.
Please explain the improvements made based on the last Corporate Governance Evaluation results released by TWSE Corporate Governance Center, and propose improvement
measures for any issues that are yet to be rectified: The Company has implemented self-evaluation of corporate governance regularly in compliance with relevant laws and
regulations. In the future, the Company will continue to strengthen the corporate governance in the aspects of improvement and protection of shareholder rights, equal
treatments to all shareholders, enhancement of board structure and enhance information transparency.
Status of Implementation
Performance Summary		 suppliers at planned intervals to select good suppliers as our partners.
4.
Stakeholder rights: The Company provides unimpeded channels to
communicate with stakeholders and respects and maintains their rights and
benefits proper. If any concerns arise against stakeholders’ legitimate rights,
the Company will properly handle based on the principle of good faith.
5.
Further Education for Directors and Audit Committee Members: Directors and
Audit Committee Members of the Company are all professionals in their
respective fields. Please refer to the Appendix on page 23 for a summary of
training for Directors in 2018.
6.
Risk Management Policy and Risk Assessment: Please refer to "Risk
Management Last Year and by Report Publishing Date" on pages 262-264 for
the details of the risk management policy, organizational framework, and
relevant risk controls of the Company. In addition, the Company has analyzed,
followed up on, and addressed events that could cause high risk to operational
goals to optimize the risk management mechanism.
7.
Customer service policy: The Company has set up a customer service line to
provide an impeded channel for customer communication. We also actively
participate in relevant food safety associations, perform our member
responsibilities and obligations, care about community care and philanthropy,
and apply for relevant health food certification.
8.
Insurance for directors and members of Audit Committee: the Company has
insured itself against liabilities of its directors and members of Audit
Committee.
No.
Yes
Assessment Item

-29-

Training
Hours		 3 3 3 3 3 3
Course Name Corporate governance and securities laws & regulations -
study on compliance with business merger and acquisition
laws and related legal liability
Interpretation of technology and accounting practices and
focus of internal audit/internal control		 How
directors
and
supervisors
review
internal
control/internal audits, and talk about the whistleblowing
system
Accounting/information disclosure strategy and corporate
governance
Effect of blockchain development on enterprises		 Notes to the update of the company act and new taxation
requirements applicable to mainland china and foreign
nationals

Organizer		 Accounting Research
and Development
Foundation		 Accounting Research
and Development
Foundation		 Taiwan Corporate
Governance		 Association Taiwan Corporate
Governance
Association

Training
Date		 May 03,
2018		 December
19, 2018		 August 08,
2018		 November
09, 2018

Name		 Ter-Fung
Tsao		 George
Chou		 Daniel
Chiang

Title		 Chairman Independent
Director		 Independent
Director

-30-

By identity
(Note 1)
Name
Also an
compensation
committee
member of
another public
company
Remarks
Teachers of public
or private colleges
for the subject of
commerce, law,
finance,
accounting, or
business
Judge, prosecutor,
attorney, accountant,
or business salesperson
who passed national
exams & certified
specialists or
technicians
With job
experience in
commerce, law,
finance,
accounting, or
business
1
2
3
4
5
6
7
8
Independent
Director
Ben Chang
V
V
V
V
V
V
V
V
V
2
-
Independent
Director
George Chou
V
V
V
V
V
V
V
V
V
3
-
Independent
Director
Daniel Chiang
V
V
V
V
V
V
V
V
V
1
-
Note 1: Please specify whether it’s director, independent director, or other under “Position”;
Note 2: Please tick the corresponding items when directors and supervisors comply with the following conditions two years before being elected and during their term.
(1) Not an employee of the Company or any subsidiary.
(2) Not a director or supervisor of affiliated companies except an independent director of an investee of the Company, of the parent of the Company, or subsidiaries, as appointed in
accordance with the Securities and Exchange Act or with the laws of the country of the parent or subsidiary.
(3) Does not hold more than 1% of total stock issued directly or indirectly nor is a natural shareholder on the top-ten shareholdings list;
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship in the above three items.
(5) Not a director, supervisor or employee of the institutional shareholder that holds over 5% of total stock issued directly or indirectly; and is not the top five shareholders of the
Company;
(6) Not a director, supervisor, manager or a shareholder with over 5% shareholdings of a company or organization that has business with the Company;
(7) Not a professional or an owner, partner, director, supervisor, officer, or spouse of a sole proprietorship, partnership, company, or institution that providing commercial, legal,
financial, and accounting services or consultation to the Company or its affiliates.
(8) No violation of any items specified in Article 30 of the Company Act.		 By identity
(Note 1)
Name
Also an
compensation
committee
member of
another public
company
Remarks
Teachers of public
or private colleges
for the subject of
commerce, law,
finance,
accounting, or
business
Judge, prosecutor,
attorney, accountant,
or business salesperson
who passed national
exams & certified
specialists or
technicians
With job
experience in
commerce, law,
finance,
accounting, or
business
1
2
3
4
5
6
7
8
Independent
Director
Ben Chang
V
V
V
V
V
V
V
V
V
2
-
Independent
Director
George Chou
V
V
V
V
V
V
V
V
V
3
-
Independent
Director
Daniel Chiang
V
V
V
V
V
V
V
V
V
1
-
Note 1: Please specify whether it’s director, independent director, or other under “Position”;
Note 2: Please tick the corresponding items when directors and supervisors comply with the following conditions two years before being elected and during their term.
(1) Not an employee of the Company or any subsidiary.
(2) Not a director or supervisor of affiliated companies except an independent director of an investee of the Company, of the parent of the Company, or subsidiaries, as appointed in
accordance with the Securities and Exchange Act or with the laws of the country of the parent or subsidiary.
(3) Does not hold more than 1% of total stock issued directly or indirectly nor is a natural shareholder on the top-ten shareholdings list;
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship in the above three items.
(5) Not a director, supervisor or employee of the institutional shareholder that holds over 5% of total stock issued directly or indirectly; and is not the top five shareholders of the
Company;
(6) Not a director, supervisor, manager or a shareholder with over 5% shareholdings of a company or organization that has business with the Company;
(7) Not a professional or an owner, partner, director, supervisor, officer, or spouse of a sole proprietorship, partnership, company, or institution that providing commercial, legal,
financial, and accounting services or consultation to the Company or its affiliates.
(8) No violation of any items specified in Article 30 of the Company Act.		 By identity
(Note 1)
Name
Also an
compensation
committee
member of
another public
company
Remarks
Teachers of public
or private colleges
for the subject of
commerce, law,
finance,
accounting, or
business
Judge, prosecutor,
attorney, accountant,
or business salesperson
who passed national
exams & certified
specialists or
technicians
With job
experience in
commerce, law,
finance,
accounting, or
business
1
2
3
4
5
6
7
8
Independent
Director
Ben Chang
V
V
V
V
V
V
V
V
V
2
-
Independent
Director
George Chou
V
V
V
V
V
V
V
V
V
3
-
Independent
Director
Daniel Chiang
V
V
V
V
V
V
V
V
V
1
-
Note 1: Please specify whether it’s director, independent director, or other under “Position”;
Note 2: Please tick the corresponding items when directors and supervisors comply with the following conditions two years before being elected and during their term.
(1) Not an employee of the Company or any subsidiary.
(2) Not a director or supervisor of affiliated companies except an independent director of an investee of the Company, of the parent of the Company, or subsidiaries, as appointed in
accordance with the Securities and Exchange Act or with the laws of the country of the parent or subsidiary.
(3) Does not hold more than 1% of total stock issued directly or indirectly nor is a natural shareholder on the top-ten shareholdings list;
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship in the above three items.
(5) Not a director, supervisor or employee of the institutional shareholder that holds over 5% of total stock issued directly or indirectly; and is not the top five shareholders of the
Company;
(6) Not a director, supervisor, manager or a shareholder with over 5% shareholdings of a company or organization that has business with the Company;
(7) Not a professional or an owner, partner, director, supervisor, officer, or spouse of a sole proprietorship, partnership, company, or institution that providing commercial, legal,
financial, and accounting services or consultation to the Company or its affiliates.
(8) No violation of any items specified in Article 30 of the Company Act.		 By identity
(Note 1)
Name
Also an
compensation
committee
member of
another public
company
Remarks
Teachers of public
or private colleges
for the subject of
commerce, law,
finance,
accounting, or
business
Judge, prosecutor,
attorney, accountant,
or business salesperson
who passed national
exams & certified
specialists or
technicians
With job
experience in
commerce, law,
finance,
accounting, or
business
1
2
3
4
5
6
7
8
Independent
Director
Ben Chang
V
V
V
V
V
V
V
V
V
2
-
Independent
Director
George Chou
V
V
V
V
V
V
V
V
V
3
-
Independent
Director
Daniel Chiang
V
V
V
V
V
V
V
V
V
1
-
Note 1: Please specify whether it’s director, independent director, or other under “Position”;
Note 2: Please tick the corresponding items when directors and supervisors comply with the following conditions two years before being elected and during their term.
(1) Not an employee of the Company or any subsidiary.
(2) Not a director or supervisor of affiliated companies except an independent director of an investee of the Company, of the parent of the Company, or subsidiaries, as appointed in
accordance with the Securities and Exchange Act or with the laws of the country of the parent or subsidiary.
(3) Does not hold more than 1% of total stock issued directly or indirectly nor is a natural shareholder on the top-ten shareholdings list;
(4) Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship in the above three items.
(5) Not a director, supervisor or employee of the institutional shareholder that holds over 5% of total stock issued directly or indirectly; and is not the top five shareholders of the
Company;
(6) Not a director, supervisor, manager or a shareholder with over 5% shareholdings of a company or organization that has business with the Company;
(7) Not a professional or an owner, partner, director, supervisor, officer, or spouse of a sole proprietorship, partnership, company, or institution that providing commercial, legal,
financial, and accounting services or consultation to the Company or its affiliates.
(8) No violation of any items specified in Article 30 of the Company Act.
Remarks - - -
Also an
compensation
committee
member of
another public
company		 2 3 1
Independence (Note 2) 8 V V V
7 V V V
6 V V V
5 V V V
4 V V V
3 V V V
2 V V V
1 V V V

With or without five years of work experience or more and the
following professional experience
With job
experience in
commerce, law,
finance,
accounting, or
business		 V V V
Judge, prosecutor,
attorney, accountant,
or business salesperson
who passed national
exams & certified
specialists or
technicians
Teachers of public
or private colleges
for the subject of
commerce, law,
finance,
accounting, or
business
Conditions Name Ben Chang George Chou Daniel Chiang
By identity
(Note 1)		 Independent
Director		 Independent
Director		 Independent
Director

-31-

Remarks Supplementary information:
(1) If the board dissents or modifies the recommendation made by the committee, specify the date and term of the board meeting and
proposal content, board resolution and handling of committee opinion: N/A.
(2) When members dissent or have reservations of a resolution made at the committee meeting with track records or written statements,
specify the date and term of the committee meeting, proposal content, opinion of all members, and handling of their opinion: N/A.
Ratio of attendances
(B / A) (%)		 100% 100% 100%
Number of
attendances (B)		 2 2 2
Name Ben Chang
George Chou		 Daniel Chiang
Title Convener Committee
members		 Committee
members

-32-

Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons		 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons		 The Company complies with the
Corporate Social Responsibility
Best Practice Principles for
TWSE/TPEX Listed Companies.










The Company complies with the
Corporate Social Responsibility
Best Practice Principles for
TWSE/TPEX Listed Companies.
Implementation
Performance Summary		 1.
The Company has established the “CSR Best Practice Principles” and actively
implemented environmental protection and energy conservation, and involved
in social charity events.
2.
The Company provides education on occupational safety and health and
arranges disaster response exercises at planned intervals.
3.
The Company has formed a dedicated team to promote CSR and related affairs
and report the results to the management.
4.
The Company has defined the organizational reward and punishment policies in
the “Employee Work Rules” and has established a well-planned system to
evaluate employee performance and reward excellent employees.		 1.
The main packaging materials adopted by the Company’s products are
categorized into glass, iron/aluminum cans, plastic and paper cases, etc., by
nature, which are selected based on the four indicators:
(1). Quality and Safety: All packaging materials holding food comply with the
“Sanitation Standard for Food Utensils, Containers, and Packages” to ensure
the safety of the packaging materials.
(2). Environmental Protection and Recycling: The packaging of all products bears
the CNS recycling mark to remind consumers that the packaging may be
recycled after using the products, and the paper cases are made of eco-friendly
pulp. The Company selects suppliers who pass product certification, and uses
its best efforts to reduce consumption of the consumables for packaging
materials in order to mitigate the rapid decrease of trees due to human being’s
excessive development and to do its best for the environment and ecology in
which human beings are living.
No
Yes �
�
�
�		 �
Assessment Item 1.
Corporate governance promotion		 (1) Does the Company establish a CSR policy
or system and review the effectiveness of
implementation?
(2) Does the Company arrange CSR training
on a regular basis?
(3) Does the Company establish a dedicated
(concurrent) unit to promote CSR with
authorization from top management and to
report the effectiveness of implementation
to the board?
(4) Does the Company establish a fair
compensations policy combing with the
employee performance evaluation system
and CSR policy and an effective and
well-defined reward and punishment
system?		 2.
Development of a sustainable environment:
(1) Does the Company make efforts to
enhance resource efficiency and use
recycled materials with lower
environmental impact?

-33-

Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons







 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons







 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons
Implementation
Performance Summary		 (3). Waste Reduction: The packaging and design of such products as gift boxes
have been reviewed and approved in accordance with the “Excessive Product
Packaging Restriction” laws and regulations promulgated by Environmental
Protection Administration before the product hits the market, in order to
prevent the packaging from deriving excessive waste and to protect the
environment on the earth.
(4). Green Ecology: Given the increasing green consumption consciousness, paper
packaging materials adopted by bulk products, which pass FSC certification,
account for 87.6% of all packaging materials, including the long-life milk
series already adopting 100% packing materials with FSC certification.
Note: The source of data refers to the data for packaging materials adopted by
the products generating top 10 sales of the Company's Dayuan Factory and by
the products generating top 2 sales of the Company's Zhongli Factory. The
proportion of recycled pulp in the gross weight of the packaging materials
refers to the gross weight of recycled eco-friendly pulp ÷ the gross weight of all
packaging materials as adopted.
The proportion of recycled pulp in the gross weight
No
Yes
Assessment Item

-34-

Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons		 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons

The Company complies with the
Corporate Social Responsibility
Best Practice Principles for
TWSE/TPEX Listed Companies.
Implementation
Performance Summary		 2.
The Company always spares no effort to protect the environment in response to
the environmental protection policies promoted by the government. The
Company implements environment management and environmental equipment
inspections, and also establishes a dedicated unit to engage in transportation,
maintenance, and improvement of various pollution equipment. Meanwhile, the
Company adopts a management model consisting of planning (P), deployment
(D), checking (C), and auditing (A) to set the indicators about the consumption
of power, water, waste water emission, waste articles, and waste gas emission to
help it control said conditions from time to time.
In response to the implementation of ISO 14001 environmental management
system, the Company has successively adopted the air pollution control
procedure, wastewater control procedure, industrial waste management
regulations, toxic chemical substance operation control, operating standards for
noise control, and operating procedures for management of water dispensers
since November 2014.
3.
The Company aggressively implements various energy conservation and
emission reduction policies. Apart from implementing continuous process
monitoring and equipment efficiency enhancement, we have implemented
energy conservation management with different means,
such as recycling condensate and hot water from bottle washers to save water
and reduce wastewater, installing the dissolved air flotation (DAF) equipment at
the wastewater treatment system, increasing wastewater treatment, and
enhancing fuel and electricity efficiency, so as to achieve targets for energy
conservation, emissions reduction, and GHG reduction.		 1.
The Company has established the “Employee Work Rules” to protect the rights
and benefits of employees and contributed pension funds for employees. The
Company has also established the Employee Welfare Committee to undertake
various employee welfare affairs.
2.
The Company has established a grievance system and procedures as defined in
the “Measures for Workplace Sexual Harassment Prevention” and Regulations
for Grievances and Punishment”. The Company has also established the
Grievance Address Committee to implement the grievance system. Apart from
reporting grievances to the committee, employees can file their grievances by
grievance hotline or e-mail.
No
Yes �

�
�
�
Assessment Item (2) Does the Company establish an
appropriate environmental management
system (EMS) according to the
characteristics of its industry?
(3) Has the Company noticed the effect of
climate change on its business activities
and does it implement GHG inventory and
establish an energy conservation and GHG
reduction strategy?		 3.
Implementation of philanthropy
(1)
Does the Company establish relevant
management policies and procedures with
reference to relevant international
regulations and international human
rights treaties?
(2)
Does the Company establish mechanisms
and channels for and properly handle
employee grievances?

-35-

Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons

 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons

 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons
Implementation
Performance Summary		 3.
The Company implements education and training on labor safety and health
whenever new employees come onboard, and conducts a health examination for
workers at all of the plants in August. In addition, the Company also feeds the
employees with information on occupational safety and health of the work
environment from time to time.
4.
The Company holds the employer-employee (labor/management) meeting at
planned intervals and has set up a suggestion box on the intranet mechanism to
interact with employees. In addition, the Company gives notices to employees
through harmonious employer-employee communication and maintains sound
and harmonious employer-employee relations, to prevent significant operational
changes.
5.
The Company provides a diversified learning environment, by virtue of the
systematic general education courses, inter-departmental on-the-job training
and practice, research counseling from senior consultants, participating in
projects, attendance at theme meetings, inter-departmental and inter-company
job rotation, management’s continuing education abroad, and self-learning by
reading designated reading materials, in order to facilitate personal and team
development and growth.
6.
The Company provides a hotline of the contact window for stakeholders on the
corporate website to provide immediate services and assistance so as to
maintain and protect consumer rights and benefits.
7.
The Company labels foods and manages advertisements with reference to the
“Act Governing Food Safety and Sanitation” and discloses ingredient supplier
information with reference to the “Regulations Governing the Registration of
Food Businesses”.
8.
The Company evaluates each supplier prior to having business with them. The
evaluation also includes if suppliers have food safety records and assesses the
severity of their offences, so as to select excellent suppliers as partners through
the supplier evaluation process.
9.
Given food safety is the most important thing to protect consumer rights and
benefits, although the Company does not include CSR-related terms in
contracts signed with suppliers, through periodic visits and annual evaluation
and audit of active suppliers, the Company reinforces supplier management to
ensure the quality (Q), cost (C), delivery (D), and service (S) of suppliers and
ingredients conform to production needs and thereby ensure consumer health
No
Yes
�
�
�

�
�
�
�
Assessment Item (3)
Does the Company provide employees
with a safe and healthy work environment
and regularly arrange safety and health
training/education for employees?
(4)
Does the Company establish mechanisms
for periodic employee communication
and reasonably notify employees of
significant operational changes that could
substantially affect them?
(5)
Does the Company establish effective
training programs for employees to
develop employability?
(6)
Does the Company establish policies and
procedures to protect consumer rights and
benefits in R&D, procurement,
production, operation, and service
processes?
(7)
Does the Company follow relevant
regulations and international standards to
market and label products and services?
(8)
Does the Company assess if suppliers
have records of causing impacts on the
environment and society?
(9)
When signing contracts with major
suppliers, does the Company include the
following terms in the contract: when
suppliers violate the Company’s CSR
policy and have significant impact on the
environment and society, the Company

-36-

Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons		 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons		 Non-compliance with the Corporate
Social Responsibility Best Practice
Principles for TWSE/TPEX Listed
Companies and Reasons		 The Company complies with the
Corporate Social Responsibility
Best Practice Principles for
TWSE/TPEx Listed Companies.		 5.
If the Company has established own code of CSR practice with reference to the “Corporate Social Responsibility Best Practice Principles for TWSE/TPEX Listed Companies,”
specify its operation and non-compliance with the best practice principles: The Company has established and put into practice the “Corporate Social Responsibility Best Practice” in
compliance with the principles.		 6.
Other material information enabling a better understanding of CSR implementation: Major activities sponsored by the Company last year		 7.
If the organizational CSR report has passed the verification standards of relevant certification authorities, please specify: The Company’s CSR Report has been verified by Deloitte
Taiwan with the limited assurance report.

Beneficiary		 Taoyuan City Health Family Education Association Taiwanese Association of Diabetes Educators Taiwan Association for Food Science and Technology
Taiwan Economy and Industry Association		 Yu-Cheng Social Welfare Foundation Changhua County Private Christian Joy Nursery Good Shepherd Social Welfare Foundation Taiwan Institute of Directors Hualien Road Running Association Consumers’ Foundation, Chinese Taipei
Implementation
Performance Summary		 and safety. The Company has formed a dedicated team to promote CSR affairs, and has
completed the CSR Reports for 2015-2017 and established the “CSR” site on the
Company's website for the public to download the same Report from the site.

Item		 11 12 13 14 15 16 17 18 19 20

Beneficiary		 Chinese Christian Relief Association Taipei Communications Educational Foundation Taipei Trend Study Educational Foundation
Chinese Taiwan Businessmen Unite Promotion
Association		 Sun Yun-suan Foundation Taiwan Functional Food Industry Association Hai Ching Foundation Chinese Christian Evangelistic Association Taipei Campus Evangelical Fellowship International Life Sciences Institute Taiwan
No
Yes �
Assessment Item may terminate or rescind the contract at
any time?
4.
Reinforcement of disclosure of CSR
information.
(1)
Does the Company disclose relevant and
reliable CSR information on the
corporate website and MOPS?

Item		 1 2 3 4 5 6 7 8 9 10

-37-

Non-compliance with Ethical
Corporate Management Best
Practice Principles for
TWSE/TPEX Listed Companies
and Reasons		 Non-compliance with Ethical
Corporate Management Best
Practice Principles for
TWSE/TPEX Listed Companies
and Reasons		 The Company complies with the
Ethical Corporate Management
Best Practice Principles for
TWSE/TPEX Listed Companies.		 The Company complies with the
spirit of the Ethical Corporate
Implementation Performance Summary The Company has established the “ Ethical Corporate Management Best Practice
Principles” and specified clearly in the “Ethical Corporate Management Best
Practice Principles” and “Employees Work Rules” that employees are not allowed
to extort treatments, gifts, kickbacks, or benefits of any form based on their
authority. The Company also makes known to employees that “maintaining
business integrity through fair and ethical operations” is the backbone policy of
Standard Foods. To protect organizational trade secrets and intellectual property,
employees are requested to sign a “letter of undertaking” to promise not to accept
commissions, kickbacks, paybacks, cash, loans, orundue or improper
advantage (including, but not limited to, treatment or travel or gift). In
addition, the Company has specified the policy for avoiding conflicts of
interest in the “Rules of Procedure for Board Meetings”.		 The Company does not accept cash gifts or kickbacks of any kind from suppliers
to ensure reasonable prices and premium quality. The Company’s human
No
Yes �
�
�		 �
Assessment Item 1.
Policies and plans for fair and
ethical business operations
(1) Does the Company specify its
policies and practices to
maintain fair and ethical
business operations in relevant
regulations and external
documents? Do the board and
management actively
implement the commitments
made in relevant policies?
(2) Does the Company draw up
programs to prevent unethical
conduct and set out in each
program and implement SOPs,
conduct guidelines, penalties
for violation, and a grievance
system?
(3) Does the Company take
precautionary action to prevent
business activities specified in
paragraph 2 of Article 7 of the
Ethical Corporate Management
Best Practice Principles for
TWSE/TPEX Listed
Companies and other business
activities within its scope of
business with higher behavioral
risk?		 2.
Implementation of fair and ethical
business operations
(1) Does the Company assess if
trading counterparts involved in

-38-

Non-compliance with Ethical
Corporate Management Best
Practice Principles for
TWSE/TPEX Listed Companies
and Reasons		 Non-compliance with Ethical
Corporate Management Best
Practice Principles for
TWSE/TPEX Listed Companies
and Reasons		 Management Best Practice
Principles for TWSE/TPEX
Listed Companies.		 The Company complies with the
spirit of the Ethical Corporate
Management Best Practice
Implementation Performance Summary resources unit is the dedicated (concurrent) unit to promote fair and ethical
business operations. In addition, the Company has established a sound internal
control system where internal auditors audit the performance of each unit at
planned intervals.
When new employees report to the Company, the human resources unit will
inform them of the Company’s fair and ethical business operations. In addition,
we have established a laws and regulations site on the intranet to provide
employees with relevant legal knowledge.		 Coordinated by the human resources unit, the Company’s audit unit accepts
reports on unfair and unethical business operations, and such reports and reward
system, investigation standards and protection measures for informers are handled
No
Yes �
�
�
�		 �
Assessment Item any unfair and unethical
business operations and include
the fair and ethical business
operations clause in the
transaction agreement signed
with them?
(2) Does the Company establish a
dedicated (concurrent) unit
directly under the board to
promote fair and ethical
business operations and report
the effectiveness of
implementation directly to the
board?
(3) Does the Company establish
and implement policies to
prevent conflicts of interest and
provide appropriate channels
for reporting such conflicts?
(4) Has the Company established
effective accounting and
internal control systems to
implement fair and ethical
business operations? Does the
Company have these system
audited regularly by the internal
audit unit or a CPA?
(5) Does the Company arrange
regular internal/external
training/ education for fair and
ethical business operations?
3.
Operation of the whistleblower
system
(1) Does the Company establish a
practical whistleblower and
reward system and channels to

-39-

Non-compliance with Ethical
Corporate Management Best
Practice Principles for
TWSE/TPEX Listed Companies
and Reasons		 Non-compliance with Ethical
Corporate Management Best
Practice Principles for
TWSE/TPEX Listed Companies
and Reasons		 Principles for TWSE/TPEX
Listed Companies.		 The Company complies with the
spirit of the Ethical Corporate
Management Best Practice
Principles for TWSE/TPEX
Listed Companies.

5.
If the Company has established own code of business ethics with reference to the “Ethical Corporate Management Best Practice Principles for TWSE/TPEX Listed
Companies,” specify its operation and non-compliance with the best practice principles:
The Company has established the “Ethical Corporate Management Best Practice Principles” and put it into practice in compliance with the best practice principles.
6.
Other material information enabling a better understanding of fair and ethical business operations (such as review and revise the code of business ethics):
(1) The Company always observes the Company Act, Securities and Exchange Act, Business Entity Accounting Act, relevant rules and regulations governing
TWSE/TPEX listed companies, and other business behaviors to implement fair and ethical business operations.
(2) The Company has specified the policy for avoiding conflicts of interest in the “Rules of Procedure for Board Meetings”. Under this policy, for proposals constituting a
conflict of interest between himself/herself or his/her representatives that may harm the interest of the Company, a director may express opinions and answer to
interpellation but is not allowed to join relevant discussions and vote for the proposal. In addition, this director should recur from the discussions and voting of the
proposal.
(3) The Company has established the “Insider Trading Prevention Regulations” to prohibit directors, managers, and employees from disclosing material internal
information to a third party or from enquiring or collecting undisclosed material internal information unrelated with own duties from those acknowledging such
material internal information.
They are also requested not to disclose to others undisclosed material internal information acknowledged from work.
Implementation Performance Summary with reference to the Company’s “Ethical Corporate Management Best Practice
Principles” and human resources regulations.		 The Company posts the annual report on the corporate website for investors to
download to understand relevant information.
No
Yes �
�		 �
Assessment Item facilitate reporting of unfair and
unethical business operations
and assign appropriate
personnel to handle a reported
case?
(2) Does the Company establish a
SOP and a non-disclosure
mechanism of relevant
investigations?
(3) Does the Company establish
and implement an informer
protection policy to ensure no
informer will receive indecent
treatment?		 4.
Reinforcement of information
disclosure
(1) Does the Company disclose the
content and effectiveness of
implementation of the Code of
Business Ethics on the
corporate website and MOPS?

-40-

-41-

III.10. Status of implementation of the internal control system III.10.1. Statement of Internal Control

Standard Foods Corporation Statement of Compliance of the Internal Control System

Date: March 22, 2019

This Company makes the following statements on the compliance of the internal control system in 2018 with reference to self-assessment results.

  1. We understand that it is the responsibility of the Company's management to establish, implement, and maintain the internal control system. The Company has established the internal control system to provide a reasonable assurance for the realization of operating effectiveness and efficiency (including profits, performance, and assets safety), the reliability, timeliness, transparency, and compliance of reports, and the conformity to relevant laws and regulations.

  2. The internal control system is designed with limitations; therefore, no matter how perfect it is designed, an effective internal control system ensures only the realization of the aforementioned three objectives. Due to the changes in the environment and conditions, the effectiveness of an internal control system could change at any time. Our internal control system is designed with self-monitoring mechanisms; therefore, we are able to have corrective actions initiated upon identifying any nonconformity.

  3. We have based the internal control criteria on the “Regulations Governing Establishment of Internal Control Systems by Public Companies” (referred to as “the Governing Rules” hereinafter) to determine the effectiveness of internal control design and enforcement. The internal control criteria of the “Governing Rules” are the management control processes. The internal control, are divided into five elements: (1) environment control, (2) risk analysis, (3) control process, (4) information and communication, and (5) supervision. Each element is subdivided into several items. Please refer to the “Governing Rules” for the details of the said items.

  4. We have established the aforementioned internal control criteria to assess the effectiveness of internal control design and enforcement.

  5. According to the aforementioned assessment results, the Company’s internal control system on December 31, 2018 (including the supervision and management of subsidiaries), including the understanding of business performance and efficiency, the reliability, timeliness, transparency, and regulatory compliance of reports, the conformity to governing regulations, and the design and enforcement of the internal control system are effective and feasible to ensure the realization of the aforementioned objectives.

  6. The Declaration of Internal Control is in our annual report and prospectus for public information. For any forgery and concealment of the aforementioned information to the public, we will be held responsible by law in accordance with Securities Transaction Regulation No. 20, No. 32, No. 171 and No. 174.

  7. We hereby declare that the Declaration of Internal Control was approved by the seven directors at the board meeting unanimously on March 22, 2019

Standard Foods Corporation

Chairman: Ter-Fung Tsao (Signature)

President: Yao Steven Yih Chun (Signature)

-42-

III.10.2. The CPA audit review should be disclosed if the internal control system is audited by a CPA: None.

III.11. Punishment of the Company and employees by the law, punishment of employees by the Company for violation of internal control system regulations, and major defects and improvement in last year and by the report publishing date: None.

III.12. Major resolutions made at the shareholders’ meeting and board meeting in last year and by the report publishing date:

(1) Major resolutions made at board meetings in last year are listed as follows:

Date Meeting Proposals Resolutions
March 22,
2018		 Board of
Directors		 1.
The motion for the Company’s
Financial Statements and
Consolidated Financial Statements for
2017.
2.
The motion for the distribution of
2017 earnings.
3.
The motion for the allocation of the
remuneration to Directors and
compensation for employees in 2017.
4.
The motion for amendment to the
“Operating Procedure for Making
Endorsements/Guarantees” of the
Company.
5.
The motion for amendment to the
“Procedure for the Loaning of Funds”
of the Company.
6.
The motion for the Company’s
Statement of Compliance with the
Internal Control System 2017.
7.
The motion of the application for a
rollover of the credit limit with Mega
Bank amounting to NT$300 million.
8.
The motion for the Company's
undertaking of endorsement/guarantee
for the application filed by its
subsidiary, Standard Beverage Co.,
Ltd., with ANZ Bank (Taiwan)
Limited for a rollover of the credit
limit amounting to US$5 million.
9.
The motion for amendment to the
“Articles of Association of the Audit
Committee” of the Company.
10. The motion for establishment of the
“Regulations Governing the
Performance Evaluation of Directors
andManagers”.		 1. Unanimously approved as
proposed by all attending
Directors.
2. Unanimously approved as
proposed by all attending
Directors.
3. Unanimously approved as
proposed by all attending
Directors.
4. Unanimously approved as
proposed by all attending
Directors.
5. Unanimously approved as
proposed by all attending
Directors.
6. Unanimously approved as
proposed by all attending
Directors.
7. Unanimously approved as
proposed by all attending
Directors.
8. Unanimously approved as
proposed by all attending
Directors.
9. Unanimously approved as
proposed by all attending
Directors.
10.Unanimously approved as
proposed by all attending
Directors.

-43-

Date Meeting Proposals Resolutions
11. The motion of the authorization of the
Chairman to act on behalf of and in
the name of the Company in affixing a
signature to documents related to
financing and derivatives trading.
12. The motion of setting the date and the
agenda for the General Shareholders’
Meeting of 2018.
13. The motion of the payment of salaries
and remuneration to the Managers in
2017 and the estimated salaries and
remuneration in 2018.		 11.Unanimously approved as
proposed by all attending
Directors.
12.Unanimously approved as
proposed by all attending
Directors. The General
Shareholders’ Meeting was
held on June 15, 2018.
13.Unanimously approved as
proposed by all attending
Directors.
May 08, 2018 Board of
Directors		 1. Motion for disposition of the Company's
real property including land and factory
premisesinWugu.		 1. Unanimously approved as
proposed by all attending
Directors.
July 11, 2018 Board of
Directors		 1. The motion of setting the record date
and release date for cash dividends in
2018.
2. The motion of opening an account with
the branch of Hwatai Bank.		 1. Unanimously approved as
proposed by all attending
Directors.
2. Unanimously approved as
proposed by all attending
Directors.
August 07,
2018		 Board of
Directors		 1. The motion for the Consolidated
Financial Statements of Q2 2018.
2. The motion for periodic assessment of
independence and competence of the
CPAs.		 1. Unanimously approved as
proposed by all attending
Directors.
2. Unanimously approved as
proposed by all attending
Directors.
November
07, 2018		 Board of
Directors		 1. The motion for remuneration to the
CPAs in 2018.
2. The motion for the Consolidated
Financial Statements of Q3 2018.
3. The audit plan in 2019.
4. The motion of the application for a
rollover of the credit limit amounting
to NT$500 million and the credit limit
for derivative trade amounting to
NT$30 million with CTBC Bank.
5. The motion of the application for a
rollover of the credit limit amounting
to NT$320 million with CHB, Chien
KuoBranch.		 1. Unanimously approved as
proposed by all attending
Directors.
2. Unanimously approved as
proposed by all attending
Directors.
3. Unanimously approved as
proposed by all attending
Directors.
4. Unanimously approved as
proposed by all attending
Directors.
5. Unanimously approved as
proposed by all attending
Directors.

-44-

Date Meeting Proposals Resolutions
6. The motion of the application for a
rollover of the credit limit amounting
to NT$10 million and the credit limit
for derivative trade amounting to US$1
million with HSBC Taiwan, Taipei
Branch.
7. Motion for the Company's undertaking
of endorsement/guarantee for the
application filed by the Company's
BVI subsidiary, Eike Information Co.,
Ltd., for a rollover of the credit limit.
8. The motion for the limit of performace
evaluation bonus in 2018.
9. The motion for proportion of provision
of compensation for employees and
remuneration for Directorsin 2018.		 6. Unanimously approved as
proposed by all attending
Directors.
7. Unanimously approved as
proposed by all attending
Directors.
8. Unanimously approved as
proposed by all attending
Directors.
9. Unanimously approved as
proposed by all attending
Directors.
March 22,
2019		 Board of
Directors		 1. The motion for business plan and
budget in 2019.
2. The motion for amendment to the
“Procedures for Asset Acquisition and
Disposal”.
3. The motion for performance evaluation
on Directors and managers in 2018.
4. The motion for the allocation of the
remuneration for Directors and
compensation for employees in 2018.
5. The motion for the Company’s
Financial Statements and Consolidated
Financial Statements for 2018.
6. The motion for the distribution of 2018
earnings.
7. The motion for the Company’s
Statement of Compliance With the
Internal Control System 2018.
8. The motion for re-election of the
Directors (including Independent
Directors) of the 13th Board.
9. The motion for setting the time limit
for nomination of candidates for
Directors of 13th Board, the number of
Directors (including Independent
Directors) to be elected, and the venue
where thenomination is accepted.		 1. Unanimously approved as
proposed by all attending
Directors.
2. Unanimously approved as
proposed by all attending
Directors.
3. Unanimously approved as
proposed by all attending
Directors.
4. Unanimously approved as
proposed by all attending
Directors.
5. Unanimously approved as
proposed by all attending
Directors.
6. Unanimously approved as
proposed by all attending
Directors.
7. Unanimously approved as
proposed by all attending
Directors.
8. Unanimously approved as
proposed by all attending
Directors.
9. Unanimously approved as
proposed by all attending
Directors.

-45-

Date Meeting Proposals Resolutions
10. The motion for review of the
candidates for Directors (including
Independent Directors) nominated by
the Board of Directors.
11. The motion for admission for the
elected new Directors of 13th Board to
hold the position as Director,
Supervisor, or manager of another
company engaged in business identical
with or similar to the Company’s.
12. The motion of setting the date and the
agenda for the General Shareholders’
Meeting of 2019.
13. The motion for establishment of a team
dedicated to CSR affairs.
14. The motion for establishment of a
“team dedicated to corporate
governance affairs”.		 10. Unanimously approved as
proposed by all attending
Directors.
11. Unanimously approved as
proposed by all attending
Directors.
12. Unanimously approved as
proposed by all attending
Directors. The General
Shareholders’ Meeting was
held on June 13, 2019.
13. Unanimously approved as
proposed by all attending
Directors.
14. Unanimously approved as
proposed by all attending
Directors.
15. The motion for transfer of CEO.
16. The motion of the application for a
rollover of the credit limit with Mega
Bank amounting to NT$300 million.
17. The motion for the application with
ANZ Bank (Taiwan) Limited, Sales
Dept. for a rollover of the credit limit
amounting to US$25million.		 15. Unanimously approved as
proposed by all attending
Directors except for Director
Arthur Tsao, who excused
himself from the meeting
due to a conflict of interest in
accordance with the
Company Act and Rules of
Procedure for Board of
Directors Meetings.
16. Unanimously approved as
proposed by all attending
Directors.
17. Unanimously approved as
proposed by all attending
Directors.

2. Important resolutions made at the Company’s 2018 general shareholders’ meeting:

  • (1) Adoption of the Business Report and Financial Statements for 2017: Approved.

(2) Adoption of 2017 Earnings Distribution: The motion was approved per the resolution made by the Shareholders’ Meeting. The Company's unappropriated earnings amounted to NT$1,174,833,753 at the beginning of 2017. Plus the net income amounting to NT$2,173,043,400 in 2017, the Company’s allocable earnings were NT$2,922,397,249. Less the legal reserve to be provided, the 2017 earnings were distributed as the first priority and at NT$2 per share for the cash dividend. The unappropriated earnings after the distribution were NT$1,092,218,067.

  • (3) Amendment to the “Operating Procedure for Making Endorsements/Guarantees” of the Company: The motion was approved per the resolution made by the Shareholders’ Meeting.

-46-

The information about Shareholders’ Meetings has also been disclosed on the MOPS on June 15, 2018.

  • (4) Amendment to the “Procedure for the Loaning of Funds” of the Company: The motion was approved per the resolution made by the Shareholders’ Meeting. The information about Shareholders’ Meetings has also been disclosed on the MOPS on June 15, 2018.

  • III.13. Summary of opinion difference in major resolutions at the board meeting between directors or supervisors in last year and by the report publishing date with written records or statements: None.

  • III.14. Resignation and relief of relevant roles, including the organization chairman, president, accounting officer, financial officer, chief internal auditor, and R&D officer, in last year and by the report publishing date:

Title Name Inauguration Discharge Reasons for
Resignation/Discharge
Chairman
& CEO		 Ter-Fung Tsao May 5, 2017 March 22, 2019 Chairman Upon Job
Rotation

-47-

IV. CPA’s fees

CPA Fee Bracket

CPA Firm CPA’s name CPA’s name CPA’s name CPA’s name Auditing period Auditing period Remarks
Deloitte Touche
Tohmatsu CPA
Firm		 Tza-Li Kung,
CPA		 Ching-Chen
Yang, CPA		 January 2018-
December 2018
Unit: NT$Thousand
Bracket CPA Fees Auditing fees Non-auditing fees Total
Below $2,000,000 V
2,000,000(including)～4,000,000
4,000,000(including)～6,000,000 V V
6,000,000(including)～8,000,000 V
8,000,000(including)～10,000,000
Over 10,000,000 (including)

The Company should disclose the following items under any of the following circumstances:

  • (1) Disclose the amount of the audit and non-audit service fees and content of non-audit services when the amount of non-audit service fees paid to CPAs, their firms and affiliates for is over a quarter of the audit service fees: N/A.

  • (2) Disclose the amount and proportion reduced and reasons when there is a change of CPA firm that the audit service fee is lower than the year before the CPA change: N/A.

  • (3) Disclose the amount and proportion reduced and reasons when the audit service fee is fifteen percent less than last year: N/A.

-48-

V. CPA’s change information:

V.1. Regarding former CPAs

==> picture [435 x 243] intentionally omitted <==

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

Replacement date June 2018
Cause of replacement Internal duty adjustment of Deloitte Taiwan
Party Concerned
Specify the reasons for replacement: Termination of Condition CPA Client
appointment by the client or the CPA or rejection of
appointment
Voluntary termination of appointment
N/A
Rejection of (successive) appointment
Opinions and reasons for audit reports other than
N/A
“unqualified opinion” issued within the past two years.
Accounting principles or practice
Yes Disclosure of financial statements
Scope or procedure of audit
Opinions different from the issuer Others
None V
Explanation
Other Information to Disclose
(Information to be disclosed in Items 1-4 to 1-7, None
Paragraph 6, Article 10 of these Regulations)
----- End of picture text -----

V.2. Regarding successive CPAs

Firm DeloitteTaiwan
CPA’s name CPA Tza-Li Kung
CPA Ching-Chen Yang
Appointment date June 2018
Consultation of the accounting processing method or accounting
principles and potential opinion expressed for financial statements for
specifictransactions prior toappointment andresults.		 N/A
Writtenopinions different from the opinions expressed byformerCPAs N/A

  • V.3. Reply from former CPAs on items 1 and 2-3, paragraph 6, Article 10 of these Regulations: N/A.

  • VI. The chairman, president, and financial or accounting managers of the Company worked for the CPA or its affiliates last year: None.

-49-

VII.Share transfer and share mortgage of directors, supervisors, executives, and shareholders holding over 10% of shares in last year and by the report publishing date:

VII.1.Information on the change in shareholding of
shareholders.
Title
Name
Chairman
Mu Te Investment Co., Ltd.
Representative: Ter-Fung Tsao
Director
Mu Te Investment Co., Ltd.
Representative: Jason Hsuan
Director
Mu Te Investment Co., Ltd.
Representative: Wendy Tsao
Director
Charng Hui Ltd.
Representative: Arthur Tsao
Independent
Director
Ben Chang
Independent
Director
George Chou
Independent
Director
Daniel Chiang
And also major
shareholder
holding 10% or
more
Ter-Fung Tsao
CEO
Arthur Tsao
(Date of Taking Office:
March 22,2019)
President
Yao Steven Yih Chun
Group CFO
Chris Hong
Sales Division
Director
Hsiang-Jung Huang
R&D Division
Hsin-Chuan Wang
Marketing
Division Director
Yen-Lin Cheng
E-Commerce
Director
Yi-Ting Huang
Major
Shareholder
Holding 10% or
More
Chia Chieh Investment
Co., Ltd. Trust Property
Account		 VII.1.Information on the change in shareholding of
shareholders.
Title
Name
Chairman
Mu Te Investment Co., Ltd.
Representative: Ter-Fung Tsao
Director
Mu Te Investment Co., Ltd.
Representative: Jason Hsuan
Director
Mu Te Investment Co., Ltd.
Representative: Wendy Tsao
Director
Charng Hui Ltd.
Representative: Arthur Tsao
Independent
Director
Ben Chang
Independent
Director
George Chou
Independent
Director
Daniel Chiang
And also major
shareholder
holding 10% or
more
Ter-Fung Tsao
CEO
Arthur Tsao
(Date of Taking Office:
March 22,2019)
President
Yao Steven Yih Chun
Group CFO
Chris Hong
Sales Division
Director
Hsiang-Jung Huang
R&D Division
Hsin-Chuan Wang
Marketing
Division Director
Yen-Lin Cheng
E-Commerce
Director
Yi-Ting Huang
Major
Shareholder
Holding 10% or
More
Chia Chieh Investment
Co., Ltd. Trust Property
Account		 VII.1.Information on the change in shareholding of
shareholders.
Title
Name
Chairman
Mu Te Investment Co., Ltd.
Representative: Ter-Fung Tsao
Director
Mu Te Investment Co., Ltd.
Representative: Jason Hsuan
Director
Mu Te Investment Co., Ltd.
Representative: Wendy Tsao
Director
Charng Hui Ltd.
Representative: Arthur Tsao
Independent
Director
Ben Chang
Independent
Director
George Chou
Independent
Director
Daniel Chiang
And also major
shareholder
holding 10% or
more
Ter-Fung Tsao
CEO
Arthur Tsao
(Date of Taking Office:
March 22,2019)
President
Yao Steven Yih Chun
Group CFO
Chris Hong
Sales Division
Director
Hsiang-Jung Huang
R&D Division
Hsin-Chuan Wang
Marketing
Division Director
Yen-Lin Cheng
E-Commerce
Director
Yi-Ting Huang
Major
Shareholder
Holding 10% or
More
Chia Chieh Investment
Co., Ltd. Trust Property
Account		 directors, supervisors, executives, and major
Unit: Shares		 directors, supervisors, executives, and major
Unit: Shares		 directors, supervisors, executives, and major
Unit: Shares		 directors, supervisors, executives, and major
Unit: Shares
Title Name 2018 As of April 15
Shares
Increase
(Decrease)		 Shares Under
Pledge Increase
(Decrease)		 Shares Increase
(Decrease)		 Shares Under
Pledge
Increase
(Decrease)
Chairman Mu Te Investment Co., Ltd.
Representative: Ter-Fung Tsao		 0 0 0
0
Director Mu Te Investment Co., Ltd.
Representative: Jason Hsuan
Director Mu Te Investment Co., Ltd.
Representative: Wendy Tsao
Director Charng Hui Ltd.
Representative: Arthur Tsao		 0 0 0
0
Independent
Director		 Ben Chang 0 0 0
0
Independent
Director		 George Chou 0 0 0
0
Independent
Director		 Daniel Chiang 0 0 0
0
And also major
shareholder
holding 10% or
more		 Ter-Fung Tsao 0 0 0
0
CEO Arthur Tsao
(Date of Taking Office:
March 22,2019)		 0 0 0
0
President Yao Steven Yih Chun 20,000 0 0
0
Group CFO Chris Hong 0 0 1,000
0
Sales Division
Director		 Hsiang-Jung Huang 0 0 0
0
R&D Division Hsin-Chuan Wang 0 0 0
0
Marketing
Division Director		 Yen-Lin Cheng 0 0 1,000
0
E-Commerce
Director		 Yi-Ting Huang 0 0 1,000
0
Major
Shareholder
Holding 10% or
More		 Chia Chieh Investment
Co., Ltd. Trust Property
Account		 105,000 0 0
0

VII.2.Shares transferred: None.

VII.3.Shares mortgaged: N/A.

-50-

Remarks
Name and relationship of spouse or
relative who is a top-ten shareholder
and is within the second degree of
lineal consanguinity of another top-ten
shareholder
(Note 3)
Relationship		 Chairman of Mu
Te		 The Chairman of
Mu Te also holds
the position as
theDirector of
Chia Yun.		 The Chairman of
Mu Te also holds
the position as
theDirector of
Chia Chieh.		 Mu Te is the
trustee.		 Director of Chia
Yun		 Director of Chia
Chieh		 Chairman of Mu Te

Name		 Ter-Fung Tsao Chia Yun
Investment Co.,
Ltd. Trust
Property Account		 Chia Chieh
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd.		 Chia Yun
Investment Co.,
Ltd. Trust
Property Account		 Chia Chieh
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd.
Shares held in other’s names Shareholding
ratio%		 0 2.48
Shares 0 22,651,211
Shareholding of spouse
and minor children		 Shareholding
ratio		 0 0
Shares 0 0
Shares held by shareholder Shareholding
ratio% (note 2)		 17.16 4.46
Shares 156,998,400 40,848,203
Name (Note 1) Mu Te Investment Co., Ltd.
Trust Property Account
Representative: Ter-Fung Tsao

-51-

Remarks
Name and relationship of spouse or
relative who is a top-ten shareholder
and is within the second degree of
lineal consanguinity of another top-ten
shareholder
(Note 3)
Relationship		 Director of Chia
Yun		 The Chairman of
Chia Yun also
holds the
position as the
Director of
Mu Te.		 The Chairman of
Chia Yun also
holds the
position as the
Director of
Chia Chieh.		 The Chairman of
Chia Yun also
holds the
position as the
Director of
Mu Te.		 Director of Mu
Te		 Director of Chia
Chieh		 Director of Mu Te

Name		 Ter-Fung Tsao Mu Te
Investment Co.,
Ltd. Trust
Property Account		 Chia Chieh
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd.		 Mu Te
Investment Co.,
Ltd. Trust
Property Account		 Chia Chieh
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd.
Shares held in other’s names Shareholding
ratio%		 0 0
Shares 0 0
Shareholding of spouse
and minor children		 Shareholding
ratio		 0 0
Shares 0 0
Shares held by shareholder Shareholding
ratio% (note 2)		 14.55 0.00
Shares 133,125,408 10,988
Name (Note 1) Chia Yun Investment Co., Ltd.
Trust Property Account
Representative: Yi-Ling Chen

-52-

Remarks
Name and relationship of spouse or
relative who is a top-ten shareholder
and is within the second degree of
lineal consanguinity of another top-ten
shareholder
(Note 3)
Relationship		 Director of Chia
Chieh		 The Chairman of
Chia Chieh also
holds the position
as a Director of
Mu Te.		 The Chairman of
Chia Chieh also
holds the position
as a Director of
Chia Yun.		 The Chairman of
Chia Chieh also
holds the position
as a Director of
Mu Te.		 Director of Mu Te Director of Chia
Yun		 Director of Mu Te

Name		 Ter-Fung Tsao Mu Te
Investment Co.,
Ltd. Trust
Property Account		 Chia Yun
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd.		 Mu Te
Investment Co.,
Ltd. Trust
Property Account		 Chia Yun
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd.
Shares held in other’s names Shareholding
ratio%		 0 0
Shares 0 0
Shareholding of spouse
and minor children		 Shareholding
ratio		 0 0
Shares 0 0
Shares held by shareholder Shareholding
ratio% (note 2)		 11.85 0.00
Shares 108,398,160 5,871
Name (Note 1) Chia Chieh Investment Co.,
Ltd. Trust Property Account
Representative: Xiu-Zhen Hsiao

-53-

Remarks
Name and relationship of spouse or
relative who is a top-ten shareholder
and is within the second degree of
lineal consanguinity of another top-ten
shareholder
(Note 3)
Relationship		 Chairman of Mu
Te		 Director of Chia
Yun		 Director of Chia
Chieh		 Chairman of Mu
Te		 - - - Chairman of Mu
Te		 Mu Te is the
trustee.		 The Chairman of
Mu Te also holds
the position as the
Chairman of Chia
Yun.

Name		 Mu Te
Investment Co.,
Ltd. Trust
Property Account		 Chia Yun
Investment Co.,
Ltd. Trust
Property Account		 Chia Chieh
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd.		 - - - Ter-Fung Tsao Mu Te
Investment Co.,
Ltd. Trust
Property Account		 Chia Yun
Investment Co.,
Ltd. Trust
Property Account
Shares held in other’s names Shareholding
ratio%		 2.48 0 0 0 0
Shares 22,651,211 0 0 0 0
Shareholding of spouse
and minor children		 Shareholding
ratio		 0 0 0 0 0
Shares 0 0 0 0 0
Shares held by shareholder Shareholding
ratio% (note 2)		 4.46 3.61 0.02 2.48 2.48
Shares 40,848,203 33,039,081 163,822 20,699,259 22,650,057
Name (Note 1) Ter-Fung Tsao Bilai Investment Co., Ltd.
Representative: Su-Win Tseng		 HSBC as Trustee of RBC
Emerging Markets Equity Fund		 Mu Te Investment Co., Ltd.
Representative: Ter-Fung Tsao

-54-

Remarks Note1: The top-ten shareholders must be stated. For institutional shareholders, the name of the institutional shareholder and representative must be listed separately.
Note2: For computing the shareholding ratio, the shareholding of the shareholders, spouse, minors, and held in other’s name must be computed separately.
Note3: Disclose relations between shareholders, including legal and natural person, in the proceeding paragraphs according to "Regulations Governing the Preparation of Financial Reports by Securities Issuers".
Name and relationship of spouse or
relative who is a top-ten shareholder
and is within the second degree of
lineal consanguinity of another top-ten
shareholder
(Note 3)
Relationship		 The Chairman of
Mu Te also holds
the position as the
Chairman of Chia
Chieh.		 Chairman of Mu
Te		 Director of Chia
Yun		 Director of Chia
Chieh		 - - - - -

Name		 Chia Chieh
Investment Co.,
Ltd. Trust
Property Account		 Mu Te
Investment Co.,
Ltd. Trust
Property Account		 Chia Yun
Investment Co.,
Ltd. Trust
Property Account		 Chia Chieh
Investment Co.,
Ltd. Trust
Property Account		 - - - - -
Shares held in other’s names Shareholding
ratio%		 2.48 0 0 0 0 0
Shares 22,651,211 0 0 0 0 0
Shareholding of spouse
and minor children		 Shareholding
ratio		 0 0 0 0 0 0
Shares 0 0 0 0 0 0
Shares held by shareholder Shareholding
ratio% (note 2)		 4.46 1.44 0 1.33 1.17 0.00
Shares 40,848,203 13,153,240 0 12,140,000 10,660,815 0
Name (Note 1) Nan Shan Life Insurance Co.,
Ltd.
Representative: Ying-Zhog Du		 Chun-Yao Lin Fubon Life Insurance Co., Ltd.
Representative: Ming-Hsing
Tsai

-55-

IX. The shareholding of the same invested company by the Company, the directors, the supervisors, the managers or another business that is controlled by the Company directly or indirectly

March 31, 2019; Unit: Shares

Transfer Invested Business (Note 1) The Company’s Investment The Company’s Investment Investment of Director,
Supervisor, Management, and a
Business Controlled by the
CompanyDirectlyor Indirectly		 Investment of Director,
Supervisor, Management, and a
Business Controlled by the
CompanyDirectlyor Indirectly
Comprehensive Investment
Comprehensive Investment
Shares Shareholding
Ratio		 Shares Shareholding
Ratio		 Shares Shareholding
Ratio
Standard Dairy Products Taiwan Ltd.
30,000,000		 100.0% － － 30,000,000 100.0%
Standard Beverage Co., Ltd. 7,907,000 100.0% － － 7,907,000 100.0%
Charng Hui Ltd. 24,100,000 100.0% － － 24,100,000 100.0%
Domex Technology Corporation 10,374,399 52.0% － － 10,374,399 52.0%
Le Bonta Wellness International Co. N/A
(Note 2)		 100.0% － － N/A
(Note 2)		 100.0%
Accession Ltd. 123,600,000 100.0% － － 123,600,000 100.0%
Dermalab S.A. － － 400 100.0% 400 100.0%
Shanghai Standard Foods Co. － － N/A
(Note 2)		 100.0% N/A
(Note 2)		 100.0%
Shanghai Le Ben De Health
Technology Co., Ltd.		 － － N/A
(Note 2)		 100.0% N/A
(Note 2)		 100.0%
Swissderma, SL － － 3,000 100.0% 3,000 100.0%
Standard Investment (Cayman) Ltd. 150,124,814 100.0% － － 150,124,814 100.0%
Standard Corporation (Hong Kong)
Ltd.		 － － 150,050,814 100.0% 150,050,814 100.0%
Standard Investment (China) Ltd. － － N/A
(Note 2)		 99.0% N/A
(Note 2)		 99.0%
Standard Foods (China) Ltd. － － N/A
(Note 2)		 100.0% N/A
(Note 2)		 100.0%
Shanghai Dermalab Corporation － － N/A
(Note 2)		 100.0% N/A
(Note 2)		 100.0%
Le Bonta Wellness Co., Ltd. N/A
(Note 2)		 51.0% N/A
(Note 2)		 49.0% N/A
(Note 2)		 100.0%
Standard Foods (Xiamen) Ltd. － － N/A
(Note 2)		 100.0% N/A
(Note 2)		 100.0%
Shanghai Le Ho Industrial Co., Ltd. － － N/A
(Note 2)		 100.0% N/A
(Note 2)		 100.0%
Shanghai Le Min Industrial Ltd. － － N/A
(Note 2)		 100.0% N/A
(Note 2)		 100.0%

Note1: Recorded with equity method. Note2: It is a limited company without any shares

-56-

(I) History of capitalization
1. History of capitalization:		 Remarks
Others		 1986.06.06 MOEA. Investment Bureau
(75) Kong-Son-Tzi No. 2799
1986.06.27 MOEA. Investment Bureau
(75) Kong-Son-Tzi No. 3149
1986.09.22 MOEA. Investment Bureau
(75) Kong-Son-Tzi No. 4718
1988 04.09 MOEA. Investment Bureau
(77) Kong-Son-Tzi No. 1831
1990.05.16 MOEA. Investment Bureau
(79) Kong-Son-Tzi No. 3425
1991.05.15 SFE Ruling (80)
Tai-Tsai-Cheng (1) No.00935
1992.02.17 SFE Ruling (81)
Tai-Tsai-Cheng (1) NO.00269		 1993.04.13 SFE Ruling (82)
Tai-Tsai-Cheng (1) No.00771		 1994.01.14 SFE Ruling (83)
Tai-Tsai-Cheng (1) No.49242		 1995.01.07 SFE Ruling (84)
Tai-Tsai-Cheng (1) No.52905		 1995.12.04 SFE Ruling (84)
Tai-Tsai-Cheng (1) No.62578		 1996.12.24 SFE Ruling (85)
Tai-Tsai-Cheng (1) No.74787
Non-money
Capital
None		 None None None None None None None None None None None
Source of Capital (NTD) Incorporation Capital increased by cash NT$ 100 Capital increased by cash
NT$ 10,211,600		 Capitalization from retained
earnings for NT$ 30,000,000
Capitalization from retained
earnings for NT$ 117,000,000
Capitalization from retained
earnings for NT$ 32,400,000
Capital increased by cash
NT$ 48,600,000
Capitalization from retained
earnings for NT$ 64,152,000		 Capitalization from retained
earnings for NT$ 122,860,800		 Capitalization from retained
earnings for NT$ 172,005,120		 Capitalization from retained
earnings for NT$ 240,807,170
Capitalization from employee
bonus for NT$ 5,513,480		 Capitalization from retained
earnings for NT$ 339,335,420
Capitalization from employee
bonus for NT$ 3,494,440		 Capitalization from retained
earnings for NT$ 476,467,380
Capitalization from employee
Issued shares Amount 4,788,300 4,788,400 15,000,000 45,000,000 162,000,000 194,400,000 307,152,000 430,012,800 602,017,920 848,338,570 1,191,168,430 1,672,052,910
Shares 47,883 47,884 150,000 450,000 16,200,000 19,440,000 30,715,200 43,001,280 60,201,792 84,833,857 119,116,843 167,205,291

Authorized shares		 Amount
5,000,000
5,000,000
15,000,000
45,000,000
162,000,000
194,400,000
307,152,000
430,012,800
602,017,920
848,338,570		 1,191,168,430 1,672,052,910
Shares 50,000 50,000 150,000 450,000 16,200,000 19,440,000 30,715,200 43,001,280 60,201,792 84,833,857 119,116,843 167,205,291

Issuing
price
(NTD)		 100 100 100 100 10 10 10 10 10 10 10 10

Year /
Month		 1986/06 1986/06 1986/09 1988/04 1990/05 1991/07 1992/03 1993/07 1994/02 1995/03 1996/02 1997/03

-57-

Remarks
Others		 1997.12.16 SFE Ruling (86)
Tai-Tsai-Cheng (1) No.92147		 1998.12.28 SFE Ruling (87)
Tai-Tsai-Cheng (1) No.106085		 1999.12.24 SFE Ruling (88)
Tai-Tsai-Cheng (1) No.109947		 2001.01.02 SFE Ruling (90)
Tai-Tsai-Cheng (1) No.103971		 2009.07.03 FSC Far.Tzi No.
0980033057 Letter		 2010.07.05 FSC Far.Tzi No.
0990034588 Letter		 2011.07.04 FSC Far.Tzi No.
1000030659 Letter		 2012.06.26 FSC Far.Tzi No.
1010027983 Letter		 2013.07.02 FSC Far.Tzi No.
1020025191 Letter		 2014.07.11 FSC Far.Tzi No.
1030026432 Letter		 2015.07.29 FSC Far.Tzi No.
1040028838 Letter		 2016.09.01 JinSoSunTzi No.
10501215010		 2017.09.04 JinSoSunTzi No.
10601126490
Non-money
Capital		 None None None None None None None None None None None None None
Source of Capital (NTD) bonus for NT$ 4,417,100 Capitalization from retained
earnings for NT$ 418,013,220
Capitalization from employee
bonus for NT$ 4,636,230		 Capitalization from retained
earnings for NT$ 523,675,590
Capitalization from employee
bonus for NT$ 5,228,560		 Capitalization from retained
earnings for NT$ 393,540,980
Capitalization from employee
bonus for NT$ 5,497,570		 Capitalization from retained
earnings for NT$ 181,358,710
Capitalization from employee
bonus for NT$ 5,180,650		 Capitalization from retained
earnings for NT$ 16,045,920
Capitalization from retained
earnings for NT$ 483,784,550
Capitalization from retained
earnings for NT$ 927,253,720
Capitalization from retained
earnings for NT$ 1,112,704,460
Capitalization from retained
earnings for NT$ 862,345,960
Capitalization from retained
earnings for NT$595,018,710
Capitalization from retained
earnings for NT$720,633,770
Capitalization from retain earning
for NT$ 871,966,860		 Capitalization from retain earning
for NT$ 351,957,540
Issued shares Amount 2,094,702,360 2,623,606,510 3,022,645,060 3,209,184,420 3,225,230,340 3,709,014,890 4,636,268,610 5,748,973,070 6,611,319,030 7,206,337,740 7,926,971,510 8,798,938,370 9,150,895,910
Shares 209,470,236 262,360,651 302,264,506 320,918,442 322,523,034 370,901,489 463,626,861 574,897,307 661,131,903 720,633,774 792,697,151 879,893,837 915,089,591
Authorized shares Amount 3,300,000,000 3,300,000,000 3,300,000,000 3,300,000,000 3,300,000,000 3,800,000,000 4,800,000,000 5,800,000,000 6,800,000,000 7,400,000,000 8,000,000 ,000 8,800,000,000 9,200,000,000
Shares 330,000,000 330,000,000 330,000,000 330,000,000 330,000,000 380,000,000 480,000,000 580,000,000 680,000,000 740,000,000 800,000,000 880,000,000 920,000,000
Issuing
price
(NTD)		 10 10 10 10 10 10 10 10 10 10 10 10 10
Year /
Month		 1998/03 1999/02 2000/02 2001/02 2009/08 2010/08 2011/08 2012/08 2013/07 2014/08 2015/08 2016/08 2017/09

-58-

  1. Type of Share:
Type of Share Authorized shares Authorized shares Authorized shares Remarks
Outstanding shares (Available for
trading ontheTWSE)
Un-issued
shares		 Total
Registered
commonshares		 915,089,591 4,910,409 920,000,000

3. Relevant information on the declaration system: None.

(II) Shareholder structure
(II) Shareholder structure
April 15,2019
Shareholder
structure
QTY
Quantity


Government
agencies
Financial
institutions		 Other
institutional
investors		 Natural
persons		 Foreign
institutions
& natural
persons		 Total
Number of
persons		 0
13
148
35,737
465
36,363
Share held 0 32,170,127 495,262,401 199,476,054 188,181,009 915,089,591
Shareholding
ratio %		 0.00%
3.52%		 54.12% 21.80% 20.56%
100.00%

(III) Dispersal of shareholding NTD 10 Par value

April 15, 2019

Classification Number of
Shareholders		 Share Held Shareholding ratio
%
1-999 11,534
2,447,253		 0.27%
1,000-5,000 18,519 38,852,097 4.25%
5,001-10,000 3,271
23,730,913		 2.59%
10,001-15,000 1,049 12,888,054
1.41%
15,001-20,000 523 9,272,330 1.01%
20,001-30,000 525 13,093,726 1.43%
30,001-40,000 216 7,505,920 0.82%
40,001-50,000 154
6,980,882
0.76%
50,001-100,000 274
19,039,246		 2.08%
100,001-200,000 124
16,952,779		 1.85%
200,001-400,000 61
17,299,093		 1.89%
400,001-600,000 20 9,925,288 1.08%
600,001-800,000 18 12,607,863 1.38%
800,001-1,000,000 7 6,265,038 0.68%
Over 1,000,001shares 68 718,229,109 78.50%
Total 36,363 915,089,591
100.00%

-59-

(IV) Major shareholder
April 15,2019
Shares
Name of MajorShareholders
Share Held
Shareholding Ratio
Mu Te Investment Co., Ltd. Trust Property Account
156,998,400
17.16
Chia Yun Investment Co.,Ltd. Trust PropertyAccount
133,125,408
14.55
Chia Chieh Investment Co., Ltd. Trust Property Account
108,503,160
11.86
Ter-FungTsao
40,848,203
4.46
Bilai Investment Co., Ltd.
33,039,081
3.61
HSBC as Trustee of RBC Emerging Markets Equity
FundInvestment Account
22,699,259
2.48
Mu Te Investment Co., Ltd.
22,650,057
2.48
Nan Shan Life Insurance Co.,Ltd.
13,153,240
1.44
Chun-Yao Lin
12,140,000
1.33
Fubon Life Insurance Co.,Ltd.
10,660,815
1.17		 (IV) Major shareholder
April 15,2019
Shares
Name of MajorShareholders
Share Held
Shareholding Ratio
Mu Te Investment Co., Ltd. Trust Property Account
156,998,400
17.16
Chia Yun Investment Co.,Ltd. Trust PropertyAccount
133,125,408
14.55
Chia Chieh Investment Co., Ltd. Trust Property Account
108,503,160
11.86
Ter-FungTsao
40,848,203
4.46
Bilai Investment Co., Ltd.
33,039,081
3.61
HSBC as Trustee of RBC Emerging Markets Equity
FundInvestment Account
22,699,259
2.48
Mu Te Investment Co., Ltd.
22,650,057
2.48
Nan Shan Life Insurance Co.,Ltd.
13,153,240
1.44
Chun-Yao Lin
12,140,000
1.33
Fubon Life Insurance Co.,Ltd.
10,660,815
1.17		 (IV) Major shareholder
April 15,2019
Shares
Name of MajorShareholders
Share Held
Shareholding Ratio
Mu Te Investment Co., Ltd. Trust Property Account
156,998,400
17.16
Chia Yun Investment Co.,Ltd. Trust PropertyAccount
133,125,408
14.55
Chia Chieh Investment Co., Ltd. Trust Property Account
108,503,160
11.86
Ter-FungTsao
40,848,203
4.46
Bilai Investment Co., Ltd.
33,039,081
3.61
HSBC as Trustee of RBC Emerging Markets Equity
FundInvestment Account
22,699,259
2.48
Mu Te Investment Co., Ltd.
22,650,057
2.48
Nan Shan Life Insurance Co.,Ltd.
13,153,240
1.44
Chun-Yao Lin
12,140,000
1.33
Fubon Life Insurance Co.,Ltd.
10,660,815
1.17
Shares
Name of MajorShareholders		 Share Held
 Shareholding Ratio
Mu Te Investment Co., Ltd. Trust Property Account 156,998,400 17.16
Chia Yun Investment Co.,Ltd. Trust PropertyAccount 133,125,408 14.55
Chia Chieh Investment Co., Ltd. Trust Property Account 108,503,160 11.86
Ter-FungTsao 40,848,203 4.46
Bilai Investment Co., Ltd. 33,039,081 3.61
HSBC as Trustee of RBC Emerging Markets Equity
FundInvestment Account		 22,699,259 2.48
Mu Te Investment Co., Ltd. 22,650,057 2.48
Nan Shan Life Insurance Co.,Ltd. 13,153,240 1.44
Chun-Yao Lin 12,140,000 1.33
Fubon Life Insurance Co.,Ltd. 10,660,815 1.17
**(V) **
Market Price, Net Worth, Earnings & Dividend per Share in the past two years
Market Price, Net Worth, Earnings & Dividend per Share in the past two years
Market Price, Net Worth, Earnings & Dividend per Share in the past two years
Market Price, Net Worth, Earnings & Dividend per Share in the past two years
Market Price, Net Worth, Earnings & Dividend per Share in the past two years
Market Price, Net Worth, Earnings & Dividend per Share in the past two years
Year
Item		 2017 2018 As of March 31,
2019
(Note 5)
Market
Price per
Share		 Highest 82.60 75.30 54.40
Lowest 72.00 42.90 48.05
Average 76.47 59.34
51.28
Net Worth
per Share		 BeforeAppropriation 16.28 17.40 18.73
After Appropriation 16.28 (Note 1) (Note 1)
Earnings
per Share		 Weighted Average
Shares		 908,420,120 908,420,120
908,420,120
Earnings per Share
Before Adjustment		 2.39 3.25
0.87
Earnings per Share After
Adjustment
2.39		 (Note 1)
(Note 1)
Dividends
per Share		 Cash Dividends 2.0 (Note 1)
-
Stock Earnings
Distribution		 - (Note 1)
-
Capital Reserve
Distribution		 - -
-
Accumulated
Unpaid
Dividends
-		 -
-
Analysis of
Returnon		 Price/Earnings Ratio
(Note2)		 32.00 18.26
-

-60-

Year
Item		 Year
Item		 2017 2018 As of March 31,
2019
(Note 5)
Investment Price/Dividend Ratio
(Note 3)		 38.24 (Note 1)
-
Cash Dividends Yield
Rate (Note4)		 2.62 (Note 1)
-

Note 1: Subject to the approval of annual shareholders' meeting.

Note 2: Profit ratio = Closing price per share of the year / Earning per share.

Note 3: Earning ratio = Closing price per share of the year / Cash dividend per share.

  • Note 4: Cash dividend yield rate = Cash dividend per share / Closing price per share of the year.

Note 5: The column of the net worth per share and earnings per share is the data of the latest quarter certified (or reviewed) by auditors while other columns are for the financial data of the year.

(VI) Execution of Dividend Policy

1. Dividend Policy:

Based on the amended Company Act announced in May 2015, the distribution of stock dividends and bonus is only limited to the shareholders, employees are not included. Accordingly, we have resolved to change the profit distribution policy under the Company Chapter in the General Shareholders’ Meeting held on June 15, 2016.

Based on the revised policy, if there is a profit after the annual closing of books, this Company shall pay the profit-seeking enterprise annual income tax, cover losses of previous years, make 10% legal reserve, and appropriate or reverse special reserve by law. Then, this Company shall appropriate 30-100% of the remaining amount with the accumulated unappropriated earnings as dividends for shareholders. Cash dividends shall equal to 30-100% of the distributable dividend. However, for a major investment program without the possibility of obtaining other funding, the cash dividend can be reduced to 5-20% of the distributable dividend. The distribution to the shareholders shall be proposed by the Board of Director and resolved by the shareholders’ meeting.

2. Proposed Distribution of Dividends:

The Company’s Board of Directors resolved on March 22, 2019 to have stock dividends distributed at $2.5/share; also, the proposal is to be reviewed and discussed at the Annual Meeting of Shareholders on June 13, 2019.

  • (VII) Impact on operating performances and EPS that resulted from the stock dividend distribution of this year: None.

(VIII) Compensations for employees and remunerations to directors and supervisors

  1. Information of compensations for employee and remunerations to directors and supervisors:

When there is pretax income before deducting employee profit distribution and remuneration to the board members, the company shall set aside no less than 0.5% of the figure to its employees as profit sharing. The distribution, whether in cash or stock, shall be resolved by the board. The eligible employees are subject to certain criteria. No more

-61-

than 0.75% of the same base above shall be set aside as remuneration to directors. The above appropriations shall be reported in the shareholder’s meeting. No such allocation shall be made before accumulated losses from previous years are made up.

  1. The basis of estimating the amount of compensations for employee and remunerations to directors/supervisors for calculating the number of shares to be distributed as stock distribution and the accounting treatment of the discrepancy, if any, between the actual distributed amount and the estimated figure, for the current period:

The Company’s compensations payable to employees and remuneration payable to Directors and Supervisors for 2018 are estimated at NT$31,722,923 and NT$20,959,787 respectively. Said employee compensation and remuneration to the Directors in 2018 are calculated as an amount equivalent to 0.90% and 0.59%, respectively, of the pretax income before the distribution deduction.

If the distribution amount is changed after the date the Company’s individual financial statements approved for publication, it is processed as change in accounting estimate and adjusted to the bookkeeping in the following year.

If the distribution of stock dividend to employees is resolved by the Board of Directors, the number of stock dividend share is determined by having the bonus amount divided by the closing price on the day before the board meeting.

  1. Distribution policy proposed by the Board of Directors:

  2. (1) The distribution of stocks as compensations for employees and remunerations to directors:

    • 1.1 Compensations for Employees: NT$31,722,923.

    • 1.2 Stock Compensation for Employees: NT$ 0

    • 1.3 Remuneration to Directors and Supervisors: NT$20,959,787.

The aforementioned pro forma employee bonus and remuneration to Directors proposed by the Board was in line with the estimated amount in the 2018 Financial Statements.

  • (2) The stock compensations to employees and the ratio of the stock compensations to the total amount of net income and total remuneration to employees: N/A.

  • Actual distribution of dividends to employees and remuneration to directors and in the prior year:

In 2017, the Company distributed cash bonuses to employees at NT$28,387,825 and remuneration to Directors at NT$15,448,838. These amounts were consistent with the amount adopted in the 2017 Financial Statements.

(IX) Treasury stock: None.

II. Corporate bond: None. III. Preferred stock: None.

-62-

IV. Issuance of global depository receipts

IV. Issuance of global depository receipts IV. Issuance of global depository receipts IV. Issuance of global depository receipts
Date oftheinitial issuance June19,1997
Place of issuance and listing Issued in the United States and Europe and
traded at Euro MTF Market of
Luxembourg Stock Exchange.
Total Amount USD29,070,000
Offering price perGDR(US$) USD9.69
UnitsIssued 3,000,000 units
Underlying Securities Common stock of Standard Foods
Corporation held by the shareholders
CommonSharesRepresented (Shares) 15,000,000 share
Rights and ObligationofGDR Holders Same as those ofCommonShareHolders
Trustee None
Depository Bank The Bank of New York Mellon
Corporation
Custodian Bank TrustDepartment,MegaBank
GDRs Outstanding (Units) as of March31,2019 7,046.4units
Apportionment of the expenses for the Issuance and the
maintenance
All fees and expenses related to the
issuance of GDRs were borne by the
selling shareholders while the maintenance
expenses were borne byissuer
Terms and Conditions in the Deposit Agreement and
the CustodyAgreement		 Please see the Deposit Agreement and the
CustodyAgreementfordetails
Market
price per
unit (USD)		 2018 Highest 12.91
Lowest 7.01
Average 9.91
As of March 31, 2019 Highest 8.79
Lowest 7.85
Average 8.26

V. Employee stock option certificates: None.

VI. Restricted employee rights and new shares issue: None

VII. Mergers and acquisitions: None.

VIII. Fund implementation plan

(I) Plan Details

Outstanding equity issuance and marketable security subscription, or the completed equity issuance or subscribed marketable security in the last three years without success up to the last quarter before the printing of the annual report: N/A.

(II) Execution

The implementation of the aforementioned plans: N/A.

-63-

Five. Overview of Business Operations

I. Principal activities

(I) Operating scope:

  1. Major business: Manufacturing and selling of nutritious foods, edible oil, dairy products, and beverages.

  2. Operating ratio of current products

Operating ratio of current products
Product type
Nutritious Foods
Cooking products Food
Others
Total		 2018
Businessratio
40%
51%
9%
100%

(II) Industry overview:

  1. Status and Development of Industry With the nation’s increasing attention on the food safety issue, the related food safety laws and regulations have become stricter. Therefore, food suppliers need to keep improving their inspection ability to protect consumers’ “food” safety. Additionally, medical treatment technology has made progress and has thereby extended the life expectancy. People increasingly value routine healthcare and upgrading of life quality. The sport trend is therefore booming domestically. Meanwhile, the market for functional dietary supplement products grows accordingly. Taiwan is moving forward toward an aging society. The demand for elderly meals and dietary supplement products tends to be increasing. Various food suppliers are using their best efforts to develop the market.

  2. Correlation of the Up-stream, Mid-stream, and Down-stream Dealers in the Industry

  3. (1) Upstream Dealers in the Industry: For agriculture, livestock husbandry, and packaging materials, etc.

  4. (2) Mid-stream Dealers in the Industry: For R&D, manufacturing, and inspection, etc.

  5. (3) Down-stream Dealers in the Industry: For transportation, warehousing, and various distribution channels, etc.

3. Product Development Trends

  • (1)Integrate the element of a “health concept” into existing products to provide consumers with a new choice.

  • (2)Develop new nutritional dietary supplement products to provide the nutrients lacked by citizens and resolve the trouble in health for citizens in their daily life, and apply for health certification for the products.

  • (3)Launch “clean label” products in response to consumers’ pursuit of pure natural products.

  • Competition

-64-

  • (1)With the relatively low criteria required to enter the food industry and multiple competitors in the same trade, the products are easily copied, thus market competition has become increasingly intense.

  • (2)The main raw materials and supplies adopted by the food industry, namely farm and pasture products, might be affected by natural conditions significantly in the process of production. Such factors as climate change, plant diseases and pests, and rotation tillage or suspension of farming will affect the supply and also increase the purchasing costs.

  • (3)Given the expanding channel scale, the channels take advantage of their strength in distribution channels to develop products under their private brands and thereby threaten suppliers’ survival and profitability.

(III) Technology research and development

  1. R&D spending in the most recent years and up to the printing of the report
Unit: NT$ thousand
2018 As of April 30, 2019
Amount 167,794 35,611

  1. Successfully developed technology and products with R&D expenses in last year and by the report publishing date:

  2. (1) Newly Launched Quaker Complete Nutrition Food Products: Complete Nutrients for Meals - Launch of double effect balancing powder. Complete Nutrients for Meals - Launch of low-sugar and vanilla flavor. Complete Nutrients for Meals - Launch of new care and balancing nutritional formula.

  3. (2) New Milk Powder Products on the Market-

    • Launch of three beneficial probiotic dietary supplement products for mothers, choice milk powder for children, three beneficial probiotic grow-up milk powders, three beneficial probiotic milk powders for children, collagen and high-iron milk powder, vitamin high-calcium milk powder, and dream care high calcium milk powder with an upgraded formula.

    • First launch of Immu grow up milk powder and Immu milk powder for children.

  4. (3) Launch of New Cereal and Grain Products - Launch of seven new Quaker So Right breakfast series. Launch of Quaker Organic Oats Drink. Launch of Great Day Organic Rice.

  5. (4) Launch of New Health Tonic Series -

Development of Quaker cranberry extract.

Development and launch of the new 42ml Cubilose product.

  • (5) Completion of Research of Process and Packaging Materials -

  • Completion of research on light-resistant and oxygen-resistant PET packing materials - already developed packaging materials satisfying needs. Completion of research on Complete Nutrients for Meals vacuum blending process - already applied to the formal process.

-65-

Completion of research on low-temperature purification technology - already replaced new purification equipment which was already applied to the formal process.

  1. R&D Projects in the Latest Year:

  2. (1) Application for permit for infant formula food (special nutrition food).

  3. (2) Development and research of herbal meals.

  4. (3) Research of room temperature cereal and grain drinks.

  5. (4) Research of puffed wheat or rice.

  6. (5) Research of elements and formulas of soft capsule series.

  7. (6) Research of efficacy experiment and production technology of lactic acid bacteria.

  8. (7) Basic research of bead coating technology.

  9. (8) Development of an application for nutritional supplements for patients.

  10. (9) Development of health food and applications.

  11. (10) Research of light-resistant and oxygen-resistant PP packaging materials.

-66-

(IV) Long-term and short-term business development plan

  1. Short-term business development plans

  2. (1) Control the latest consumption trends and tides in the market to launch products which satisfy consumers’ needs.

  3. (2) Listen to customers’ needs and ideas, and pursue growth together with customers.

  4. (3) Optimize the official website and online shopping platforms, in the hopes of communicating with and serving consumers more directly.

  5. Long-term business development plans

  6. (1) Win consumers’ reliance and care about consumers’ health with high-standard product quality.

  7. (2) Integrate resources in Taiwan and China and share experience to upgrade the effect and expand the business scale in the market.

  8. (3) Continue to deepen the development of brands and corporate social responsibility to enable the Company to become the most reliable food company for consumers.

II. Market analysis and the conditions of sales and production

  • (I) Market analysis

  • Sales regions: For Taiwan and China only. Market supply and demand:

Nutritious Foods:

1. Oats

  • (1) Market share

Our cereal products, including instant oats, three-in one cereal, canned cereal powder, package cereal powder, and Quaker oats drink, are well received among consumers. Our brand has been seen as trustworthy by local consumers and continued to lead the cereal product market in Taiwan in 2018.

(2) Future supply and demand and market growth:

Consumers in Taiwan tend to increasingly value food safety and quality. In line with the market trends, the Company continues to make investments and manage the quality to provide consumers with excellent products ahead of others in the market of cereals and grains. The Company will take comforting quality and satisfaction of needs as the first priority to provide comforting and guaranteed products reliable to consumers and to allow the public to eat more happily, healthily, and with more relief.

  • (3) Competitiveness, the advantages and disadvantages of development, and countermeasures.

The Company voluntarily studies the demands of consumers in cereal and grain products with a proper balance in the development of products for good health, good taste, high quality, and diversity. In 2018, the Company expanded its

-67-

cereal and grain product series, and launched the Quaker So Right breakfast series imported from New Zealand as it has high quality in response to consumers’ need for high-quality products. Meanwhile, the Company continued to investing in advertisements to allow more consumers know about Quaker.

With respect to the existing cereal and grain products, the Company continued to promote the health advantages in fine-quality cereals and grains to enable the young population to accept the healthy Quaker cereal and grain series and also to expand the popularity of cereals and grains. In 2019, the Company will continue to promote the comforting quality and fine-quality products with identified origin of product to consumers. Meanwhile, the Company will also launch more tasty products to gain popularity among more consumers.

In the future, the Company will continue to develop a wider array of grain products so that grains of Standard Foods will be the brand preferred by consumers of all ages and could satisfy the choice of different groups of consumers for different health reasons. In addition, the Company will continue to unveil new products, invest in advertisement for new appeals, upgrade brand value, and broaden the product portfolio to drive further business growth.

  1. Herbal tonic drink

  2. (1) Market share

According to the AC Nielsen market survey, in Taiwan Standard Foods was the number one tonic drink seller with a market share of 40%. This has proven recognition among the customers for the product.

  • (2) Future supply and demand and market growth:

With the rise of health awareness from consumers and Taiwan's moving forward toward an aging society, the demand for healthcare is growing stably. Consumers may live longer and desire to pursue a better life. The sale of such functional products as dietary supplement products for joints and sight, etc. is optimistic. Accordingly, functional products which may satisfy consumers’ needs are growing.

  • (3) Competitiveness, the advantages and disadvantages of development, and responsive strategies.

The Company is used to playing the role of a pioneer in the herbal tonic drink market. The QUAKER Ginseng Essence, Essence of Herbs, and Reishi drinks launched by the Company are leading brands in the market for the time being. The Company will continue to invest in omnimedia advertisements and business development to build its health image and good reputation as a healthcare and nutrition expert in the mind of consumers. With abundant product lines and innovative spirit, the Company transcends others in the market. Therefore, the Company will keep growing with remarkable development potential in the future.

The Company uses its best efforts to provide consumers with products of

-68-

higher quality. In 2018, it continued to strongly promote Quaker chicken essence products and provide consumers with a better experience with its exclusive process and quality control. Therefore, the Company will continue to develop the market by launching its health and dietary supplement products made of excellent and genuine materials. Since the glucosamine drink has become a leading brand recognized by the senior group, the Company will continue to promote it. Further, in response to citizen’s preference for 3C products, the Lutein drink launched by the Company in 2017 was well received by consumers. The Company will tie Lutein with such tonic foods as Lycium chinense and cranberries to provide consumers with a more bright and healthy choice.

In the upcoming year, the Company will continue to use its best efforts to develop and promote innovative dietary supplement products to satisfy different consumers’ needs. Meanwhile, the Company will continue to invest in advertisements to strive for the market of health dietary supplement products through diversified merchandising activities, and upgrade the market share and popularity to create better sales for health herbal drinks and do its best for modern people’s health.

3. Baby food

(1) Market share

Quaker knows that all mothers wish to save the best for their babies. Based on health science, the Quaker Infant and Young Child Nutrition Research Center is engaged in providing products which satisfy the need for infant nutrition and provide high quality in Taiwan. The three beneficial probiotics grow up milk powder, organic rice extract, and organic malt extract series are Quaker’s most popular foods for infants and young children. Aiming to enable babies to take every bite comfortably and with relief, we have launched milk powder for mothers, side food, milk powder for infants, grow up milk powder, milk powder for young children, and more convenient liquid grow up milk formula as the best choices bridging breast milk and growth at various stages, in order to take care of the babies in Taiwan attentively.

(2) Future supply and demand and market growth:

There were approximately 180,000 new born babies in 2018 (down by 6% from the previous year). This was echoed, by the sustained effort of the government in the advocacy of breast feeding, with breast feeding being on the rise in Taiwan, and the breastfeeding rate increased accordingly. The entire market size for infant and children’s food shrank. Currently, each family usually raises only -2 babies on average. The consumption behaviors of the new generation of parents have shifted to value formula nutrition and product safety more and more. Quaker will continue to invest in product conformity to the trends of the demand for infants’ nutritional value with innovation so that Quaker brand and babies can grow

-69-

up healthily together.

  • (3) Competitiveness, the advantages and disadvantages of development, and countermeasures.

Despite the limited infant and young child market size of Taiwan, Quaker brands still persists in pursuing good nutrition and continues its development. In addition to the three beneficial probiotics which are healthy for the digestive system of babies with accreditation on the effect, the products imported from Denmark as they have become the first choice when mothers wish to change milk for their babies, and the accredited organic rice extract produced in Taiwan may serve as the pure side food for babies. The Company also launched the all new Quaker brand Love Milk Powder series aimed at enabling babies to have balanced nutrition after quitting breast milk. The only Quaker liquid grow up formula milk which passes the accreditation of immunity may upgrade babies’ immunity effectively, and Quaker’s commitment to provide babies with the best formula is therefore realized.

The influence of foreign suppliers still remained at the beginning of 2018. Given the disadvantageous factors about brands and sales, Quaker launched the brand new premium DHA nutrition milk powder for mothers and Immu premium LF series to better satisfy new generation mothers’ needs and babies’ nutrition. Meanwhile, the Company will continue to invest in creative brand image commercials on TV and online, and also tangible and digital merchandising activities. It will also accumulate its resources in the Quaker Mother Classroom and professional health education to manage its business with due diligence, in order to enable Quaker to be one of the most popular brands for consumers and the most popular infant and young child brand for mothers in Taiwan.

Dairy products and drinks:

4. Powdered milk

(1) Market share

The Company’s adult milk powder plays a leading role in Taiwan’s low-fat milk powder market. According to the Kantar Worldpanel market survey, given the increasing demand for functional and healthy products in Taiwan’s market, Quaker adult milk powder has been and is still the leader in the adult low-fat milk powder market since 2001, with over 40% of market share in Taiwan.

(2) Future supply and demand and market growth:

Although the adult milk powder market in Taiwan is growing sluggishly, Quaker will exercise its expertise in health and nutrition, and keep launching quality and multifunctional products to satisfy consumers’ needs for health, as well as constant innovative marketing strategies and comprehensive channel communication to win recognition from consumers.

Looking out to market opportunities, in consideration of the demographic

-70-

change to the senior group and demand for healthcare in Taiwan, the market potential of adult milk powder is still promising. In response to the demand of the senior group to live longer, better, and healthier, the adult milk powder market is more eager to invest in health and, therefore, Quaker will upgrade the product formula again, and keep investing oriented toward the appeal for health, functionality, and nutrition.

In response to citizens needs for nutrition, he Company’s R&D team has prepared a series of healthy milk powder exclusive to individuals. In 2018, the Company upgraded the milk powder exclusive for females, and also launched Quaker High-Iron Milk Powder with Collagen Formula containing seven times the collagen protein. In addition, the Company designed the Dream Care High-Calcium Milk Powder for females over 40 years old to enhance the appeal for soy isoflavones again.

The main products including Quaker High Calcium Milk Powder with double health certificates and glucosamine milk powder helped build the Company’s more solid leadership in the adult nutrition market and win reliance and positive recognition from consumers. Quaker will continue to meet the needs of more consumers and continuously strengthen the Company’s leadership within the low-fat milk powder market.

  • (3) Competitiveness, the advantages and disadvantages of development, and responsive strategies.

For the overall physical health of the people, the Company continuously spares no effort to make improvement. After launching the ready-to-drink “Quaker Nutri System Food” in 2007, we launched formulas for diabetes, dialysis, and cancer patients to meet the market needs. With comprehensive marketing campaigns and celebrity endorsers, we boosted up sales. Later, we continued to launch new products meeting the market trend, such as the original flavor sugar-free, enhanced and enhanced nutrition series to fulfill the needs of different consumer groups so that consumers can “enjoy balanced nutrition in one can” and to strengthen Quaker’s status in the market of medical grade nutrition supplements.

Standard Foods makes “devoted to the pursuit of good nutrition” the mission of business operations and commits to providing consumers with best quality products. Many products of Standard Foods have passed national health food certification and its brand name is recognized and trusted by consumers. It is our intention to seize the adult functional supplement market with Quaker’s brand name and sales experience, our powerful R&D team and the most flexible marketing strategy, so as to create better sales performance for the Company’s supplement business

  • 5 Distribution product

  • (1) Adult milk powder:

-71-

Given the significant growth of whole-fat milk powder, the Fernleaf whole-fat series outperformed. Among the other things, the Fernleaf premium milk powder 2.6kg unit marketed through Costco exclusively has hit records consecutively in 2018, and was in short supply frequently. Low-fat milk powder is shrinking. By brand exposure, communication with media and merchandising, Anlene’s market share was growing slightly. The Company will continue to upgrade the market share and enhance brand power as its annual target. The new Fernleaf low-fat series, “Energy High-Calcium 1.5kg”, was launched in October 2018. Blended with Zinc and Vitamin B complex, the series strove for the functional milk powder market actively.

(2) Children’s milk powder:

The market of children’s milk powder declined under the influence of a low birth rate and children’s earlier exit from the market. The sales volume and value of the entire market declined accordingly. However, the Fernleaf milk powder sales kept growing, as it continued to attract new customers. In response to the e-commerce development trend, the Company adopted the Shopee channel for the first time since 2018 and focused development on the e-commerce market for appliances for mothers and infants. In the upcoming year, Fernleaf will still focus its development on the new customer solicitation plan, and attract old customers and upgrade old customers’ purchases by means of preferential activities and fine-quality complimentary gifts, so as to upgrade sales in diversified manners.

(3) Sliced cheese:

The entire market grew slightly. Sliced cheese still ranked as the top 1 in sales in the cheese market. Among the other things, Cheesedale sliced cheese sales were in the first place among all sliced cheese products. In December 2017, the 180g top grade cheese of Cheesedale was launched. Its sales were beyond expectations and, therefore, it became the most important star product of Cheesedale. According to a survey conducted by Kantar in Q4 of 2017, the popularity and purchase volume of Cheesedale sliced cheese were growing year by year. Cheesedale launched the new jumbo package 1145g in December 2018, in hopes of controlling the momentum for purchase of Cheesedale products and solidifying the market share for loyal consumers.

In the upcoming year, the Company will work with Fonterra Brands (Far East) Limited, Taiwan Branch closely to keep promoting competitive merchandising activities and upgrading the market share actively via stable operation of channels to hit the record again.

Cooking oil:

  1. Cooking oil

  2. (1) Market share

-72-

Aiming to provide families in Taiwan with high quality cooking oil, we have been wholeheartedly running the “Great Day” brand over the last three decades. The sunflower oil, canola oil, Five Precious Oil from Great Day, pure olive oil, and grape seed oil are preferred and supported by consumers for its healthy and quality image, making it the leading brand in Taiwan. As the leader of all varieties of cooking oil, sales of Great Day products are stable.

In China, our subsidiary distributes sunflower oil under the brand “Duo Li”. Insisting on providing healthy and quality cooking oil, Duo Li has gradually become the No. 1 brand of sunflower oil in China.

(2) Future supply/demand and market growth

The increasing concern from consumers for quality and safety drove them for pure oil and imported oil gradually. We believe sales of sunflower and olive oil will grow steadily under this trend. Since the Great Day series has emerged as the leading cooking oil in Taiwan, we will continue with the trend for consumer health and continue to promote Great Day Pure Sunflower Oil as the top choice for housewives owning to its persistence in quality. The sales of Great Day pure olive oil imported from Italy as it grows steadily, so we will continue to invest in advertising to boost sales further via TV commercials and merchandising activities. Great Day Blended Five Precious Oil has passed the national health food certification and is also a popular product. It emerged and remained as the product of top sales in the market of blended edible oil.

In the market of China, competitive items were launched to the consumer market under a cut-throat strategy without a pause for a larger market share. This made the market of severe competition even more complicated. Yet, the appeal of health of the consumers with good quality products can still be the way to earn the trust and recognition of consumers so far as health is concerned. Likewise, “Duo Li” sunflower oil, squeezed under a scientific method and preserved packaging process, has gradually earned the recognition of consumers in appealing to good health.

  • (3) Competitiveness, the advantages and disadvantages of development, and responsive strategies.

As the concern about cooking oil safety rises, family cooking styles also change to a macrobiotic diet and healthy cooking oil. Pure sunflower oil and pure olive oil has thus become the market mainstream and the niche of stable growth for “Great Day”. Both have secured the market shares in the first place.

Great Day has been certified by SQF, the highest international standard on food safety in 2017 to provide full protection of quality and safety for consumers. This implies that Great Day has met the highest international standard in raw materials, production processes, and product quality. In 2018, higher quality edible

-73-

oil was promoted to consumers as a result of the aggressive investment in various merchandising activities.

In the upcoming year, the edible oil market is expected to keep growing stably. Great Day will uphold its professional technology and experience and continue to offer more choices of healthy edible oil for customers in Taiwan for household needs.

We will continue to upgrade brand value and the image of health. In addition, we will use the spirit of brand innovation to produce good edible oil, to upgrade product value and quality, and to satisfy consumers in Taiwan in need of healthy edible oil. In the China market, we will also continue to control the changes in channels, expand the sales network, and combine channels to organize joint events, and improve the healthy image of “Duo Li” cooking oil with nationwide promotional activities.

Others:

7 Distribution product

  • (1) Market share

According to the market survey conducted by AC Nielsen, the momentum of the candy market turned out to be such leisure food as cough drops and chocolate and the market size shrank accordingly in 2018. However, Mentos and Chupa Chups continued to keep growing in the shrinking candy market, by launching short-term seasonal products and theme products in convenient chain stores on a quarterly basis to continue attracting consumers and upgrading consumers’ purchases.

  • (2) Competitiveness, the advantages and disadvantages of development, and responsive strategies.

In 2018, we went through the fiercest competition in the mint candy market. The two leading mint candy brands, Halls and Eclipse, competed with each other intensively, and Wm. Wrigley Jr. Company and Arrow were merged. For Mentos and Chupa Chups, we will continue to launch new seasonal packages and permanent best-sellers to maintain their leadership in the candy and lollipop market.

8. EMS service (Subsidiary- Domex Corp.):

(1) Market share

EMS is professional Electronic Manufacturing Services; at the present, the electronic products around the world are either self-produced or commissioned to EMS for manufacture; Domex Corp owns less than 1% of the EMS market share at the moment.

  • (2) Future supply/demand and market growth

-74-

With the various big companies worldwide expanding their productivity through factory establishment or incorporation, the competition within the industry is afraid to become fiercer. In the future, the EMS market will advance into the era with slim margin, and along with the structural transformation of the technological industry, the EMS industry will demonstrate the trend of “the bigger the stronger”.

  • (3) Competitiveness, the advantages and disadvantages of development, and responsive strategies.

Since the scale of Domex Corp is not big, we are capable of providing flexibly towards the alterations of production process and product line to collaborate with the different demands from the clients, and these are the vital factors for the current competition and development for Domex Corp. However, the EMS market is an industry where the bigger the stronger, Domex Corp will use diversified strategies in the future to avoid direct competition with large OEM factories.

(II) Application and production process of major products

1. Application of major products

Mainproduct Product application
Nutritious Foods High fiber grain-based foods and nutritious beverages for
breakfast andhealthdiets.
Cooking products Food
product type		 For cooking needs.
Other food types For leisurefoods.
EMS service
(Subsidiary –Domex
Corp.)		 As the designated use of customers varies, most of them
are medical and communications products.
  1. Production Process of Major Products Processing Flow Chart for Oat flake: Raw material → cutting → pressing → cooling → sieving → packaging Processing Flow Chart for Oat powder:

Raw material → foam slurry → gelatinization → drying → graining → sieving → packaging

Processing Flow Chart for Tonic Drinks: Raw material → extracting → filtering → mixing → bottling → packaging Processing Flow Chart for Dairy Products:

Raw material → homogenization → pasteurization → refrigerating → bottling → packaging

Processing Flow Chart for Refined Oil: Raw oil → refining, de-acidification → bleaching → deodorization → winterization → packaging

Processing Flow Chart for Three Treasure Oats: Raw material → extrusion → drying → cooling → packaging EMS service production process (Subsidiary –Domex Corp.): Components → SMT → DIP → Assembly → Testing → Packaging

-75-

(III) Supply of major ingredients

Major ingredients Sources
Oats Importedfrom Australia
SunflowerOilCrude Oil ImportedfromUkraine
Oleic Canola oil Crude
Oil		 Imported from Australia
Flour Domestic suppliers
Cane sugar TaiwanSugarCorporation
Rawmilk Domesticmilk farmers
Milkpowder SuppliersinNewZealand,Australia,Europe,andTaiwan
Electronic Parts
Subsidiary –Domex
Corp.		 Supplied by domestic dealers for international companies, as
well as domestic manufacturers.

-76-

Unit: NT$ Thousand As of March 31, 2019 (Note 2)

Relationship
with the
issuer		 Note 1: List the name, sales amount and sales ratio of the customers who have accounted for over 10% of total sales in the last two years. The customers who are not related
parties and must be kept in confidence in accordance with the agreement signed and can be identified by code.
Note 2: As of the date before the printing of this report. Listed companies or companies traded in brokerage shall disclose if there is any financial data for the most recent period
audited and attested or reviewed by a CPA.
Note 3: No substantial change occurred in the last two years.
2. Major Suppliers in the past two fiscal years
Unit: NT$ Thousand		 Item
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the issuer
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the
issuer
Name
Amount
Net purchase
amount up to
the last quarter
(%)
Relationship
with the
issuer
1
A
Company
2,284,259
13.5
Others
17,560,257
100.0
Others
14,695,165
86.5
Others
4,323,625
100.0
Net Purchase
Amount
17,560,257
100.0
Net
Purchase
Amount
16,979,424
100.0
Net
Purchase
Amount
4,323,625
100.0
Note 1: List the name, sales amount and sales ratio of the customers who have accounted for over 10% of the total sales amount in the last two years. The customers who are not
related parties and must be kept in confidence in accordance with the agreement signed and can be identified by code.
Note 2: Note 2: As of the date before the printing of this report. Listed companies or companies traded in brokerage shall disclose if there is any financial data for the most recent
period audited and attested or reviewed by a CPA.
Note 3: Our company has no suppliers with a stock amount of above 10% during the recent two years; therefore there is no need to disclose.		 Item
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the issuer
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the
issuer
Name
Amount
Net purchase
amount up to
the last quarter
(%)
Relationship
with the
issuer
1
A
Company
2,284,259
13.5
Others
17,560,257
100.0
Others
14,695,165
86.5
Others
4,323,625
100.0
Net Purchase
Amount
17,560,257
100.0
Net
Purchase
Amount
16,979,424
100.0
Net
Purchase
Amount
4,323,625
100.0
Note 1: List the name, sales amount and sales ratio of the customers who have accounted for over 10% of the total sales amount in the last two years. The customers who are not
related parties and must be kept in confidence in accordance with the agreement signed and can be identified by code.
Note 2: Note 2: As of the date before the printing of this report. Listed companies or companies traded in brokerage shall disclose if there is any financial data for the most recent
period audited and attested or reviewed by a CPA.
Note 3: Our company has no suppliers with a stock amount of above 10% during the recent two years; therefore there is no need to disclose.		 Item
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the issuer
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the
issuer
Name
Amount
Net purchase
amount up to
the last quarter
(%)
Relationship
with the
issuer
1
A
Company
2,284,259
13.5
Others
17,560,257
100.0
Others
14,695,165
86.5
Others
4,323,625
100.0
Net Purchase
Amount
17,560,257
100.0
Net
Purchase
Amount
16,979,424
100.0
Net
Purchase
Amount
4,323,625
100.0
Note 1: List the name, sales amount and sales ratio of the customers who have accounted for over 10% of the total sales amount in the last two years. The customers who are not
related parties and must be kept in confidence in accordance with the agreement signed and can be identified by code.
Note 2: Note 2: As of the date before the printing of this report. Listed companies or companies traded in brokerage shall disclose if there is any financial data for the most recent
period audited and attested or reviewed by a CPA.
Note 3: Our company has no suppliers with a stock amount of above 10% during the recent two years; therefore there is no need to disclose.		 Item
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the issuer
Name
Amount
Percentage
of net
purchase
amount (%)
Relationship
with the
issuer
Name
Amount
Net purchase
amount up to
the last quarter
(%)
Relationship
with the
issuer
1
A
Company
2,284,259
13.5
Others
17,560,257
100.0
Others
14,695,165
86.5
Others
4,323,625
100.0
Net Purchase
Amount
17,560,257
100.0
Net
Purchase
Amount
16,979,424
100.0
Net
Purchase
Amount
4,323,625
100.0
Note 1: List the name, sales amount and sales ratio of the customers who have accounted for over 10% of the total sales amount in the last two years. The customers who are not
related parties and must be kept in confidence in accordance with the agreement signed and can be identified by code.
Note 2: Note 2: As of the date before the printing of this report. Listed companies or companies traded in brokerage shall disclose if there is any financial data for the most recent
period audited and attested or reviewed by a CPA.
Note 3: Our company has no suppliers with a stock amount of above 10% during the recent two years; therefore there is no need to disclose.
As of March 31, 2019 Relationship
with the
issuer

Percentage of
total net sale
amount up to the
last quarter (%)		 15.9 84.1 100.0
Net purchase
amount up to
the last quarter
(%)		 100.0 100.0

Amount		 1,169,274 6,167,892 7,337,166 Amount 4,323,625 4,323,625

Name		 A company Others Net sale
amount		 Name Others Net
Purchase
Amount
2018 Relationship
with the
issuer		 2018 Relationship
with the
issuer
Percentage
of total net
sale amount
(%)		 16.6 83.4 100.0 Percentage
of net
purchase
amount (%)		 13.5 86.5 100.0
Amount 4,533,832 22,806,755 27,340,587
Amount 2,284,259 14,695,165 16,979,424
Name A Company
(Note 2)		 Others Net sale
amount
Name A
Company		 Others Net
Purchase
Amount
2017 Relationship
with the
issuer		 2017 Relationship
with the issuer
Percentage
of total net
sale amount
(%)
16.4
83.6
100.0
Percentage
of net
purchase
amount (%)
100.0
100.0
Amount 4,329,907 22,148,017 26,477,924
Amount 17,560,257 17,560,257

Name		 A Company
(Note 2)		 Others Net sale amount Name Others Net Purchase
Amount
Item 1
Item 1

-77-

(V) Production Quantities and Value over the Past Two Years

Unit: 1 tons / NTD Thousand

Unit: 1 tons / NTD Thousand Unit: 1 tons / NTD Thousand Unit: 1 tons / NTD Thousand
Fiscal year
QTY &
Value
2017		 2018
Major Products Capacity Production
Quantity		 Production
Value		 Capacity Production
Quantity		 Production
Value
Nutritious Foods
131,854
86,552.76		 6,118,787 131,854 91,457.94
6,464,859
Cooking
products Food
product type		 669,676
264,541.41		 10,352,763 669,676 284,810.21
10,840,472
Others (Note 1)
12,038.69		 259,266 (Note 1) 13,131.26
320,136
(Note 2)
1,254,143
(Note3)		 1,982,313 (Note 2) 1,162,748
(Note3)
1,561,377
Total 801,530 363,132.86 18,713,129 801,530 389,399.41
17,625,466
1,254,143
(Note3)		 1,162,748
(Note3)

Note 1: Nutritious Foods production line was used for production.

Note 2: Diversified products are produced by a single production line. Note 3: Pieces as the unit

(VI) Production Sales and Value over the Past Two Years

Unit: 1 tons / NTD Thousand

Unit:1 tons /NTD Thousand Unit:1 tons /NTD Thousand Unit:1 tons /NTD Thousand Unit:1 tons /NTD Thousand
Fiscal year
Sales
Quantities
and Value
2017		 2018
Major Products Domestic Sales Export Sales Domestic Sales Export Sales
Quantity Value Quantity Value Quantity Value Quantity Value
Nutritious Foods
93,478.90		 10,114,799
1,037.10		 87,943 101,183.40 10,855,924
683.50
73,983
Cooking
products Food
product type		 22,750.70 1,820,916 233,863.60 11,311,473 23,344.40 1,937,524 246,208.10 11,879,761
Others 11,881.10 2,360,323 0.00 782,470 12,730.50 1,788,938 0.00
804,457
0.00
(Note1)
316,959.00
(Note1)		 0.00
(Note1)
520,632.00
(Note1)
805,015.00
(Note2)		 380,274.00
(Note2)		 578,756.00
(Note2)		 384,267.00
(Note2)
Total 128,110.70 14,296,038 234,900.70 12,181,886 137,258.30 14,582,386 246,891.60
12,758,201
0.00
(Note1)
316,959.00
(Note1)		 0.00
(Note1)
520,632.00
(Note1)
805,015.00
(Note 2)		 380,274.00
(Note 2)		 578,756.00
(Note 2)		 384,267.00
(Note 2)

Note 1: Unit=bottle Note 2: Unit=piece

-78-

III. Status of employees over the past two years and up to the printing of the annual report

Fiscal year Fiscal year 2017 2018 As of April 30,
2019
Number of
Employees		 Management & Staff 2,652 2,657 2,637
Technicians &Laborers 938 948 909
Total 3,590 3,605 3,546
AverageAge 35.18 36.66 36.74
AverageYears ofService 5.65 5.77 5.89
Education
distribution		 Ph.D. 14 12 16
Masters 194 206 208
College/ University 1,818 1,866 1,774
Senior HighSchool 1,159 1,126 1,183
Junior 405 395 365

Note: Contracted personnel and foreign laborers are included.

-79-

IV. Expenditure on environmental protection

  • Standard Food has spared no effort to support the government’s environmental policy. In addition to environmental management inspections and environmental protection equipment, we have a responsible team designated for the operation, repair and maintenance, and improvement of pollution fighting equipment

  • (I) In 2018 until the date of publication of the Annual Report, Standard Foods has been punished with a fine in the amount of NT$26,000 due to its failure to submit the wastewater pollution mitigation plan to the competent authority for approval prior to performance of the construction in accordance with Article 18 of the Water Pollution Control Act and Paragraph 1 of Article 10 of the Water Pollution Control Measures and Test Reporting Management Regulations (Doc. No.: 30-107-090002) on September 4, 2018.

(II) Response strategy and potential expenses

  1. Planned improvement actions

  2. (1) Planned Improvement Actions: In 2018, the Company has executed training for engineering personnel to strengthen the descriptions and training about environmental protection requirements for engineering construction and processes thereof to prevent the same defect from occurring again.

  3. (2) Potential Expenditures: For a total of three dry machine wet scrubbers for air pollution emission equipment, and update of parts and upgrading of functions in 2019, the expenditure is estimated to be NT$ 1 million.

  4. (3) Estimated environmental protection expenses in the next three years

Year 2019 2020 2021
Pollution fighting
equipment or
expenditure
planned		 Environmental
protection
equipment
operating expense
and garbage clean
up expense		 Environmental
protection
equipment
operating expense
and garbage clean
up expense		 Environmental
protection
equipment
operating expense
and garbage clean
up expense
Corrective action
planned		 Maintain
environmental
protection
equipment and
cleanup garbage		 Maintain
environmental
protection
equipment and
cleanup garbage		 Maintain
environmental
protection
equipment and
cleanup garbage
Amount NT$14,800
thousand		 NT$15,540
thousand		 NT$15,540
thousand

(4) Impact afterwards

Year 2019 2020 2021
Impact on net
income		 Minor Minor Minor
Impact on
competitiveness		 None None None

-80-

V. Employee / Employer Relations

(I) Major coordination and implementation of current labor issues

1. Employee’s welfare package

Employees’ welfare is arranged as follows:

  • (1) Labor insurance and health insurance are arranged for employees as required by law. The Company will have the employees informed automatically upon the occurrence of insurance settlements and will assist them in applying for the said settlement for their protection.

  • (2) The Company has group insurance for employees as a whole (including their spouses and children) including life insurance, accident insurance, medical insurance, and cancer-prevention insurance with the premium paid by the Company in full.

  • (3) Annual bonus and performance prize money from retained earnings are distributed to employees.

  • (4) Physical check-ups for employees are arranged periodically.

  • (5) Gifts are distributed to employees on Moon Festival, Dragon Boat Festival, Chinese New Year, and Labor Day.

The Employee Welfare Committee will handle the employees’ welfare as follows:

  • (1) Gifts are distributed to employees on Moon Festival, Dragon Boat Festival, and Chinese New Year.

  • (2) Birthday gift money

  • (3) The Committee offers wedding, birth, consolation and condolence, and disability subsidies to employees.

  • (4) Company tour compensation.

  • (5) Group activity compensation.

  • (6) Festival celebration activities.

The Company has set up employee welfare committee per approvals of 1986.11.03 Taoyuan County Government Ruling Fu-Lao-She-Chi No.148470 and Department of Labor, Taipei City Government 1992.07.14 Ruling Bei-Shi-Lao No.12761. The Committee members are elected by employees and a membership fee is collected monthly for welfare activities.

2. Retirement plan

The Company has a retirement plan defined for the contracted managers and employees.

Since 2005.07.01, those who elected the new pension system, the Company deposits the monthly pension to his/her personal under Bureau of Labor Insurance according to the regulation of "Labor Pension Act ". And those who elected the old pension system and the seniority of service accumulated by the aforementioned employees, according to the regulation of "Labor Pension Act ", the Company deposits the monthly pension of the actuarial computation from actuaries to an account in Taiwan under Supervisory Committee Labor Retirement Reserve for its management. In addition, the Company appoints the relevant managers to defined benefit liability.

3. Education and training

-81-

Talents are important assets of the Company. We believe that the growth of the Company will only follow the growth of employees. We have a plan formed to help our employees upgrade in order to have an outstanding team organized for competitive advantages and for the ongoing concern of the organization taken as a whole.

We have helped our employees refine their expertise, communication skills, and management and leadership. A training blueprint is drawn for each department with a focus on various trainings for each job level; moreover, management trainees are recruited for manufacturing operations and a diversified learning environment is provided. For example, orientation training, plant tours, sales joint calls, common course training, intra-departmental on-job training and practice, senior adviser’s research and guidance, project study, theme meeting attendance, intra-departmental and inter-company rotation, annual sales meetings, overseas study for management and assigned textbook reading and self-learning for personal and group development and growth in a diversified learning environment are provided.

For the cultivation of expertise, a learning program is designed according to the expertise needed for performing job responsibilities. Technology and experience are to be passed on and the core competence is to be built through the internal instructors’ training and accreditation system and the counseling procedure of the management. The industrial growth and employee’s personal development needs are to be integrated to construct a talent database for internal promotion.

We provide general new employee training, freshman guidance and factory tours for new colleagues, as well as professional advanced training courses related to the posts to assist new colleagues in blending into the Company and understanding the Company within the shortest period of time, and are capable of performing their skills to work.

Help is given to sales & marketing teams to build up and substantiate the expertise and skills needed for job performance by providing them with special skill courses, comprehensive guidance, and joint call assistance. Moreover, annual sales meetings are arranged to help salespersons understand the Company, products, and marketing strategy in order to be cooperative and maintain energy and creativity.

For the cultivation of the management trainees, courses are arranged and a supervisor will be appointed to prepare the trainees for management responsibilities in the near future. We have a talent database for internal promotion constructed through job rotation, project study, and the instruction of senior management and consultants.

Standard Foods used its best efforts to train professional talents and, therefore, was awarded the silver medal for “Taiwan Train Quality System (TTQS)” by the Workforce Development Agency, Ministry of Labor, Executive Yuan. It participated in the evaluation again and won the higher honor after it won the bronze medal in 2014. TTQS refers to the national talent evaluation system and is an indicator key to labor quality. The award presented to the Company represents that the Company's performance in upgrading the quality of human resources is remarkable.

The education and training expenses of the Company in 2018 amounted to NT$13,439 thousand.

-82-

4. Protection measures for working environment and employee personal safety:

  • To protect the working environment of the factory and office and the safety of employees, the Company has all kinds of standard operating manuals and protective measures regulated in accordance with the Labor Safety and Health Act and the Labor Safety and Health Facilities Rules.

  • (1) Establishment of Labor Health & Safety Committee: Meetings are held annually to discuss labor health and safety and firefighting plans.

  • (2) Stipulation of occupational hazards prevention plan: Protect labor safety and prevent occupation hazards from occurring.

  • (3) Stipulation of health and safety inspection plan: Inspect machine and equipment safety automatically to prevent accidents from occurring.

  • (4) Stipulation of health and safety code: It is stipulated by the Labor Health & Safety Committee and the labor representative to ensure its enforcement by employees.

  • (5) Employee’s health check-up: It includes the physical check-up and health management arranged for the contracted laborers, new recruits, and employees.

  • (6) Labor health and safety education and training: Labor health & safety education and disaster prevention training are arranged periodically.

  • (7) Special training: Machine and equipment operators must be trained by the independent training institutions that are contracted by the government and must receive a certificate of qualification.

  • (8) Transportation of female workers for graveyard shifts: The Company will have transportation arranged for female workers who get off duty after 22:00 at night.

  • (9) Employee’s dormitory: The Company has a dormitory arranged for male workers and female workers who live too far away or who work the graveyard shift.

  • (10)Appointment of labor health & safety personnel: The Company has labor health & safety personnel and Class A labor health & safety managers designated in accordance with laws.

  • (11)Designation of medical personnel: Medical personnel are arranged in the factory to care for the employees in accordance with laws.

  • (12)Occupational disaster investigation: Analyze the status and causes of occupational disasters and have preventive action stipulated and report the incidents to labor inspection units for the record.

  • (13)Subcontractor management: A review committee is organized by subcontractors and the Company to study work safety and prevent occupational disasters from occurring.

  • (14)Operational environment test: Inspect the noise level in the working area annually to protect worker’s hearing.

  • (15)Substantiate control processes: Substantiate fire control processes, restrictive space processes, and firefighting system suspension process according to the standard operation procedure.

  • (16)Labor health & safety audit: Firefighting directors of each unit and department head are to tour the factory daily to prevent accidents from occurring and to protect the safety of life and property.

5. Employee’s rules

Employee’s rules are stipulated according to the Labor Standards Law and regulations to define the rights and obligations of employer and employees, to substantiate management systems and to inspire employees to work together as a team. The service rules for employees are detailed as follows:

-83-

  • (1) Employees are obligated to perform tasks responsibly and diligently, follow the reasonable instructions and supervision of the management in all levels and may not take their job responsibilities lightly or dodge and disobey work assignments. The management is obligated to guide employers in a friendly manner.

  • (2) Employees are expected to work hard, take care of public property, reduce losses, improve product quality, increase productivity, and to keep business and job responsibilities in confidence to the outsiders.

  • (3) Employees are to report for work to their direct supervisors according to the chain of command, except in an emergency.

  • (4) Employees without the consent of the Company may not bring in any friend or family to work for the Company.

  • (5) Employees may not take advantage of the position held within the Company to benefit themselves or any third party.

  • (6) With the written consent from the Company, employees may not work for another company that operates similar business, which would cause a breach of the employment contract.

  • (7) Employees may not demand entertainment or accept gifts, kickback or any illegal gains by performing or not performing job duties.

  • (8) Employees may not bring ammunition, knives or guns, dangerous objects (anything that are irrelevant to their job performance, which may cause physical harm to anyone and lead to work accident, or any chemicals and flammables that are not for work purpose), illegal items by law, or any non-work associated items to the work venue.

  • (9) Employees may not, at will, take the property of the Company off the premises or the factory, lease the property of the Company to any outside party without authorization.

  • (10)The employment contract is negotiated and stipulated by both the employer and the employee by free will. The following guidelines shall be followed when the employer deem there’s necessity to make adjustment:

  • i. For the needs of the Company’s operation and not for undue motive or purpose, unless stipulated in law otherwise.

  • ii. No adverse changes to the employee’s salary or working condition.

  • iii. Employee is still eligible to perform the new assignment, in both physical and skill-set terms.

  • iv. Employer shall give necessary assistance when the employee is relocated in a remote location.

  • v. Taking the welfare of employee and his/her family life for consideration.

6. Employer-employee relations

Our company elects labor representatives according to the Regulations for Implementing Labor-Management Meetings stipulated by the Council of Labor Affairs; the attendance from the management representative is nominated by the Company. The term of office for labor-management meeting representatives is three years per each term; the labor representative may renew the term of office via election, and the management representative may renew the term of office via designation. The labor-management meeting is composed of representatives from both the labor and the management parties; a labor-management meeting is called for every three months to coordinate the labor-management relationship, to stimulate

-84-

labor-management collaboration, as well as to prevent all kinds of labor issues. The labor welfare affairs, labor safety and hygiene, enhancement of production efficiency and annual schedule are discussed and negotiated by the labor and the management parties during the meeting, which will then be implemented after reaching agreement to benefit both the labor and the management parties.

(II) Losses resulting from labor disputes in the most recent years and up to the printing of the annual report: None.

VI. Important commitments

April 30,2019
Restrictive
clauses
(Note 2)
(Note 3)
None
None
Nature of
agreement		 Client Agreement period Content Restrictive
clauses
Technological
Cooperation
Quaker Co.		 July,1994 –
July11, 2029
(Note 1)		 Quaker Oatmeal and Baby
Oatmeal Powder in Taiwan		 (Note 2)
Exclusive
Distributor		 Fonterra
Brands (Far
East)Limited		 April 28,2008-
April 27, 2021
(Note 3)		 Exclusive Sales Agent in
Taiwan for Fonterra Brand
Products		 (Note 3)
Supply and
Sales
Agreement		 MND PX
Ministry		 October 23, 2018-
October 22, 2019
(Note 4)		 Welfare for Military Personnel
and Their Spouses		 None
Long-term
Loan		 Shin Kong
Commercial
Bank		 December 15, 2017-
December 15, 2021		 The guarantee limit amounted
to NT$50 million.		 None

Note 1: The terms and conditions for Agreement renewal is for five years each time. The parties shall meet no later than six months prior to the expiration of the term of the Agreement in order to discuss the renewal of the Agreement.

Note 2: If there is a subsequent material decline of 18% or more in Net Sales of the Quaker brand products in any two consecutive quarters as compared with Net Sales in the corresponding quarterly periods in the previous fiscal year due to the non-performance of the agreement; also, the Company could not evidence it to the Quaker Oats Company in the USA that it was due to special causes instead of non-performance of the agreement, the Quaker Oats Company shall have the option to terminate the Agreement with the Company informed in writing six months in advance.

Note 3: The renewal shall be decided within three months prior to expiration of the Agreement. Unless otherwise agreed by both parties, the Agreement shall be renewed for another three years based on the original terms and conditions upon expiration of the Agreement, and so on.

Note 4: Renewed per year.

-85-

Six. Financial Information

  • I. Condensed Balance Sheet, Income Statements, CPAs and Their Opinions over the Last Five Years

  • (I) Condensed Balance Sheet and Comprehensive Income Statement- International Financial Reporting Standards

Condensed Balance Sheet – IFRS -Consolidated

Unit: NT$ Thousands

Fiscal year
Item		 Fiscal year
Item		 Financial Informationover thelast five years Financial Informationover thelast five years Financial Informationover thelast five years Financial Informationover thelast five years Financial Informationover thelast five years As of March 31,
2019 Financial
Information
(Note2)
2014 2015 2016 2017 2018
Current Assets 13,501,577 15,391,892 15,127,876 15,496,940 17,107,047 16,579,979
Property, Plant and
Equipment		 3,691,574
3,783,949		 4,684,441 5,676,084 5,478,238
5,506,039
IntangibleAssets 7,504
166,422		 144,702 78,066 73,050 74,787
Other Assets 940,694
1,187,011		 1,862,067 1,458,398 1,339,321
1,427,874
Total Assets 18,141,349 20,529,274 21,819,086 22,709,488 23,997,656 23,588,679
Current
Liabilities		 Before
appropriation		 5,659,720
6,441,771		 6,865,895 7,137,271 7,510,934
6,068,785

After
appropriation		 6,812,734
7,710,086		 8,273,725 8,967,450 (Note 2)
(Note 2)
Noncurrent Liabilities 378,442
584,030		 535,430 548,609 446,397 502,315
Total
Liabilities		 Before
appropriation		 6,038,162
7,025,801		 7,401,325 7,685,880 7,957,331
6,571,10

After
appropriation		 7,191,176
8,294,116		 8,809,155 9,516,059 (Note 2)
(Note 2)
Equity attributable to
owners of the parent		 11,955,482 13,306,157 14,217,975 14,785,740 15,806,926
16,764,584
CapitalStock 7,206,338 7,926,972 8,798,939 9,150,897 9,150,897 9,150,897
CapitalSurplus 51,331
63,153		 72,397 83,124 93,045 93,045
Retained
Earnings		 Before
appropriation		 4,232,457
5,022,383		 5,449,618 5,833,327 6,915,111
7,703,760
After
appropriation		 2,358,809
2,882,101		 3,689,830 4,003,148 (Note 2)
(Note 2)
Otherequity 486,538 314,831 (81,797) (260,426) (330,945) (161,936)
Treasury Stock (21,182) (21,182) (21,182) (21,182) (21,182) (21,182)
Non-controllinginterest 147,705 197,316 199,786 237,868 233,399 252,995
Total
equity		 Before
appropriation		 12,103,187 13,503,473 14,417,761 15,023,608 16,040,325
17,017,579
After
appropriation		 10,950,173 12,235,158 13,009,931 13,193,429 (Note 2)
(Note 2)

Note 1: Reviewed by CPA. Note 2: Subject to the approval of annual shareholders' meeting.

-86-

Condensed Comprehensive Income Statement - IFRS - Consolidated

Condensed Comprehensive Income Statement - IFRS - Consolidated Condensed Comprehensive Income Statement - IFRS - Consolidated Condensed Comprehensive Income Statement - IFRS - Consolidated Condensed Comprehensive Income Statement - IFRS - Consolidated Condensed Comprehensive Income Statement - IFRS - Consolidated Condensed Comprehensive Income Statement - IFRS - Consolidated Condensed Comprehensive Income Statement - IFRS - Consolidated
Unit: NT$Thousands,except EPS is in NT$
Fiscal year
Item		 Financial informationover thelast five years As of March 31,
2019 Financial
Information
(Note.1)
2014 2015 2016 2017 2018
Salesrevenue 21,800,013 25,514,586 27,073,564 26,477,924 27,340,587 7,337,166
Gross Profit 6,222,406 8,040,850 8,005,049 7,399,955 8,254,345 2,235,865
OperatingIncome 2,457,158 3,287,048 3,011,552 2,794,878 3,149,836 1,013,091
Non-operating
Income/expense		 112,867 111,503 268,253 (49,475) 526,396 18,431
Earnings beforetax 2,570,025 3,398,551 3,279,805 2,745,403 3,676,232 1,031,522
Net income from
continuing operations		 2,090,360 2,752,467 2,637,756 2,209,909 2,968,307 798,264
Loss from discontinued
operations		 -
-		 - - -
-
Net income (loss) 2,090,360 2,752,467 2,637,756 2,209,909 2,968,307 798,264
Other comprehensive
income (net after tax)		 223,874 (191,612) (438,072) (214,628) (138,749)
178,990
Current comprehensive
income/loss		 2,314,234 2,560,855 2,199,684 1,995,281 2,829,558 977,254
Net earnings attributable to
owners of the parent		 2,075,851 2,730,613 2,606,544 2,173,044 2,949,089 788,649
Net earnings attributable to
non-controllinginterest		 14,509 21,854 31,212 36,865 19,218 9,615
Comprehensive
income/loss attributable to
owners ofthe parent		 2,299,759 2,538,837 2,170,889 1,964,868 2,813,107 957,658
Comprehensive
income/loss attributable to
non-controllinginterest		 14,475 22,018 28,795 30,413 16,451 19,596
Earningsper share(Note 2) 2.29 3.01 2.87 2.39 3.25 0.87

Note 1: Reviewed by CPA.

Note 2: It is calculated in accordance with the weighted average shares after the retrospective adjustment proportionally to the capitalized earnings.

-87-

Condensed Balance Sheet – IFRS -Individual

Unit: NT$ Thousand

Unit: NT$Thousand Unit: NT$Thousand Unit: NT$Thousand Unit: NT$Thousand Unit: NT$Thousand
Fiscal year
Item		 Financial informationover thelast five years
2014 2015 2016 2017 2018
Current Assets 5,515,351 6,343,538 5,048,559 5,266,070 6,625,406
Property, Plant and
Equipment		 1,291,293 1,324,881 1,363,441 1,409,677 1,420,548
IntangibleAssets 6,490 6,438 3,558 3,375 1,672
Other Assets 7,498,763 8,596,705 10,097,381 10,295,641 10,308,831
Total Assets 14,311,897 16,271,562 16,512,939 16,974,763 18,356,457
Current
Liabilities		 Before
appropriation		 2,053,387 2,599,476 1,914,283 1,790,235 2,220,075
After
appropriation		 3,206,401 3,867,791 3,322,113 3,620,414 (Note 1)
Noncurrent Liabilities 303,028 365,929 380,681 398,788 329,456
Total
Liabilities		 Before
appropriation		 2,356,415 2,965,405 2,294,964 2,189,023 2,549,531
After
appropriation		 3,509,429 4,233,720 3,702,794 4,019,202 (Note 1)
CapitalStock 7,206,338 7,926,972 8,798,939 9,150,897 9,150,897
CapitalSurplus 51,331 63,153 72,397 83,124 93,045
Retained
Earnings		 Before
appropriation		 4,232,457 5,022,383 5,449,618 5,833,327 6,915,111
After
appropriation		 2,358,809 2,882,101 3,689,830 4,003,148 (Note 1)
Otherequity 486,538 314,831 (81,797) (260,426) (330,945)
Treasury Stock (21,182) (21,182) (21,182) (21,182) (21,182)
Total equity Before
appropriation		 11,955,482 13,306,157 14,217,975 14,785,740 15,806,926
After
appropriation		 10,802,468 12,037,842 12,810,145 12,955,561 (Note 1)

Note 1: Subject to the approval of annual shareholders' meeting.

-88-

Condensed Comprehensive Income Statement - IFRS - Individual

Unit: NT$ Thousands, except EPS is in NT$

Unit: NT$Thousands,except EPS is in NT$ Unit: NT$Thousands,except EPS is in NT$ Unit: NT$Thousands,except EPS is in NT$ Unit: NT$Thousands,except EPS is in NT$ Unit: NT$Thousands,except EPS is in NT$
Fiscal year
Item
Financial information over the last five years
2014 2015 2016 2017 2018
Salesrevenue 11,488,057 11,746,796 11,655,791 11,259,683 12,187,907
GrossProfit 3,547,802 3,895,187 3,835,072 3,689,421 4,082,297
OperatingIncome 2,024,934 2,283,059 2,191,994 2,136,045 2,370,064
Non-operating
Income/expense		 427,912 934,105 883,742 427,729 1,117,097
Earnings before tax 2,452,846 3,217,164 3,075,736 2,563,774 3,487,161
Net income from
continuing operations		 2,075,851 2,730,613 2,606,544 2,173,044 2,949,089
Loss from discontinued
operations		 -
-		 - -
-
Net income (loss) 2,075,851 2,730,613 2,606,544 2,173,044 2,949,089
Other comprehensive
income (net after tax)		 223,908 (191,776) (435,655) (208,176)
(135,982)
Total current
comprehensiveincome/loss		 2,299,759 2,538,837 2,170,889 1,964,868 2,813,107
Earningsper share(Note 1) 2.29 3.01 2.87 2.39 3.25

Note 1: It is calculated in accordance with the weighted average shares after the retrospective adjustment proportionally to the capitalized earnings.

(II) CPAs and their auditing opinions in the past five years

Fiscal year CPA Firm CPA’s name Auditing
opinion
2018 Deloitte Touche Tohmatsu CPA Firm Tza-Li Kung, Ching-Chen Yang Unqualified
2017 Deloitte Touche Tohmatsu CPA Firm Ting-Chen Hsu, Tza-Li Kung Unqualified
2016 Deloitte Touche Tohmatsu CPA Firm Ting-Chen Hsu, Tza-Li Kung Unqualified
2015 Deloitte Touche Tohmatsu CPA Firm Ting-Chen Hsu, Hung-Hsiang Tsai
Unqualified
2014 Deloitte Touche Tohmatsu CPA Firm Ting-Chen Hsu, Hung-Hsiang Tsai
Unqualified

-89-

II. Financial analysis in the past five years (1) Financial Analysis - IFRS (consolidated)

Fiscal year
Item(Note1)		 Fiscal year
Item(Note1)
Financial analysis over the last five years
Financial analysis over the last five years
Financial analysis over the last five years
Financial analysis over the last five years
Financial analysis over the last five years		 As of March
31, 2019 (Note)
2014 2015 2016 2017 2018
Financial
structure (%)		 Ratio of liabilities to assets (%) 33.28 34.22 33.92 33.84 33.16
27.86
Long-term capital to property,
plant,and facility (%)		 338.11 372.30 319.21 274.35 300.95
318.19
Solvency (%) Current ratio (%) 238.55 238.94 220.33 217.13 227.76
273.20

Quick ratio (%)		 142.08 144.83 127.07 129.47 150.05
183.31
(Times) interest earned ratio 108.12 147.77 62.24 37.26 46.53
98.62
Operating
ability		 Accounts receivable turnover
(times)		 5.37 5.83 5.57 5.11 4.86
5.18
Days sales in accounts
receivable		 67.97 62.61 65.53 71.42 75.10
70.46
Inventoryturnover(times) 4.24 4.67 4.80 4.31 4.36
4.98
Accounts payable turnover
(times)		 13.80 13.70 9.40 9.96 9.76
10.95
Average days in sales 86.08 78.16 76.04 84.68 83.71
73.29
Property, plant and facility
turnover(times)		 6.43 6.83 6.39 5.11 4.90
5.34
Total assets turnover(times) 1.28 1.32 1.28 1.19 1.17
1.23
Profitability Ratio of return on total assets
(%)		 12.39 14.33 12.67 10.21 12.99
13.56
Ratio of return on total equities
(%)		 18.21 21.50 18.89 15.01 19.11
19.32
Ratio of net income before tax
to paid-incapital(%) (Note 7)		 35.66 42.87 37.28 30.00 40.17
45.09
Profit ratio (%) 9.58 10.79 9.74 8.35 10.86
10.88
Earningsper share($) 2.29
3.01
2.87
2.39
3.25
0.87
Cash flow Cash flow ratio(%) 37.31 41.49 32.99 35.62 35.14
12.44
Cash flow adequacyratio(%) 117.18 110.34 105.11 88.34 101.02
106.49
Cash reinvestment ratio(%) 6.89 8.89 5.41 5.88 3.93
3.62
Balance Degree ofoperatingleverage 1.42 1.37 1.45 1.49 1.47
1.40
Degree of financial leverage 1.01 1.01 1.02 1.03 1.03
1.01
Root causes for the financial ratio change in the last two years:
1. The increase in interest earned ratio in 2018 was primarily a result of the increase in operating profit resulting in the
increase in net income before tax.
2. The increase in return on total assets and ratio of net income before tax to paid-in capital in 2018 was primarily a
result of the increase in the increase in operating revenue of Standard Foods and of Standard Foods (Xiamen).
3. The increase in profit ratio in 2018 was primarily a result of the increase in the investment income and increase in
disposition of investment-based real property resulting from the operating profit and profit gained by certain
subsidiaries.
4. The increase in EPS in 2018 was primarily a result of the increase in net income from the same period of last year.
5. The decrease in cash reinvestment ratio in 2018 wasprimarilya result of the increase in cash dividend from lastyear.
  1. The decrease in cash reinvestment ratio in 2018 was primarily a result of the increase in cash dividend from last year. Note: Reviewed by CPAs.

-90-

Financial Analysis - IFRS (Individual)

Fiscal year
Item(Note1)		 Fiscal year
Item(Note1)
Financial analysis over the last five years
Financial analysis over the last five years
Financial analysis over the last five years
Financial analysis over the last five years
Financial analysis over the last five years
2014 2015 2016 2017 2018
Financial
structure (%)		 Ratio of liabilitiestoassets(%) 16.46 18.22 13.90 12.90
13.89
Long-term capital to property,
plant,and facility%		 949.32 1,031.95 1,070.72 1,077.16
1,135.93
Solvency (%) Current ratio(%) 268.60 244.03 263.73 294.16
298.43

Quick ratio(%)		 147.27 151.70 146.95 170.75
202.26
(Times)interest earned ratio 14,345.13 12,005.34 1,382.64 -
5,093.75
Operating
ability		 Accounts receivable turnover
(times)		 6.25 6.29 5.99 5.74
5.97
Days salesin accountsreceivable 58.40 58.03 60.93 63.59 61.13
Inventoryturnover(times) 4.08 3.87 4.02 4.05
4.36
Accountspayable turnover(times) 8.64 8.61 9.01 9.39
9.90
Average days in sales 89.46 94.32 90.80 90.12
83.71
Property, plant and facility turnover
(times)		 9.54 8.98 8.67 8.12
8.61
Total assets turnover(times) 0.85 0.77 0.71 0.67
0.69
Profitability Ratio of return on total assets(%) 15.31 17.86 15.91 12.98
16.70
Ratio of returnon totalequities (%) 18.32 21.62 18.94 14.98
19.29
Ratio of net income before tax to
paid-in capital(%) (Note 5)		 34.04 40.59 34.96 28.02
38.12
Profit ratio(%) 18.07 23.25 22.36 19.30
24.21
Earnings pershare ($) 2.29 3.01 2.87 2.39 3.25
Cash flow Cash flowratio (%) 83.91 81.02 106.59 107.93
79.67
Cash flow adequacyratio(%) 156.21 145.70 147.59 129.44
119.95
Cash reinvestment ratio(%) 4.81 6.18 4.74 3.09
(0.34)
Balance Degree of operatingleverage 1.32 1.37 1.40 1.40
1.35
Degree of financial leverage 1.00 1.00 1.00 1.00
1.00
The root causes for the financial ratio change in the last two years:
1.
The increase in interest earned ratio in 2018 was primarily a result of the interest expenses derived from the leasehold
in 2018 and no interest expenses derived in 2017.
2.
The increase in ratio of return on total assets in 2018 was primarily a result of the increase in the investment income
and increase in disposition of investment-based real property resulting from the operating profit and profit gained by
certain subsidiaries.
3.
The increase in ratio of return on total equities in 2018 was primarily a result of the increase in the investment
income and increase in disposition of investment-based real property resulting from the operating profit and profit
gained by certain subsidiaries.
4.
The increase in ratio of net income before tax to paid-in capital and profit ratio in 2018 was primarily a result of the
increase in net income before tax from the same period of last year.
5.
The increase in EPS in 2018 was primarily a result of the increase in net income from the same period of last year.
6.
The decrease in cash flow ratio in 2018 was primarily a result of the decrease in net cash flow from operating
activities, and increase in accounts payable and other payables.
The decrease in cash reinvestment ratio in 2018 wasprimarilya result of the increase in cash dividends from lastyear.
Note 1:
The following equations shall be listed at the bottom of this chart.
1. Financial structure

  • (1) Ratio of debt to assets = Total debt/Total assets.

  • (2) Long-term capital to fixed assets ratio＝(total equity＋non-current debt)/total net fixed assets

  • Solvency

  • (1) Current ratio = Current assets / Current liability

  • (2) Quick ratio = (Current assets – Inventory – Prepaid expense) / Current liabilities

  • (3) Times interest earned ratio = Net income before tax and interest expense / Interest expense of the year

  • Operating ability

  • (1) Accounts receivable turnover (including accounts receivable and notes receivable derived from business operation) = Net sales / Average accounts receivable (including accounts receivable and notes receivable derived from business operation).

  • (2) Average collection days = 365 / Account receivable turnover

-91-

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

  • (4) Accounts payable turnover (including accounts payable and notes payable derived from business operation) = Cost of goods sold / Average accounts payable (including accounts payable and notes payable derived from business operation).

  • (5) Average inventory turnover days = 365 / Inventory turnover

  • (6) Fixed assets turnover＝Net sales / Average net fixed assets

  • (7) Total assets turnover = Net sales / Total assets

  • Profitability

  • (1) Return on assets = [Net income (loss) + interest expense x (1-tax rate)] / Average total assets

  • (2) Return on shareholder’s equity = Net income (loss) / Net average shareholders’ equity

  • (3) Profit ratio = Net income (loss) / Net sales

  • (4) EPS = (Net earnings attributable to owners of the parent - preferred dividend) / Weighted-average shares issued. (Note 2)

  • Cash flow

  • (1) Cash flow ratio = Net cash flow from operating activity / Current liability

  • (2) Cash flow adequacy ratio = Net cash flow from operating activities in the past five years / (Capital expenditure + Inventory increase + Cash dividend) in the past five years

  • (3) Cash reinvestment ratio = (Net cash flow from operating activity – Cash dividend) / (Fixed assets + Long-term investment + other assets + Working capital). (Note 3)

  • Leverage:

  • (1) Degree of operating leverage = (Net operating income – Variable operating cost and expense) / Operating income (Note 4).

  • (2) Degree of financial leverage = Operating income / (Operating income – interest expense).

Note 2: When analyzing EPS equation above, please note the followings

  1. Based on weighted average common stocks, not the shares issued at the end of the year.

  2. Calculation for weighted-average common stock shall take into consideration the number of floating days of new shares issued from cash funding and treasury shares

  3. Those that had capital increase from retain earnings or capital reserve, the total capital shall be adjusted retroactively by the percentage of increase, and no consideration for the issuing period is needed, when calculate EPS for the entire fiscal year or the first six months

  4. If the preferred shares are non-convertible cumulative preferred stocks, the dividend (whether paid or not) shall be deducted from the after-tax net income/loss. If the preferred shares are non-cumulative preferred stocks, the dividends shall be deducted from the after-tax net income. No such adjustment shall be made if after-tax net loss.

Note 3: When analyzing the cash flows, please note the following matters:

  1. Cash flows from operating activities mean the business has generated a net inflow of cash.

  2. Capital expenditure means cash paid for long-term assets purchase during the year.

  3. Inventory addition is only included when inventory balance at the period end is bigger than that at the beginning of the period. No inventory addition is included if inventory balance was down at the year end.

  4. Cash dividend includes cash distribution paid to holders of both common stocks and preferred stocks. 5. Gross fixed assets means total fixed assets before depreciation.

Note 4: The issuer shall divide each operation cost and expense into fixed and variable categories based on their natures, if it is done by estimation or subjective judgments, the bases shall be logical and consistent.

Note 5: If the Company’s stock is without a par value or the par value is not NT$10, the calculation of paid-in capital ratio referred to above should be replaced with the equity ratio attributable to the shareholders of the parent company on the balance sheet.

-92-

III.Audit committee’s report in the most recent year

Standard Foods Corporation Audit Committee’s Audit Report

The Board has submitted the Company’s 2018 business report, consolidated and individual financial statements and earnings distribution proposal, where consolidated and individual financial statements have been audited by CPA Tza-Li Kung and CPA Ching-Chen Yang of Deloitte Touch Tohmatsu through the appointment by the Board and an audit report has been issued accordingly.

The aforementioned business report, consolidated and individual financial statements and earnings distribution proposal have been audited by the undersigned and are considered in the conformity with applicable laws and regulations. Therefore, the Audit Committee’s Audit Report is hereby issued in accordance with Article 14-4 of the Securities and Exchange Law and Article 219 of the Company Law.

Please kindly review and approve

To:

Standard Foods Corporation 2019 General Shareholders Meeting

Standard Foods Corporation

Audit Committee Convener: Ben Chang

March 23, 2018

-93-

IV. Financial Report and consolidated financial statements IV.1. Financial Report of Standard Foods Corporation and Subsidiaries

Standard Foods Corporation and Subsidiaries

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

Only for English translation

-94-

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies required to be included in the consolidated financial statements of affiliates in accordance with the “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises” for the year ended December 31, 2018 are all the same as the companies required to be included in the consolidated financial statements of parent and subsidiary companies as provided in International Financial Reporting Standards No. 10, “Consolidated Financial Statements”. Relevant information that should be disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated financial statements of parent and subsidiary companies. Hence, we have not prepared a separate set of consolidated financial statements of affiliates.

Very truly yours,

STANDARD FOODS CORPORATION

By

TER-FUNG TSAO Chairman March 22, 2019

-95-

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Standard Foods Corporation

Opinion

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

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

Basis for Opinion

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

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

-96-

Key audit matter of the Group’s consolidated financial statements for the year ended December 31, 2018 is stated as follows:

Evaluation of Inventory

The products of the Group mainly include nutritional foods, edible oils, dairy products, and beverages. To assess the existence of inventory impairment, the management had performed an assessment thereof by taking into consideration the current market condition and historical sales experience. Refer to Notes 4, 5, and 15 to the consolidated financial statements for detailed information related to assessment of inventory. Because the assessment of impairment loss of inventory involves critical accounting estimates and management’s judgments, the assessment of impairment loss of inventory was deemed to be a key audit matter.

Our audit procedures performed in response to the abovementioned key audit matter included obtaining information pertaining to the lower of cost or net realizable value (LCNRV), sampling the projected pricing information to the most recent sales record to assess the reasonableness of the judgment on LCNRV, as well as collecting related documentations on obsolete inventory to assess the appropriateness of methodology adopted in the calculation of the impairment loss of inventory.

Other Matter

We have also audited the parent company only financial statements of Standard Foods Corporation as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion.

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

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

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

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

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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 the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

-97-

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

  1. Identify and assess the risks of material misstatement of the consolidated 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 Group’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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

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

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

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

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

-98-

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ 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.

The engagement partners on the audit resulting in this independent auditors’ report are Tza-Li Gung and Ching-Cheng Yang.

Deloitte & Touche Taipei, Taiwan Republic of China

March 22, 2019

Notice to Readers

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

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and consolidated financial statements shall prevail.

-99-

STANDARD FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss - current (Note 7)
Financial assets at fair value through other comprehensive income - current (Note 8)
Available-for-sale financial assets - current (Note 10)
Financial assets at amortized cost - current (Note 9)
Debt investments with no active market - current (Note 12)
Notes receivable (Notes 13 and 29)
Trade receivables (Notes 5, 13 and 29)
Finance lease receivables - current (Note 14)
Other receivables (Note 13)
Current tax assets (Note 31)
Inventories (Note 15)
Prepayments (Note 16)
Other current assets (Notes 22 and 40)
Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through profit or loss - non-current (Note 7)
Financial assets at fair value through other comprehensive income - non-current (Note 8)
Available-for-sale financial assets - non-current (Note 10)
Financial assets measured at cost - non-current (Note 11)
Property, plant and equipment (Notes 18 and 40)
Investment properties (Notes 19 and 40)
Goodwill
Other intangible assets (Note 20)
Deferred tax assets (Note 31)
Finance lease receivables - non-current (Note 14)
Net defined benefit assets
Long-term prepayments for leases (Note 21)
Other non-current assets (Notes 22 and 40)
Total non-current assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term borrowings (Notes 23 and 40)
Short-term bills payable (Note 23)
Financial liabilities at fair value through profit or loss - current (Note 7)
Contract liabilities - current (Note 29)
Notes payable (Note 24)
Trade payables (Note 24)
Trade payables to related parties (Note 39)
Other payables (Note 25)
Current tax liabilities (Note 31)
Provisions - current (Note 26)
Current portion of long-term borrowings (Notes 23 and 40)
Finance lease payables - current
Other current liabilities (Note 25)
Total current liabilities
NON-CURRENT LIABILITIES
Long-term borrowings (Notes 23 and 40)
Deferred tax liabilities (Note 31)
Finance lease payables - non-current
Net defined benefit liabilities
Other non-current liabilities (Note 25)
Total non-current liabilities
Total liabilities
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 28)
Ordinary shares
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Treasury shares
Total equity attributable to owners of the Company
NON-CONTROLLING INTERESTS (Note 28)
Total equity
TOTAL		 2018 2017
Amount
%
$ 2,589,952
11
617,790
2
154,439
1
-
-
1,505,913
6
-
-
2,887
-
6,161,079
26
2,640
-
222,129
1
13,349
-
4,199,286
17
1,615,672
7
21,911
-
17,107,047
71
7,315
-
167,260
1
-
-
-
-
5,478,238
23
110,776
-
818
-
72,232
-
400,746
2
29,724
-
2,564
-
381,081
2
239,855
1
6,890,609
29
$ 23,997,656
100
$ 1,731,478
7
119,904
-
-
-
360,115
2
131,916
1
2,162,745
9
8,602
-
2,609,886
11
337,835
1
-
-
12,000
-
2,137
-
34,316
-
7,510,934
31
15,000
-
136,123
1
4,809
-
265,770
1
24,695
-
446,397
2
7,957,331
33
9,150,897
38
93,045
-
2,650,503
11
260,426
1
4,004,182
17
6,915,111
29
(330,945)
(1)
(21,182)
-
15,806,926
66
233,399
1
16,040,325
67
$ 23,997,656
100		 Amount
%
$ 3,152,682
14
-
-
-
-
204,078
1
-
-
639,832
3
4,846
-
5,079,140
22
2,412
-
156,538
1
800
-
4,558,081
20
1,676,153
7
22,378
-
15,496,940
68
-
-
-
-
118,943
1
46,235
-
5,676,084
25
239,249
1
817
-
77,249
-
362,183
2
32,363
-
1,430
-
396,450
2
261,545
1
7,212,548
32
$ 22,709,488
100
$ 2,312,473
10
99,953
1
11,253
-
-
-
99,380
-
1,506,263
7
3,269
-
2,393,841
11
307,268
1
112,814
1
12,000
-
496
-
278,261
1
7,137,271
32
27,000
-
92,979
-
2,337
-
372,219
2
54,074
-
548,609
2
7,685,880
34
9,150,897
40
83,124
-
2,433,199
11
81,797
-
3,318,331
15
5,833,327
26
(260,426)
(1)
(21,182)
-
14,785,740
65
237,868
1
15,023,608
66
$ 22,709,488
100

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

-100-

STANDARD FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE
Sales (Note 29)
OPERATING COSTS
Cost of goods sold (Notes 15, 30 and 39)
GROSS PROFIT
OPERATING EXPENSES (Note 30)
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Expected credit loss
Total operating expenses
OPERATING INCOME
NON-OPERATING INCOME AND EXPENSES
Other income (Note 30)
Other gains and losses (Notes 19 and 30)
Finance costs (Note 30)
Total non-operating income and expenses
PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (Note 31)
NET PROFIT FOR THE YEAR
OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss
Remeasurement of defined benefit plans
Unrealized gain (loss) on investments in equity
instruments at fair value through other
comprehensive income
Income tax relating to items that will not be
reclassified subsequently to profit or loss
(Note 31)
Total items that will not be reclassified
subsequently to profit or loss		 2018
Amount
%
$ 27,340,587
100
19,086,242
70
8,254,345
30
4,010,005
15
921,459
3
167,794
-
5,251
-
5,104,509
18
3,149,836
12
71,957
-
535,184
2
(80,745)
-
526,396
2
3,676,232
14
707,925
3
2,968,307
11
(6,336)
-
(36,460)
-
11,060
-
(31,736)
-		 2017
Amount
%
$ 26,477,924
100
19,077,969
72
7,399,955
28
3,673,864
14
834,577
3
96,636
-
-
-
4,605,077
17
2,794,878
11
89,836
-
(63,596)
-
(75,715)
-
(49,475)
-
2,745,403
11
535,494
2
2,209,909
9
(35,062)
-
-
-
5,397
-
(29,665)
-
(Continued)

-101-

STANDARD FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Items that may be reclassified subsequently to profit
or loss
Exchange differences on translating the financial
statements of foreign operations
Unrealized gain (loss) on available-for-sale
financial assets
Income tax relating to the items that may be
reclassified subsequently to profit or loss
(Note 31)
Total items that may be reclassified
subsequently to profit or loss
Other comprehensive loss for the year, net of
income tax
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
NET PROFIT ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
EARNINGS PER SHARE (Note 32)
Basic
Diluted		 2018
Amount
%
$ (147,177)
(1)
-
-
40,164
-
(107,013)
(1)
(138,749)
(1)
$ 2,829,558
10
$ 2,949,089
11
19,218
-
$ 2,968,307
11
$ 2,813,107
10
16,451
-
$ 2,829,558
10
$ 3.25
$ 3.24		 2017
Amount
%
$ (153,670)
(1)
(56,340)
-
25,047
-
(184,963)
(1)
(214,628)
(1)
$ 1,995,281
8
$ 2,173,044
8
36,865
-
$ 2,209,909
8
$ 1,964,868
8
30,413
-
$ 1,995,281
8
$ 2.39
$ 2.39

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

(Concluded)

-102-

Total Equity $ 14,417,761 $ 14,417,761 - - (1,407,830) (1,407,830) - 10,261 10,261 - 8,135 8,135 2,209,909 (214,628) (214,628) 1,995,281 1,995,281 15,023,608 15,023,608 43,887 43,887 15,067,495 15,067,495 - - (1,830,179) (1,830,179) 13,339 13,339 (11,170) (11,170) (28,718) (28,718) 2,968,307 (138,749) (138,749) 2,829,558 2,829,558 - $ 16,040,325 $ 16,040,325
Non-controlling Interests $ 199,786 - - - - - (466) 8,135 36,865 (6,452) 30,413 237,868 19,289 257,157 - - - - (11,491) (28,718) 19,218 (2,767) 16,451 - $ 233,399
Total 14,217,975 - - (1,407,830) - 10,261 466 - 2,173,044 (208,176) 1,964,868 14,785,740 24,598 14,810,338 - - (1,830,179) 13,339 321 - 2,949,089 (135,982) 2,813,107 - 15,806,926
$ $
Treasury Shares $ (21,182) - - - - - - - - - - (21,182) - (21,182) - - - - - - - - - - $ (21,182)
Total (81,797) - - - - - - - - (178,629) (178,629) (260,426) 22,584 (237,842) - - - - 48,233 - - (141,022) (141,022) (314) (330,945)
$ $
Other (46,970) - - - - - - - - - - (46,970) - (46,970) - - - - 46,970 - - - - - -
$ $
Other Equity Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other Comprehensive Income $ - - - - - - - - - - - - 116,974 116,974 - - - - - - - (34,736) (34,736) (314) $ 81,924
Equity Attributable to Owners of the Company Exchange Differences on Translating the
Unrealized Gain		 Financial
(Loss) on		 Statements of
Available-for-		 Foreign
sale Financial		 Total
Operations
Assets		 5,449,618
$ (185,556)
$ 150,729		 -
-
-		 -
-
-		 (1,407,830)
-
-		 (351,958)
-
-		 -
-
-		 -
-
-		 -
-
-		 2,173,044
-
-		 (29,547)
(122,290)
(56,339)		 2,143,497
(122,290)
(56,339)		 5,833,327
(307,846)
94,390		 2,014
-
(94,390)		 5,835,341
(307,846)
-		 -
-
-		 -
-
-		 (1,830,179)
-
-		 -
-
-		 (44,494)
1,263
-		 -
-
-		 2,949,089
-
-		 5,040
(106,286)
-		 2,954,129
(106,286)
-		 314
-
-		 6,915,111
$ (412,869)
$ -
$ $
Retained Earnings Unappropriated Special Reserve
Earnings		 $ -
$ 3,277,073		 -
(260,654)		 81,797
(81,797)		 -
(1,407,830)		 -
(351,958)		 -
-		 -
-		 -
-		 -
2,173,044		 -
(29,547)		 -
2,143,497		 81,797
3,318,331		 -
2,014		 81,797
3,320,345		 -
(217,304)		 178,629
(178,629)		 -
(1,830,179)		 -
-		 -
(44,494)		 -
-		 -
2,949,089		 -
5,040		 -
2,954,129		 -
314		 $ 260,426
$ 4,004,182
Legal Reserve $ 2,172,545 260,654 - - - - - - - - - 2,433,199 - 2,433,199 217,304 - - - - - - - - - $ 2,650,503
Capital Surplus $ 72,397 - - - - 10,261 466 - - - - 83,124 - 83,124 - - - 13,339 (3,418) - - - - - $ 93,045
Ordinary Shares $ 8,798,939 - - - 351,958 - - - - - - 9,150,897 - 9,150,897 - - - - - - - - - - $ 9,150,897
BALANCE AT JANUARY 1, 2017 Appropriation of 2016 earnings Legal reserve Special reserve Cash dividends to shareholders Share dividends to shareholders Adjustment of capital surplus for the Company's cash dividends received by subsidiaries Changes in percentage of ownership interests in subsidiaries Increase in non-controlling interests Net profit for the year ended December 31, 2017 Other comprehensive loss for the year ended December 31, 2017, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017 Effect of retrospective application and retrospective restatement BALANCE AT JANUARY 1, 2018 AS RESTATED Appropriation of 2017 earnings Legal reserve Special reserve Cash dividends to shareholders Adjustment of capital surplus for the Company's cash dividends received by subsidiaries Actual acquisitions of interests in subsidiaries Decrease in non-controlling interests Net profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2018

-103-

STANDARD FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Expected credit loss recognized on trade receivables
Impairment loss recognized on trade receivables
Net (gain) loss on fair value changes of financial assets and financial
liabilities at fair value through profit or loss
Finance costs
Interest income
Dividend income
Loss on disposal of property, plant and equipment
Gain on disposal of investment properties
Gain on disposal of investments
Impairment losses recognized on financial assets measured at cost
Impairment losses recognized on property, plant and equipment
Others
Changes in operating assets and liabilities
Financial assets mandatorily classified as fair value through profit or
loss
Notes receivable
Trade receivables
Other receivables
Inventories
Prepayments
Other current assets
Accrued pension assets
Financial liabilities held for trading
Contract liabilities
Notes payable
Trade payables
Trade payables - related parties
Other payables
Provisions
Other current liabilities
Net defined benefit liabilities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities		 2018
$ 3,676,232
473,373
53,528
5,251
-
(22,339)
80,745
(39,917)
(10,584)
8,243
(369,427)
-
-
18,035
-
(561,425)
1,920
(1,134,594)
(62,972)
326,026
38,204
454
(1,134)
-
154,687
34,401
666,896
5,332
234,594
-
(146,238)
(113,121)
3,316,170
36,998
(78,814)
(635,107)
2,639,247		 2017
$ 2,745,403
412,926
51,482
-
186
16,107
75,715
(48,341)
(16,500)
4,202
-
(733)
48,825
-
3
-
115,765
16,452
170,433
(297,024)
375,105
(4,117)
(1,914)
(4,854)
-
(581,852)
29,873
(5,038)
77,861
91,416
(147,153)
1,450
3,125,678
47,628
(75,873)
(555,163)
2,542,270
(Continued)

-104-

STANDARD FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of financial assets at fair value through other
comprehensive income
Purchase of financial assets at amortized cost
Refunds of financial assets at amortized cost
Purchase of available-for-sale financial assets
Proceeds on sale of available-for-sale financial assets
Purchase of debt investments with no active market
Proceeds from sale of debt investments with no active market
Proceeds from capital reduction of financial assets carried at cost
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Proceeds from disposal of investment properties
Payments for intangible assets
Proceeds from disposal of intangible assets
Increase in finance lease receivables
Decrease in finance lease receivables
Increase in other financial assets
Decrease in other financial assets
Increase in other non-current assets
Increase in long-term prepayments for leases
Other dividends received
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings
Increase in short-term bills payable
Proceeds from long-term borrowings
Payments for long-term borrowings
Increase in finance lease payables
Decrease in finance lease payables
Increase in other financial liabilities
Decrease in other financial liabilities
Decrease in other non-current liabilities
Dividends paid to owners of the Company
Acquisition of subsidiaries
Dividends paid to non-controlling interests
Non-controlling interests subscribing for shares issued by subsidiaries
Net cash used in financing activities
EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE
OF CASH HELD IN FOREIGN CURRENCIES		 2018
$ 2,621
(1,512,643)
820,126
-
-
-
-
-
(386,244)
13,913
495,580
(5,572)
-
(36,290)
38,701
-
21,101
(22,340)
-
10,584
(560,463)
(555,347)
19,951
-
(12,000)
4,067
-
-
(28,458)
(687)
(1,845,558)
(59,682)
-
-
(2,477,714)
(163,800)		 2017
$ -
-
-
(1,139,565)
1,487,263
(815,449)
536,426
549
(1,008,160)
696
-
(7,938)
23,902
(36,290)
1,515
(99,897)
23,698
(11,379)
(6,599)
16,500
(1,034,728)
871,296
29,978
39,000
-
593
(840)
16,931
-
(46,243)
(1,397,569)
-
(28,718)
36,853
(478,719)
(43,691)
(Continued)

-105-

STANDARD FOODS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		 2018
$ (562,730)
3,152,682
$ 2,589,952		 2017
$ 985,132
2,167,550
$ 3,152,682

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

-106-

STANDARD FOODS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

Standard Foods Corporation (the “Company”) was incorporated on June 6, 1986. The Company mainly manufactures and sells nutritious foods, edible oils, dairy products and beverages.

The Company’s shares have been listed on the Taiwan Stock Exchange since April 1994.

The consolidated financial statements of the Company and its subsidiaries, collectively referred to as the “Group”, are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 22, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

  • a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (“FSC”)

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC did not have any material impact on the Group’s accounting policies:

1) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as of January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

-107-

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets and financial liabilities as of January 1, 2018.

Financial Assets
Cash and cash equivalents
Equity securities
Mutual funds
Time deposits with
original maturities of
more than 3 months
Notes receivable, trade
receivables and other
receivables
Other financial assets
Financial Asset
FVTPL
Add: Reclassification from
available-for-sale (IAS 39)
Required reclassification
Remeasurement of financial assets
at cost (IAS 39)
FVTOCI
Equity instruments
Add: Reclassification from
available-for-sale (IAS 39)
Remeasurement of financial assets
at cost (IAS 39)
Amortized cost
Add: Reclassification from loans
and receivables (IAS 39)		 Measurement Category
Carrying Amount
IAS 39
IFRS 9
IAS 39
IFRS 9
Remark
Loans and receivables
Amortized cost
$ 3,152,682
$ 3,152,682
d)
Available‑for‑sale
Mandatorily at FVTPL
6,789
6,368
a)
Available‑for‑sale
Fair value through other
comprehensive income
(FVTOCI) - equity
instruments
316,233
360,541
a)
Available‑for‑sale
Mandatorily at FVTPL
46,234
46,234
b)
Loans and receivables
Amortized cost
639,832
639,832
c)
Loans and receivables
Amortized cost
5,240,524
5,240,354
d)
Loans and receivables
Amortized cost
159,496
159,496
d)
IAS 39 Carrying
Amount as of
January 1, 2018
Reclassifications
Remeasurements
IFRS 9 Carrying
Amount as of
January 1, 2018
Retained
Earnings
Effect on
January 1, 2018
Other Equity
Effect on
January 1, 2018
Remark
$ -
-
$ 53,023
$ -
b)
-
-
(421)
a)
-
53,023
(421)
$ 52,602
$ (1,583)
$ 1,162
-
-
316,233
-
a)
-
-
44,308
a)
-
316,233
44,308
360,541
3,597
21,422
-
-
9,192,534
-
c), d)
-
9,192,534
-
9,192,534
-
-
$ -
$ 9,561,790
$ 43,887
$ 9,605,677
$ 2,014
$ 22,584

a) The Group elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTPL and designated as at FVTOCI under IFRS 9, respectively. As a result, the related other equity - unrealized gain (loss) on available-for-sale financial assets was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI in the amount of $95,552 thousand.

Investments in unlisted shares previously measured at cost under IAS 39 have been classified at FVTPL and designated as at FVTOCI under IFRS 9, respectively, and were remeasured at fair value. Consequently, a decrease of $421 thousand was recognized in financial assets at FVTPL and retained earnings and an increase of $44,308 thousand was recognized in financial assets at FVTOCI. An increase of $25,019 thousand was recognized in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of $19,289 thousand was recognized in non-controlling interests adjustment on January 1, 2018.

The Group recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $3,597 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of $3,597 thousand in retained earnings on January 1, 2018.

-108-

  • b) Mutual funds previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in an increase of $1,162 thousand in other equity - unrealized gain (loss) on available-for-sale financial assets and a decrease of $1,162 thousand in retained earnings on January 1, 2018.

  • c) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

  • d) Cash and cash equivalents, notes receivable, trade receivables, other receivables and other financial assets that were previously classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

  • 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for the related accounting policies.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. The receivables were recognized, or the deferred revenue was reduced when revenue is recognized for the relevant contract under IAS 18.

Prior to the application of IFRS 15, the Group recognized the estimated sales returns and discounts as provisions. Under IFRS 15, the Group recognizes such estimation as refund liability (classified under other current liabilities).

Impact on assets, liabilities and equity for prior year

As Originally
Stated
Adjustments
Arising from
Initial
Application
Contract liabilities - current
$ -
$ 210,540
Provisions - current
112,814
(112,814)
Other current liabilities
278,261
(97,726)
Total effect on liabilities
$ 391,075
$ -		 Restated
$ 210,540
-
180,535
$ 391,075

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

-109-

  • b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019
New IFRSs
Annual Improvements to IFRSs 2015-2017 Cycle
Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”
IFRS 16 “Leases”
Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”
Amendments to IAS 28 “Long-term Interests in Associates and Joint
Ventures”
IFRIC 23 “Uncertainty Over Income Tax Treatments”		 Effective Date
Announced by IASB (Note 1)
January 1, 2019
January 1, 2019 (Note 2)
January 1, 2019
January 1, 2019 (Note 3)
January 1, 2019
January 1, 2019

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

  • Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 “Leases”, IFRIC 4 “Determining Whether an Arrangement Contains A Lease” and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets and lease liabilities for all leases on the balance sheets except for those whose payments under low-value asset and short-term leases will be recognized as expenses. On the statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, including property interest qualified as investment properties, are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the statements of cash flows.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

-110-

Anticipated impact on assets, liabilities and equity

Carrying Adjustments Adjusted
Amount as of Arising from Carrying
December 31, Initial Amount as of
2018 Application January 1, 2019
Right-of-use assets $ 378,595 $ 214,752 $ 593,347
Total effect on assets $ 378,595 $ 214,752 $ 593,347
Lease liabilities $ 6,947 $ 214,752 $ 221,699
Total effect on liabilities $ 6,947 $ 214,752 $ 221,699

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

  • c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

Effective Date New IFRSs Announced by IASB (Note 1) Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 2) Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets To be determined by IASB between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” January 1, 2021 Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

  • Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

  • Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

Except for the above impact, as of the date the financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  • a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and IFRSs as endorsed and issued into effect by the FSC.

-111-

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

  • 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

  • 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

  • 3) Level 3 inputs are unobservable inputs for the asset or liability.

  • c. Classification of current and non-current assets and liabilities

Current assets include:

  • 1) Assets held primarily for the purpose of trading;

  • 2) Assets expected to be realized within twelve months after the reporting period; and

  • 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

  • 1) Liabilities held primarily for the purpose of trading;

  • 2) Liabilities due to be settled within twelve months after the reporting period; and

  • 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period.

Assets and liabilities that are not classified as current are classified as non-current.

  • d. Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

-112-

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of the Group and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

Refer to Note 17, Tables 9 and 10 for the detailed information on subsidiaries (including the percentages of ownership and main businesses).

e. Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

For the purpose of presenting consolidated financial statements, the functional currencies of the Company and the group entities (including subsidiaries that use currencies which are different from the currency of the Company) are translated into the presentation currency, the New Taiwan dollar, as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; and income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

f. Inventories

Inventories consist of raw materials, work in progress, finished goods and merchandise and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

g. Property, plant and equipment

Property, plant and equipment (including assets held under finance leases) are stated at cost, less recognized accumulated depreciation and accumulated impairment loss.

Property, plant and equipment in the course of construction are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such assets are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

-113-

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

h. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

i. Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

j. Intangible assets

  • 1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

-114-

  • 2) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

  • 3) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

k. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

l. Financial instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

-115-

  • a) Measurement category

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI.

  • i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 38.

  • ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

  • i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

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

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes receivable, trade receivables, investments in debt instruments, other receivables and other financial assets that measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

  • i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

  • ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

-116-

iii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at FVTPL, available-for-sale financial assets, and loans and receivables.

  • i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is held for trading.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 38.

ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

-117-

iii. Loans and receivables

Loans and receivables (including notes receivable, trade receivables, cash and cash equivalents, debt investments with no active market, other receivables and other financial assets) are measured at amortized cost using the effective interest method, less any impairment, except for short-term notes receivable and trade receivables when the effect of discounting is immaterial.

Cash equivalents includes time deposits with original maturities within three months from the date of acquisition, they must be highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments.

  • b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables) and finance lease receivables.

The Group always recognizes lifetime expected credit losses (ECLs) for trade receivables and finance lease receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

2017

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Financial assets carried at amortized cost, such as notes receivable and trade receivables, are assessed for impairment on a collective basis even if they were assessed as not impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience in the collection of payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables, and other situations.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is 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.

-118-

For financial assets measured at amortized cost, 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 was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For 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 the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of a financial asset is reduced by impairment loss directly for all financial assets with the exception of notes receivable and trade receivables where the carrying amount is reduced through the use of an allowance account. When notes receivable and trade receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables and other receivables that are written off against the allowance account.

c) Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

-119-

  • 2) Equity instruments

Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs.

The repurchase of the Group’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

  • m. Revenue recognition

2018

The Group identifies contracts with customers and recognizes revenue when performance obligations are satisfied.

For contracts where the period between the date on which the Group transfers a promised good to a customer and the date on which the customer pays for that good is one year or less, the Group does not adjust the promised amount of consideration for the effects of a significant financing component.

  • Revenue from the sale of goods

Revenue from the sale of goods comes from sales of nutritious foods, cooking products, electronic goods and cosmetics. Sales of goods are recognized as revenue when the goods are delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables and contract assets are recognized concurrently. Any amounts previously recognized as contract assets are reclassified to trade receivables when the remaining obligations are performed. When the customer initially purchases the goods, the transaction price received is recognized as a contract liability until the goods have been delivered to the customer.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

  • 1) Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

  • a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

  • b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

  • c) The amount of revenue can be measured reliably;

-120-

  • d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

  • e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

  • 2) Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established and it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a timely basis, with reference to the principal outstanding and at the applicable effective interest rate.

n. Leasing

Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

1) The Group as lessor

Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

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

  • 2) The Group as lessee

Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated balance sheets as a finance lease obligation.

Finance expenses implicit in lease payments for each period are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized.

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

  • o. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Other than stated above, all other borrowing costs are recognized in profit or loss in the period in which they are incurred.

-121-

p. Government grants

Government grants are not recognized until there is reasonable assurance that the Group will comply with the conditions attached to the grants and that the grants will be received.

Government grants are recognized in profit or loss on a systematic basis over the periods in which the Group recognizes as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognized as deferred revenue and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognized in profit or loss in the period in which they become receivable.

q. Employee benefits

  • 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined contribution retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period in which they occur. Remeasurement, comprising actuarial gains and losses, effect of changes to asset ceiling and return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

3) Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Group can no longer withdraw the offer of the termination benefit and when the Group recognizes any related restructuring costs.

r. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

-122-

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

  • 2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused tax credits for research and development expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

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

  • 3) Current tax and deferred taxes for the year

Current tax and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions based on historical experience and other factors that are considered to be relevant which related to information that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Write-down of Inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

-123-

6. CASH AND CASH EQUIVALENTS

December 31
2018
2017
Cash on hand
$ 2,757
$ 4,667
Checking accounts and demand deposits
2,096,223
2,656,056
Cash equivalents (investments with original maturities of less than 3
months)
Time deposits
490,972
491,959
$ 2,589,952
$ 3,152,682
The market rate intervals of cash in bank at the end of the reporting period were as follows:
December 31
2018
2017
Bank deposits
0.001%-3.600%
0.010%-3.800%
FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
December 31
2018
2017
Financial assets at FVTPL-current
Financial assets mandatorily classified as at FVTPL
Non-derivative financial assets
Mutual funds
$ 617,790
$ -
Financial assets at FVTPL-non-current
Financial assets mandatorily classified as at FVTPL
Non-derivative financial assets
Domestic unlisted shares
$ 7,315
$ -
Financial liabilities-current
Financial liabilities held for trading
Derivative financial liabilities (not under hedge accounting)
Foreign exchange swap contracts (a)
$ -
$ 11,253
a.
At the end of the reporting period, outstanding foreign exchange swap contracts not under hedge
accounting were as follows:
December 31, 2018
None.
Notional Amount (In Thousands)
Maturity Date
December 31, 2017
US$6,000/RMB41,364
May 24, 2018		 December 31 December 31
2018
2017
$ 617,790
$ -
$ 7,315
$ -
$ -
$ 11,253
swap contracts not under hedge
Maturity Date
May 24, 2018

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

-124-

The Group entered into foreign exchange swap contracts to manage exposures to exchange rate fluctuation risk of foreign currency denominated assets and liabilities.

  • b. As of December 31, 2018 and 2017, the Group did not have outstanding future contracts not under hedge accounting.

The Group entered into future contracts to manage exposures to price volatility risk of raw materials.

  • c. As of December 31, 2018 and 2017, the Group did not have outstanding structured time deposits.

The Group entered into structured time deposits mainly to have earnings from favorable effects on fluctuations of interest rates.

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME - 2018

December 31, December 31,
2018
Current
Investments in equity instruments at FVTOCI $ 154,439
Non-current
Investments in equity instruments at FVTOCI $ 167,260
a. Investments in equity instruments at FVTOCI
December 31,
2018
Current
Listed shares and emerging market shares
Ordinary shares - Far Eastern International Bank $ 13,434
Ordinary shares - Chunghwa Telecom Co., Ltd 5,492
Ordinary shares - Formosa Plastics Corporation 9,236
Ordinary shares - China Steel Corporation 19,479
Ordinary shares - Polytronics Technology Corp. 86,503
Ordinary shares - Taiwan Semiconductor Manufacturing Co., Ltd. 20,295
$ 154,439
Non-current
Listed shares and emerging market shares
Ordinary shares - GeneFerm Biotechnology Co., Ltd. 90,095
Unlisted shares
Ordinary shares - Dah Chung Bills Finance Corp. 12,805
Ordinary shares - InnoComm Mobile Technology Corp. 63,360
Ordinary shares - AsiaVest Liquidation Co. 1,000
$ 167,260

These investments in the Group are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity

-125-

instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Group’s strategy of holding these investments for long-term purposes. These investments in the equity instruments were classified as available-for-sale under IAS 39. Refer to Note 3, Note 10 and Note 11 for information relating to their reclassification and comparative information for 2017.

In 2018, the Group disposed part of other equity in order to manage credit concentration risk. The Group transferred a gain or loss of $314 thousand from other equity to retained earnings.

Dividend of $10,584 thousand was recognized during the year.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

December 31,
2018
Current
Time deposits with original maturities of more than 3 months $ 1,505,913

The interest rate for time deposits with original maturities of more than 3 months was ranging from 0.79%-3.20% as at the end of the reporting period. The time deposits were classified as debt investments with no active market under IAS 39. Refer to Note 3 and Note 12 for information relating to their reclassification and comparative information for 2017.

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

December 31,
2017
Current
Listed shares $ 157,843
Mutual funds 46,235
$ 204,078
Non-current
Emerging market shares $ 118,943

-126-

11. FINANCIAL ASSETS MEASURED AT COST - 2017

December 31,
2017
Non-current
Unlisted shares $ 46,235
Mutual funds -
$ 46,235
Classified according to measurement categories
Available-for-sale $ 46,235

Management believed that the fair value of the above unlisted shares and mutual funds held by the Group cannot be reliably measured due to the wide range of reasonable fair value estimates. Therefore, the financial assets were measured at cost less impairment at the end of the reporting period.

The Group recognized impairment loss on financial assets as follows:

December 31,
2017
Unlisted shares $ 13,194
Mutual funds 35,631
$ 48,825

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

December 31,
2017
Current
Time deposits with original maturities of more than 3 months $ 639,832

The market interest rate of the time deposits with original maturities of more than 3 months was ranging from 0.65%-2.25% per annum as of December 31, 2017.

-127-

13. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable
Operating
Trade receivables
At amortized cost
Gross carrying amount
Less: Allowance for impairment loss
Other receivables
Accrued interest
Payments on behalf of others
Others		 December 31 December 31
2018
$ 2,887
$ 6,169,871
(8,792)
$ 6,161,079
$ 6,767
491
214,871
$ 222,129		 2017
$ 4,846
$ 5,084,532
(5,392)
$ 5,079,140
$ 3,890
1,643
151,005
$ 156,538

In 2018

The average credit period of receivables from sales of goods was 30-90 days. In order to minimize credit risk, the management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Group’s provision matrix.

December 31, 2018

Expected credit loss rate
Gross carrying amount
Loss allowance (Lifetime ECL)
Amortized cost		 Not Past Due
0.00%
$ 5,637,795
(45)
$ 5,637,750		 Less than 30
Days
0.10%
$ 319,103
(325)
$ 318,778		 31 to 90 Days
91 to 180 Days
Over 180 Days
0.14%
2.37%
100.00%
$ 192,296
$ 15,789
$ 7,775
(273)
(374)
(7,775)
$ 190,023
$ 15,415
$ -		 Total
$ 6,172,758
(8,792)
$ 6,163,966

-128-

The movements of the loss allowance of trade receivables were as follows:

For The Year For The Year
Ended
December 31,
2018
Balance at January 1, 2018 per IAS 39 $ 5,392
Adjustment on initial application of IFRS 9 -
Balance at January 1, 2018 per IFRS 9 5,392
Add: Net remeasurement of loss allowance 5,251
Less: Amounts written off (1,733)
Foreign exchange translation gains and losses (118)
Balance at December 31, 2018 $ 8,792

For some trade receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss because there was no significant change in credit quality and the amounts were still considered recoverable.

In 2017

The Group applied the same credit policy in 2018 and 2017. Allowance for impairment loss was recognized against trade receivables based on the estimated irrecoverable amounts determined by reference to past default experience with the counterparties and an analysis of their current financial position.

The aging of notes receivable, trade receivables and other receivables was as follows:

December 31,
2017
Not past due $ 4,971,631
Past due 1-30 days 155,736
Past due 31-90 days 82,764
Past due 91-180 days 25,318
Past due 181 days or more 10,467
$ 5,245,916

The above aging schedule was based on the number of past due days from the end of credit term.

The aging of trade receivables that were past but not impaired was as follows:

December 31,
2017
Past due 1-30 days $ 155,396
Past due 31-90 days 81,779
Past due 91-180 days 24,579
Past due 181 days or more 7,139
$ 268,893

The above aging schedule was based on the number of past due days from the end of credit term.

-129-

The movements of the allowance for doubtful trade receivables were as follows:

Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2017
$ 2,131
$ 18,714
Add: Impairment losses recognized on
receivables
-
8,405
Less: Amounts written off during the year as
uncollectible
-
(15,384)
Less: Impairment losses reversed
(431)
(7,788)
Foreign exchange translation gains and losses
-
(255)
Balance at December 31, 2017
$ 1,700
$ 3,692		 Total
$ 20,845
8,405
(15,384)
(8,219)
(255)
$ 5,392

The notes receivable and other receivables as of December 31, 2017 were neither past due nor impaired.

14. FINANCE LEASE RECEIVABLES

Gross investment in leases
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Less: Unearned finance income
Present value of minimum lease payments
Finance lease receivables
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Financial lease receivables		 **December ** 31
2018
$ 4,200
17,900
18,200
40,300
(7,936)
$ 32,364
$ 2,640
13,133
16,591
$ 32,364		 2017
$ 4,100
17,300
23,000
44,400
(9,625)
$ 34,775
$ 2,412
11,909
20,454
$ 34,775

The Group entered into finance lease arrangements for biological assets. All leases were denominated in New Taiwan dollars. The term of finance leases entered into was 10 years. The effective interest rate of lease contract was 5.01% per annum.

The simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision, is applied to finance lease receivables. Finance lease receivables are secured by the leased equipment. As of December 31, 2018, no finance lease receivable was past due. The Group has not recognized a loss allowance for finance lease receivables after considering historical experience, industry forecast and the collaterals.

-130-

15. INVENTORIES

Merchandise
Finished goods
Work in progress
Raw materials
Packing materials		 December 31 December 31
2018
$ 589,695
1,679,573
402,693
1,442,850
84,475
$ 4,199,286		 2017
$ 635,117
1,494,384
458,720
1,891,542
78,318
$ 4,558,081

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2018 included $(4,047) thousand reversals of inventory write-downs, $59,736 thousand loss on abandonment of inventories. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2017 included $11,757 thousand loss on write-downs of inventories and $70,532 thousand loss on abandonment of inventories.

16. PREPAYMENTS

Prepayments for purchases
Prepayments for rent
Prepayments for insurance
Excess business tax paid
Prepayments for advertisements
Others		 December 31 December 31
2018
$ 966,879
8,673
14,632
252,592
241,060
131,836
$ 1,615,672		 2017
$ 881,365
6,141
1,263
326,847
15,346
445,191
$ 1,676,153

17. SUBSIDIARIES

Subsidiaries included in consolidated financial statements.

Investor
Investee
Main Business
The Company
Standard Dairy Products Taiwan
Limited (“Standard Dairy
Products”)
Manufacture and sale of dairy
products and beverages
The Company
Charng Hui Ltd. (“Charng Hui”)
Investing
The Company
Domex Technology Corporation
(“Domex Technology”)
Manufacture and sale of
computer peripherals and
computer appliances
The Company
Standard Beverage Company
Limited (“Standard Beverage”)
Manufacture and sale of
beverages
The Company
Accession Limited
Investing
The Company
Standard Investment (“Cayman”)
Limited (“Cayman Standard”)
Investing		 Proportion of Ownership
December 31
2018
2017
Remark
100.0
100.0
-
100.0
100.0
In January 2017, Chang Hui reduced
capital in the amount of $300,000
thousand.
52.0
52.0
-
100.0
100.0
-
100.0
100.0
-
100.0
100.0
In March 2017, November 2017,
December 2017 and in September
2018, the Company respectively
invested RMB73,000 thousand,
RMB12,395 thousand, RMB21,488
thousand and RMB437 thousand in
Cayman Standard.
(Continued)

-131-

Investor
Investee
Main Business
The Company
Le Bonta Wellness International
Corporation (“Le Bonta
Wellness”)
Sale of health food
Accession Limited
Shanghai Standard Foods Co.,
Ltd. (“Shanghai Standard”)
Manufacture and sale of edible
oils and nutritious foods
Accession Limited
Shanghai Le Ben De Health
Technology Co., Ltd.
(“Shanghai Le Ben De”)
Technical consultant on health
technology, technical
transfer and technical
service
Accession Limited
Dermalab S.A. (“Dermalab”)
Development and sale of
cosmetics
Dermalab
Swiss Live Cosmetics China
Limited (“Swiss Line”)
Sale of cosmetics
Dermalab
Swissdema SL (“Swissdema”)
Sale of cosmetics
Cayman Standard
Standard Corporation (Hong
Kong) Limited (“Hong Kong
Standard”)
Investing
Hong Kong Standard
Standard Investment (China) Co.,
Ltd. (“China Standard
Investment”)
Investing and sale of edible
oils and nutritious foods
Hong Kong Standard
Shanghai Le Ming Industrial Co.,
Ltd. (“Shanghai Le Ming”)
Management of properties
Hong Kong Standard
Shanghai Le Ho Industrial Co.,
Ltd. (“Shanghai Le Ho”)
Management of properties
China Standard
Investment
Standard Foods (China) Co., Ltd.
(“China Standard Foods”)
Manufacture and sale of edible
oils and nutritious foods
China Standard
Investment
Shanghai Dermalab Corporation
(“Shanghai Dermalab”)
Sale of nutritional foods,
cosmetic and engage in
import and export business
The Company and
China Standard
Investment
Shanghai Le Ben Tuo Health
Technology Co., Ltd.
(“Shanghai Le Ben Tuo”)
Sale of nutritional foods and
engage in import and export
business
China Standard
Investment
Standard Foods (Xiamen) Co.,
Ltd. (“Xiamen Standard")
Manufacture and sale of edible
oils and nutritious foods		 Proportion of Ownership
December 31
2018
2017
Remark
100.0
100.0
-
100.0
100.0
-
100.0
100.0
-
100.0
80.0
In May 2018, Accession Limited bought
20% equity from non-controlling
interests, and the Company’s
percentage of shareholding increased
from 80% to 100%.
100.0
100.0
-
100.0
100.0
-
100.0
100.0
In March 2017, November 2017,
December 2017 and in September
2018, Cayman Standard respectively
invested RMB73,000 thousand,
RMB12,395 thousand, RMB21,488
thousand and RMB259 thousand
Hong Kong Standard.
99.0
99.0
In July 2017 and November 2017, Hong
Kong Standard respectively invested
RMB73,832 thousand and
RMB12,395 thousand in China
Standard Investment. Hong Kong
Standard did not subscribe for cash
capital increase of investee in
September 2017 and November 2017,
ant the Company’s percentage of
shareholding decreased from 100.0%
to 99.0%.
100.0
100.0
In December 2017, Hong Kong Standard
invested RMB9,869 thousand in
Shanghai Le Ming.
100.0
100.0
In December 2017, Hong Kong Standard
invested RMB11,619 thousand in
Shanghai Le Ho.
100.0
100.0
-
100.0
100.0
-
100.0
100.0
China Standard Investment originally
held 100% interest in Shanghai Le
Ben Tuo. After the Company invested
RMB 40,900 thousand in Shanghai Le
Ben Tuo in April 2017, the Company
and China Standard Investment held
51% interest and 49% interest,
respectively, in Shanghai Le Ben Tuo
and the Group held 100% interest in
Shanghai Le Ben Tuo.
100.0
100.0
-
(Concluded)

-132-

18. PROPERTY, PLANT AND EQUIPMENT


Cost
Balance at January 1, 2017
Additions
Disposals
Transferred from prepayments for equipment
Transferred from investment properties
Transferred to investment properties
Reclassified
Effects of foreign currency exchange differences
Balance at December 31, 2017
Accumulated depreciation and impairment
Balance at January 1, 2017
Disposals
Depreciation expenses
Transferred from investment properties
Effects of foreign currency exchange differences
Balance at December 31, 2017
Carrying amount at December 31, 2017
Cost
Balance at January 1, 2018
Additions
Disposals
Reclassified
Effects of foreign currency exchange differences
Balance at December 31, 2018
Accumulated depreciation and impairment
Balance at January 1, 2018
Disposals
Depreciation expenses
Impairment losses recognized
Effects of foreign currency exchange differences
Balance at December 31, 2018
Carrying amount at December 31, 2018		 Freehold Land
$ 702,405
-
-
-
-
-
-
-
$ 702,405
$ -
-
-
-
-
$ -
$ 702,405
$ 702,405
-
-
-
-
$ 702,405
$ -
-
-
-
-
$ -
$ 702,405		 Buildings
$ 2,468,967
24,160
(27,395)
-
19,562
-
914,278
(21,406)
$ 3,378,166
$ 1,024,310
(27,209)
125,735
7,470
(3,814)
$ 1,126,492
$ 2,251,674
$ 3,378,166
-
(40,088)
149,726
(40,616)
$ 3,447,188
$ 1,126,492
(39,513)
148,160
7,288
(8,185)
$ 1,234,242
$ 2,212,946		 Equipment
$ 3,564,413
100,455
(111,826)
-
-
-
483,623
(18,934)
$ 4,017,731
$ 2,447,515
(106,935)
232,186
-
(10,466)
$ 2,562,300
$ 1,455,431
$ 4,017,731
1,657
(99,012)
320,982
(88,150)
$ 4,153,208
$ 2,562,300
(80,695)
267,506
10,747
(11,178)
$ 2,748,680
$ 1,404,528		 Other
Equipment
$ 499,405
37,505
(39,725)
-
-
-
61,201
(3,221)
$ 555,165
$ 392,816
(39,904)
52,306
-
(4,579)
$ 400,639
$ 154,526
$ 555,165
1,738
15,617
38,504
(366)
$ 610,658
$ 400,639
18,882
55,387
-
(2,895)
$ 472,013
$ 138,645		 Property in
Construction
$ 1,313,892
846,040
-
438,033
-
(120)
(1,459,102)
(26,695)
$ 1,112,048
$ -
-
-
-
-
$ -
$ 1,112,048
$ 1,112,048
382,849
-
(523,543)
48,360
$ 1,019,714
$ -
-
-
-
-
$ -
$ 1,019,714		 Total
$ 8,549,082
1,008,160
(178,946)
438,033
19,562
(120)
-
(70,256)
$ 9,765,515
$ 3,864,641
(174,048)
410,227
7,470
(18,859)
$ 4,089,431
$ 5,676,084
$ 9,765,515
386,244
(123,483)
(14,331)
(80,772)
$ 9,933,173
$ 4,089,431
(101,326)
471,053
18,035
(22,258)
$ 4,454,935
$ 5,478,238

The above items of property, plant and equipment are depreciated on a straight-line basis over the following estimated useful lives of the assets:

Building
Main buildings 20-51 years
Electrical and mechanical equipment 8-20 years
Engineering 3-39 years
Others 3-20 years
Equipment
Main equipment 2-20 years
Engineering 3-20 years
Others 3-15 years
Other equipment 2-15 years

Refer to Note 40 for the carrying amount of property, plant and equipment pledged by the Group to secure borrowings granted to the Group.

-133-

19. INVESTMENT PROPERTIES

Completed Completed
Investment
Property
Cost
Balance at January 1, 2017 $ 318,021
Transferred from property, plant and equipment 120
Transferred to property, plant and equipment (19,562)
Balance at December 31, 2017 $ 298,579
Accumulated depreciation and impairment
Balance at January 1, 2017 $ 64,101
Depreciation expenses 2,699
Transferred to property, plant and equipment (7,470)
Balance at December 31, 2017 $ 59,330
Carrying amount at December 31, 2017 $ 239,249
Cost
Balance at January 1, 2018 $ 298,579
Disposals (141,270)
Balance at December 31, 2018 $ 157,309
Accumulated depreciation and impairment
Balance at January 1, 2018 $ 59,330
Depreciation expenses 2,320
Disposals (15,117)
Balance at December 31, 2018 $ 46,533
Carrying amount at December 31, 2018 $ 110,776

The investment properties held by the Group are depreciated using the straight-line method over the following estimated useful lives:

Building
Main buildings 35-51 years
Electrical and mechanical equipment 24-25 years
Engineering 28 years
Others 24 years

On May 8, 2018, the Company entered into a property sale agreement at Wugu Dist, New Taipei City with Pei Chen Co., Ltd. The selling price was 508,620 thousands (included business tax), and the gain from disposal was 369,427 thousands (included in statements of comprehensive income under other gains and losses). The transaction was accomplished at the third quarter of September 2018.

-134-

The fair values of the investment properties were $214,323 thousand and $528,903 thousand as of December 31, 2018 and 2017, respectively. The management of the Group arrived at the fair value amounts by reference to market evidence of transaction prices for similar properties.

All of the Group’s investment properties are held under freehold interests. The carrying amounts of investment properties pledged by the Group to secure borrowings granted to the Group are disclosed in Note 40.

20. OTHER INTANGIBLE ASSETS

Trademark
Cost
Balance at January 1, 2017
$ 123,651
Additions
-
Disposals
(23,902)
Effects of foreign currency exchange differences
(8,554)
Balance at December 31, 2017
$ 91,195
Accumulated amortization and impairment
Balance at January 1, 2017
$ 10,877
Amortization expenses
6,818
Effects of foreign currency exchange differences
(164)
Balance at December 31, 2017
$ 17,531
Carrying amount at December 31, 2017
$ 73,664
Cost
Balance at January 1, 2018
$ 91,195
Additions
-
Effects of foreign currency exchange differences
115,844
Balance at December 31, 2018
$ 207,039
Accumulated amortization and impairment
Balance at January 1, 2018
$ 17,531
Amortization expenses
5,048
Effects of foreign currency exchange differences
114,690
Balance at December 31, 2018
$ 137,269
Carrying amount at December 31, 2018
$ 69,770		 Computer
Software
$ 220,834
7,938
-
(577)
$ 228,195
$ 213,988
11,100
(478)
$ 224,610
$ 3,585
$ 228,195
5,572
(498)
$ 233,269
$ 224,610
6,684
(487)
$ 230,807
$ 2,462		 Total
$ 344,485
7,938
(23,902)
(9,131)
$ 319,390
$ 224,865
17,918
(642)
$ 242,141
$ 77,249
$ 319,390
5,572
115,346
$ 440,308
$ 242,141
11,732
114,203
$ 368,076
$ 72,232

The above items of other intangible assets are amortized on a straight-line basis over the following estimated lives:

Trademark 10-20 years Computer software 2-3 years

-135-

21. LONG-TERM PREPAYMENTS FOR LEASES

The long-term prepayments for leases are land use rights located in mainland China. As of December 31, 2018 and 2017, long-term prepayments for leases amounted to $381,081 thousand and $396,450 thousand, respectively.

22. OTHER ASSETS

Current
Pledge time deposits (Note 40)
Pledge demand deposits (Note 40)
Advances to officers
Non-current
Prepayments for equipment
Refundable deposits
Pledge time deposits
Others		 December 31 December 31
2018
$ 1,010
-
20,901
$ 21,911
$ 31,565
41,720
89,506
77,064
$ 239,855		 2017
$ 1,007
4,179
17,192
$ 22,378
$ 44,107
63,220
91,090
63,128
$ 261,545

23. BORROWINGS

  • a. Short-term borrowings
Secured borrowings (Note 40)
Bank loans
Unsecured borrowings
Bank loans		 December 31 December 31
2018
$ 90,000
1,641,478
$ 1,731,478		 2017
$ 134,000
2,178,473
$ 2,312,473

The range of interest rates on bank loans was 1.05%-4.35% and 1.05%-4.57% per annum as of December 31, 2018 and 2017, respectively.

-136-

b. Short-term bills payable

Commercial paper
Less: Unamortized discount on bills payable		 December 31 December 31
2018
$ 120,000
(96)
$ 119,904		 2017
$ 100,000
(47)
$ 99,953

Outstanding short-term bills payable were as follows:

December 31, 2018

Financial
Institutions
Commercial paper
Mega Bills Finance
Co., Ltd.
International Bills
Finance Corp.
Taiwan Bills
Finance Corp.
December 31, 2017
Financial
Institutions
Commercial paper
Mega Bills Finance
Co., Ltd.
International Bills
Finance Corp.		 Nominal
Amount
$ 50,000
50,000
20,000
$ 120,000
Nominal
Amount
$ 50,000
50,000
$ 100,000		 Discount
Amount
$ (13)
(63)
(20)
$ (96)
Discount
Amount
$ (13)
(34)
$ (47)		 Carrying
Amount
Interest
Rate
Collateral
$ 49,987
1.34%
-
49,937
1.34%
-
19,980
1.34%
-
$ 119,904
Carrying
Amount
Interest
Rate
Collateral
$ 49,987
1.338%
-
49,966
1.368%
-
$ 99,953		 Carrying
Amount of
Collateral
$ -
-
-
$ -
Carrying
Amount of
Collateral
$ -
-
$ -
  • c. Long-term borrowings
Secured borrowings (Note 40)
Bank loans*
Less: Current portions
Long-term borrowings		 December 31
2018
$ 27,000
(12,000)
$ 15,000		 2017
$ 39,000
(12,000)
$ 27,000
  • As of December 31, 2018, the interest rate of the bank borrowings secured by the Group’s equipment (see Note 40) was 1.91% per annum. The bank borrowings will be repayable quarterly from March 2018 to March 2021.

-137-

24. NOTES PAYABLE AND TRADE PAYABLES

Notes payable
Operating
Non-operating
Trade payables
Operating		 December 31 December 31
2018
$ 131,916
-
$ 131,916
$ 2,162,745		 2017
$ 99,046
334
$ 99,380
$ 1,506,263

The average credit period of payables for purchases of goods was 30-90 days. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

25. OTHER LIABILITIES

Current
Other payables
Payable for salaries or bonuses
Payable for compensation of employees
Payable for remuneration to directors
Payable for commission and rebates
Payable for advertisement
Payable for royalties
Payable for freight
Payable for equipment
Others
Other liabilities
Advance receipts from customers
Financial liabilities of put option equity instruments from disposal
of subsidiaries
Refund liability
Others
Non-current
Other liabilities
Guarantee deposits
Others		 December 31 December 31
2018
$ 282,514
31,723
20,960
840,152
285,122
23,806
101,140
158,266
866,203
$ 2,609,886
$ 1,147
-
15,231
17,938
$ 34,316
$ 19,961
4,734
$ 24,695		 2017
$ 258,162
23,388
15,449
741,931
117,751
20,704
92,957
235,243
888,256
$ 2,393,841
$ 216,185
45,196
-
16,880
$ 278,261
$ 48,769
5,305
$ 54,074

-138-

Accession Limited and The MM-Group AG (MM-Group) signed an agreement to purchase equity of Dermalab on February 10, 2015. According to the agreement, MM-Group had the right to ask Accession Limited to buy 20% equity of Dermalab which was held by MM-Group since April 1, 2017. The purchase price was CHF1,500 thousand. Financial liabilities recognized by the Group according to this agreement amounted to $45,196 thousand as of December 31, 2017, MM-Group executed the equity right in May 2018.

26. PROVISIONS

Current
Customer returns
Balance at January 1, 2017
Addition
Usage
Effect of foreign currency exchange differences
Balance at December 31, 2017		 December 31 December 31
2018
$ -		 2017
$ 112,814
Customer
Returns
$ 21,420
296,365
(204,945)
(26)
$ 112,814

The provision for customer returns in 2017 was the estimated product returns that may occur in the year; the estimate was based on historical experience and other relevant factors. The provision was recognized as a reduction of operating revenue in the periods the related goods were sold.

27. RETIREMENT BENEFIT PLANS

  • a. Defined contribution plans

The Company and domestic subsidiaries of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages. The foreign subsidiaries also make contributions to defined contribution plan in accordance with the local regulations.

  • b. Defined benefit plans

The defined benefit plan of the Company and domestic subsidiaries of the Group are operated by the government of the Republic of China (“ROC”) in accordance with the Labor Standards Law. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company and domestic subsidiaries of the Group make monthly contributions to their respective pension funds administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Group has no right to influence the investment policy and strategy.

-139-

Dermalab of the Group also adopted a defined benefit plan.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

December 31
2018
2017
Present value of funded defined benefit obligation
$ 700,665
$ 705,155
Fair value of plan assets
(437,458)
(334,366)
Net defined benefit liabilities
$ 263,207
$ 370,789
Movements in net defined benefit liabilities (assets) were as follows:
Present Value
of the Defined
Benefit
Obligation
Fair Value of
the Plan Assets
Net Defined
Benefit
Liabilities
(Assets)
Balance at January 1, 2017
$ 709,634
$ (373,443)
$ 366,191
Service cost
Current service cost
11,186
-
11,186
Net interest expense (income)
7,428
(3,867)
3,561
Recognized in profit or loss
18,614
(3,867)
14,747
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
-
749
749
Actuarial loss - changes in demographic
assumptions
28,435
-
28,435
Actuarial gain - changes in financial
assumptions
(3,695)
-
(3,695)
Actuarial loss - experience adjustments
9,573
-
9,573
Recognized in other comprehensive income
34,313
749
35,062
Contributions from the employer
-
(14,636)
(14,636)
Contributions from plan participants
2,220
(2,220)
-
Benefits paid
(57,242)
57,242
-
Exchange differences
(2,384)
1,809
(575)
Balance at December 31, 2017
705,155
(334,366)
370,789
Service cost
Current service cost
10,904
-
10,904
Past service cost and loss on settlements
1,305
-
1,305
Net interest expense (income)
7,901
(3,789)
4,112
Recognized in profit or loss
20,110
(3,789)
16,321
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
-
(6,758)
(6,758)
Actuarial loss - changes in demographic
assumptions
4,531
-
4,531
Actuarial gain - changes in financial
assumptions
(1,022)
-
(1,022)
Actuarial loss - experience adjustments
9,586
-
9,586
Recognized in other comprehensive income
13,095
(6,758)
6,337
(Continued)		 December 31

-140-

Present Value Present Value Net Defined
of the Defined Benefit
Benefit Fair Value of Liabilities
Obligation the Plan Assets (Assets)
Contributions from the employer $ - $ (130,576) $ (130,576)
Contributions from plan participants 2,475 (2,475) -
Benefits paid (41,468) 41,468 -
Exchange differences 1,298 (962) 336
Balance at December 31, 2018 $ 700,665 $ (437,458) $ 263,207
(Concluded)

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

  • 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

  • 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

  • 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rates
Expected rates of salary increase		 December 31
2018
2017
0.875%-1.250%
0.700%-1.500%
0.500%-3.000%
0.500%-3.000%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rates
0.250% increase
0.250% decrease
Expected rates of salary increase
0.250% increase
0.250% decrease		 December 31
2018
$ (21,406)
$ 22,249
$ 19,815
$ (19,341)		 2017
$ (17,049)
$ 18,084
$ 17,369
$ (16,836)

-141-

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year
The average duration of the defined benefit obligation		 **December ** 31
2018
2017
$ 33,078
$ 18,100
2.8-15.1 years
3.7-15.9 years

28. EQUITY

a. Share capital

  • 1) Ordinary shares
Number of shares authorized (in thousands)
Shares authorized
Number of shares issued and fully paid (in thousands)
Shares issued		 December 31 December 31
2018
920,000
$ 9,200,000
915,089
$ 9,150,897		 2017
920,000
$ 9,200,000
915,089
$ 9,150,897
  • 2) Global depositary receipts

As of December 31, 2018, a total of 7,046.4 units of Global Depositary Receipts (GDRs) (representing 35,232 shares of the Company’s ordinary shares), where each GDR representing five shares of the Company’s ordinary shares, were traded on the Euro MTF Market of the Luxembourg Stock Exchange. Holders of the GDRs may request at any time that the shares represented by the GDRs be transferred to them.

  • b. Capital surplus
May be used to offset a deficit, distributed as cash dividends, or
transferred to share capital (1)
Recognized from the difference between consideration received
or paid and the carrying amount of the subsidiaries’ net assets
during actual disposal or acquisition
May be used to offset a deficit
Changes in percentage of ownership interests in subsidiaries (2)
Recognized from treasury share transactions
May not be used for any purpose
Share options		 December 31
2018
$ 1
466
92,578
-
$ 93,045		 2017
$ 1
466
79,239
3,418
$ 83,124

-142-

  • 1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

  • 2) Such capital surplus arises from the effect of changes in ownership interests in subsidiaries that result from equity transactions other than actual disposals or acquisitions, or from changes in capital surplus of subsidiaries accounted for using the equity method.

  • c. Retained earnings and dividend policy

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be appropriated from (less any paying taxes and deficit):

  • 1) 10% thereof as legal reserve;

  • 2) Special reserve provided or reversed in accordance with the regulations;

  • 3) 30% to 100% of this the sum of the remainder and prior years’ unappropriated earnings as dividends.

The Company’s Articles of Incorporation also prescribe that 30% to 100%of dividends shall be paid in cash; however, if the Company has major investment plans for which external funds are not available, the percentage may be lowered to 5% to 20%. The distribution plan shall be proposed by the Company’s board of directors and resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of the compensation of employees and remuneration of directors after amendment, refer to Note 30(h) “employees’ compensation and remuneration of directors”.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

Except for non-ROC resident shareholders, all shareholders receiving the dividends are allowed a tax credit equal to their proportionate share of the income tax paid by the Company.

The appropriations of earnings 2017 and 2016 approved in the shareholders’ meetings on June 15, 2018 and June 22, 2017, respectively, were as follows:

Legal reserve
Special reserve
Cash dividends
Share dividends		 Appropriation of Earnings
For the Year Ended
December 31
2017
2016
$ 217,304
$ 260,654
178,629
81,797
1,830,179
1,407,830
-
351,958		 Dividends Per Share
(NT$)
For the Year Ended
December 31
2017
2016
$ 2.0
$ 1.6
-
0.4

-143-

The appropriations of earnings for 2018 had been proposed by the Company’s board of directors on March 22, 2019. The appropriations and dividends per share were as follows:

Appropriation Appropriation Dividends Per Dividends Per
of Earnings Share (NT$)
Legal reserve $ 294,909
Special reserve 70,519
Cash dividends 2,287,723 $ 2.50

The appropriations of earnings for 2018 are subject to the resolution of the shareholders in their meeting to be held on June 13, 2019.

d. Special reserves

Beginning at January 1
Appropriation in respect of:
Debit to other equity items
Balance at December 31		 For the Year Ended For the Year Ended December 31
2018
$ 81,797
178,629
$ 260,426		 2017
$ -
81,797
$ 81,797

Appropriation for special reserve should be made in the amount equal to the net debit balance of other equity. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and, thereafter, distributed.

e. Other equity items

1) Exchange differences on translating the financial statements of foreign operations

Balance at January 1
Effect of change in tax rate
Recognized for the year
Exchange differences on translating the financial
statements of foreign operations
Other comprehensive income recognized for the year
Acquisition of further interests in subsidiaries
Balance at December 31		 For the Year Ended For the Year Ended December 31
2018
$ (307,846)
11,127
(117,413)
(106,286)
1,263
$ (412,869)		 2017
$ (185,556)
-
(122,290)
(122,290)
-
$ (307,846)

-144-

  • 2) Unrealized gain (loss) on available-for-sale financial assets
Balance at January 1, 2017
Recognized for the year
Unrealized gain (loss) on revaluation of available-for-sale financial assets
Reclassification adjustment
Disposal of available-for-sale financial assets
Other comprehensive income recognized for the year
Balance at December 31, 2017
Balance at January 1, 2018 per IAS 39
Adjustment on initial application of IFRS 9
Balance at January 1, 2018 per IFRS 9		 $ 150,729
(55,606)
(733)
(56,339)
$ 94,390
$ 94,390
(94,390)
$ -
  • 3) Unrealized gain (loss) on financial assets at FVTOCI
For the Year For the Year
Ended
December 31,
2018
Balance at January 1 per IAS 39 $ -
Adjustment on initial application of IFRS 9 116,974
Balance at January 1 per IFRS 9 116,974
Recognized for the year
Unrealized gain (loss) - equity instruments (34,736)
Other comprehensive income recognized for the year (34,736)
Cumulative unrealized gain (loss) of equity instruments transferred to retained
earnings due to disposal (314)
Balance at December 31 $ 81,924
  • 4) Other equity items - other (recognized from put option of equity instruments from disposal of subsidiaries)
Balance at January 1
Exercised the put option of equity instruments from disposal
of subsidiaries
Balance at December 31		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ (46,970)
46,970
$ -		 2017
$ (46,970)
-
$ (46,970)

-145-

f. Non-controlling interests

Balance at January 1 per IAS 39
Adjustment on initial application of IFRS 9
Balance at January 1 per IFRS 9
Share in profit for the year
Other comprehensive income (loss) during the year
Effect of change in tax rate
Exchange difference on translating the financial statements of
foreign entities
Unrealized gain (loss) on financial assets at FVTOCI
Remeasurement on defined benefit plans
Related income tax
Acquisition of non-controlling interests in subsidiaries
Non-controlling interests arising from acquisition of subsidiaries
Changes in percentage of ownership interests in subsidiaries
Cash dividends distributed by subsidiaries to non-controlling
interests
Balance at December 31		 For the Year Ended For the Year Ended December 31
2018
$ 237,868
19,289
257,157
19,218
89
(728)
(1,641)
(609)
122
(11,491)
-
-
(28,718)
$ 233,399		 2017
$ 199,786
-
199,786
36,865
-
(6,333)
-
(114)
(5)
-
36,853
(466)
(28,718)
$ 237,868

g. Treasury shares

Shares Held by
Subsidiaries (In
Thousands of
Purpose of Buy-back Shares)
Number of shares at January 1, 2017 6,413
Increase during the year 256
Number of shares at December 31, 2017 6,669
Number of shares at December 31, 2018 6,669

For the purpose of maintaining the Company’s credit and shareholders’ equity, the Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:

Name of Subsidiary
Number of
Shares Held
(In Thousands
of Shares)
December 31, 2018
Chang Hui
6,669
December 31, 2017
Chang Hui
6,669		 Carrying
Amount
Market Price
$ 21,182
$ 331,473
$ 21,182
$ 493,541

-146-

The Company’s shares held by subsidiaries were treated as treasury shares, aside from the rights to participate in any share issuance for cash and to vote, the rest were similar to general shareholder’s rights.

29. REVENUE

For the Year Ended December 31 the Year Ended December 31 the Year Ended December 31
2018 2017
Revenue from contracts with customers
Revenue from sale of goods $ 27,340,587 $ 26,477,924
a. Contract balances
December 31,
2018
Notes receivable (Note 13) $ 2,887
Trade receivables (Note 13) $ 6,161,079
Contract liabilities - current
Sale of goods $ 360,115
b. Disaggregation of revenue
Reportable Segments
Nutritious Cooking
Foods Products Others Total
For the year ended
December 31, 2018
Type of goods or services
Sale of goods $ 10,929,907 $ 13,817,285 $ 2,593,395 $ 27,340,587
For the year ended
December 31, 2017
Type of goods or services
Sale of goods $ 10,202,742 $ 13,132,389 $ 3,142,793 $ 26,477,924

-147-

30. NET PROFIT

Net profit includes:

a. Other income

Rental income
Operating lease rental income
Investment properties
Others
Interest income
Bank deposits
Financial assets at amortized cost
Repurchase agreements collateralized by bonds
Others
Dividends
Available-for-sale financial assets
Investments in equity instruments at FVTOCI		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 20,878
578
21,456
29,541
8,701
150
1,525
39,917
-
10,584
10,584
$ 71,957		 2017
$ 24,530
465
24,995
46,791
-
197
1,353
48,341
16,500
-
16,500
$ 89,836

b. Other gains and losses

Gain on disposal of financial assets
Available-for-sale financial assets
Fair value changes of financial assets and financial liabilities
Financial assets held for trading
Financial liabilities held for trading
Financial assets measured at cost
Net foreign exchange gains (losses)
Net loss on disposal of property, plant and equipment
Net gain on disposal of investment properties
Impairment losses recognized on property, plant and equipment
Government grants
Others		 For the Year Ended For the Year Ended December 31
2018
$ -

13,031
9,308
-
10,478
(8,243)
369,427
(18,035)
107,359
51,859
$ 535,184
 2017
$ 733
(16,107)
-
(48,825)
(67,137)
(4,202)
-
-
54,747
17,195
$ (63,596)

-148-

c. Finance costs

Interest on bank loans
Interest on short-term bills payable
Obligations under financial leases
Other interest expense
Total interest expense on financial liabilities measured at
amortized cost
Less: Amounts included in the cost of qualifying asset
Information about capitalized interest was as follows:
Capitalized interest
Capitalized rate
d. Impairment loss (reversal of impairment loss) on financial assets
Trade receivables
Inventories (included in operating costs)
Financial assets measured at cost
Property, plant and equipment
e.
Depreciation and amortization		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
2017
$ 79,564
$ 74,434
96
644
718
228
367
418
80,745
75,724
-
(9)
$ 80,745
$ 75,715
For the Year Ended December 31
2018
2017
$ -
$ 9
-
0.800%
For the Year Ended December 31
2018
$ 5,251
$ (4,047)
$ -
$ 18,035		 2017
$ 186
$ 11,757
$ 48,825
$ -
An analysis of depreciation by function
Operating costs
Operating expenses
Non-operating revenue and expenses
An analysis of amortization by function
Operating costs
Operating expenses		 For the Year Ended For the Year Ended December 31
2018
$ 381,355
89,698
2,320
$ 473,373
$ 23,794
29,734
$ 53,528		 2017
$ 335,076
75,151
2,699
$ 412,926
$ 25,474
26,008
$ 51,482

-149-

f. Operating expenses directly related to investment properties

Direct operating expenses of investment properties that generated
rental income
Direct operating expenses of investment properties that did not
generated rental income		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 751
581
$ 1,332		 2017
$ 2,573
583
$ 3,156

g. Employee benefits expense

Post-employment benefits
Defined contribution plans
Defined benefit plans (see Note 27)
Other employee benefits
Total employee benefits expense
An analysis of employee benefits expense by function
Operating costs
Operating expenses		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 124,208
16,321
140,529
2,126,065
$ 2,266,594
$ 828,990
1,437,604
$ 2,266,594		 2017
$ 110,842
14,747
125,589
1,958,872
$ 2,084,461
$ 784,848
1,299,613
$ 2,084,461
  • h. Employees’ compensation and remuneration of directors

The Company accrued compensation of employees and remuneration of directors at the rates of no less than 0.5% and no higher than 0.75%, respectively, of net profit before income tax, compensation of employees, and remuneration of directors. The compensation of employees and remuneration of directors for the years ended December 31, 2018 and 2017, which were approved by the Company’s board of directors on March 22, 2019 and March 22, 2018, respectively, were as follows:

Accrual rate

Compensation of employees
Remuneration of directors
Amount		 For the Year Ended December 31
2018
2017
0.90%
0.90%
0.59%
0.59%
Compensation of employees
Remuneration of directors		 For the Year Ended December 31 For the Year Ended December 31
2018
Cash
$ 31,723
20,960		 2017
Cash
$ 23,388
15,449

-150-

If there is a change in the amounts after the annual consolidated financial statements were authorized for issue, the differences are recorded as a change in the accounting estimate.

There was no difference between the actual amounts of compensation of employees and remuneration of directors paid and the amounts recognized in the consolidated financial statements for the year ended December 31, 2017 and 2016.

Information on the compensation of employees and remuneration of directors resolved by the Company’s board of directors in 2019 and 2018 is available on the Market Observation Post System website of the Taiwan Stock Exchange.

  • i. Gain or loss on foreign currency exchange
Foreign exchange gains
Foreign exchange losses
Net gain (losses)		 **For the Year Ended ** **For the Year Ended ** December 31
2018
$ 76,847
(66,369)
$ 10,478		 2017
$ 90,343
(157,480)
$ (67,137)

31. INCOME TAXES

  • a. Major components of tax expense recognized in profit or loss
Current tax
In respect of the current year
Land value increment tax
Income tax on unappropriated earnings
Adjustments for prior years
Deferred tax
In respect of the current year
Effect of tax rate changes
Income tax expense recognized in profit or loss		 For the Year Ended For the Year Ended December 31
2018
$ 630,223
27,947
-
(5,159)
653,011
77,051
(22,137)
54,914
$ 707,925		 2017
$ 511,732
-
46,536
22,568
580,836
(45,342)
-
(45,342)
$ 535,494

A reconciliation of accounting profit and income tax expenses is as follows:

Profit before tax
Income tax expense calculated at the statutory rate
Nondeductible expenses in determining taxable income
Tax-exempt income
Unrecognized deductible temporary differences and loss
carryforwards		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 3,676,232
$ 887,299
23,150
(184,192)
2,459		 2017
$ 2,745,403
$ 542,734
26,194
(111,089)
12,735
(Continued)

-151-

Investment credits
Income tax on unappropriated earnings
Land value increment tax
Effect of tax rate changes
Adjustments for prior years’ tax
Income tax expense recognized in profit or loss		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ (21,442)
-
27,947
(22,137)
(5,159)
$ 707,925		 2017
$ (4,184)
46,536
-
-
22,568
$ 535,494
(Concluded)

In 2017, the applicable corporate income tax rate used by the group entities in the ROC was 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings has been reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

b. Income tax recognized in other comprehensive income

Deferred tax
Effect of tax rate changes
In respect of the current year
Exchange differences on translating the financial statements of
foreign operations
Fair value changes of financial assets at FVTOCI
Remeasurement of defined benefit plans
Total income tax recognized in other comprehensive income
Current tax assets and liabilities
Current tax assets
Tax refund receivable
Current tax liabilities
Income tax payable		 For the Year Ended For the Year Ended December 31
2018
2017
$ (21,055)
$ -
(29,037)
(25,047)
(83)
-
(1,049)
(5,397)
$ (51,224)
$ (30,444)
December 31
2018
$ 13,349
$ 337,835		 2017
$ 800
$ 307,268
  • c. Current tax assets and liabilities

-152-

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2018

Deferred tax assets
Temporary differences
Investments accounted for using
the equity method
Exchange differences on
translating the financial
statements of foreign
operations
Defined benefit plans
Payable for advertisement
Deferred sales returns and
allowances
Allowance for inventory loss
Financial assets measured at cost
Others
Loss carryforwards
Deferred tax liabilities
Temporary differences
Investments accounted for using
the equity method
Reserve for land value increment
tax
Defined benefit plans
Others		 Opening
Balance
Effect of Tax
Rate Changes
Recognized in
Profit or Loss
Recognized in
Other
Comprehensi
ve Income
$ 92,479
$ 16,330
$ (17,709)
$ -
63,052
11,127
-
29,037
63,789
10,855
551
1,229
55,745
-
-
-
19,129
3,376
(15,738)
-
7,326
1,332
1,413
-
41,930
7,400
(5,527)
83
18,652
3,010
(7,342)
-
362,102
53,430
(44,352)
30,349
81
14
-
-
$ 362,183
$ 53,444
$ (44,352)
$ 30,349
$ 53,736
$ 9,483
$ 37,241
$ -
33,685
-
-
-
332
228
-
180
5,226
541
(4,542)
-
$ 92,979
$ 10,252
$ 32,699
$ 180		 Exchange
Differences
$ -
-
66
(969)
-
-
-
25
(878)
-
$ (878)
$ -
-
-
13
$ 13		 Closing
Balance
$ 91,100
103,216
76,490
54,776
6,767
10,071
43,886
14,345
400,651
95
$ 400,746
$ 100,460
33,685
740
1,238
$ 136,123

For the year ended December 31, 2017

Opening Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
Deferred tax assets
Temporary differences
Investments accounted for using
the equity method
$ 92,897
$ 26
$ (444)
Exchange differences on
translating the financial
statements of foreign
operations
38,005
-
25,047
Defined benefit plans
56,661
1,700
5,543
Payable for advertisement
57,005
(100)
-
Deferred sales returns and
allowances
4,472
14,657
-
Allowance for inventory loss
7,597
(271)
-
Financial assets measured at cost
34,548
7,382
-
Others
15,096
3,593
-
306,281
26,987
30,146
Loss carryforwards
-
81
-
$ 306,281
$ 27,068
$ 30,146		 Exchange
Differences
Closing Balance
$ -
$ 92,479
-
63,052
(115)
63,789
(1,160)
55,745
-
19,129
-
7,326
-
41,930
(37)
18,652
(1,312)
362,102
-
81
$ (1,312)
$ 362,183
(Continued)

-153-

Opening Balance
Recognized in
Profit or Loss
Recognized in
Other
Comprehensive
Income
Deferred tax liabilities
Temporary differences
Investments accounted for using
the equity method
$ 69,338
$ (15,602)
$ -
Reserve for land value increment
tax
33,685
-
-
Defined benefit plans
630
-
(298)
Others
8,012
(2,672)
-
$ 111,665
$ (18,274)
$ (298)		 Exchange
Differences
Closing Balance
$ -
$ 53,736
-
33,685
-
332
(114)
5,226
$ (114)
$ 92,979
(Concluded)
  • e. Deductible temporary differences and unused loss carryforwards for which no deferred tax assets have been recognized in the consolidated balance sheets
Loss carryforwards
Expiry in 2019
Expiry in 2020
Expiry in 2021
Expiry in 2022
Expiry in 2023
Deductible temporary differences		 December 31 December 31
2018
$ 580
11,268
25,402
41,636
69,645
$ 148,531
$ 50,272		 2017
$ 590
11,092
36,363
42,727
410
$ 91,182
$ 114,531
  • f. Income tax assessments

The income tax returns of the Company, Standard Dairy Products, Domex Technology, Charng Hui and Le Bonta Wellness through 2016 have been assessed by the tax authorities.

The income tax returns of Standard Beverage through 2017 have been assessed by the tax authorities.

32. EARNINGS PER SHARE

Basic earnings per share
Diluted earnings per share		 For Unit: NT$ Per Share
the Year Ended December 31		 Unit: NT$ Per Share
the Year Ended December 31
2018
$ 3.25
$ 3.24		 2017
$ 2.39
$ 2.39

-154-

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 2,949,089		 2017
$ 2,173,044

Weighted average number of ordinary shares outstanding (in thousands of shares):

Weighted average number of ordinary shares used in computation of
basic earnings per share
Effect of potentially dilutive ordinary shares:
Compensation of employees
Weighted average number of ordinary shares used in the
computation of diluted earnings per share		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
908,420
742
909,162		 2017
908,420
413
908,833

If the Company offered to settle compensation paid to employees in cash or shares, the Company assumed the entire amount of the compensation would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

33. GOVERNMENT GRANTS

In 2018, the Group received government grants, and recognized $5,828 thousand in other gains and losses. In 2018 and 2017, the Group received government grants of RMB21,023 thousand and RMB12,091 thousand, respectively, for the relevant operating expenses of China’s headquarters. The amounts were recognized as deferred revenue and subsequently transferred to other income when the Group recognized the corresponding operating expenses. The Group recognized $101,531 thousand and $54,747 thousand as other gains and losses during 2018 and 2017, respectively.

34. EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS

On May 18, 2018, the Group subscribed for shares of non-controlling interests at a percentage of 20%, which increased its continuing interest from 80% to 100%.

-155-

The above transactions were accounted for as equity transactions, since the Group did not cease to have control over these subsidiaries.

Dermalab
Cash consideration received $ (59,682)
The transfer of capital premium’s stock warrants 48,512
The equity instrument’s put option of the financial liability of the subsidiary transferred
to non-controlling interests 3,418
The proportionate share of the carrying amount of the net assets of the subsidiary
transferred to non-controlling interests 11,491
Reattribution of other equity from non-controlling interests
Exchange differences on translating the financial statements of foreign operation (1,263)
Others (46,970)
Differences recognized from equity transactions $ (44,494)
Line items adjusted for equity transactions
Capital surplus - changes in percentage of ownership interests in subsidiaries $ (44,494)

On September 28 and November 9, 2017, the Group subscribed for the increase in capital of China Standard Investment at a percentage different from its existing ownership percentage, and reduced its continuing interest from 100% to 99%.

The above transactions were accounted for as equity transactions, since the Group did not cease to have control over these subsidiaries.

China Standard China Standard
Investment
Cash consideration received $ 36,853
The proportionate share of the carrying amount of the net assets of subsidiaries
transferred to non-controlling interests (35,742)
Differences recognized from equity transactions $ 1,111
Line items adjusted for equity transactions
Capital surplus - changes in percentage of ownership interests in subsidiaries $ 1,111

-156-

35. CASH FLOWS INFORMATION

Changes in liabilities arising from financing activities:

For the year ended December 31, 2018

Short-term borrowings
Short-term bills payable
Long-term borrowings
Finance lease payables
Guarantee deposits received
Other non-current liabilities
For the year ended December 31, 2017		 Opening
Balance
Cash Flows
$ 2,312,473
$ (555,347)
99,953
19,951
39,000
(12,000)
2,833
4,067
48,769
(28,458)
5,305
(687)
$ 2,508,333
$ (572,474)
Opening
Balance
Cash Flows
$ 1,460,871
$ 871,296
69,975
29,978
-
39,000
3,080
(247)
31,330
16,931
52,297
(46,243)
$ 1,617,553
$ 910,715		 Non-cash
Changes
Exchanging
Rate
Adjustments
$ (25,648)
-
-
46
(350)
116
$ (25,836)
Non-cash
Changes
Exchanging
Rate
Adjustments
$ (19,694)
-
-
-
508
(749)
$ (19,935)		 Closing
Balance
$ 1,731,478
119,904
27,000
6,946
19,961
4,734
$ 1,910,023
Closing
Balance
$ 2,312,473
99,953
39,000
2,833
48,769
5,305

Short-term borrowings
Short-term bills payable
Long-term borrowings
Finance lease payables
Guarantee deposits received
Other non-current liabilities
$ 2,508,333

36. OPERATING LEASE ARRANGEMENTS

  • a. The Group as lessee

Operating leases relate to leases of land and building with lease terms between 1 and 20 years. The Group does not have a bargain purchase option to acquire the leased land and building at the expiration of the lease periods.

Domex Technology leased a parcel of land from the Hsinchu Science Park Administration. The operating lease expires on August 2019 and can be renewed upon expiration.

-157-

The future minimum lease payments of non-cancellable operating lease commitments are as follows:

Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years		 December 31 December 31
2018
$ 55,887
99,744
-
$ 155,631		 2017
$ 58,701
31,098
7,744
$ 97,543

The lease payments recognized in profit or loss for the current period was as follows:

Minimum lease payments **For the Year Ended ** **For the Year Ended ** December 31
2018
$ 131,944		 2017
$ 124,904
  • b. The Group as lessor

Operating leases relate to investment properties owned by the Group with lease terms between 1 and 5 years. The lessees do not have bargain purchase options to acquire the properties at the expiry of the lease periods.

The future minimum lease payments of non-cancellable operating leases are as follows:

Not later than 1 year
Later than 1 year and not later than 5 years		 December 31
2018
$ 18,986
18,943
$ 37,929		 2017
$ 22,329
47,696
$ 70,025

37. CAPITAL MANAGEMENT

The Group’s capital management objective is to ensure financial resources are available and operating plans are in place for working capital, capital expenditures, research and development expenses, refund liabilities and dividend disbursement, etc. in the next twelve months. The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance.

-158-

38. FINANCIAL INSTRUMENTS

  • a. Fair value of financial instruments that are measured at fair value on a recurring basis

  • 1) Fair value hierarchy

December 31, 2018
Financial assets at FVTPL
Unlisted shares
Mutual fund beneficiary
certification
Financial assets at FVTOCI
Investments in equity
instruments at
FVTOCI
Listed shares and
emerging market
shares
Unlisted shares
December 31, 2017
Available-for-sale financial
assets
Listed shares and
emerging market
shares
Equity securities
Mutual funds
Financial liabilities at fair
value through profit or
loss
Derivative instruments		 Level 1
$ -
617,790
$ 617,790
$ 244,534
-
$ 244,534
Level 1
$ 276,786
46,235
$ 323,021
$ -		 Level 2
$ -
-
$ -
$ -
-
$ -
Level 2
$ -
-
$ -
$ 11,253		 Level 3
$ 7,315
-
$ 7,315
$ -
77,165
$ 77,165
Level 3
$ -
-
$ -
$ -		 Total
$ 7,315
617,790
$ 625,105
$ 244,534
77,165
$ 321,699
Total
$ 276,786
46,235
$ 323,021
$ 11,253

There were no transfers between Levels 1 and 2 for the years ended December 31, 2018 and 2017.

-159-

  • 2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

Financial Assets
Balance at January 1, 2018
Recognized in profit or loss (included in
other gains and losses)
Recognized in other comprehensive
income (included in unrealized gain
(loss) on financial assets at FVTOCI)
Sales/settlements
Transfers out of Level 3
Impact of exchange rates
Balance at December 31, 2018
Recognized in other gains and losses -
unrealized
For the year ended December 31, 2017		 Financial Assets
at FVTPL
Equity
Instruments
$ 6,368
3,125
-
(1,978)
(200)
-
$ 7,315
$ 1,147		 Financial Assets
at FVTOCI
Equity
Instruments
$ 83,754
-
(4,749)
(1,823)
-
(17)
$ 77,165		 Total
$ 90,122
3,125
(4,749)
(3,801)
(200)
(17)
$ 84,480
$ 1,147

None.

  • 3) Valuation techniques and inputs applied for Level 2 fair value measurement
Financial Instruments
Derivatives - foreign exchange
swap contracts		 Valuation Techniques and Inputs
Discounted cash flow.
Future cash flows are estimated based on observable forward
exchange rates at the end of the reporting period and contract
forward rates, discounted at a rate that reflects the credit risk
of various counterparties.
  • 4) The valuation techniques of unlisted shares with no active market are mainly applicable for market and asset valuation methods.

The market method is mainly used to value the fair value of investment objects’ market prices and environments.

The asset method is mainly utilized to value the fair value of investment objects’ net asset values.

-160-

  • b. Categories of financial instruments
Financial assets
Financial assets at FVTPL
Mandatorily classified as at FVTPL
Loans and receivables (1)
Available-for-sale financial assets (2)
Financial assets at amortized cost (3)
Financial assets at FVTOCI
Equity instruments
Financial liabilities
Financial liabilities at FVTPL
Held for trading
Financial liabilities at amortized cost (4)		 December 31
2018
2017
$ 625,105
$ -
-
9,227,309
-
369,256
10,614,196
-
321,699
-
-
11,253
4,367,443
4,359,078

  • 1) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, and trade and other receivables. Those reclassified to held-for-sale disposal groups are also included.

  • 2) The balances include the carrying amount of available-for-sale financial assets measured at cost.

  • 3) The balances include financial assets at amortized cost, which comprise cash and cash equivalents, debt investments, and notes receivable and trade receivables. Those reclassified to held-for-sale disposal groups are also included.

  • 4) The balances include financial liabilities at amortized cost, which comprise short-term and long-term loans, short-term bills payable, trade and other payables, and bonds issued. Those reclassified to held-for-sale disposal groups are also included.

  • c. Financial risk management objectives and policies

The Group’s major financial instruments include cash and cash equivalents, equity and debt investments, mutual funds, trade receivables, trade payables and loans. The Group’s Financial Department provides services to the business, coordinates access to financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

  • a) Foreign currency risk

The Group’s foreign currency risk arises from its foreign currency monetary assets and liabilities. The Group watches out for the fluctuation of market exchange rate, and takes appropriate actions to manage the exchange rate risk.

-161-

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) at the end of the reporting period are set out in Note 42.

Sensitivity analysis

The Group was mainly exposed to the RMB, USD, EUR, and AUD.

The following table details the Group’s sensitivity to a 3% increase or decrease in the functional currency against the relevant foreign currencies. A change of 3% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis used the outstanding foreign currency denominated monetary items at the end of the reporting period and assumed the exchange rates at the end of the reporting period changed by 3% increase of decrease. The amount below indicates an increase (decrease) in pre-tax profit associated with the functional currency weakening 3% against the relevant currency. For a 3% strengthening of the functional currency against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

Profit or loss
Profit or loss		 RMB Impact
For the Year Ended
December 31
2018
2017
$ 834 (i)
$ 2,356 (i)
EUR Impact
For the Year Ended
December 31
2018
2017
$ 1,378 (iii)
$ (665) (iii)		 USD Impact
For the Year Ended
December 31
2018
2017
$ 18,939 (ii)
$ 9,734 (ii)
AUD Impact
For the Year Ended
December 31
2018
2017
$ 2,707 (iv)
$ (604) (iv)

  • i. This was mainly attributable to the exposure of outstanding RMB bank deposits which were not hedged at the end of the reporting period.

  • ii. This was mainly attributable to the exposure of outstanding USD bank deposits, debt investments with no active market, receivables and payables which were not hedged at the end of the reporting period.

  • iii. This was mainly attributable to the exposure on outstanding receivables and payables in EUR which were not hedged at the end of the reporting period.

  • iv. This was mainly attributable to the exposure on outstanding receivables and payables in AUD which were not hedged at the end of the reporting period.

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The Group pays attention to the fluctuations of exchange rates in the market, and takes appropriate actions to manage the exchange rate risk.

-162-

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting periods were as follows.

Fair value interest rate risk
Financial assets
Financial liabilities
Cash flow interest rate risk
Financial assets
Financial liabilities		 December 31
2018
2017
$ 955,885
$ 602,963
1,806,328
2,360,455
1,163,880
655,700
79,000
139,000

Sensitivity analysis

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate assets and liabilities, the analysis was prepared assuming the amount of the asset and liability outstanding at the end of the reporting period was outstanding for the whole year. A 1% basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 1% higher and all other variables were held constant, the Group’s pre-tax profit for the years ended December 31, 2018 and 2017 would increase (decrease) by $10,849 thousand and $5,557 thousand, respectively.

The Group’s sensitivity to interest rates decreased during the current year mainly due to the decrease in variable rate debt instruments.

c) Other price risk

The Group was exposed to equity price risk due to its investments in listed equity securities and mutual funds. The Group has appointed a special team to monitor the price risk and will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 1% higher/lower, pre-tax profit for the year ended December 31, 2018 would have increased/decreased by $6,251 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $3,217 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 1% higher/lower, pre-tax other comprehensive income for the years ended December 31, 2017 would increase/decrease by $3,230 thousand, as a result of the changes in fair value of available-for-sale financial assets.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation could be the carrying amount of the respective recognized financial assets as stated in the consolidated balance sheets.

-163-

In order to minimize credit risk, management of the Group has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade receivable at the end of the reporting period to ensure that adequate allowances are made for irrecoverable amounts.

The table below analyzes the collaterals held as security and other credit enhancements, and their financial effect in respect of the financial assets recognized in the Group’s consolidated balance sheets:

December 31, 2018

Carrying
Amount
Receivables
$ 6,163,966		 Maximum Exposure to Credit Risk Mitigated by
Collateral
Other Credit
Enhancements
Total
$ 94,755
$ 11,189
$ 105,944

December 31, 2017

Receivables Maximum Exposure to Credit Risk Mitigated by
Collateral
Other Credit
Enhancements
Total
$ 161,732
$ 19,202
$ 180,934
  • 3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Group’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2018 and 2017, the Group had available unutilized bank loan facilities in the amounts of $8,454,225 thousand and $7,752,677 thousand, respectively.

a) Liquidity and interest rate risk table for non-derivative financial liabilities

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. The table included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

-164-

December 31, 2018

Non-derivative financial liabilities
Non-interest bearing
Finance lease liabilities
Variable interest rate liabilities
Fixed interest rate liabilities
Contract liabilities
December 31, 2017
Non-derivative financial liabilities
Non-interest bearing
Finance lease liabilities
Variable interest rate liabilities
Fixed interest rate liabilities		 On Demand
or Less than
1 Month
$ 260,158
222
30,067
644,922
120,038
$ 1,055,407
On Demand
or Less than
1 Month
$ 153,410
1
63
392,837
$ 546,311		 1-3 Months
$ 603,234
445
3,086
627,795
240,077
$ 1,474,637
1-3 Months
$ 372,788
2
33,204
1,020,643
$ 1,426,637		 3 Months to
1 Year
$ 1,599,695
2,002
31,304
509,072
-
$ 2,142,073
3 Months to
1 Year
$ 1,319,480
505
79,809
980,722
$ 2,380,516		 1-5 Years
$ 19,961
5,164
15,215
37,371
-
$ 77,711
1-5 Years
$ 48,769
2,928
27,646
-
$ 79,343

The amounts included above for variable interest rate instruments for non-derivative financial liabilities was subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

b) Liquidity and interest rate risk table for derivative financial liabilities

The following table detailed the Group’s liquidity analysis for its derivative financial instruments. The table was based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement.

December 31, 2018

None.

December 31, 2017

On Demand
or Less than
1 Month
1-3 Months
3 Months to
1 Year
Gross settled
Foreign exchange swap
contracts
Inflows
$ -
$ -
$ 179,918
Outflows
-
-
(191,171)
$ -
$ -
$ (11,253)		 1-5 Years
$ -
-
$ -

-165-

39. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Besides as disclosed elsewhere in other notes, details of transactions between the Group and other related parties are disclosed below.

  • a. Related parties and relationships

Name of Related Party Relationship with the Group GeneFerm Biotechnology Co., Ltd. (“GeneFerm”) The Company is one of the directors

  • b. Purchases of goods
For the Year Ended December 31 For the Year Ended December 31
Related Party Category/Name 2018 2017
The Company is one of the directors
GeneFerm $ 25,529 $ 25,572
Purchases from related parties were conducted on normal commercial terms.
  • c. Payables to related parties
Line Items
Related Party Category/Name
Trade payables
The Company is one of the directors
GeneFerm
The outstanding payables from related parties were unsecured.		 December 31
2018
$ 8,602		 2017
$ 3,269
  • d. Compensation of key management personnel
Short-term employee benefits
Post-employment benefits		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 40,280
533
$ 40,813		 2017
$ 30,273
450
$ 30,723

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

-166-

40. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings, issuance of bank acceptances, performance guaranty, and bond for customs clearance:

Pledge time deposits (included in other current assets)
Pledge demand deposits (included in other current assets)
Pledge time deposits (included in other non-current assets)
Property, plant and equipment, net
Investment properties, net		 December 31 December 31
2018
$ 1,010
-
89,506
153,868
58,697
$ 303,081		 2017
$ 1,007
4,179
91,090
99,709
60,485
$ 256,470

41. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of December 31, 2018 were as follows:

  • a. The Company has entered into a license agreement with The Quaker Oats Company (Quaker) for a period ending July 11, 2029. The agreement provides that the Company may use Quaker’s trademark, and process, manufacture, market and sell Quaker baby cereal, oatmeal, fruit cereal, ready-to-eat cereal, sesame paste, milk powder and other cereal products in the ROC. In consideration of the above, the Company shall pay Quaker royalties at an agreed percentage of net sales (as defined).

  • b. Unused letters of credit of approximately US$4,733 thousand and EUR488 thousand.

  • c. Unrecognized commitments for acquisition of property, plant and equipment of approximately $175,709 thousand.

42. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant assets and liabilities denominated in foreign currencies other than functional currencies of the Group entities and the exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2018

Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
USD
$ 12,753
30.72 (USD:NTD)
USD
14,631
6.86 (USD:RMB)
EUR
1,661
35.20 (EUR:NTD)
RMB
6,219
4.47 (RMB:NTD)
AUD
4,717
21.67 (AUD:RMB)
CHF
2,923
6.97 (CHF:RMB)		 Carrying
Amount
$ 391,681
449,371
58,453
27,810
102,184
91,155
$ 1,120,654

(Continued)

-167-

Foreign
Currencies
Exchange Rate
Non-monetary items
USD
$ 33
6.86 (USD:RMB)
CHF
1,379
6.97 (CHF:RMB)
Financial liabilities
Monetary items
USD
771
30.72 (USD:NTD)
USD
6,045
6.86 (USD:RMB)
EUR
356
35.20 (EUR:NTD)
AUD
551
21.67 (AUD:NTD)
SGD
501
22.48 (SGD:NTD)
December 31, 2017
Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
USD
$ 11,475
29.76 (USD:NTD)
USD
8,155
6.53 (USD:RMB)
RMB
17,202
4.57 (RMB:NTD)
CHF
3,026
6.69 (CHF:RMB)
Non-monetary items
USD
110
6.53 (USD:RMB)
Financial liabilities
Monetary items
USD
2,727
29.76 (USD:NTD)
USD
6,000
6.53 (USD:RMB)
EUR
631
35.57 (EUR:NTD)
AUD
875
23.18 (AUD:NTD)
CHF
1,761
6.69 (CHF:RMB)
Non-monetary items
USD
371
6.53 (USD:RMB)		 Carrying
Amount
$ 1,000
43,007
$ 44,007
$ 23,666
185,681
12,535
11,944
11,262
$ 245,088
(Concluded)
Carrying
Amount
$ 341,507
242,698
78,530
92,147
$ 754,882
$ 3,260
$ 81,172
178,560
22,450
20,280
53,645
$ 356,107
$ 11,253

-168-

The Group is mainly exposed to RMB and USD. The following information was aggregated by the functional currencies of the group entities, and the exchange rates between respective functional currencies and the presentation currency were disclosed. The significant realized and unrealized foreign exchange gains (losses) were as follows:

For the Year Ended December 31

Foreign
Currencies
NTD
RMB
CHF		 2018
Exchange Rate
Net Foreign
Exchange Gains
(Losses)
1 (NTD:NTD)
$ 5,483
4.55 (RMB:NTD)
5,136
31.19 (CHF:NTD)
(141)
$ 10,478		 2017
Exchange Rate
Net Foreign
Exchange Gains
(Losses)
1 (NTD:NTD)
$ (55,430)
4.51 (RMB:NTD)
(11,975)
30.90 (CHF:NTD)
268
$ (67,137)

43. SEPARATELY DISCLOSED ITEMS

  • a. Financings provided: See Table 1 attached.

  • b. Endorsement/guarantee provided: See Table 2 attached.

  • c. Marketable securities held (excluding investments in subsidiaries): See Table 3 attached.

  • d. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None.

  • e. Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None.

  • f. Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: See Table 4 attached.

  • g. Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 5 attached.

  • h. Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 6 attached.

  • i. Trading in derivative instruments: See Table 7 attached.

  • j. Others: Intercompany relationships and significant intercompany transactions: None.

  • k. Information on investees (excluding investees of mainland China): See Table 9 attached.

  • l. Information on investment in mainland China

  • 1) The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses) of the investee, share of profits/losses of investee, ending balance, amount received as dividends from the investee, and the limitation on investee: See Table 10 attached.

  • 2) Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss: None.

-169-

44. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on types of corporation. Specifically, the Group’s reportable segments were as follows:

  • Standard Foods segment - the Company

  • Standard Dairy Products segment - Standard Dairy Products

  • China Standard segment - Shanghai Standard, China Standard Investment, China Standard Foods and Xiamen Standard

  • Other segments - other than the above corporation

  • a. Operating segment information


For the year ended December 31, 2018
Sales from external customers
Sales among intersegments
Total sales
Interest income
Financial cost
Depreciation expense
Amortization expense
Other important non-cash items
Impairment loss on assets
Operating segment income (loss)
Unallocated amount
Income before income tax
For the year ended December 31, 2017
Sales from external customers
Sales among intersegments
Total sales
Interest income
Financial cost
Depreciation expense
Amortization expense
Other important non-cash items
Impairment loss on assets
Operating segment income (loss)
Unallocated amount
Income before income tax		 Standard Foods
Segment

$ 10,681,521
1,506,386
$ 12,187,907
$ 15,502
$ 686
$ 187,440
$ 10,324
$ 18,035
$ 2,778,553
$ 9,924,080
1,335,603
$ 11,259,683
$ 13,923
$ -
$ 175,239
$ 14,181
$ 43,425
$ 2,105,329		 Standard Dairy
Products
Segment

$ 2,615,642
739,330
$ 3,354,972
$ 4,109
$ -
$ 34,733
$ 2,029
$ -
$ 540,305
$ 2,505,306
608,762
$ 3,114,068
$ 3,839
$ -
$ 25,898
$ 1,995
$ -
$ 571,685		 China Standard
Segment

$ 12,171,356
2,378
$ 12,173,734
$ 18,074
$ 76,371
$ 213,340
$ 34,612
$ -
$ 348,732
$ 11,609,116
1,018
$ 11,610,134
$ 27,145
$ 71,429
$ 187,457
$ 25,026
$ -
$ 35,795		 Other Segments
$ 1,884,219
5,142
$ 1,889,361
$ 7,541
$ 8,997
$ 37,859
$ 6,563
$ -
$ 10,204
$ 2,439,422
3,784
$ 2,443,206
$ 8,586
$ 9,438
$ 24,332
$ 10,280
$ 5,400
$ (96,585)		 Adjustments
and
Eliminations
$ (12,151)
(2,253,237)
$ (2,265,388)
$ (5,308)
$ (5,308)
$ -
$ -
$ -
$ (1,563)
$ -
(1,949,167)
$ (1,949,167)
$ (5,152)
$ (5,152)
$ -
$ -
$ -
$ 129,179		 Consolidated
$ 27,340,587
-
$ 27,340,587
$ 39,917
$ 80,745
$ 473,373
$ 53,528
$ 18,035
$ 3,676,232
-
$ 3,676,232
$ 26,477,924
-
$ 26,477,924
$ 48,341
$ 75,715
$ 412,926
$ 51,482
$ 48,825
$ 2,745,403
-
$ 2,745,403

-170-

b. Geographical information:

The Group operates in two principal geographical areas - Taiwan and mainland China.

The Group’s revenue from external customers by location of operations and information about its non-current assets by location of asset are detailed below.

Taiwan
Mainland China
Others
Taiwan
Mainland China
Others		 Revenue from External
Customers		 Revenue from External
Customers		 Revenue from External
Customers
For the Year Ended December 31
2018
2017
$ 14,977,018
$ 14,691,991
12,247,648
11,702,655
115,921
83,278
$ 27,340,587
$ 26,477,924
Non-current Assets
December 31
2018
$ 2,198,922
3,812,887
28,373
$ 6,040,182		 2017
$ 2,264,446
4,203,004
28,817
$ 6,496,267

Non-current assets exclude financial instruments, deferred tax assets and net defined benefit assets.

c. Information about major customers

Single customer contributing 10% or more to the Group’s revenue for the years ended December 31, 2018 and 2017 was summarized as follows:

Customer A For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
Amount
%
$ 3,561,949
13.0		 2017
Amount
%
$ 4,329,907
16.4

-171-

FINANCING PROVIDED TO OTHERS
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Note 1:
“0” for the Company, subsidiaries are numbered from “1”.
Note 2:
Reasons for financing are as follows:
a.
Need for operation.
b.
Need for short-term financing.
Aggregate
Financing
Limits
(Note 3)
$ 1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)		 1,195,792
(Note 4)
1,195,792
(Note 4)		 3,400,834
(Note 5)
3,400,834
(Note 5)		 111,020
(Note 6)		 11,510
(Note 7)		 216,439
(Note 8)		 135,094
(Note 9)
Financing Limit
for Each
Borrower
(Note 3)
$ 1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)		 1,195,792
(Note 4)
1,195,792
(Note 4)		 3,400,834
(Note 5)
3,400,834
(Note 5)		 111,020
(Note 6)		 11,510
(Note 7)		 216,439
(Note 8)		 135,094
(Note 9)
Collateral Value $ -
-
-
-		 -
-		 -
-		 - - - -
Item -
-
-
-		 -
-		 -
-		 - - - -
Allowance for
Impairment
Loss		 $ -
-
-
-		 -
-		 -
-		 - - - -
Reasons for
Short-term
Financing		 Need for operation
Need for operation
Need for operation
Need for operation		 Need for operation
Need for operation		 Need for operation
Need for operation		 Need for operation Need for operation Need for operation Need for operation
Business
Transaction
Amounts		 $ -
-
-
-		 -
-		 -
-		 - - - -
Nature of
Financing
(Note 2)		 b.
b.
b.
b.		 b.
b.		 b.
b.		 b. b. b. b.
Interest
Rate		 2.50%
2.500%-
4.350%
2.50%
2.50%		 2.500%-
4.350%
2.50%		 -
1.900%		 2.50% 2.50% 2.50% 2.50%
Actual
Borrowing
Amount		 $ 190,451
56,295
287,064
89,506		 443,055
603,964		 184,290
68,607		 - - 635 841
Ending Balance $ 447,530
89,506
716,048
89,506		 469,907
648,919		 184,290
68,607		 22,377 8,951 179,012 89,506
Highest Balance
for the Period		 $ 467,010
93,402
747,216
93,402		 490,361
677,165		 185,730
133,539		 116,753 9,340 186,804 93,402
Related
Parties		 Y
Y
Y
Y		 Y
Y		 Y
Y		 Y Y Y Y
Financial Statement
Account		 Financing receivables
- related parties
Financing receivables
- related parties
Financing receivables
- related parties
Financing receivables
- related parties		 Financing receivables
- related parties
Financing receivables
- related parties		 Financing receivables
- related parties
Financing receivables
- related parties		 Financing receivables
- related parties		 Financing receivables
- related parties		 Financing receivables
- related parties		 Financing receivables
- related parties
Borrower Standard Foods
(China) Co., Ltd.
Shanghai
Dermalab
Corporation
Standard Foods
(Xiamen) Co.,
Ltd.
Shanghai Le Ben
Tuo Health
Technology Co.,
Ltd.		 Standard Foods
(China) Co., Ltd.
Standard
Investment
(China) Co., Ltd.		 Shanghai Standard
Foods Co., Ltd.
Dermalab S.A.		 Standard
Investment
(China) Co., Ltd.		 Standard
Investment
(China) Co., Ltd.		 Standard
Investment
(China) Co., Ltd.		 Standard
Investment
(China) Co., Ltd.
Lender Standard
Investment
(China) Co., Ltd.		 Shanghai Standard
Foods Co., Ltd.		 Accession Limited Shanghai Le Ben
Tuo Health
Technology Co.,
Ltd.		 Shanghai Le Ben
De Health
Technology Co.,
Ltd.		 Shanghai Le Ho
Industrial Co.,
Ltd.		 Shanghai Le Min
Industrial Co.,
Ltd.
No.
(Note 1)		 1 2 3 4 5 6 7

-172-

-173-

ENDORSEMENTS/GUARANTEES PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Note 1:
“0” for the Company, subsidiaries are numbered from “1”.
Note 2:
Relationships between the endorsement/guarantee provider and the guaranteed party:
a.
Trading partner.
b.
Majority owned subsidiary.
c.
The Company and subsidiary owns over 50% ownership of the investee company.
d.
A subsidiary jointly owned by the Company and company’s directly-owned subsidiary.
e.
Guaranteed by the Company according to construction contract.
f.
Investee company. The guarantees were provided based on the Company’s proportionate share in an investee company.
Note 3:
The total amount shall not exceed 80% of the net value in the financial statements of Standard Foods Corporation; the amount was calculated at $12,014,239 thousand (the net value per financial statements as of September 30, 2018 of $15,017,799 thousand x 80%).
Note 4:
The total amount shall not exceed 100% of the net value in the financial statements of Standard Foods Corporation; the amount was calculated at $15,017,799 thousand (the net value per financial statements as of September 30, 2018 of $15,017,799 thousand x 100%).
Note 5:
The total amount shall not exceed 10% of the net value in the financial statements of Standard Foods Corporation, ultimate parent company; the amount was calculated at $1,501,780 thousand (the net value per financial statements as of September 30, 2018 of $15,017,799 thousand x 10%).
Note 6:
The total amount shall not exceed 100% of the net value in the financial statements of Shanghai Standard Foods Co., Ltd.; the amount was calculated at $2,989,479 thousand (the net value per financial statements as of September 30, 2018 of $2,989,479 thousand x 100%).
Note 7:
The total amount shall not exceed 80% of the net value in the financial statements of Standard Investment (China) Co., Ltd.; the amount was calculated at $3,009,368 thousand (the net value per financial statements as of September 30, 2018 of $3,761,710 thousand x 80%).
Note 8:
The total amount shall not exceed 100% of the net value in the financial statements of Standard Investment (China) Co., Ltd.; the amount was calculated at $3,761,710 thousand (the net value per financial statements as of September 30, 2018 of $3,761,710 thousand x 100%).
Note 9:
Guarantee provided by the listed parent company, guarantee provided by the subsidiary or guarantee provided to subsidiaries in mainland China, coded “Y”.
Note 10: The amount was eliminated upon consolidation.
Guarantee
Provided to
Subsidiaries in
Mainland China
(Note 9)		 -
-		 Y
Y		 Y
Y
Y
Guarantee
Provided by
Subsidiary
(Note 9)		 -
-		 -
-		 -
-
-
Guarantee
Provided by
Parent Company
(Note 9)		 Y
Y		 -
-		 -
-
-

Maximum
Endorsement/
Guarantee
Amount		 $ 15,017,799
(Note 4)
15,017,799
(Note 4)		 2,989,479
(Note 6)
2,989,479
(Note 6)		 3,761,710
(Note 8)
3,761,710
(Note 8)
3,761,710
(Note 8)
Ratio of
Accumulated
Endorsement/
Guarantee to Net
Equity Per Latest
Financial
Statements		 1.02%
1.23%		 -
-		 -
-
-
Amount of
Endorsement/
Guarantee
Collateralized by
Properties		 $ -
-		 -
-		 -
-
-
Amount Actually
Drawn		 $ 22,000
-		 -
-		 -
-
-
Ending Balance $ 153,575
184,290		 -
-		 -
-
-
Maximum
Balance for the
Period		 $ 154,775
185,730		 461,260
461,260		 1,183,701
1,382,390
441,420
Limits on
Endorsement/
Guarantee
Amount
Provided to Each
Guaranteed
Party		 $ 12,014,239
(Note 3)
12,014,239
(Note 3)		 1,501,780
(Note 5)
1,501,780
(Note 5)		 3,009,368
(Note 7)
3,009,368
(Note 7)
1,501,780
(Note 5)
Guaranteed Party
Nature of
Relationship
(Note 2)		 b.
b.		 d.
d.		 b.

b.
d.

Name		 Standard Beverage Company
Limited
Accession Limited		 Standard Investment (China)
Co., Ltd.
Standard Foods (China) Co.,
Ltd.		 Standard Foods (China) Co.,
Ltd.
Standard Foods (Xiamen) Co.,
Ltd.
Shanghai Standard Foods Co.,
Ltd.
Endorsement/Guarantee
Provider		 Standard Foods Corporation Shanghai Standard Foods Co.,
Ltd.		 Standard Investment (China)
Co., Ltd.
No.
(Note 1)		 0 1 2

-174-

MARKETABLE SECURITIES HELD
DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note (Continued)
December 31, 2018
Fair Value
(Note 2)		 $ 13,434
5,492
90,095
12,805
80,084
100,161
215,238
62,017
-
-
-
5,205
2,110
-
-
-

Percentage
of
Ownership		 -
-
7.8
0.3
-
-
-
-
1.9
0.9
5.5
1.9
7.0
0.2
7.8
1.0

Carrying
Amount		 $ 13,434
5,492
90,095
12,805
80,084
100,161
215,238
62,017
-
-
-
5,205
2,110
-
-
-
Shares 1,343,427
48,600
2,145,110
1,243,213
5,928,855
6,770,618
13,259,604
5,635,847
Note 1
500,000
2,424,242
850,500
180,376
11,200
800,000
107,815
Financial Statement Account Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Relationship with the
Holding Company		 The Company is one of the
directors
Type and Name of Marketable Securities Shares
Far Eastern International Commercial Bank Co., Ltd.
Chunghwa Telecom Co., Ltd.
GeneFerm Biotechnology Co., Ltd.
Dah Chung Bills Finance Corp.
Mutual funds
Taishin 1699 Money Market Fund
Jih Sun Money Market Fund
Hua Nan Phoenix Money Market Fund
CTBC Hwa-win Money Market Fund
Walden VC 2, L.P.
Shares
Techgains Pan-Pacific Corporation
Authenex, Inc.
Global Strategic Investment Co., Ltd.
Paradigm Venture Capital Corporation
U-Teck Environment Corporation, Ltd.
Octamer, Inc. - Series E Preferred Stock
Octamer, Inc. - Series F Preferred Stock
Holding Company Name Standard Foods Corporation

-175-

Note Note 2 (Continued)
December 31, 2018
Fair Value
(Note 2)		 $ -
-
-
-
-
-
3,913
32,038
17,014
70,056
331,473
9,236
19,479
86,503
20,295
10,280
17,802
4,013

Percentage
of
Ownership		 1.2
1.2
1.2
1.3
1.3
1.2
-
-
-
-
0.7
-
-
2.0
-
-
-
-

Carrying
Amount		 $ -
-
-
-
-
-
3,913
32,038
17,014
70,056
331,473
9,236
19,479
86,503
20,295
10,280
17,802
4,013
Shares 3,455
71,397
29,173
31,135
29,102
12,938
264,531
1,973,674
1,471,492
5,186,457
6,669,471
91,440
803,258
1,596,000
90,000
1,000,000
1,453,360
297,080
Financial Statement Account Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Relationship with the
Holding Company		 Parent of Charng Hui Ltd.
Charng Hui Ltd. is one of
the directors
Type and Name of Marketable Securities Fortemedia, Inc. - Series D Preferred Stock
Fortemedia, Inc. - Series E Preferred Stock
Fortemedia, Inc. - Series F Preferred Stock
Fortemedia, Inc. - Series G Preferred Stock
Fortemedia, Inc. - Series I Preferred Stock
Fortemedia, Inc. - Series - Common Stock
Mutual funds
Jih Sun Money Market Fund
Hua Nan Phoenix Money Market Fund
KGI Victory Money Market Fund
Taishin 1699 Money Market Fund
Shares
Standard Foods Corporation
Formosa Plastics Corporation
China Steel Corporation
Polytronics Technology Corp.
Taiwan Semiconductor Manufacturing Co., Ltd.
Mutual funds
Fuh Hwa Global Strategic Allocation FoF
Franklin Templeton SinoAm Franklin Templeton Global
Bond Fund of Funds-Accu.
Taishin 1699 Money Market
Holding Company Name Standard Dairy Products Taiwan
Limited
Charng Hui Ltd.

-176-

Note Note 1:
No number of units of the Fund.
Note 2:
The amount was eliminated upon consolidation.
December 31, 2018
Fair Value
(Note 2)		 $ -
-
1,708
3,466
63,360
1,000

Percentage
of
Ownership		 23.7
6.0
-
-
13.4
0.7

Carrying
Amount		 $ -
-
1,708
3,466
63,360
1,000
Shares 8,297,000
1,000,000
225,000
282,988
3,600,000
200
Financial Statement Account Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - non-current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through profit or
loss - current
Financial assets at fair value through other
comprehensive income - non- current
Financial assets at fair value through other
comprehensive income - non- current
Relationship with the
Holding Company		 Charng Hui Ltd. is one of
the directors
Type and Name of Marketable Securities Shares
Hong Da Leasing & Finance Co., Ltd.
CNEX Co., Ltd.
Mutual funds
Fuh Hwa Greater China Mid & Small Cap
Franklin Templeton SinoAm Global Bd Acc
Shares
InnoComm Mobile Technology Corp.
Shares
AsiaVest Liquidation Co.
Holding Company Name Standard Beverage Company
Limited
Domex Technology Corporation
Accession Limited

-177-

FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)		 Other Terms Note 1:
The day of the transaction was approved by the Company’s board of directors.
Note 2:
The disposal cost of property, plant and equipment had been deducted.
Note 3:
The payments were all received and the transfer of ownership was completed.
Note 4:
The amount was eliminated upon consolidation.
Price Reference The fair value of the land
and property was
$505,527 thousand,
estimated by an
independent qualified
professional valuer,
Mr. LAI, CHING-HUI
from GOLD REAL
ESTATE
APPRAISAL CO.,
LTD., a Certified Real
Estate Appraiser in the
ROC.
Purpose of
Disposal
Relationship -
Counterparty PEI CHEN Co.,
Ltd.
Gain (Loss) on
Disposal		 $ 369,427
(Note 2)
Collection Note 3
Transaction
Amount		 $ 508,620
(value-added
taxes
included)
Carrying
Amount		 $ 126,153
Original
Acquisition
Date		 1990.01.31-
2017.09.30
Event Date 2018.05.08
(Note 1)
Property Land and property at
Wugu Dist., New
Taipei City
Seller Standard Foods
Corporation

-178-

FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Note
Notes/Accounts Payable
(Receivable)
% to
Total		 8.08
-
45.12
-
98.21
22.26
99.19
71.50
36.96
5.75
Ending Balance $ 174,492
-
(174,492)
-
531,325
(531,325)
1,706,611
(1,706,611)
137,187
(137,187)
Abnormal Transaction Payment Terms -
-
-
-
-
-
-
-
-
-
Unit Price
-

-

-

-
-
-
-
-
-
-
Transaction Details Payment Terms 55 days after month end closing (net
of receivables and payables)
55 days after month end closing (net
of receivables and payables)
55 days after month end closing (net
of receivables and payables)
55 days after month end closing (net
of receivables and payables)
60 days after month-end closing
60 days after month-end closing
55 days after month-end closing
55 days after month-end closing
60 days after month-end closing
60 days after month-end closing
% to
Total		 12.36
10.53
62.54
22.04
93.94
18.45
99.55
50.64
80.44
30.83
Amount $ (1,506,386)
739,330
1,506,386
(739,330)
(1,818,198)
1,818,198
(4,970,150)
4,970,150
(3,025,966)
3,025,966
Purchases
(Sales)		 Sales
Purchases
Purchases
Sales
Sales
Purchases
Sales
Purchases
Sales
Purchases
Nature of Relationships The Company’s subsidiary
Parent company of Standard
Dairy Products Taiwan
Limited
Brother company of Shanghai
Standard Foods Co., Ltd.
Brother company of Standard
Investment (China) Co., Ltd.
Parent company of Standard
Foods (China) Co., Ltd.
Standard Investment (China)
Co., Ltd.’s subsidiary
Parent company of Standard
Foods (Xiamen) Co., Ltd.
Standard Investment (China)
Co., Ltd.’s subsidiary
Related Party Standard Dairy Products
Taiwan Limited
Standard Foods Corporation
Standard Investment
(China) Co., Ltd.
Shanghai Standard Foods
Co., Ltd.
Standard Investment
(China) Co., Ltd.
Standard Foods (China)
Co., Ltd.
Standard Investment
(China) Co., Ltd.
Standard Foods (Xiamen)
Co., Ltd.
Company Name Standard Foods Corporation
Standard Dairy Products
Taiwan Limited
Shanghai Standard Foods
Co., Ltd.
Standard Investment
(China) Co., Ltd.
Standard Foods (China)
Co., Ltd.
Standard Investment
(China) Co., Ltd.
Standard Foods (Xiamen)
Co., Ltd.
Standard Investment
(China) Co., Ltd.

-179-

DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Allowance for
Bad Debts		 $ -
-
$ -
$ -
$ -
-
$ -
$ -
-
-
$ -
$ -
-
$ -
$ -
-
-
$ -
$ -
-
-
$ -
Amounts Received in
Subsequent Period
$ 174,492
(Note 1)
3,819 (Note 1)
$ 178,311
$ -
(Note 1)
$ 531,325
(Note 1)
-
(Note 1)
16,042
(Note 1)
$ 547,367
$ 1,166
(Note 1)
-
(Note 1)
-
(Note 1)
$ 1,166
$ 1,233,918
(Note 1)
26,812
(Note 1)
$ 1,260,730
$ 101
(Note 1)
-
(Note 1)
9,656
(Note 1)
$ 9,757
$ 30
(Note 1)
-
(Note 1)
-
(Note 1)
$ 30
Overdue Actions Taken -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Amount $ -
-
$ -
$ -
$ -
-
-
$ -
$ -
-
-
$ -
$ -
-
$ -
$ -
-
-
$ -
$ -
-
-
$ -
Turnover
Rate		 8.60
3.01
20.65
3.65
6.08
2.94
Ending Balance for
Account Receivable - Related Parties		 Trade receivables
$ 174,492
Other receivables
3,819
$ 178,311
Financing receivables
$ 184,290
Trade receivables
$ 531,325
Financing receivables
603,964
Other receivables
16,042
$ 1,151,331
Trade receivables
$ 4,551
Financing receivables
443,055
Other receivables
16,495
$ 464,101
Trade receivables
$ 1,706,611
Other receivables
48,913
$ 1,755,524
Trade receivables
$ 171
Financing receivables
190,451
Other receivables
9,656
$ 200,278
Trade receivables
$ 30
Financing receivables
287,064
Other receivables
23,549
$ 310,643
Nature of Relationships The Company’s subsidiary

Accession Limited’s subsidiary
Brother company of Shanghai
Standard Foods Co., Ltd.
Brother company of Shanghai
Standard Foods Co., Ltd.
Parent company of Standard
Foods (China) Co., Ltd.
Standard Investment (China)
Co., Ltd.’s subsidiary
Standard Investment (China)
Co., Ltd.’s subsidiary
Related Party Standard Dairy Products
Taiwan Limited
Shanghai Standard Foods Co.,
Ltd.
Standard Investment (China)
Co., Ltd.
Standard Foods (China) Co.,
Ltd.
Standard Investment (China)
Co., Ltd.
Standard Foods (China) Co.,
Ltd.
Standard Foods (Xiamen)
Co., Ltd.
Company Name Standard Foods Corporation
Accession Limited
Shanghai Standard Foods
Co., Ltd.
Standard Foods (China) Co.,
Ltd.
Standard Investment (China)
Co., Ltd.

-180-

TABLE 7

STANDARD FOODS CORPORATION AND SUBSIDIARIES

DERIVATIVES TRADING INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

The Company was not engaged in derivatives trading during 2018.

Shanghai Standard Foods Co., Ltd. (“Shanghai Standard”) entered into foreign exchange swap contracts during 2018 to manage exposures to exchange rate fluctuation risk of foreign currency denominated assets and liabilities.

As of December 31, 2018, Shanghai Standard did not have outstanding foreign exchange swap contracts.

Standard Investment (China) Co., Ltd. (“China Standard Investment”), Standard Foods (Xiamen) Co., Ltd. (“Xiamen Standard”), Shanghai Standard, and Shanghai Le Ben De Health Technology Co., Ltd. (“Shanghai Le Ben De”) entered into structured time deposits in 2018 mainly to have earnings from favorable effects on fluctuations of interest rates.

As of December 31, 2018, China Standard Investment, Standard Foods (Xiamen) Co., Ltd. (“Xiamen Standard”), Shanghai Standard, and Shanghai Le Ben De did not have outstanding structured time deposits.

The net loss from derivative transactions of China Standard Investment, Standard Foods (Xiamen) Co., Ltd. (“Xiamen Standard”), Shanghai Standard and Shanghai Le Ben De was $19,220 thousand in 2018.

-181-

FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Transactions Details % to Total Sales
or Assets (Note 3)
0.7
-
5.5
2.7
-
-
-
-
-
-
-
-		 0.8
0.3
-
-		 -
-
6.7
2.2
0.1
2.5
0.1
-
0.1
0.3
0.1
-
0.1
1.8
0.1
-
-
0.2
-		 (Continued)
Payment Terms According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions		 No rate
Interest rate 1.900%
According to the general conditions
Interest rate 1.900%		 According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
Interest rate 2.500%
According to the general conditions
Interest rate 2.500%
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
Interest rate 2.500%-4.350%
Interest rate 2.500%-4.350%
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
Amount
(Note 4)
$ 174,492
3,819
1,506,386
739,330
8,667
307
139
1,759
1,320
6,480
4,747
5,671		 184,290
68,607
479
1,411		 9
112
1,818,198
531,325
16,042
603,964
14,291
2,836
13,439
92,767
20,249
4,551
16,495
443,055
17,794
588
8,246
67,595
3,768
Financial Statement Accounts Trade receivables - related parties
Other receivables - related parties
Sales
Purchases
Royalty revenue
Trade payables - related parties
Other receivables - related parties
Purchases
Service revenue
Sales
Trade payables - related parties
Purchases		 Financing receivables - related parties
Financing receivables - related parties
Other receivables - related parties
Interest income		 Trade payables - related parties
Other payables - related parties
Sales
Trade receivables - related parties
Other receivables - related parties
Financing receivables - related parties
Other expenses
Interest income
Trade payables - related parties
Sales
Purchases
Trade receivables - related parties
Other receivables - related parties
Financing receivables - related parties
Interest income
Sales
Sales
Purchases
Trade receivables - related parties
Relationship
(Note 2)		 a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.		 a.
a.
a.
a.		 c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
c.
Counterparty Standard Dairy Products Taiwan Limited
Standard Dairy Products Taiwan Limited
Standard Dairy Products Taiwan Limited
Standard Dairy Products Taiwan Limited
Standard Dairy Products Taiwan Limited
Standard Beverage Company Limited
Standard Beverage Company Limited
Standard Beverage Company Limited
Standard Beverage Company Limited
Shanghai Le Ben Tuo Co., Ltd
Dermalab
Dermalab		 Shanghai Standard Foods Co., Ltd.
Dermalab
Dermalab
Dermalab		 Standard Investment (China) Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Investee Company Standard Foods Corporation Accession Limited Shanghai Standard Foods Co., Ltd.
No.
(Note 1)		 0 1 2

-182-

Transactions Details % to Total Sales
or Assets (Note 3)
-
-
7.1
0.2
-
18.2
-
0.8
0.1
-
-
-
-
0.2
-
-
0.1
0.6
-
11.1
1.2
-
0.1
-
-
-
-
-
-
0.4
-
-
-
-
-
-
-
-		 0.2
0.1		 (Continued)
Payment Terms According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
Interest rate 2.500%
According to the general conditions
Interest rate 2.500%
According to the general conditions
According to the general conditions
Interest rate 2.500%-4.350%
Interest rate 2.500%-4.350%
Interest rate 2.500%-4.350%
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
Interest rate 2.500%
According to the general conditions
Interest rate 2.500%
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
Interest rate 2.500%
According to the general conditions
Interest rate 2.500%
According to the general conditions
Interest rate 2.500%
Interest rate 2.500%
According to the general conditions
Interest rate 2.500%
Interest rate 2.500%		 According to the general conditions
According to the general conditions
Amount
(Note 4)
$ 171
9,656
1,706,611
48,913
538
4,970,150
98
190,451
18,226
8,072
2,506
59
391
56,295
2,294
30
23,549
137,187
266
3,025,966
287,064
9,241
28,100
9
1,532
188
21
2,731
262
89,506
4,075
2,939
48
635
33
63
841
42		 42,456
16,201
Financial Statement Accounts Trade receivables - related parties
Other receivables - related parties
Trade payables - related parties
Other payables - related parties
Sales
Purchases
Rental expenses
Financing receivables - related parties
Other revenue
Interest income
Other receivables - related parties
Trade payables - related parties
Sales
Financing receivables - related parties
Interest income
Trade receivables - related parties
Other receivables - related parties
Trade payables - related parties
Sales
Purchases
Financing receivables - related parties
Other revenue
Interest income
Trade receivables - related parties
Other receivables - related parties
Trade payables - related parties
Sales
Purchases
Expenses
Financing receivables - related parties
Advance payable
Interest income
Other payables - related parties
Financing payables - related parties
Interest expenses
Other payables - related parties
Financing payables - related parties
Interest expenses		 Purchases
Trade payables - related parties
Relationship
(Note 2)		 a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
a.
c.
c.
c.
c.
c.
c.		 c.
c.
Counterparty Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Shanghai Dermalab Corporation
Shanghai Dermalab Corporation
Shanghai Dermalab Corporation
Shanghai Dermalab Corporation
Shanghai Dermalab Corporation
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shangahi Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ho Industrial Co., Ltd.
Shangahi Le Ho Industrial Co., Ltd.
Shangahi Le Ho Industrial Co., Ltd.
Shangahi Le Min Industrial Co., Ltd.
Shangahi Le Min Industrial Co., Ltd.
Shangahi Le Min Industrial Co., Ltd.		 Dermalab
Dermalab
Investee Company Standard Investment (China) Co.,
Ltd.		 Shanghai Dermalab Corporation
No.
(Note 1)		 3 4

-183-

Transactions Details % to Total Sales
or Assets (Note 3)
-
-
-
-
-
1.0
-
1.7		 Note 1:
The parent company and its subsidiaries do business with each other. Information shall be stated separately and numbered as follows:
a.
Parent company is 0.
b. Subsidiaries, sequentially numbered by Arabic numerals from 1.
Note 2:
The related parties have the following three relationships:
a.
Parent company to its subsidiaries.
b. Subsidiaries to its parent company.
c.
Subsidiaries to subsidiaries.
Note 3:
Amounts of balance sheet accounts are calculated as percentage of consolidated total assets; amounts of income statement accounts are calculated as percentage of consolidated total revenues.
Note 4:
The amount was eliminated upon consolidation.
(Concluded)
Payment Terms According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
According to the general conditions
Amount
(Note 4)
$ 1,527
1,769
4,075
7,407
512
234,032
84
460,339
Financial Statement Accounts Other receivables - related parties
Sales
Other revenue
Rental revenue
Trade receivables - related parties
Trade payables - related parties
Sales
Purchases
Relationship
(Note 2)		 c.
c.
c.
c.
c.
c.
c.
c.
Counterparty Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Shanghai Le Ben Tuo Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Investee Company Standard Foods (China) Co., Ltd.
No.
(Note 1)		 5

-184-

INFORMATION ON INVESTEES
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Subsidiary (Note 5)
Subsidiary (Note 5)
Subsidiary (Note 5)
Subsidiary (Note 5)
Subsidiary (Note 5)
Subsidiary (Note 5)
Subsidiary (Note 5)
Indirect subsidiary (Note 5)
Indirect subsidiary (Note 5)
Indirect subsidiary (Note 5)
Indirect subsidiary (Note 5)		 Note 1:
This amount was the share of profit of the investee of $94,907 thousand plus the realized gain on sidestream transactions of $1,976 thousand.
Note 2:
This amount was the share of profit of the investee of $440,456 thousand plus the realized gain on upstream transactions of $6,107 thousand.
Note 3:
This amount was the share of profit of the investee of $1,168 thousand plus the realized gain on upstream transactions of $352 thousand.
Note 4:
This is a limited company with no issued shares.
Note 5:
The amount was eliminated upon consolidation.
Share of
Profits (Loss)		 $ 92,931
(Note 1)
186,208
434,349
(Note 2)
1,765
20,789
1,520
(Note 3)
585
-
-
-
-
Net Income
(Loss) of the
Investee		 $ 94,907
186,208
440,456
15,104
39,972
1,168
585
3,674
-
-
186,412
As of December 31, 2018 Carrying
Amount		 $ 3,450,370
4,772,853
950,516
252,543
210,974
80,577
12,288
105,014
-
-
4,771,781
% 100
100
100
100
52
100
100
100
100
100
100
Shares 123,600,000
150,060,815
30,000,000
24,100,000
10,374,399
7,907,000
�4
400
10,000
3,000
150,012,815
Original Investment Amount
December 31,
2017		 $ 3,936,267
4,708,891
300,853
230,000
114,116
79,072
14,350
206,905
39
96
4,707,394

December 31,
2018		 $ 3,936,267
4,710,865
300,853
230,000
114,116
79,072
14,350
266,587
39
96
4,708,566
Main Businesses and Products Investment business
Investment business
Manufacture and sale of dairy products and beverages
Investment business
Manufacture and sale of computer peripherals and
computer and information products
Manufacture and sale of beverages
Sale of health foods
Development and sale of cosmetics
Sale of cosmetics
Sale of cosmetics
Investment business
Location Tortola, British Virgin Islands
Grand Cayman, Cayman Islands
Taipei, Taiwan
Taipei, Taiwan
Hsinchu, Taiwan
Taipei, Taiwan
Yilan, Taiwan
Switzerland
Hong Kong
Spain
Hong Kong
Investee Company Accession Limited
Standard Investment (Cayman) Limited
Standard Dairy Products Taiwan
Limited
Charng Hui Ltd.
Domex Technology Corporation
Standard Beverage Company Limited
Le Bonta Wellness International
Corporation
Dermalab S.A.
Swiss Line Cosmetics China Limited
Swissderma SL
Standard Corporation (Hong Kong)
Limited
Investor Company Standard Foods Corporation
Accession Limited
Dermalab S.A.
Standard Investment
(Cayman) Limited

-185-

INFORMATION ON INVESTMENTS IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Note 11
Note 11
Note 11
Note 11
Note 11
Note 11
Note 11
Note 11
Note 11		 Accumulated Outward Remittance for
Investment in Mainland China as of
December 31, 2018
Investment Amounts Authorized by
Investment Commission, MOEA
Upper Limit on the Amount of
Investment Stipulated by Investment
Commission, MOEA
$ 8,919,525
$ 8,919,525
Unlimited amount of investment (Note 10)
Note 1:
The methods for engaging in investment in mainland China include the following:
a.
Direct investment in mainland China.
b.
Indirect investment in mainland China through companies registered in a third region.
c.
Other methods.		 Accumulated Outward Remittance for
Investment in Mainland China as of
December 31, 2018
Investment Amounts Authorized by
Investment Commission, MOEA
Upper Limit on the Amount of
Investment Stipulated by Investment
Commission, MOEA
$ 8,919,525
$ 8,919,525
Unlimited amount of investment (Note 10)
Note 1:
The methods for engaging in investment in mainland China include the following:
a.
Direct investment in mainland China.
b.
Indirect investment in mainland China through companies registered in a third region.
c.
Other methods.
Accumulated
Repatriation of
Investment
Income as of
December 31,
2018		 $ -
-
-
-
-
-
-
-
-
Carrying Amount
as of
December 31,
2018		 $ 3,050,302
3,885,350
1,759,800
(29,778)
263,687
29,125
1,217,367
545,148
340,237

Investment
Gain (Loss)
(Note 2)		 $ 85,797
(Note 9)
185,333
(Note 9)
158,263
(Note 9)
(11,826)
(Note 9)
(57,568)
(Note 9)
653
(Note 9)
90,047
(Note 9)
510
(Note 9)
779
(Note 9)

%
Ownership
of Direct or
Indirect
Investment		 100.0
99.0
99.0
99.0
99.5
100.0
99.0
100.0
100.0
Net Income (Loss)
of the Investee		 $ 80,043
187,205
146,474
(11,945)
(57,851)
653
84,641
510
779
Accumulated
Outward
Remittance for
Investment from
Taiwan as of
December 31,
2018		 $ 3,949,575
(Note 4)
3,718,677
(Note 5)
-
(Note 6)
-
(Note 6)
181,048
(Note 7)
31,220
(Note 4)
-
(Note 6)
607,717
(Note 5)
378,009
(Note 5)
Remittance of Funds Inward $ -
-
-
-
-
-
-
-
-
Outward $ -
-
-
-
-
-
-
-
-
Accumulated
Outward
Remittance for
Investment from
Taiwan as of
January 1, 2018		 $ 3,949,575
(Note 4)
3,718,677
(Note 5)
-
(Note 6)
-
(Note 6)
181,048
(Note 7)
31,220
(Note 4)
-
(Note 6)
607,717
(Note 5)
378,009
(Note 5)		 Upper Limit on the Amount of
Investment Stipulated by Investment
Commission, MOEA
Unlimited amount of investment (Note 10)
Method of
Investment
(Note 1)		 b.
(Note 3)
b.
(Note 5)
c.
(Note 6)
c.
(Note 6)
a. and c.
(Note 7)
c.
(Notes 4 and 8)
c.
(Note 6)
b.
(Note 5)
b.
(Note 5)
Paid-in Capital $ 3,949,575
3,755,530
1,631,668
29,949
380,418
31,220
1,307,582
607,717
378,009
Investment Amounts Authorized by
Investment Commission, MOEA		 $ 8,919,525
Main Businesses and Products Manufacture and sale of edible oil
products and nutritional foods
Investment and sales of edible oil
products and nutritional foods
Manufacture and sale of edible oil
products and nutritional foods
Sale of nutritional foods,
cosmetics and international
trading
Sale of nutritional foods and
international trading
Sale of nutritional foods and
international trading
Manufacture and sale of edible oil
products and nutritional foods
Property management
Property management
Accumulated Outward Remittance for
Investment in Mainland China as of
December 31, 2018
$ 8,919,525
Investee Company Shanghai Standard Foods Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Shanghai Dermalab Corporation
Shanghai Le Ben Tuo Health
Technology Co., Ltd.
Shanghai Le Ben De Health Technology
Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Shanghai Le Ho Industrial Co., Ltd.
Shanghai Le Min Industrial Co., Ltd.

-186-

-187-

V. Financial Report of Standard Foods Corporation

Standard Foods Corporation

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

Only for English translation

-188-

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Standard Foods Corporation

Opinion

We have audited the accompanying financial statements of Standard Foods Corporation (the Company), which comprise the balance sheets as of December 31, 2018 and 2017, and the statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and its financial performance and its cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. 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 financial statements for the year ended December 31, 2018. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter of the Company’s financial statements for the year ended December 31, 2018 is stated as follows:

Evaluation of Inventory

The products of the Company mainly include nutritional foods, edible oils, dairy products, and beverages. To assess the existence of inventory impairment, the management had performed an assessment thereof by taking into consideration the current market condition and historical sales experience. Refer to Notes 4, 5 and 14 to the financial statements for detailed information related to assessment of inventory. Because the assessment of impairment loss of inventory involves critical accounting estimates and management’s judgments, the assessment of impairment loss of inventory was deemed to be a key audit matter.

-189-

Our audit procedures performed in response to the abovementioned key audit matter included obtaining information pertaining to the lower of cost or net realizable value (LCNRV), sampling the projected pricing information to the most recent sales record to assess the reasonableness of the judgment on LCNRV, as well as collecting related documentations on obsolete inventory to assess the appropriateness of methodology adopted in the calculation of the impairment loss of inventory.

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

Management is responsible for the preparation and fair presentation of the 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 financial statements that are free from material misstatement, whether due to fraud or error.

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

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

Auditors’ Responsibilities for the Audit of the Financial Statements

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

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

  1. Identify and assess the risks of material misstatement of the 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 auditors’ report to the related disclosures in the 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 auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

-190-

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

  2. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the 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 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 financial statements for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ 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.

The engagement partners on the audit resulting in this independent auditors’ report are Tza-Li Gung and Ching-Cheng Yang.

Deloitte & Touche Taipei, Taiwan Republic of China

March 22, 2019

Notice to Readers

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

For the convenience of readers, the independent 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. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors’ report and financial statements shall prevail.

-191-

STANDARD FOODS CORPORATION

BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit or loss - current (Note 7)
Financial assets at fair value through other comprehensive income - current (Note 8)
Available-for-sale financial assets - current (Note 10)
Financial assets at amortized cost - current (Note 9)
Debt investments with no active market - current (Note 12)
Notes receivable (Note 13)
Trade receivables from unrelated parties (Note 13)
Trade receivables from related parties (Note 33)
Other receivables (Note 13)
Other receivables from related parties (Note 33)
Inventories (Note 14)
Prepayments (Note 15)
Other current assets (Note 20)
Total current assets
NON-CURRENT ASSETS
Financial asset at fair value through profit or loss - non-current (Note 7)
Financial asset at fair value through other comprehensive income - non-current (Note 8)
Available-for-sale financial assets - non-current (Note 10)
Financial assets measured at cost - non-current (Note 11)
Investments accounted for using the equity method (Note 16)
Property, plant and equipment (Note 17)
Investment properties (Note 18)
Other intangible assets (Note 19)
Deferred tax assets (Note 28)
Other non-current assets (Note 20)
Total non-current assets
TOTAL
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Contract liabilities - current (Note 26)
Notes payable (Note 21)
Trade payables (Note 21)
Trade payables to related parties (Note 33)
Other payables (Note 22)
Current tax liabilities (Note 28)
Provisions - current (Note 23)
Finance lease payables - current
Other current liabilities (Note 22)
Total current liabilities
NON-CURRENT LIABILITIES
Deferred tax liabilities (Note 28)
Finance lease payables - non-current
Net defined benefit liabilities (Note 24)
Other non-current liabilities (Note 22)
Total non-current liabilities
Total liabilities
EQUITY (Note 25)
Ordinary shares
Capital surplus
Retained earnings
Legal reserve
Special reserve
Unappropriated earnings
Total retained earnings
Other equity
Treasury shares
Total equity
TOTAL		 2018 2017
Amount
%
$ 798,695
4
457,500
3
18,926
-
-
-
982,763
5
-
-
567
-
1,984,166
11
174,492
1
69,246
-
3,958
-
1,833,004
10
281,679
2
20,410
-
6,625,406
36
7,315
-
102,900
-
-
-
-
-
9,865,439
54
1,420,548
8
-
-
1,672
-
315,024
2
18,153
-
11,731,051
64
$ 18,356,457
100
$ 7,995
-
9,348
-
885,178
5
13,656
-
1,004,863
5
289,077
2
-
-
1,499
-
8,459
-
2,220,075
12
134,429
1
3,631
-
191,196
1
200
-
329,456
2
2,549,531
14
9,150,897
50
93,045
-
2,650,503
15
260,426
1
4,004,182
22
6,915,111
38
(330,945)
(2)
(21,182)
-
15,806,926
86
$ 18,356,457
100		 Amount
%
$ 647,061
4
-
-
-
-
17,630
-
-
-
451,300
3
2,746
-
1,746,502
10
175,966
1
13,307
-
2,293
-
1,888,673
11
304,075
2
16,517
-
5,266,070
31
-
-
-
-
118,943
1
16,389
-
9,745,304
57
1,409,677
8
126,375
1
3,375
-
269,785
2
18,845
-
11,708,693
69
$ 16,974,763
100
$ -
-
1,029
-
725,217
4
3,269
-
811,301
5
224,762
2
19,842
-
-
-
4,815
-
1,790,235
11
90,736
-
-
-
306,997
2
1,055
-
398,788
2
2,189,023
13
9,150,897
54
83,124
1
2,433,199
14
81,797
-
3,318,331
20
5,833,327
34
(260,426)
(2)
(21,182)
-
14,785,740
87
$ 16,974,763
100

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

-192-

STANDARD FOODS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE
Sales (Notes 26 and 33)
OPERATING COSTS
Cost of goods sold (Notes 14, 27 and 33)
GROSS PROFIT
OPERATING EXPENSES (Note 27)
Selling and marketing expenses
General and administrative expenses
Research and development expenses
Expected credits loss (gain)
Total operating expenses
OPERATING INCOME
NON-OPERATING INCOME AND EXPENSES
Other income (Notes 27 and 33)
Other gains and losses (Notes 18 and 27)
Finance costs (Note 27)
Share of the profit or loss of subsidiaries
Total non-operating income and expenses
PROFIT BEFORE INCOME TAX
INCOME TAX EXPENSE (Note 28)
NET PROFIT FOR THE YEAR
OTHER COMPREHENSIVE INCOME (LOSS)
Items that will not be reclassified subsequently to
profit or loss
Remeasurement of defined benefit plans (Note 24)
Unrealized gain (loss) on investments in equity
instruments at fair value through other
comprehensive income		 2018
Amount
%
$ 12,187,907
100
8,105,610
66
4,082,297
34
1,279,292
10
329,152
3
104,193
1
(404)
-
1,712,233
14
2,370,064
20
30,011
-
379,164
3
(685)
-
708,607
6
1,117,097
9
3,487,161
29
538,072
5
2,949,089
24
1,343
-
(28,444)
-		 2017
Amount
%
$ 11,259,683
100
7,570,262
67
3,689,421
33
1,155,740
10
317,957
3
79,679
1
-
-
1,553,376
14
2,136,045
19
33,233
-
(63,949)
-
-
-
458,445
4
427,729
4
2,563,774
23
390,730
4
2,173,044
19
(33,444)
-
-
-
(Continued)

-193-

STANDARD FOODS CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Share of the other comprehensive income (loss) of
subsidiaries accounted for using the equity
method
Income tax relating to items that will not be
reclassified subsequently to profit or loss
(Note 28)
Total items that will not be reclassified
subsequently to profit or loss
Items that may be reclassified subsequently to profit
or loss
Exchange differences on translating the financial
statements of foreign operations
Unrealized gain (loss) on available-for-sale
financial assets
Share of the other comprehensive income (loss) of
subsidiaries accounted for using the equity
method
Income tax relating to items that may be
reclassified subsequently to profit or loss
(Note 28)
Total items that may be reclassified
subsequently to profit or loss
Other comprehensive loss for the year, net of
income tax
TOTAL COMPREHENSIVE INCOME FOR THE
YEAR
EARNINGS PER SHARE (Note 29)
Basic
Diluted		 2018
Amount
%
$ (10,429)
-
7,834
-
(29,696)
-
(146,450)
(1)
-
-
-
-
40,164
-
(106,286)
(1)
(135,982)
(1)
$ 2,813,107
23
$ 3.25
$ 3.24		 2017
Amount
%
$ (1,344)
-
5,241
-
(29,547)
-
(147,337)
(1)
(60,208)
(1)
3,869
-
25,047
-
(178,629)
(2)
(208,176)
(2)
$ 1,964,868
17
$ 2.39
$ 2.39

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

(Concluded)

-194-

Total Equity $ 14,217,975 $ 14,217,975 - - (1,407,830) (1,407,830) - 10,261 10,261 466 2,173,044 (208,176) (208,176) 1,964,868 1,964,868 14,785,740 14,785,740 24,598 24,598 14,810,338 14,810,338 - - (1,830,179) (1,830,179) 13,339 13,339 321 2,949,089 (135,982) (135,982) 2,813,107 2,813,107 - $ 15,806,926 $ 15,806,926
Treasury Shares $ (21,182) - - - - - - - - - (21,182) - (21,182) - - - - - - - - - $ (21,182)
Total (81,797) - - - - - - - (178,629) (178,629) (260,426) 22,584 (237,842) - - - - 48,233 - (141,022) (141,022) (314) (330,945)
$ $
Other (46,970) - - - - - - - - - (46,970) - (46,970) - - - - 46,970 - - - - -
$ $
Other Equity Unrealized Gain (Loss) on Financial Assets at Fair Value Through Other Comprehensive Income $ - - - - - - - - - - - 116,974 116,974 - - - - - - (34,736) (34,736) (314) $ 81,924
Unrealized Gain (Loss) on Available-for- sale Financial Assets $ 150,729 - - - - - - - (56,339) (56,339) 94,390 (94,390) - - - - - - - - - - $ -
Exchange Differences on Translating the Financial Statements of Foreign Operations $ (185,556) - - - - - - - (122,290) (122,290) (307,846) - (307,846) - - - - 1,263 - (106,286) (106,286) - $ (412,869)
Total 5,449,618 - - (1,407,830) (351,958) - - 2,173,044 (29,547) 2,143,497 5,833,327 2,014 5,835,341 - - (1,830,179) - (44,494) 2,949,089 5,040 2,954,129 314 6,915,111
$ $
Retained Earnings Unappropriated Special Reserve
Earnings		 $ -
$ 3,277,073		 -
(260,654)		 81,797
(81,797)		 -
(1,407,830)		 -
(351,958)		 -
-		 -
-		 -
2,173,044		 -
(29,547)		 -
2,143,497		 81,797
3,318,331		 -
2,014		 81,797
3,320,345		 -
(217,304)		 178,629
(178,629)		 -
(1,830,179)		 -
-		 -
(44,494)		 -
2,949,089		 -
5,040		 -
2,954,129		 -
314		 $ 260,426
$ 4,004,182
Legal Reserve $ 2,172,545 260,654 - - - - - - - - 2,433,199 - 2,433,199 217,304 - - - - - - - - $ 2,650,503
Capital Surplus $ 72,397 - - - - 10,261 466 - - - 83,124 - 83,124 - - - 13,339 (3,418) - - - - $ 93,045
Ordinary Shares $ 8,798,939 - - - 351,958 - - - - - 9,150,897 - 9,150,897 - - - - - - - - - $ 9,150,897
BALANCE AT JANUARY 1, 2017 Appropriation of 2016 earnings Legal reserve Special reserve Cash dividends to shareholders Share dividends to shareholders Adjustment of capital surplus for the Company's cash dividends received by subsidiaries Changes in percentage of ownership interests in subsidiaries Net profit for the year ended December 31, 2017 Other comprehensive loss for the year ended December 31, 2017, net of income tax Total comprehensive income (loss) for the year ended December 31, 2017 BALANCE AT DECEMBER 31, 2017 Effect of retrospective application BALANCE AT JANUARY 1, 2018, AS RESTATED Appropriation of 2017 earnings Legal reserve Cash dividends to shareholders Share dividends to shareholders Adjustment of capital surplus for the Company's cash dividends received by subsidiaries Actual acquisitions of interests in subsidiaries Net profit for the year ended December 31, 2018 Other comprehensive income (loss) for the year ended December 31, 2018, net of income tax Total comprehensive income (loss) for the year ended December 31, 2018 Disposals of investments in equity instruments designated as at fair value through other comprehensive income BALANCE AT DECEMBER 31, 2018

-195-

STANDARD FOODS CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Expected credit loss reversed on trade receivables
Impairment loss reversal of impairment loss on trade receivables
Net gain on fair value changes of financial assets and liabilities
designated as at fair value through profit or loss
Finance costs
Interest income
Dividend income
Share of the profit of subsidiaries
Net loss on disposal of property, plant and equipment
Gain on disposal of investment properties
Net gain on disposal of investments
Impairment losses recognized on property, plant and equipment
Impairment losses recognized on financial assets measured at cost
Changes in operating assets and liabilities
Financial assets mandatorily classified as at fair value through profit
or loss
Notes receivable
Trade receivables
Trade receivables from related parties
Other receivables
Other receivables from related parties
Inventories
Prepayments
Other current assets
Contract liabilities
Notes payable
Trade payables
Trade payables to related parties
Other payables
Provisions
Other current liabilities
Net defined benefit liabilities
Cash generated from operations
Interest received
Interest paid
Income tax paid
Net cash generated from operating activities		 2018
$ 3,487,161
187,440
10,323
(404)
-
(5,178)
685
(15,502)
(3,847)
(708,607)
1,341
(369,427)
-
18,035
-
(453,269)
2,179
(237,260)
1,474
(53,660)
(1,665)
55,669
22,394
(3,892)
6,131
8,320
159,961
10,387
193,562
-
(14,333)
(114,458)
2,183,560
13,223
(685)
(427,304)
1,768,794		 2017
$ 2,563,774
175,239
14,181
-
(440)
-
-
(13,923)
(7,505)
(458,445)
3,067
-
(96)
-
43,425
-
332
119,895
(44,819)
7,381
1,077
(38,772)
69,585
(4,634)
-
(2,728)
(129,095)
(22,212)
2,599
10,645
2,084
207
2,290,822
13,369
-
(372,068)
1,932,123
(Continued)

-196-

STANDARD FOODS CORPORATION

STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds on disposal of financial assets at fair value through other
comprehensive income
Purchase of financial assets at amortized cost
Refunds of financial assets at amortized cost
Purchases of available-for-sale financial assets
Proceeds on sale of available-for-sale financial assets
Purchases of debt investments with no active market
Proceeds from sale of debt investments with no active market
Proceeds from capital reduction of financial assets measured at cost
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments for intangible assets
Proceeds from disposal of investment properties
(Increase) decrease in other financial assets
Increase in other non-current assets
Dividends received from subsidiaries
Other dividends received
Net cash generated from (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in guarantee deposits received
Increase in finance lease payables
Increase in other financial liabilities
Dividends paid to owners of the Company
Acquisition of interest in subsidiaries
Proceeds from capital reduction of subsidiaries
Net cash used in financing activities
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE
YEAR
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR		 2018
$ 799
(1,282,163)
750,700
-
-
-
-
-
(218,023)
558
(4,881)
495,580
1,169
(4,219)
467,351
3,847
210,718
(855)
5,130
-
(1,830,179)
(1,974)
-
(1,827,878)
151,634
647,061
$ 798,695		 2017
$ -
-
-
(425,000)
425,096
(650,900)
258,100
549
(224,412)
176
(7,761)
-
(1,190)
(3,783)
420,805
7,505
(200,815)
-
-
50
(1,407,830)
(659,328)
300,000
(1,767,108)
(35,800)
682,861
$ 647,061

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

(Concluded)

-197-

NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

STANDARD FOODS CORPORATION

1. GENERAL INFORMATION

Standard Foods Corporation (the “Company”) was incorporated on June 6, 1986. The Company mainly manufactures and sells nutritious foods, edible oils, dairy products and beverages.

The Company’s shares have been listed on the Taiwan Stock Exchange since April 1994.

The financial statements are presented in the Company’s functional currency, the New Taiwan dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Company’s board of directors on March 22, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

  • a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (FSC)

Except for the following the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC did not have any material impact on the Company’s accounting policies.

  • 1) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as of January 1, 2018, the Company has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

-198-

The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Company’s financial assets and financial liabilities as of January 1, 2018.

Financial Assets
Cash and cash equivalents
Equity securities
Time deposits with
original maturities of
more than 3 months
Notes receivable, trade
receivables and other
receivables
Refundable deposits
Financial Asset
FVTPL
Add: Reclassification from
available-for-sale (IAS 39)
Required reclassification
Remeasurement of financial assets
at cost (IAS 39)
FVTOCI
Equity instruments
Add: Reclassification from
available-for-sale (IAS 39)
Remeasurement of financial assets
at cost (IAS 39)
Amortized cost
Add: Reclassification from loans
and receivables (IAS 39)		 Measurement Category
Carrying Amount
IAS 39
IFRS 9
IAS 39
IFRS 9
Remark
Loans and receivables
Amortized cost
$ 647,601
$ 647,601
d)
Available‑for‑sale
Mandatorily at FVTPL
6,789
6,368
a), b)
Available‑for‑sale
Fair value through other
comprehensive income
(FVTOCI) - equity
instruments
146,173
151,069
a)
Loans and receivables
Amortized cost
451,300
451,300
c)
Loans and receivables
Amortized cost
1,940,814
1,940,814
d)
Loans and receivables
Amortized cost
15,212
15,212
d)
IAS 39 Carrying
Amount as of
January 1, 2018
Reclassifications
Remeasurements
IFRS 9 Carrying
Amount as of
January 1, 2018
Retained
Earnings
Effect on
January 1, 2018
Other Equity
Effect on
January 1, 2018
Remark
$ -
-
$ 6,789
$ -
b)
-
-
(421)
a)
-
6,789
(421)
$ 6,368
$ (1,583)
$ 1,162
-
-
146,173
-
a)
-
-
4,896
a)
-
146,173
4,896
151,069
3,597
21,422
-
-
3,054,927
-
c), d)
-
3,054,927
-
3,054,927
-
-
$ -
$ 3,207,889
$ 4,475
$ 3,212,364
$ 2,014
$ 22,584

a) The Company elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTPL and designated as at FVTOCI under IFRS 9, respectively. As a result, the related other equity - unrealized gain (loss) on available-for-sale financial assets was reclassified to other equity - unrealized gain (loss) on financial assets at FVTOCI in the amount of $94,390 thousand.

Investments in unlisted shares previously measured at cost under IAS 39 have been classified at FVTPL and designated as at FVTOCI under IFRS 9, respectively, and were remeasured at fair value. Consequently, a decrease of $421 thousand was recognized in financial assets at FVTPL and retained earnings and an increase of $4,896 thousand was recognized in financial assets at FVTOCI and an increase of $4,856 thousand was recognized in other equity - unrealized gain (loss) on financial assets at FVTOCI on January 1, 2018.

The Company recognized under IAS 39 impairment loss on certain investments in equity securities previously classified as measured at cost and the loss was accumulated in retained earnings. Since those investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, an adjustment was made that resulted in a decrease of $3,597 thousand in other equity - unrealized gain (loss) on financial assets at FVTOCI and an increase of $3,597 thousand in retained earnings on January 1, 2018.

-199-

  • b) Mutual funds previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in an increase of $1,162 thousand in other equity - unrealized gain (loss) on available-for-sale financial assets and a decrease of $1,162 thousand in retained earnings on January 1, 2018.

  • c) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

  • d) Cash and cash equivalents, notes receivable, trade receivables, other receivables and other financial assets that were previously classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

  • 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for the related accounting policies.

If the customer has retained a portion of payment to the Company in accordance with the terms of the contract in order to protect the customer from the contractor’s possible failure to adequately complete its obligations under the contract, such payment arrangement does not include a significant financing component and is recognized as a contract asset before the contractual obligation is completed under IFRS 15. Prior to the application of IFRS 15, retention receivables under construction contracts were recognized as receivables and discounted to reflect the time value of money in accordance with IAS 39.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. The receivables were recognized, or the deferred revenue was reduced when revenue is recognized for the relevant contract under IAS 18.

Prior to the application of IFRS 15, the Company recognized the estimated sales returns and discounts as provisions. Under IFRS 15, the Company recognizes such estimation as refund liability (classified under other current liabilities).

Impact on assets, liabilities and equity for prior year

As Originally
Stated
Adjustments
Arising from
Initial
Application
Contract liabilities - current
$ -
$ 1,865
Provisions - current
19,842
(19,842)
Other current liabilities
4,815
17,977
Total effect on liabilities
$ 24,657
$ -		 Restated
$ 1,865
-
22,792
$ 24,657

-200-

Except for the above impacts, as of the date the financial statements were authorized for issue, the Company continues assessing other possible impacts that the application of the aforementioned amendments and the related amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers will have on the Company’s financial position and financial performance and will disclose these other impacts when the assessment is completed.

  • b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019
New IFRSs
Annual Improvements to IFRSs 2015-2017 Cycle
Amendments to IFRS 9 “Prepayment Features with Negative
Compensation”
IFRS 16 “Leases”
Amendments to IAS 19 “Plan Amendment, Curtailment or
Settlement”
Amendments to IAS 28 “Long-term Interests in Associates and Joint
Ventures”
IFRIC 23 “Uncertainty Over Income Tax Treatments”		 Effective Date
Announced by IASB (Note 1)
January 1, 2019
January 1, 2019 (Note 2)
January 1, 2019
January 1, 2019 (Note 3)
January 1, 2019
January 1, 2019

  • Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

  • Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

  • Note 3: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 “Leases”, IFRIC 4 “Determining Whether an Arrangement Contains A Lease” and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Company will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Company as lessee

Upon initial application of IFRS 16, the Company will recognize right-of-use assets and lease liabilities for all leases on the balance sheets except for those whose payments under low-value asset and short-term leases will be recognized as expenses. On the statements of comprehensive income, the Company will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Currently, payments under operating lease contracts, including property interest qualified as investment properties, are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the statements of cash flows.

-201-

The Company anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Anticipated impact on assets, liabilities and equity

Carrying Adjustments Adjusted
Amount as of Arising from Carrying
December 31, Initial Amount as of
2018 Application January 1, 2019
Right-of-use assets $ 5,383 $ 94,071 $ 99,454
Total effect on assets $ 5,383 $ 94,071 $ 99,454
Lease liabilities $ 5,130 $ 94,071 $ 99,201
Total effect on liabilities $ 5,130 $ 94,071 $ 99,201

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

  • c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC
New IFRSs
Amendments to IFRS 3 “Definition of a Business”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets
between An Investor and Its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
Amendments to IAS 1 and IAS 8 “Definition of Material”		 Effective Date
Announced by IASB (Note 1)
January 1, 2020 (Note 2)
To be determined by IASB
January 1, 2021
January 1, 2020 (Note 3)

  • Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

  • Note 2: The Company shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

  • Note 3: The Company shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

Except for the above impact, as of the date the financial statements were authorized for issue, the Company is continuously assessing the possible impact that the application of other standards and interpretations will have on the Company’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

-202-

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  • a. Statement of compliance

These financial statements of the Company are its parent company only financial statements and have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

  • b. Basis of preparation

The financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair values and net defined benefit liabilities that are determined by deducting the fair value of plan assets from the present value of the defined benefit obligation.

The fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

  • 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

  • 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

  • 3) Level 3 inputs are unobservable inputs for the asset or liability.

When preparing these parent company only financial statements, the Company used the equity method to account for its investment in subsidiaries. In order for the amounts of the net profit for the year, other comprehensive income for the year and total equity in these parent company only financial statements to be the same as the amounts attributable to the owners of the Company in its consolidated financial statements, adjustments arising from the differences in accounting treatment between parent company only basis and consolidated basis were made to the investments accounted for by the equity method, the share of profit or loss of subsidiaries, the share of other comprehensive income of subsidiaries and the related equity items, as appropriate, in these parent company only financial statements.

  • c. Classification of current and non-current assets and liabilities

Current assets include:

  • 1) Assets held primarily for the purpose of trading;

  • 2) Assets expected to be realized within twelve months after the reporting period; and

  • 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

  • 1) Liabilities held primarily for the purpose of trading;

  • 2) Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance or to reschedule payments on a long-term basis is completed after the reporting period and before the financial statements are authorized for issue; and

-203-

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

Assets and liabilities that are not classified as current are classified as non-current.

d. Foreign currencies

In preparing the Company’s financial statements, transactions in currencies other than the Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting the financial statements, the functional currencies of the entities (including operations of the subsidiaries in other countries that use currencies which are different from the functional currency of the Company) are translated into the presentation currency - the New Taiwan dollar as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income.

On the disposal of a foreign operation (i.e. a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation are reclassified to profit or loss.

In relation to a partial disposal of a subsidiary that does not result in the Company losing of control over the subsidiary, the proportionate share of accumulated exchange differences is not recognized in profit or loss. For all other partial disposals, the proportionate share of the accumulated exchange differences recognized in other comprehensive income is reclassified to profit or loss.

e. Inventories

Inventories consist of raw materials, packaging materials and supplies, work-in-process, finished goods and merchandise and are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost on the balance sheet date.

f. Investment in subsidiaries

The Company used the equity method to account for its investments in subsidiaries.

Subsidiaries are the entities controlled by the Company.

-204-

Under the equity method, investment in a subsidiary is initially recognized at cost and adjusted thereafter to recognize the Company’s share of the profit or loss and other comprehensive income of the subsidiary. The Company also recognizes the changes in the Company’s share of equity of subsidiaries attributable to the Company.

Changes in the Company’s ownership interest in a subsidiary that do not result in the Company losing control of the subsidiary are equity transactions. The Company recognizes directly in equity any difference between the carrying amount of the investment and the fair value of the consideration paid or received.

When the Company’s share of losses of a subsidiary exceeds its interest in that subsidiary (which includes any carrying amount of the investment accounted for by the equity method and long-term interests that, in substance, form part of the Company’s net investment in the subsidiary), the Company continues recognizing its share of further losses.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment and is not amortized. Any excess of the Company’s share of the net fair value of the identifiable assets and liabilities over the cost of acquisition is recognized immediately in profit or loss.

The Company assesses its investment for any impairment by comparing the carrying amount with the estimated recoverable amount as assessed based on the entire financial statements of the invested company. Impairment loss is recognized when the carrying amount exceeds the recoverable amount. If the recoverable amount of the investment subsequently increases, the Company recognizes reversal of the impairment loss; the adjusted post-reversal carrying amount should not exceed the carrying amount that would have been recognized (net of amortization or depreciation) had no impairment loss been recognized in prior years. An impairment loss recognized on goodwill cannot be reversed in a subsequent period.

When the Company loses control of a subsidiary, it recognizes the investment retained in the former subsidiary at its fair value at the date when control is lost. The difference between the fair value of the retained investment plus any consideration received and the carrying amount of previous investment at the date when control is lost is recognized as a gain or loss in profit or loss. Besides, the Company accounts for all amounts previously recognized in other comprehensive income in relation to that subsidiary on the same basis as would be required if the Company had directly disposed of the related assets or liabilities.

Profits and losses resulting from downstream transactions are eliminated in full in the financial statements. Profits and losses transactions from upstream and transactions between subsidiaries are recognized in the financial statements only to the extent of interests in the subsidiaries that are not related to the Company.

g. Property, plant and equipment

Property, plant and equipment (including assets held under finance leases) are stated at cost, less recognized accumulated depreciation and accumulated impairment loss.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such properties are depreciated and classified to the appropriate categories of property, plant and equipment when completed and ready for intended use.

-205-

Depreciation of property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If a lease term is shorter than the assets’ useful lives, such assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

h. Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is recognized using the straight-line method or the fixed-percentage of declining-balance method.

On derecognition of an investment property, the difference between the net disposal proceeds and the carrying amount of the asset is included in profit or loss.

i. Intangible assets

  • 1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

  • 2) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

j. Impairment of tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

-206-

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

  • k. Financial instruments

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

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

  • 1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

  • a) Measurement category

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI

  • i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 32.

  • ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

  • i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

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

-207-

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, notes receivable, trade receivables, investments in debt instruments, other receivables and other financial assets that measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset, except for:

  • i) Purchased or originated credit-impaired financial assets, for which interest income is calculated by applying the credit-adjusted effective interest rate to the amortized cost of such financial assets; and

  • ii) Financial assets that are not credit-impaired on purchase or origination but have subsequently become credit-impaired, for which interest income is calculated by applying the effective interest rate to the amortized cost of such financial assets in subsequent reporting periods.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

  • iii. Investments in equity instruments at FVTOCI

On initial recognition, the Company may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at FVTPL, available-for-sale financial assets, and loans and receivables.

  • i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is held for trading.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. Fair value is determined in the manner described in Note 32.

-208-

ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in profit or loss or other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

iii. Loans and receivables

Loans and receivables (including notes receivable, trade receivables, cash and cash equivalents, debt investments with no active market, other receivables and other financial assets) are measured at amortized cost using the effective interest method, less any impairment, except for short-term notes receivable and trade receivables when the effect of discounting is immaterial.

Cash equivalents includes time deposits with original maturities within three months from the date of acquisition, they must be highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting short-term cash commitments.

  • b) Impairment of financial assets

2018

The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost (including trade receivables) and finance lease receivables.

The Company always recognizes lifetime expected credit losses (ECLs) for trade receivables and finance lease receivables. For all other financial instruments, the Company recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

-209-

Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

2017

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Financial assets carried at amortized cost, such as notes receivable and trade receivables, are assessed for impairment on a collective basis even if they were assessed as not impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Company’s past experience in the collection of payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables, and other situations.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is 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.

For financial assets measured at amortized cost, 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 was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss is not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For 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 the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

-210-

The carrying amount of a financial asset is reduced by impairment loss directly for all financial assets with the exception of notes receivable and trade receivables where the carrying amount is reduced through the use of an allowance account. When notes receivable and trade receivables are considered uncollectible, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible trade receivables and other receivables that are written off against the allowance account.

c) Derecognition of financial assets

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

  • 2) Equity instruments

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

The repurchase of the Company’s own equity instruments is recognized in and deducted directly from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

  • l. Revenue recognition

2018

The Company identifies contracts with customers and recognizes revenue when performance obligations are satisfied.

For contracts where the period between the date on which the Company transfers a promised good to a customer and the date on which the customer pays for that good is one year or less, the Company does not adjust the promised amount of consideration for the effects of a significant financing component.

-211-

Revenue from the sale of goods

Revenue from the sale of goods comes from sales of nutritious foods, cooking products, electronic goods and cosmetics. Sales of goods are recognized as revenue when the goods are delivered to the customer’s specific location because it is the time when the customer has full discretion over the manner of distribution and price to sell the goods, has the primary responsibility for sales to future customers and bears the risks of obsolescence. Trade receivables and contract assets are recognized concurrently. Any amounts previously recognized as contract assets are reclassified to trade receivables when the remaining obligations are performed. When the customer initially purchases the goods, the transaction price received is recognized as a contract liability until the goods have been delivered to the customer.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

1) Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

  • a) The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

  • b) The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

  • c) The amount of revenue can be measured reliably;

  • d) It is probable that the economic benefits associated with the transaction will flow to the Company; and

  • e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

  • 2) Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established and it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a timely basis, with reference to the principal outstanding and at the applicable effective interest rate.

  • m. Employee benefits

  • 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

-212-

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined contribution retirement benefit plans are determined using the projected unit credit method. Service cost (including current service cost) and net interest on the net defined benefit liabilities (assets) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses, effect of changes to asset ceiling and return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

3) Termination benefits

A liability for a termination benefit is recognized at the earlier of when the Company can no longer withdraw the offer of the termination benefit and when the Company recognizes any related restructuring costs.

n. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences and unused tax credits for research and development expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

-213-

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

  • 3) Current tax and deferred taxes for the year

Current tax and deferred taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions based on historical experience and other factors that are considered to be relevant which related to information that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Write-down of Inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value was based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

6. CASH AND CASH EQUIVALENTS

Cash on hand
Checking accounts and demand deposits
Cash equivalents (investments with original maturities of less than 3
months)
Time deposits		 December 31 December 31
2018
$ 1,434
414,277
382,984
$ 798,695		 2017
$ 1,384
373,037
272,640
$ 647,061

The market rate intervals of cash in bank at the end of the reporting period were as follows:

Bank deposits December 31
2018
2017
0.001%-3.600%
0.010%-3.800%

-214-

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

**8. ** December 31
2018
2017
Financial assets at FVTPL-current
Financial assets mandatorily classified as at FVTPL
Non-derivative financial assets
Mutual funds
$ 457,500
$ -
Financial assets at FVTPL-non-current
Financial assets mandatorily classified as at FVTPL
Non-derivative financial assets
Domestic unlisted shares
$ 7,315
$ -
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME -
2018
December 31,
2018
Current
Investments in equity instruments at FVTOCI
$ 18,926
Non-current
Investments in equity instruments at FVTOCI
$ 102,900
Investments in Equity Instruments at FVTOCI
December 31,
2018
Current
Listed shares and emerging market shares
Ordinary shares - Far Eastern International Bank
$ 13,434
Ordinary shares - Chunghwa Telecom Co., Ltd.
5,492
$ 18,926
Non-current
Listed shares and emerging market shares
Ordinary shares - GeneFerm Biotechnology Co., Ltd.
$ 90,095
Unlisted shares
Ordinary shares - Dah Chung Bills Finance Corp.
12,805
$ 102,900		 December 31

-215-

These investments in equity instrument are not held for trading. Instead, they are held for medium to long-term strategic purposes. Accordingly, the management elected to designate these investments in equity instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair value in profit or loss would not be consistent with the Company’s strategy of holding these investments for long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS 39. Refer to Note 3, Note 10 and Note 11 for information relating to their reclassification and comparative information for 2017. In January 2018, the Company sold its shares in GeneFerm Biotechnology Co., Ltd. in order to manage credit concentration risk. The shares sold had a fair value of $799 thousand and the Company transferred a gain of $578 thousand from other equity to retained earnings.

Dividend of $3,847 thousand was recognized during the year.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

December 31,
2018
Current
Time deposits with original maturities of more than 3 months $ 982,763

The interest rate for time deposits with original maturities of more than 3 months was ranging from 0.79%-1.97% as at the end of the reporting period. The time deposits were classified as debt investments with no active market under IAS 39. Refer to Note 3 and Note 12 for information relating to their reclassification and comparative information for 2017.

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

December 31, December 31,
2017
Current
Listed shares $ 17,630
Non-current
Emerging market shares $ 118,943

11. FINANCIAL ASSETS MEASURED AT COST - 2017

December 31,
2017
Non-current
Unlisted shares $ 16,389
Mutual funds -
$ 16,389
Classified according to measurement categories
Available-for-sale $ 16,389

-216-

Management believed that above unlisted equity investments held by the Company had fair values which cannot be reliably measured, because of the range of reasonable fair value estimates was so significant. Therefore, they were measured at cost less impairment at the end of the reporting period.

The Company recognized impairment loss on financial assets measured at cost as follows:

For the Year For the Year
Ended
December 31,
2017
Unlisted shares $ 7,794
Mutual funds 35,631
$ 43,425

12. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

December 31,
2017
Current
Time deposits with original maturities of more than 3 months $ 451,300

As of December 31, 2017, the market interest rate of the time deposits with original maturities of more than 3 months was ranging from 0.65%-1.06%.

13. NOTES RECEIVABLE, TRADE RECEIVABLES AND OTHER RECEIVABLES

Notes receivable
Operating
Trade receivables
At amortized cost
Gross carrying amount
Less: Allowance for impairment loss
Other receivables
Accrued interest
Payment on behalf of others
Others		 December 31 December 31
2018
$ 567
$ 1,985,594
(1,428)
$ 1,984,166
$ 3,871
491
64,884
$ 69,246		 2017
$ 2,746
$ 1,748,334
(1,832)
$ 1,746,502
$ 1,592
1,643
10,072
$ 13,307

-217-

In 2018

The average credit period of sales of goods was 30-90 days. In order to minimize credit risk, the management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade debt at the end of the reporting period to ensure that adequate allowance is made for possible irrecoverable amounts.

The Company applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date.

The Company writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For trade receivables that have been written off, the Company continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of trade receivables based on the Company’s provision matrix.

December 31, 2018

Not Past Due
Expected credit loss rate
0.01%
Gross carrying amount
$ 1,979,232
Loss allowance (Lifetime
ECL)
(218)
Amortized cost
$ 1,979,014		 Less than 30
Days
31 to 90 Days
6.99%
16.95%
$ 4,564
$ 1,392
(319)
(236)
$ 4,245
$ 1,156		 91 to 180
Days
35.76%
$ 495
(177)
$ 318		 Over 180
Days
100.00%
$ 478
(478)
$ -		 Total
$ 1,986,161
(1,428)
$ 1,984,733

The movements of the loss allowance of trade receivables were as follows:

For The Year For The Year
Ended
December 31,
2018
Balance at January 1, 2018 per IAS 39 $ 1,832
Adjustment on initial application of IFRS 9 -
Balance at January 1, 2018 per IFRS 9 1,832
Less: Net remeasurement of loss allowance (404)
Balance at December 31, 2018 $ 1,428

In 2017

The Company applied the same credit policy in 2018 and 2017. Allowance for impairment loss was recognized against trade receivables based on the estimated irrecoverable amounts determined by reference to past default experience with the counterparties and an analysis of their current financial position.

-218-

The aging of notes receivable, trade receivables and other receivables was as follows:

December 31,
2017
Not past due $ 1,762,555
Past due 1-30 days 272
Past due 31-90 days 897
Past due 91-180 days 466
Past due 181 days or more 197
$ 1,764,387

The above aging schedule was based on the number of past due days from the end of credit term.

As of December 31, 2017, there were no trade receivables that were past due but not impaired.

The movements of the allowance for doubtful trade receivables were as follows:

Individually
Assessed for
Impairment
Collectively
Assessed for
Impairment
Balance at January 1, 2017
$ 2,131
$ 141
Less: Impairment losses reversed
(431)
(9)
Balance at December 31, 2017
$ 1,700
$ 132		 Total
$ 2,272
(440)
$ 1,832

The notes receivable and other receivables as of December 31, 2017 were neither past due nor impaired.

14. INVENTORIES

Merchandise
Finished goods
Work in progress
Raw materials
Packing materials		 December 31 December 31
2018
$ 471,073
782,158
104,106
425,645
50,022
$ 1,833,004		 2017
$ 557,156
786,643
124,365
377,540
42,969
$ 1,888,673

The cost of inventories recognized as cost of goods sold for the year ended December 31, 2018 included $4,356 thousand loss on write-downs of inventories and $5,431 thousand loss on abandonment of inventories. The cost of inventories recognized as cost of goods sold for the year ended December 31, 2017 included $6,795 thousand loss on write-downs of inventories, $7,466 thousand loss on abandonment of inventories and $129 thousand of unallocated overheads.

-219-

15. PREPAYMENTS

Prepayments for purchases
Prepayments for equipment parts
Prepayments for fuel oil
Prepayments for insurance
Prepayments for advertisements
Others		 December 31 December 31
2018
$ 192,721
16,225
3,216
12,019
280
57,218
$ 281,679		 2017
$ 232,382
18,006
6,772
704
120
46,091
$ 304,075

16. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in subsidiaries
Unlisted companies
Accession Limited
Standard Investment (Cayman) Limited (“Cayman Standard”)
Standard Dairy Products Taiwan Limited (“Standard Dairy
Products”)
Charng Hui Ltd. (“Charng Hui”)
Domex Technology Corporation (“Domex Technology”)
Standard Beverage Company Limited (“Standard Beverage”)
Le Bonta Wellness International Corporation (“Le Bonta Wellness”)
Shanghai Le Ben Tuo Health Technology Co., Ltd. (“Shanghai Le
Ben Tuo”)
Name of Subsidiary
Accession Limited
Cayman Standard
Standard Dairy Products
Charng Hui
Domex Technology
Standard Beverage
Le Bonta Wellness
Shanghai Le Ben Tuo		 December 31
2018
2017
$ 9,865,439
$ 9,745,304
$ 3,450,370
$ 3,416,802
4,772,853
4,668,537
950,516
944,177
252,543
251,912
210,974
202,614
80,577
80,353
12,288
13,564
135,318
167,345
$ 9,865,439
$ 9,745,304
Proportion of Ownership and
Voting Rights
December 31
2018
2017
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
52.0%
52.0%
100.0%
100.0%
100.0%
100.0%
51.0%
51.0%

Standard Investment (China) Co., Ltd. (“China Standard Investment”, a subsidiary of the Company) originally held 100% interest in Shanghai Le Ben Tuo. After the Company invested $181,048 thousand in Shanghai Le Ben Tuo in April 2017, the Company and China Standard Investment hold 51% interest and 49% interest, respectively, in Shanghai Le Ben Tuo and the Company holds 100% interest in Shanghai Le Ben Tuo.

-220-

Refer to Note 36 for the details of the subsidiaries indirectly held by the Company.

17. PROPERTY, PLANT AND EQUIPMENT

Freehold Land
Cost
Balance at January 1, 2017
$ 396,356
Additions
-
Disposals
-
Transferred to investment
properties
-
Reclassified
-
Balance at December 31, 2017
$ 396,356
Accumulated depreciation and
impairment
Balance at January 1, 2017
$ -
Disposals
-
Depreciation expenses
-
Balance at December 31, 2017
$ -
Carrying amount at
December 31, 2017
$ 396,356
Cost
Balance at January 1, 2018
$ 396,356
Additions
-
Disposals
-
Reclassified
-
Balance at December 31, 2018
$ 396,356
Accumulated depreciation and
impairment
Balance at January 1, 2018
$ -
Disposals
-
Depreciation expenses
-
Impairment losses recognized
-
Balance at December 31, 2018
$ -
Carrying amount at
December 31, 2018
$ 396,356		 Buildings
$ 866,922
-
(25,482)
-
62,170
$ 903,610
$ 533,045
(25,482)
44,356
$ 551,919
$ 351,691
$ 903,610
-
(8,024)
79,856
$ 975,442
$ 551,919
(8,021)
48,587
7,288
$ 599,773
$ 375,669		 Equipment
$ 2,019,485
-
(75,267)
-
67,425
$ 2,011,643
$ 1,527,936
(72,144)
116,666
$ 1,572,458
$ 439,185
$ 2,011,643
-
(25,410)
102,054
$ 2,088,287
$ 1,572,458
(25,409)
123,662
10,747
$ 1,681,458
$ 406,829		 Other
Equipment
$ 201,996
-
(26,411)
-
11,690
$ 187,275
$ 163,806
(26,291)
13,791
$ 151,306
$ 35,969
$ 187,275
-
(8,955)
16,570
$ 194,890
$ 151,306
(7,060)
14,969
-
$ 159,215
$ 35,675		 Property in
Construction
$ 103,469
224,412
-
(120)
(141,285)
$ 186,476
$ -
-
-
$ -
$ 186,476
$ 186,476
218,023
-
(198,480)
$ 206,019
$ -
-
-
-
$ -
$ 206,019		 Total
$ 3,588,228
224,412
(127,160)
(120)
-
$ 3,685,360
$ 2,224,787
(123,917)
174,813
$ 2,275,683
$ 1,409,677
$ 3,685,360
218,023
(42,389)
-
$ 3,860,994
$ 2,275,683
(40,490)
187,218
18,035
$ 2,440,446
$ 1,420,548

The above items of property, plant and equipment are depreciated on a straight-line basis over the following estimated useful lives of the assets:

Building
Main buildings 40 years
Electrical and mechanical equipment 8-15 years
Engineering 7-39 years
Others 3-14 years
Equipment
Main equipment 2-20 years
Engineering 7-20 years
Others 3-15 years
Other equipment 2-15 years

-221-

18. INVESTMENT PROPERTIES

Cost
Balance at January 1, 2017
Transferred from property, plant and equipment
Balance at December 31, 2017
Accumulated depreciation and impairment
Balance at January 1, 2017
Depreciation expenses
Balance at December 31, 2017
Carrying amount at December 31, 2017
Cost
Balance at January 1, 2018
Disposals
Balance at December 31, 2018
Accumulated depreciation and impairment
Balance at January 1, 2018
Depreciation expenses
Disposals
Balance at December 31, 2018
Carrying amount at December 31, 2018		 Completed
Investment
Property
$ 141,150
120
$ 141,270
$ 14,469
426
$ 14,895
$ 126,375
$ 141,270
(141,270)
$ -
$ 14,895
222
(15,117)
$ -
$ -

The investment properties held by the Company are depreciated using the straight-line method over the following estimated useful lives:

Building
Main buildings 40 years
Electrical and mechanical equipment 24-25 years
Engineering 28 years

On May 8, 2018, the Company entered into a property sale agreement at Wugu Dist., New Taipei City with Pei Chen Co., Ltd. The total selling price was $508,620 thousand (included business tax), and the gain from disposal was $369,427 thousand (included in statements of comprehensive income under other gains and losses). The transaction was accomplished at the third quarter of September 2018.

The fair values of the investment properties was $314,595 thousand as of December 31, 2017. The management of the Company arrived at the fair value amounts by reference to market evidence of transaction prices for similar properties.

The Company has freehold interests in all of its investment properties.

-222-

19. OTHER INTANGIBLE ASSETS

Cost
Balance at January 1, 2017
Additions
Balance at December 31, 2017
Accumulated amortization and impairment
Balance at January 1, 2017
Amortization expenses
Balance at December 31, 2017
Carrying amount at December 31, 2017
Cost
Balance at January 1, 2018
Additions
Balance at December 31, 2018
Accumulated amortization and impairment
Balance at January 1, 2018
Amortization expenses
Balance at December 31, 2018
Carrying amount at December 31, 2018		 Computer
Software
$ 190,177
7,761
$ 197,938
$ 186,619
7,944
$ 194,563
$ 3,375
$ 197,938
4,881
$ 202,819
$ 194,563
6,584
$ 201,147
$ 1,672

The above items of other intangible assets are amortized on a straight-line basis over the following estimated lives:

Computer software 2-3 years

20. OTHER ASSETS

Current
Advances to officers		 December 31
2018
$ 20,410		 2017
$ 16,517
(Continued)

-223-

Non-current
Refundable deposits
Others		 December 31
2018
$ 14,041
4,112
$ 18,153		 2017
$ 15,212
3,633
$ 18,845
(Concluded)

21. NOTES PAYABLE AND TRADE PAYABLES

Notes payable
operating
Trade payables
Trade payables		 December 31 December 31
2018
$ 9,348
$ 885,178		 2017
$ 1,029
$ 725,217

The average credit period of payables for purchases of goods was 30-90 days. The Company has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

22. OTHER LIABILITIES

Current
Other payables
Payable for salaries or bonus
Payable for compensation of employees
Payable for remuneration of directors
Payable for commission and rebate
Payable for advertisement
Payable for royalties
Payable for freight
Payable for purchases of equipment
Payable for labor and health insurance
Payable for environmental recycling fee
Others		 December 31 December 31
2018
$ 146,997
31,723
20,960
382,860
133,109
23,806
5,876
80,993
14,661
11,056
152,822
$ 1,004,863		 2017
$ 117,654
23,388
15,449
331,382
98,902
20,704
6,477
82,626
13,197
8,629
92,893
$ 811,301
(Continued)

-224-

**23. ** Other liabilities
Advance receipts from customers
Refund liability
Others
Non-current
Other liabilities
Guarantee deposits
PROVISIONS
Current
Customer returns
Balance at January 1, 2017
Addition
Usage
Balance at December 31, 2017		 December 31 December 31 December 31
2018
2017
$ -
$ 3,960
7,263
-
1,196
855
$ 8,459
$ 4,815
$ 200
$ 1,055
(Concluded)
December 31
2018
$ -		 2017
$ 19,842
Customer
Returns
$ 9,197
103,312
(92,667)
$ 19,842

The provision for customer returns in 2017 was the estimated product returns that may occur in the year; the estimate was based on historical experience and other relevant factors. The provision was recognized as a reduction of operating revenue in the periods the related goods were sold.

24. RETIREMENT BENEFIT PLANS

a. Defined contribution plan

The Company adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

b. Defined benefit plan

The defined benefit plan of the Company is operated by the government of the Republic of China (“ROC”) in accordance with the Labor Standards Law. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company makes monthly contributions to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name.

-225-

Before the end of each year, the Company assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Company has no right to influence the investment policy and strategy.

The amounts included in the balance sheets in respect of the Company’s defined benefit plan were as follows:

Present value of defined benefit obligation
Fair value of plan assets
Net defined benefit liability
Movements in net defined benefit liability (asset) were as follows:
Present Value
of the Defined
Benefit
Obligation
Balance at January 1, 2017
$ 510,410
Service cost
Current service cost
4,944
Net interest expense (income)
5,742
Recognized in profit or loss
10,686
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
-
Actuarial loss - changes in demographic
assumptions
25,849
Actuarial loss - experience adjustments
7,117
Recognized in other comprehensive income
32,966
Contributions from the employer
-
Benefits paid
(24,813)
Balance at December 31, 2017
529,249
Service cost
Current service cost
4,888
Net interest expense (income)
5,954
Recognized in profit or loss
10,842
Remeasurement
Return on plan assets (excluding amounts
included in net interest)
-
Actuarial loss - changes in demographic
assumptions
3,905
Actuarial loss - experience adjustments
1,200
Recognized in other comprehensive income
5,105
Contributions from the employer
-
Benefits paid
(38,403)
Balance at December 31, 2018
$ 506,793		 December 31 December 31
2018
$ 506,793
(315,597)
$ 191,196
Fair Value of
the Plan Assets

$ (237,064)
-
(2,714)
(2,714)
478
-
-
478
(7,765)
24,813
(222,252)
-
(2,545)
(2,545)
(6,448)
-
-
(6,448)
(122,755)
38,403
$ (315,597)		 2017
$ 529,249
(222,252)
$ 306,997
Net Defined
Benefit
Liability
$ 273,346
4,944
3,028
7,972
478
25,849
7,117
33,444
(7,765)
-
306,997
4,888
3,409
8,297
(6,448)
3,905
1,200
(1,343)
(122,755)
-
$ 191,196

-226-

Through the defined benefit plan under the Labor Standards Law, the Company is exposed to the following risks:

  • 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

  • 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

  • 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rate
Expected rate of salary increase		 December 31
2018
2017
1.125%
1.125%
3.000%
3.000%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate
0.250% increase
0.250% decrease
Expected rate of salary increase
0.250% increase
0.250% decrease		 December 31
2018
$ (13,141)
$ 13,636
$ 13,150
$ (12,743)		 2017
$ (13,892)
$ 14,422
$ 13,908
$ (13,471)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year
The average duration of the defined benefit obligation		 December 31
2018
$ 24,899
10.9 years		 2017
$ 7,966
11 years

-227-

25. EQUITY

  • a. Share capital

  • 1) Ordinary shares

Number of shares authorized (in thousands)
Shares authorized
Number of shares issued and fully paid (in thousands)
Shares issued		 December 31 December 31
2018
920,000
$ 9,200,000
915,089
$ 9,150,897		 2017
920,000
$ 9,200,000
915,089
$ 9,150,897

2) Global depositary receipts

As of December 31, 2018, a total of 7,046.4 units of Global Depositary Receipts (GDRs) (representing 35,232 shares of the Company’s ordinary shares), where each GDR representing five shares of the Company’s ordinary shares, were traded on the Euro MTF Market of the Luxembourg Stock Exchange. Holders of the GDRs may request at any time that the shares represented by the GDRs be transferred to them.

  • b. Capital surplus
May be used to offset a deficit, distributed as cash dividends, or
transferred to share capital (1)
Recognized from the difference between consideration received
or paid and the carrying amount of the subsidiaries’ net assets
during actual disposal or acquisition
May be used to offset a deficit
Changes in percentage of ownership interests in subsidiaries (2)
Recognized from treasury share transactions
May not be used for any purpose
Share options		 December 31
2018
$ 1
466
92,578
-
$ 93,045		 2017
$ 1
466
79,239
3,418
$ 83,124

  • 1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

  • 2) Such capital surplus arises from the effect of changes in ownership interests in subsidiaries that result from equity transactions other than actual disposals or acquisitions, or from changes in capital surplus of subsidiaries accounted for using the equity method.

-228-

  • c. Retained earnings and dividend policy

Under the dividend policy as set forth in the amended Articles, where the Company made profit in a fiscal year, the profit shall be appropriated from (less any paying taxes and deficit):

  • 1) 10% thereof as legal reserve;

  • 2) Special reserve provided or reversed in accordance with the regulations;

  • 3) 30% to 100% of this the sum of the remainder and prior years’ unappropriated earnings as dividends.

The Company’s Articles of Incorporation also prescribe that 30% to 100%of dividends shall be paid in cash; however, if the Company has major investment plans for which external funds are not available, the percentage may be lowered to 5% to 20%. The distribution plan shall be proposed by the Company’s board of directors and resolved in the shareholders’ meeting for distribution of dividends and bonus to shareholders. For the policies on distribution of the compensation of employees and remuneration of directors after amendment, refer to Note 27(h). “employees’ compensation and remuneration of directors”.

Appropriation of earnings to legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. Legal reserve may be used to offset deficit. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865 and Rule No. 1010047490 issued by the FSC and the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

The appropriations of earnings 2017 and 2016 approved in the shareholders’ meetings on June 15, 2018 and June 22, 2017, respectively, were as follows:

Legal reserve
Special reserve
Cash dividends
Share dividends		 Appropriation of Earnings
For the Year Ended
December 31
2017
2016
$ 217,304
$ 260,654
178,629
81,797
1,830,179
1,407,830
-
351,958		 Dividends Per Share
(NT$)
For the Year Ended
December 31
2017
2016
$ 2.0
$ 1.6
-
0.4

The appropriations of earnings for 2018 had been proposed by the Company’s board of directors on March 22, 2019. The appropriations and dividends per share were as follows:

Appropriation Appropriation Dividends Per
of Earnings Share (NT$)
Legal reserve $ 294,909
Special reserve 70,519
Cash dividends 2,287,723 $2.50

The appropriations of earnings for 2018 are subject to the resolution of the shareholders in their meeting to be held on June 13, 2019.

-229-

d. Special reserve

Beginning at January 1
Appropriation in respect of:
Debit to other equity items
Balance at December 31		 For the Year Ended For the Year Ended December 31
2018
$ 81,797
178,629
$ 260,426		 2017
$ -
81,797
$ 81,797

Appropriation for special reserve should be made in the amount equal to the net debit balance of other equity. Any special reserve appropriated may be reversed to the extent that the net debit balance reverses and, thereafter, distributed.

e. Other equity items

1) Exchange differences on translating the financial statements of foreign operations

For the Year Ended
2018
Balance at January 1
$ (307,846)
Effect of change in tax rate
11,127
Recognized for the year
Exchange differences on translating the financial
statements of foreign operations
(117,413)
Other comprehensive income recognized for the year
(106,286)
Acquisition of further interests in subsidiaries
1,263
Balance at December 31
$ (412,869)
2) Unrealized gain (loss) on available-for-sale financial assets
Balance at January 1, 2017
Recognized for the year
Unrealized gain (loss) on revaluation of available-for-sale financial assets
Share of unrealized gain (loss) on revaluation of available-for-sale financial
assets of subsidiaries accounted for using the equity method
Reclassification adjustment
Disposal of available-for-sale financial assets
Other comprehensive income recognized for the year
Balance at December 31, 2017
Balance at January 1, 2018 per IAS 39
Adjustment on initial application of IFRS 9
Balance at January 1, 2018 per IFRS 9		 For the Year Ended December 31
2017
$ (185,556)
-
(122,290)
(122,290)
-
$ (307,846)
$ 150,729
(60,112)
3,869
(96)
(56,339)
$ 94,390
$ 94,390
(94,390)
$ -

-230-

3) Unrealized gain (loss) on financial assets at FVTOCI

For the Year For the Year
Ended
December 31,
2018
Balance at January 1 per IAS 39 $ -
Adjustment on initial application of IFRS 9 116,974
Balance at January 1 per IFRS 9 116,974
Recognized for the year
Unrealized gain (loss) - equity instruments (34,736)
Other comprehensive income recognized for the year (34,736)
Cumulative unrealized gain (loss) of equity instruments transferred to retained
earnings due to disposal (314)
Balance at December 31 $ 81,924

4) Other equity items - other (recognized from put option of equity instruments from disposal of subsidiaries)

Balance at January 1
Exercised the put option of equity instruments from disposal
of subsidiaries
Balance at December 31		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ (46,970)
46,970
$ -		 2017
$ (46,970)
-
$ (46,970)

f. Treasury shares

Shares Held by
Subsidiaries (In
Thousands of
Purpose of Buy-back Shares)
Number of shares at January 1, 2017 6,413
Increase during the year 256
Number of shares at December 31, 2017 6,669
Number of shares at December 31, 2018 6,669

For the purpose of maintaining the Company’s credit and shareholders’ equity, the Company’s shares held by its subsidiaries at the end of the reporting periods were as follows:

Name of Subsidiary
Number of
Shares Held
(In Thousands
of Shares)
December 31, 2018
Chang Hui
6,669		 Carrying
Amount
Market Price
$ 21,182
$ 331,473
(Continued)

-231-

Name of Subsidiary
Number of
Shares Held
(In Thousands
of Shares)
December 31, 2017
Chang Hui
$ 6,669		 Carrying
Amount
Market Price
$ 21,182
$ 493,541
(Concluded)

The Company’s shares held by subsidiaries were treated as treasury shares, aside from the rights to participate in any share issuance for cash and to vote, the rest were similar to general shareholder’s rights.

26. REVENUE

For the Year Ended December 31 the Year Ended December 31 the Year Ended December 31 the Year Ended December 31
2018 2017
Revenue from contracts with customers
Revenue from sale of goods $ 12,187,907 $ 11,259,683
a. Contract balances
December 31,
2018
Notes receivable (Note 13) $ 567
Trade receivables (Note 13) $ 1,984,166
Contract liabilities - current
Sale of goods $ 7,995
b. Disaggregation of revenue
Reportable Segments
Nutritious Cooking
Foods Products Others Total
For the year ended
December 31, 2018
Type of goods or services
Sale of goods $ 9,863,953 $ 1,945,877 $ 378,077 $ 12,187,907
For the year ended
December 31, 2017
Type of goods or services
Sale of goods $ 9,101,553 $ 1,828,188 $ 329,942 $ 11,259,683

-232-

27. NET PROFIT

Net Profit

a. Other income

Rental income
Operating lease rental income
Investment properties
Interest income
Bank deposits
Financial assets at amortized cost
Repurchase agreements collateralized by bonds
Others
Royalties
Dividends		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 1,995
10,360
5,008
116
18
15,502
8,667
3,847
$ 30,011		 2017
$ 3,420
13,852
-
-
71
13,923
8,385
7,505
$ 33,233

b. Other gains and losses

Gain on disposal of financial assets
Available-for-sale financial assets
Fair value changes of financial assets and financial liabilities
Net gain on financial assets mandatorily classified as at
FVTPL
Financial assets measured at cost
Net foreign exchange gains (losses)
Net loss on disposal of property, plant and equipment
Net gain on disposal of investment properties
Impairment losses recognized on property, plant and equipment
Government grants
Others		 For the Year Ended For the Year Ended December 31
2018
$ -

5,178
-
4,165
(1,341)
369,427
(18,035)
1,200
18,570
$ 379,164
 2017
$ 96
-
(43,425)
(31,443)
(3,067)
-
-
-
13,890
$ (63,949)

c. Finance costs

Interest on bank loans
Obligations under finance leases
Total interest expense on financial liabilities measured at
amortized cost
Less: Amounts included in the cost of qualifying assets		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ -
685
685
-
$ 685		 2017
$ 9
-
9
(9)
$ -

-233-

Information about capitalized interest was as follows:

Capitalized interest
Capitalization rate
d. Impairment losses recognized (reversed)
Trade receivables
Inventories (included in operating costs)
Financial assets measured at cost
Property, plant and equipment
e.
Depreciation and amortization
An analysis of depreciation by function
Operating costs
Operating expenses
Non-operating income and expenses
An analysis of amortization by function
Operating costs
Operating expenses
f.
Operating expenses directly related to investment properties
Direct operating expenses of investment properties that generated
rental income		 For the Year Ended For the Year Ended December 31
2018
$ -
-
For the Year Ended		 2017
$ 9
0.8%
December 31
2018
$ (404)
4,356
-
18,035
$ 21,987
**For the Year Ended **		 2017
$ (440)
6,795
43,425
-
$ 49,780
December 31
2018
$ 151,294
35,924
222
$ 187,440
$ 2,899
7,424
$ 10,323
For the Year Ended		 2017
$ 137,935
36,878
426
$ 175,239
$ 5,460
8,721
$ 14,181
December 31
2018
$ 44		 2017
$ 412

-234-

g. Employee benefits expense

Post-employment benefits
Defined contribution plans
Defined benefit plans (see Note 24)
Other employee benefits
Total employee benefits expense
An analysis of employee benefits expense by function
Operating costs
Operating expenses		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 30,102
8,297
38,399
997,340
$ 1,035,739
$ 483,690
552,049
$ 1,035,739		 2017
$ 27,449
7,972
35,421
877,482
$ 912,903
$ 439,716
473,187
$ 912,903
  • h. Employees’ compensation of and remuneration of directors

The Company accrued compensation of employees and remuneration of directors at the rates of no less than 0.5% and no higher than 0.75%, respectively, of net profit before income tax, compensation of employees, and remuneration of directors. The compensation of employees and remuneration of directors for the years ended December 31, 2018 and 2017 which were approved by the Company’s board of directors on March 22, 2019 and March 22, 2018, respectively, were as follows:

Accrual rate

Compensation of employees
Remuneration of directors
Amount		 For the Year Ended December 31
2018
2017
0.90%
0.90%
0.59%
0.59%
Compensation of employees
Remuneration of directors		 For the Year Ended December 31 For the Year Ended December 31
2018
Cash
$ 31,723
20,960		 2017
Cash
$ 23,388
15,449

If there is a change in the amounts after the annual financial statements were authorized for issue, the differences will be recorded as a change in the accounting estimate.

There was no difference between the actual amounts of compensation of employees and remuneration of directors paid and the amounts recognized in the financial statements for the years ended December 31, 2017 and 2016.

Information on the compensation of employees and remuneration of directors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

-235-

  • i. Gain or loss on foreign currency exchange
Foreign exchange gains
Foreign exchange losses
Net gain (loss)		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 25,921
(21,756)
$ 4,165		 2017
$ 49,685
(81,128)
$ (31,443)

28. INCOME TAXES

  • a. Major components of tax expense recognized in profit or loss
Current tax
In respect of the current year
Land value increment tax
Income tax on unappropriated earnings
Adjustments for prior years
Deferred tax
In respect of the current year
Effect of tax rate changes
Income tax expense recognized in profit or loss		 **For the Year Ended ** **For the Year Ended ** December 31
2018
$ 463,443
27,947
-
230
491,620
64,629
(18,177)
$ 538,072		 2017
$ 369,527
-
46,528
2,172
418,227
(27,497)
-
$ 390,730

A reconciliation of accounting profit and income tax expenses is as follows:

Profit before tax
Income tax expense calculated at the statutory rate
Nondeductible expenses in determining taxable income
Tax-exempt income
Income tax on unappropriated earnings
Adjustments for prior years’ tax
Land value increment tax
Effect of tax rate changes
Income tax expense recognized in profit or loss		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 3,487,161
$ 697,432
13,374
(182,734)
-
230
27,947
(18,177)
$ 538,072		 2017
$ 2,563,774
$ 435,842
10,476
(104,288)
46,528
2,172
-
-
$ 390,730

The applicable corporate income tax rate used by the Company was 17% in 2017.In February 2018, it was announced by the President that the Income Tax Act in the ROC was amended and, starting from 2018, the corporate income tax rate was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings has been reduced from 10% to 5%.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

-236-

b. Income tax recognized in other comprehensive income

Deferred tax
Effect of tax rate changes
In respect of the current year
Exchange differences on translating the financial statements of
foreign operations
Remeasurement of defined benefit plans
Fair value changes of financial assets at FVTOCI
Share of other comprehensive income (loss) of subsidiaries
Total income tax recognized in other comprehensive income		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ (19,365)
(29,037)
487
(83)
-
$ (47,998)		 2017
$ -
(25,047)
(5,685)
-
444
$ (30,288)

c. Current tax liabilities

Current tax liabilities
Income tax payable		 December 31 December 31
2018
$ 289,077		 2017
$ 224,762

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2018

Recognized in Recognized in
Other
Recognized in Comprehensive Effect of Tax
Opening Balance Profit or Loss Income Rate Changes Closing Balance
Deferred tax assets
Temporary differences
Investments accounted for using
the equity method $ 92,479 $ (17,709) $ - $ 16,330 $ 91,100
Exchange differences on
translating the financial
statements of foreign
operations 63,052 - 29,037 11,127 103,216
Defined benefit plans 51,589 54 (269) 9,104 60,478
Deferred sales returns and
allowances 3,661 (2,131) - 646 2,176
Allowance for inventory loss 2,709 871 - 478 4,058
FVTOCI financial assets 41,930 (5,527) 83 7,400 43,886
Others 14,365 (6,790) - 2,535 10,110
$ 269,785 $ (31,232) $ 28,851 $ 47,620 $ 315,024
Deferred tax liabilities
Temporary differences
Investments accounted for using
the equity method $ 53,736 $ 37,241 $ - $ 9,483 $ 100,460
Reserve for land value increment
tax 33,685 - - - 33,685
Others 3,315 (3,844) 218 595 284
$ 90,736 $ 33,397 $ 218 $ 10,078 $ 134,429

-237-

For the year ended December 31, 2017

Recognized in Recognized in
Other
Recognized in Comprehensive
Opening Balance Profit or Loss Income Closing Balance
Deferred tax assets
Temporary differences
Investments accounted for using the equity method $ 92,897 $ 26 $ (444) $ 92,479
Exchange differences on translating the financial
statements of foreign operations 38,005 - 25,047 63,052
Defined benefit plans 44,548 1,356 5,685 51,589
Deferred sales returns and allowances 2,615 1,046 - 3,661
Allowance for inventory loss 3,798 (1,089) - 2,709
Financial assets measured at cost 34,548 7,382 - 41,930
Others 11,183 3,182 - 14,365
$ 227,594 $ 11,903 $ 30,288 $ 269,785
Deferred tax liabilities
Temporary differences
Investments accounted for using the equity method $ 69,338 $ (15,602) $ - $ 53,736
Reserve for land value increment tax 33,685 - - 33,685
Others 3,307 8 - 3,315
$ 106,330 $ (15,594) $ - $ 90,736

e. Income tax assessments

The income tax returns of the Company through 2016 have been assessed by the tax authorities.

29. EARNINGS PER SHARE

Basic earnings per share
Diluted earnings per share		 For Unit: NT$ Per Share
the Year Ended December 31		 Unit: NT$ Per Share
the Year Ended December 31
2018
$ 3.25
$ 3.24		 2017
$ 2.39
$ 2.39

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic earnings per share For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 2,949,089		 2017
$ 2,173,044

-238-

Weighted average number of ordinary shares outstanding (in thousands of shares):

Weighted average number of ordinary shares used in computation of
basic earnings per share
Effect of potentially dilutive ordinary shares:
Compensation of employees
Weighted average number of ordinary shares used in the
computation of diluted earnings per share		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
908,420
742
909,162		 2017
908,420
413
908,833

If the Company offered to settle compensation paid to employees in cash or shares, the Company assumed the entire amount of the compensation would be settled in shares and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

30. OPERATING LEASE ARRANGEMENTS

  • a. The Company as lessee

Operating leases relate to leases of buildings with lease terms between 1 and 10 years. The Company does not have a bargain purchase option to acquire the leased buildings at the expiration of the lease periods.

The future minimum lease payments of non-cancellable operating lease commitments are as follows:

Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years		 December 31 December 31
2018
$ 22,465
79,198
-
$ 101,663		 2017
$ 23,100
6,713
7,744
$ 37,557

The lease payments recognized in profit or loss for the current period was as follows:

Minimum lease payments For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 36,643		 2017
$ 39,673
  • b. The Company as lessor

Operating leases relate to investment properties owned by the Company with lease terms for 5 years. The lessees do not have bargain purchase options to acquire the properties at the expiry of the lease periods.

-239-

The future minimum lease payments of non-cancellable operating leases are as follows:

Not later than 1 year
Later than 1 year and not later than 5 years		 December 31
2018
$ -
-
$ -		 2017
$ 3,420
9,930
$ 13,350

31. CAPITAL MANAGEMENT

The Company’s capital management objective is to ensure financial resources are available and operating plans are in place for working capital, capital expenditures, research and development expenses, refund liabilities and dividend disbursement, etc. in the next twelve months. The Company manages its capital to ensure that entities in the Company and subsidiaries will be able to continue as going concerns while maximizing the return to shareholders through the optimization of the debt and equity balance.

32. FINANCIAL INSTRUMENTS

  • a. Fair value of financial instruments that are measured at fair value on a recurring basis

  • 1) Fair value hierarchy

December 31, 2018
Financial assets at FVTPL
Unlisted shares
Mutual funds
Financial assets at FVTOCI
Investments in equity
instruments at
FVTOCI
Listed shares and
emerging market
shares
Unlisted shares		 Level 1
$ -
457,500
$ 457,500
$ 109,021
-
$ 109,021		 Level 2
$ -
-
$ -
$ -
-
$ -		 Level 3
$ 7,315
-
$ 7,315
$ -
12,805
$ 12,805		 Total
$ 7,315
457,500
$ 464,815
$ 109,021
12,805
$ 121,826

-240-

December 31, 2017

Available-for-sale financial
assets
Listed shares and
emerging market
shares
Equity securities		 Level 1
$ 136,573		 Level 2
$ -		 Level 3
$ -		 Total
$ 136,573

There were no transfers between Level 1 and Level 2 for the years ended December 31, 2018 and 2017.

  • 2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

Financial Assets
Balance at January 1, 2018
Recognized in profit or loss (included in
other gains and losses)
Recognized in other comprehensive
income (included in unrealized gain
(loss) on financial assets at FVTOCI)
Sales/settlements
Capital reduction of shares return
Balance at December 31, 2018
Recognized in other gains and losses -
unrealized
For the year ended December 31, 2017
None.		 Financial Assets
at FVTPL
Equity
Instruments
$ 6,368
3,125
-
(1,978)
(200)
$ 7,315
$ 1,147		 Financial Assets
at FVTOCI
Equity
Instruments
$ 14,496
-
(1,691)
-
-
$ 12,805		 Total
$ 20,864
3,125
(1,691)
(1,978)
(200)
$ 20,120
$ 1,147
  • 3) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of unlisted equity securities - ROC in debt investments with no active market were determined using the market approach and the asset approach (adjusted net asset method).

The market approach uses prices and other relevant information that have been generated by market transactions that involved underlying assets.

The asset approach is that assets and liabilities of an investee are measured at fair value with the objective of obtaining the fair value of the investee’s underlying asset at the measurement date.

-241-

b. Categories of financial instruments

Financial assets
Financial assets at FVTPL
Mandatorily classified as at FVTPL
Loans and receivables (1)
Available-for-sale financial assets (2)
Financial assets at amortized cost (3)
Financial assets at FVTOCI
Equity instruments
Financial liabilities
Financial liabilities at amortized cost (4)		 December 31
2018
2017
$ 464,815
$ -
-
3,054,387
-
152,962
4,027,928
-
121,826
-
989,375
813,196

  • 1) The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market, notes receivable, trade receivables, other receivables, and other financial assets.

  • 2) The balances include the carrying amount of available-for-sale financial assets measured at cost.

  • 3) The balances include financial assets at amortized cost, which comprise cash and cash equivalents, debt investments, notes receivable, trade receivables, trade receivables from related parties, other receivables and other receivables from related parties and refundable deposits.

  • 4) The balances include financial liabilities measured at amortized cost, which comprise notes payable, trade payables, trade payables from related parties, payables for purchases of equipment and guarantee deposits.

  • c. Financial risk management objectives and policies

The Company’s major financial instruments include cash and cash equivalents, equity and debt investments, mutual funds, trade receivables and trade payables. The Company’s Financial Department provides services to the business, coordinates access to financial markets, monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

1) Market risk

The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

  • a) Foreign currency risk

The Company’s foreign currency risk arises from its foreign currency monetary assets and liabilities. The Company watches out for the fluctuation of market exchange rates, and takes appropriate actions to manage the exchange rate risk.

The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are set out in Note 35.

-242-

Sensitivity analysis

The Company was mainly exposed to the RMB, USD, EUR and AUD.

The following table details the Company’s sensitivity to a 3% increase or decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. A change of 3% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis used the outstanding foreign currency denominated monetary items at the end of the reporting period and assumed the exchange rates at the end of the reporting period changed by 3% increase or decrease. The amount below indicates an increase (decrease) in pre-tax profit associated with the New Taiwan dollar weakening 3% against the relevant currency. For a 3% strengthening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on pre-tax profit and the balances below would be negative.

Profit or loss
Profit or loss		 RMB Impact
For the Year Ended
December 31
2018
2017
$ 683 (i)
$ 2,206 (i)
EUR Impact
For the Year Ended
December 31
2018
2017
$ 1,378 (iii)
$ (671) (iii)		 USD Impact
For the Year Ended
December 31
2018
2017
$ 8,736 (ii)
$ 3,073 (ii)
AUD Impact
For the Year Ended
December 31
2018
2017
$ 2,707 (iv)
$ (604) (iv)

  • i. This was mainly attributable to the exposure of outstanding RMB bank deposits which were not hedged at the end of the reporting period.

  • ii. This was mainly attributable to the exposure of outstanding USD bank deposits and payables which were not hedged at the end of the reporting period.

  • iii. This was mainly attributable to the exposure of outstanding EUR bank deposits and payables which were not hedged at the end of the reporting period.

  • iv. This was mainly attributable to the exposure of outstanding AUD bank deposits and payables which were not hedged at the end of the reporting period.

  • b) Interest rate risk

The carrying amounts of the Company’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting periods were as follows.

Fair value interest rate risk
Financial assets
Financial liabilities
Cash flow interest rate risk
Financial assets		 December 31
2018
2017
$ 437,147
$ 73,040
5,130
-
928,600
650,900

-243-

Sensitivity analysis

The sensitivity analyses below were determined based on the Company’s exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate assets, the analysis was prepared assuming the amount of the asset outstanding at the end of the reporting period was outstanding for the whole year. A 1% basis point increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 1% higher/lower and all other variables were held constant, the Company’s pre-tax profit for the years ended December 31, 2018 and 2017 would increase/decrease by $9,286 thousand and $6,509 thousand, respectively.

c) Other price risk

The Company was exposed to equity price risk due to its investments in listed equity securities and mutual funds. The Company has appointed a special team to monitor the price risk and will consider hedging the risk exposure should the need arise.

Sensitivity analysis

The sensitivity analyses below were determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 1% higher/lower, pre-tax profit for the year ended December 31, 2018 would have increased/decreased by $4,648 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the pre-tax other comprehensive income for the year ended December 31, 2018 would have increased/decreased by $1,218 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 1% higher/lower, pre-tax other comprehensive income for the years ended December 31, 2017 would increase/decrease by $1,366 thousand, as a result of the changes in fair value of available-for-sale financial assets.

2) Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. As at the end of the reporting period, the Company’s maximum exposure to credit risk which will cause a financial loss to the Company due to failure of counterparties to discharge an obligation and due to financial guarantees provided by the Company could arise from:

  • a) The carrying amount of the respective recognized financial assets as stated in the balance sheets; and

  • b) The amount of contingent liabilities in relation to financial guarantees issued by the Company.

In order to minimize credit risk, management of the Company has delegated a team responsible for determining credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Company reviews the recoverable amount of each individual trade receivable at the end of the reporting period to ensure that adequate allowances are made for irrecoverable amounts.

The Company’s concentration of credit risk of 77% in total trade receivables as of December 31, 2018 and 2017, was related to the Company’s four largest customers.

-244-

The table below analyzes the collaterals held as security and other credit enhancements, and their financial effect in respect of the financial assets recognized in the Company’s balance sheets:

December 31, 2018

Carrying
Amount
Credit-impaired financial
instruments according to
impairment criteria in
IFRS 9
Receivables
$ 1,984,733		 Maximum Exposure to Credit Risk Mitigated by
Collateral
Other Credit
Enhancements
Total
$ 54,812
$ 11,189
$ 66,001

December 31, 2017

Receivables Maximum Exposure to Credit Risk Mitigated by
Collateral
Other Credit
Enhancements
Total
$ 72,533
$ 14,002
$ 86,535
  • 3) Liquidity risk

The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents deemed adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and ensures compliance with loan covenants.

The Company relies on bank borrowings as a significant source of liquidity. As of December 31, 2018 and 2017, the Company had available unutilized bank loan facilities in the amounts of $2,585,204 thousand and $2,842,586 thousand, respectively.

Liquidity and interest rate risk tables for non-derivative financial liabilities

The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The table has been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Company can be required to pay. The table included both interest and principal cash flows. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

To the extent that interest flows are at floating rates, the undiscounted amount was derived from interest rate curve at the end of the reporting period.

-245-

December 31, 2018

On Demand or
Less than
1 Month
1-3 Months
3 Months to
1 Year
Non-derivative financial
liabilities
Non-interest bearing
$ 81,293
$ 176,243
$ 731,639
Finance lease liabilities
168
336
1,512
Contract liabilities
2,665
5,330
-
$ 84,126
$ 181,909
$ 733,151
December 31, 2017
On Demand or
Less than
1 Month
1-3 Months
3 Months to
1 Year
Non-derivative financial
liabilities
Non-interest bearing
$ 67,406
$ 138,081
$ 606,654		 1-5 Years
$ -
3,956
-
$ 3,956
1-5 Years
$ 1,055

The amount included above for variable interest rate instruments for both non-derivative financial assets and liabilities was subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

33. TRANSACTIONS WITH RELATED PARTIES

The transactions between the Company and its related parties, other than those disclosed in other notes, are summarized as follows:

  • a. Related parties and relationships
Name of Related Party
Standard Dairy Products
Standard Beverage
Standard Foods (China) Co., Ltd. (“China Standard Foods”)
Shanghai Dermalab Corporation
Shanghai Le Ben Tuo Health Technology Co., Ltd.
Dermalab Corporation
GeneFerm Biotechnology Co., Ltd. (“GeneFerm”)		 Relationship with the Company
Subsidiaries
Subsidiaries
Subsidiaries
Subsidiaries
Subsidiaries
Subsidiaries
The Company is one of the directors

-246-

b. Operating revenue

Line Items
Related Party Category/Name
Sales
Subsidiaries
Standard Dairy Products
Others		 For the Year Ended December 31 For the Year Ended December 31 For the Year Ended December 31
2018
$ 1,506,386
6,480
$ 1,512,866		 2017
$ 1,335,518
85
$ 1,335,603

Sales to related parties were conducted on normal commercial terms.

  • c. Purchases of goods
Related Party Category/Name
Subsidiaries
Standard Dairy Products
Others
The Company is one of the directors
GeneFerm		 **For the Year Ended ** **For the Year Ended ** December 31
2018
$ 739,330
7,532
25,529
$ 772,391		 2017
$ 608,762
1,792
25,572
$ 636,126

Purchases from related parties were conducted on normal commercial terms.

  • d. Receivables from related parties
Line Items
Related Party Category/Name
Trade receivables
Subsidiaries
Standard Dairy Products
Others
Other receivables
Subsidiaries
Standard Dairy Products
Others		 December 31 December 31
2018
$ 174,492
-
$ 174,492
$ 3,819
139
$ 3,958		 2017
$ 175,881
85
$ 175,966
$ 2,178
115
$ 2,293

The outstanding receivables from related parties are unsecured. For the years ended December 31, 2018 and 2017, no impairment loss was recognized on receivables from related parties.

-247-

e. Payables to related parties

Line Items
Related Party Category/Name
Trade payables
Subsidiaries
Standard Beverage
Dermalab S.A
The Company is one of the directors
GeneFerm		 December 31 December 31
2018
$ 307

4,747
8,602
$ 13,656
 2017
$ -
-
3,269
$ 3,269

The outstanding payables from related parties are unsecured.

  • f. Endorsements and guarantees

Endorsements and guarantees provided by the Company

Related Party Category/Name
Subsidiaries
Standard Beverage
Amount endorsed
Amount utilized
Subsidiaries
Accession Limited
Amount endorsed
Amount utilized
g.
Other transactions with related parties
Line Items
Related Party Category/Name
Royalty revenue
Subsidiaries
Standard Dairy Products
Service revenue
Subsidiaries
Standard Beverage
Other expenses
Subsidiaries
h. Compensation of key management personnel
Short-term employee benefits
Post-employment benefits		 December 31 December 31 December 31
2018
2017
$ 153,575
$ 148,800
22,000
30,000
184,290
178,560
-
-
For the Year Ended December 31
2018
2017
$ 8,667
$ 8,385
$ 1,320
$ 1,320
$ -
$ 841
For the Year Ended December 31
2018
$ 40,280
533
$ 40,813		 2017
$ 30,273
450
$ 30,723

The remuneration of directors and key executives was determined by the remuneration committee based on the performance of individuals and market trends.

-248-

34. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Company as of December 31, 2018 were as follows:

  • a. The Company has entered into a license agreement with The Quaker Oats Company (“Quaker”) for a period ending July 11, 2029. The agreement provides that the Company may use Quaker’s trademark, and process, manufacture, market and sell Quaker baby cereal, oatmeal, fruit cereal, ready-to-eat cereal, sesame paste, milk powder and other cereal products in the ROC. In consideration of the above, the Company shall pay Quaker royalties at an agreed percentage of net sales (as defined).

  • b. Unused letters of credit of approximately US$3,975 thousand and EUR€488 thousand.

  • c. Unrecognized commitments for acquisition of property, plant and equipment of approximately $94,309 thousand.

35. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The significant assets and liabilities denominated in foreign currencies other than functional currency of the Company and the exchange rates between foreign currencies and functional currency were as follows:

December 31, 2018

Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
USD
$ 9,678
30.72 (USD:NTD)
RMB
5,094
4.47 (RMB:NTD)
EUR
1,661
35.20 (EUR:NTD)
AUD
4,717
21.67 (AUD:NTD)
Non-monetary items
Investments accounted for using the
equity method
RMB
1,867,769
4.48 (RMB:NTD)
Financial liabilities
Monetary items
USD
198
30.72 (USD:NTD)
EUR
356
35.20 (EUR:NTD)
AUD
551
21.67 (AUD:NTD)
SGD
501
22.48 (SGD:NTD)		 Carrying
Amount
$ 297,260
22,780
58,453
102,184
$ 480,677
$ 8,358,541
$ 6,067
12,535
11,944
11,262
$ 41,808

-249-

December 31, 2017

Foreign
Currencies
Exchange Rate
Financial assets
Monetary items
USD
$ 5,532
29.76 (USD:NTD)
RMB
16,110
4.57 (RMB:NTD)
Non-monetary items
Investments accounted for using the
equity method
RMB
1,813,777
4.55 (RMB:NTD)
Financial liabilities
Monetary items
USD
2,091
29.76 (USD:NTD)
EUR
631
35.57 (EUR:NTD)
AUD
875
23.18 (AUD:NTD)		 Carrying
Amount
$ 164,642
73,544
$ 238,186
$ 8,252,684
$ 62,225
22,450
20,280
$ 104,955

The significant unrealized foreign exchange gains (losses) were as follows:

For the Year Ended December 31

Foreign
Currencies
USD
RMB
EUR
AUD
Others		 2018
Exchange Rate
Net Foreign
Exchange Gains
(Losses)
30.72 (USD:NTD)
$ (2,596)
4.47 (RMB:NTD)
99
35.20 (EUR:NTD)
(2,073)
21.67 (AUD:NTD)
(2,433)
193
$ (6,810)		 2017
Exchange Rate
Net Foreign
Exchange Gains
(Losses)
29.76 (USD:NTD)
$ 16,003
4.57 (RMB:NTD)
1,679
35.57 (EUR:NTD)
1,277
23.18 (AUD:NTD)
494
44
$ 19,497

36. SEPARATELY DISCLOSED ITEMS

  • a. Information about significant transactions and investees:

  • 1) Financings provided: See Table 1 attached.

  • 2) Endorsement/guarantee provided: See Table 2 attached.

  • 3) Marketable securities held (excluding investments in subsidiaries): See Table 3 attached.

  • 4) Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: None.

-250-

  • 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital: None.

  • 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital: See Table 4 attached.

  • 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 5 attached.

  • 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: See Table 6 attached.

9) Trading in derivative instruments: See Table 7 attached.

10) Information on investees (excluding investees of mainland China): See Table 8 attached.

  • b. Information on investment in mainland China

  • 1) The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses) of the investee, share of profits/losses of investee, ending balance, amount received as dividends from the investee, and the limitation on investee: See Table 9 attached.

  • 2) Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss: None.

-251-

FINANCING PROVIDED TO OTHERS
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Note 1:
“0” for the Company, subsidiaries are numbered from “1”.
Note 2:
Reasons for financing are as follows:
a.
Need for operation.
b.
Need for short-term financing.
Aggregate
Financing
Limits
(Note 3)
$ 1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)		 1,195,792
(Note 4)
1,195,792
(Note 4)		 3,400,834
(Note 5)
3,400,834
(Note 5)		 111,020
(Note 6)		 11,510
(Note 7)		 216,439
(Note 8)		 135,094
(Note 9)
Financing Limit
for Each
Borrower
(Note 3)
$ 1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)
1,504,684
(Note 3)		 1,195,792
(Note 4)
1,195,792
(Note 4)		 3,400,834
(Note 5)
3,400,834
(Note 5)		 111,020
(Note 6)		 11,510
(Note 7)		 216,439
(Note 8)		 135,094
(Note 9)
Collateral Value $ -
-
-
-		 -
-		 -
-		 - - - -
Item -
-
-
-		 -
-		 -
-		 - - - -
Allowance for
Impairment
Loss		 $ -
-
-
-		 -
-		 -
-		 - - - -
Reasons for
Short-term
Financing		 Need for operation
Need for operation
Need for operation
Need for operation		 Need for operation
Need for operation		 Need for operation
Need for operation		 Need for operation Need for operation Need for operation Need for operation
Business
Transaction
Amounts		 $ -
-
-
-		 -
-		 -
-		 - - - -
Nature of
Financing
(Note 2)		 b.
b.
b.
b.		 b.
b.		 b.
b.		 b. b. b. b.
Interest
Rate		 2.500%-
4.350%
2.50%
2.50%
2.50%		 2.500%-
4.350%
2.50%		 -
1.900%		 2.50% 2.50% 2.50% 2.50%
Actual
Borrowing
Amount		 $ 56,295
190,451
287,064
89,506		 443,055
603,964		 184,290
68,607		 - - 635 841
Ending Balance $ 89,506
447,530
716,048
89,506		 469,907
648,919		 184,290
68,607		 22,377 8,951 179,012 89,506
Highest Balance
for the Period		 $ 93,402
467,010
747,216
93,402		 490,361
677,165		 185,730
133,539		 116,753 9,340 186,804 93,402
Related
Parties		 Y
Y
Y
Y		 Y
Y		 Y
Y		 Y Y Y Y
Financial Statement
Account		 Financing receivables
- related parties
Financing receivables
- related parties
Financing receivables
- related parties
Financing receivables
- related parties		 Financing receivables
- related parties
Financing receivables
- related parties		 Financing receivables
- related parties
Financing receivables
- related parties		 Financing receivables
- related parties		 Financing receivables
- related parties		 Financing receivables
- related parties		 Financing receivables
- related parties
Borrower Shanghai
Dermalab
Corporation
Standard Foods
(China) Co., Ltd.
Standard Foods
(Xiamen) Co.,
Ltd.
Shanghai Le Ben
Tuo Health
Technology Co.,
Ltd.		 Standard Foods
(China) Co., Ltd.
Standard
Investment
(China) Co., Ltd.		 Shanghai Standard
Foods Co., Ltd.
Dermalab S.A.		 Standard
Investment
(China) Co., Ltd.		 Standard
Investment
(China) Co., Ltd.		 Standard
Investment
(China) Co., Ltd.		 Standard
Investment
(China) Co., Ltd.
Lender Standard
Investment
(China) Co., Ltd.		 Shanghai Standard
Foods Co., Ltd.		 Accession Limited Shanghai Le Ben
Tuo Health
Technology
Co., Ltd.		 Shanghai Le Ben
De Health
Technology
Co., Ltd.		 Shanghai Le Ho
Industrial
Co., Ltd.		 Shanghai Le Min
Industrial
Co., Ltd.
No.
(Note 1)		 1 2 3 4 5 6 7

-252-

-253-

ENDORSEMENTS/GUARANTEES PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note Note Note 1:
“0” for the Company, subsidiaries are numbered from “1”.
Note 2:
Relationships between the endorsement/guarantee provider and the guaranteed party:
a.
Trading partner.
b.
Majority owned subsidiary.
c.
The Company and subsidiary owns over 50% ownership of the investee company.
d.
A subsidiary jointly owned by the Company and company’s directly-owned subsidiary.
e.
Guaranteed by the Company according to construction contract.
f.
Investee company. The guarantees were provided based on the Company’s proportionate share in an investee company.
Note 3:
The total amount shall not exceed 80% of the net value in the financial statements of Standard Foods Corporation; the amount was calculated at $12,104,239 thousand (the net value per financial statements as of September 30, 2018 of $15,017,799 thousand x 80%).
Note 4:
The total amount shall not exceed 100% of the net value in the financial statements of Standard Foods Corporation; the amount was calculated at $15,017,799 thousand (the net value per financial statements as of September 30, 2018 of $15,017,799 thousand x 100%).
Note 5:
The total amount shall not exceed 10% of the net value in the financial statements of Standard Foods Corporation, ultimate parent company; the amount was calculated at $1,501,780 thousand (the net value per financial statements as of September 30, 2018 of $15,017,799 thousand x 10%).
Note 6:
The total amount shall not exceed 100% of the net value in the financial statements of Shanghai Standard Foods Co., Ltd.; the amount was calculated at $2,989,479 thousand (the net value per financial statements as of September 30, 2018 of $2,989,479 thousand x 100%).
Note 7:
The total amount shall not exceed 80% of the net value in the financial statements of Standard Investment (China) Co., Ltd.; the amount was calculated at $3,009,368 thousand (the net value per financial statements as of September 30, 2018 of $3,761,710 thousand x 80%).
Note 8:
The total amount shall not exceed 100% of the net value in the financial statements of Standard Investment (China) Co., Ltd.; the amount was calculated at $3,761,710 thousand (the net value per financial statements as of September 30, 2018 of $3,761,710 thousand x 100%).
Note 9:
Guarantee provided by the listed parent company, guarantee provided by the subsidiary or guarantee provided to subsidiaries in mainland China, coded “Y”.
Guarantee
Provided to
Subsidiaries in
Mainland China
(Note 9)		 -
-		 Y
Y		 Y
Y
Y
Guarantee
Provided by
Subsidiary
(Note 9)		 -
-		 -
-		 -
-
-
Guarantee
Provided by
Parent Company
(Note 9)		 Y
Y		 -
-		 -
-
-

Maximum
Endorsement/
Guarantee
Amount		 $ 15,017,799
(Note 4)
15,017,799
(Note 4)		 2,989,479
(Note 6)
2,989,479
(Note 6)		 3,761,710
(Note 8)
3,761,710
(Note 8)
3,761,710
(Note 8)
Ratio of
Accumulated
Endorsement/
Guarantee to Net
Equity per Latest
Financial
Statements		 1.02%
1.23%		 -
-		 -
-
-
Amount of
Endorsement/
Guarantee
Collateralized by
Properties		 $ -
-		 -
-		 -
-
-
Amount Actually
Drawn		 $ 22,000
-		 -
-		 -
-
-
Ending Balance $ 153,575
184,290		 -
-		 -
-
-
Maximum
Balance for the
Period		 $ 154,775
185,730		 461,260
461,260		 1,382,390
1,183,701
441,420
Limits on
Endorsement/
Guarantee
Amount
Provided to Each
Guaranteed
Party		 $ 12,014,239
(Note 3)
12,014,239
(Note 3)		 1,501,780
(Note 5)
1,501,780
(Note 5)		 3,009,368
(Note 7)
3,009,368
(Note 7)
1,501,780
(Note 5)
Guaranteed Party
Nature of
Relationship
(Note 2)		 b.
b.		 d.
d.		 b.
b.
d.

Name		 Standard Beverage Company
Limited
Accession Limited		 Standard Foods (China)
Co., Ltd.
Standard Investment (China)
Co., Ltd.		 Standard Foods (Xiamen)
Co., Ltd.
Standard Foods (China)
Co., Ltd.
Shanghai Standard Foods
Co., Ltd.
Endorsement/Guarantee
Provider		 Standard Foods Corporation Shanghai Standard Foods
Co., Ltd.		 Standard Investment (China)
Co., Ltd.
No.
(Note 1)		 0 1 2

-254-

MARKETABLE SECURITIES HELD
DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Note (Continued)
December 31, 2018 Fair Value $ 13,434
5,492
90,095
12,805
80,084
100,161
215,238
62,017
-
-
-
5,205
2,110
-
-
-

Percentage of
Ownership		 -
-
7.8
0.3
-
-
-
-
1.9
0.9
5.5
1.9
7.0
0.2
7.8
1.0

Carrying
Amount		 $ 13,434
5,492
90,095
12,805
80,084
100,161
215,238
62,017
-
-
-
5,205
2,110
-
-
-
Shares 1,343,427
48,600
2,145,110
1,243,213
5,928,855
6,770,618
13,259,604
5,635,847
Note 1
500,000
2,424,242
850,500
180,376
11,200
800,000
107,815
Financial Statement Account Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Relationship with the
Holding Company		 The Company is one of the
directors
Type and Name of Marketable Securities Shares
Far Eastern International Commercial Bank
Co., Ltd.
Chunghwa Telecom Co., Ltd.
GeneFerm Biotechnology Co., Ltd.
Dah Chung Bills Finance Corp.
Mutual funds
Taishin 1699 Money Market Fund
Jih Sun Money Market Fund
Hua Nan Phoenix Money Market Fund
CTBC Hwa-win Money Market Fund
Walden VC 2, L.P.
Shares
Techgains Pan-Pacific Corporation
Authenex, Inc.
Global Strategic Investment Co., Ltd.
Paradigm Venture Capital Corporation
U-Teck Environment Corporation, Ltd.
Octamer, Inc. - Series E Preferred Stock
Octamer, Inc. - Series F Preferred Stock
Holding Company Name Standard Foods Corporation

-255-

Note Note 2 (Continued)
December 31, 2018 Fair Value $ -
-
-
-
-
-
3,913
32,038
17,014
70,056
331,473
9,236
19,479
86,503
20,295
10,280
17,802
4,013

Percentage of
Ownership		 1.2
1.2
1.2
1.3
1.3
1.2
-
-
-
-
0.7
-
-
2.0
-
-
-
-

Carrying
Amount		 $ -
-
-
-
-
-
3,913
32,038
17,014
70,056
331,473
9,236
19,479
86,503
20,295
10,280
17,802
4,013
Shares 3,455
71,397
29,173
31,135
29,102
12,938
264,531
1,973,674
1,471,492
5,186,457
6,669,471
91,440
803,258
1,596,000
90,000
1,000,000
1,453,360
297,080
Financial Statement Account Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through other
comprehensive income - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Relationship with the
Holding Company		 Parent of Charng Hui Ltd.
Charng Hui Ltd. is one of the
directors
Type and Name of Marketable Securities Fortemedia, Inc. - Series D Preferred Stock
Fortemedia, Inc. - Series E Preferred Stock
Fortemedia, Inc. - Series F Preferred Stock
Fortemedia, Inc. - Series G Preferred Stock
Fortemedia, Inc. - Series I Preferred Stock
Fortemedia, Inc. - Series - Common Stock
Mutual funds
Jih Sun Money Market Fund
Hua Nan Phoenix Money Market Fund
KGI Victory Money Market Fund
Taishin 1699 Money Market Fund
Shares
Standard Foods Corporation
Formosa Plastics Corporation
China Steel Corporation
Polytronics Technology Corp.
Taiwan Semiconductor Manufacturing Co., Ltd.
Mutual funds
Fuh Hwa Global Strategic Allocation FoF
Franklin Templeton SinoAm Franklin Templeton
Global Bond Fund of Funds-Accu.
Taishin 1699 Money Market
Holding Company Name Standard Dairy Products Taiwan
Limited
Charng Hui Ltd.

-256-

Note
December 31, 2018 Fair Value $ -
-
1,708
3,466
63,360
1,000

Percentage of
Ownership		 23.7
6.0
-
-
13.4
0.7

Carrying
Amount		 $ -
-
1,708
3,466
63,360
1,000
Shares 8,297,000
1,000,000
225,000
282,988
3,600,000
200
Financial Statement Account Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - non-current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through profit
or loss - current
Financial assets at fair value through other
comprehensive income - non-current
Financial assets at fair value through other
comprehensive income - non-current
Relationship with the
Holding Company		 Charng Hui Ltd. is one of the
directors
Type and Name of Marketable Securities Shares
Hong Da Leasing & Finance Co., Ltd.
CNEX Co., Ltd.
Mutual funds
Fuh Hwa Greater China Mid & Small Cap
Franklin Templeton SinoAm Global Bd Acc
Shares
InnoComm Mobile Technology Corp.
Shares
AsiaVest Liquidation Co.
Holding Company Name Standard Beverage Company
Limited
Domex Technology Corporation
Accession Limited

-257-

Other Terms Note 1:
The day of the transaction was approved by the Company’s board of directors.
Note 2:
The disposal cost of property plant and equipment had been deducted.
Note 3:
The payments were all received and the transfer of ownership was completed.
Price Reference The fair value of the land
and property was
$505,527 thousand,
estimated by an
independent qualified
professional valuer,
Mr. Lai, Ching-Hui
from Gold Real Estate
Appraisal Co., Ltd., a
Certified Real Estate
Appraiser in the ROC.
Purpose of
Disposal
Relationship -
Counterparty Pei Chen
Co., Ltd.
Gain (Loss) on
Disposal		 $ 369,427
(Note 2)
Collection Note 3
Transaction
Amount		 $ 508,620
(value-added
taxes
included)
Carrying
Amount		 $ 126,153
Original
Acquisition
Date		 1990.01.31-
2017.09.30
Event Date 2018.05.08
(Note 1)
Property Land and property at
Wugu Dist., New
Taipei City
Seller Standard Foods
Corporation

-258-

Note Note Note
Note
Note
Note
Note
Note
Note
Note
Note
Note		 Note:
The amounts presented above were eliminated upon consolidation.
Notes/Accounts Payable
(Receivable)
% to
Total		 8.08
-
45.12
-
98.21
22.26
99.19
71.50
36.96
5.75
Ending Balance $ 174,492
-
(174,492)
-
531,325
(531,325)
1,706,611
(1,706,611)
137,187
(137,187)
Abnormal Transaction Payment Terms -
-
-
-
-
-
-
-
-
-
Unit Price -
-
-
-
-
-
-
-
-
-
Transaction Details Payment Terms 55 days after month end closing
(net of receivables and
payables)
55 days after month end closing
(net of receivables and
payables)
55 days after month end closing
(net of receivables and
payables)
55 days after month end closing
(net of receivables and
payables)
60 days after month-end closing
60 days after month-end closing
55 days after month-end closing
55 days after month-end closing
60 days after month-end closing
60 days after month-end closing
% to
Total		 12.36
10.53
62.54
22.04
93.94
18.45
99.55
50.64
80.44
30.83
Amount $ (1,506,386)
739,330
1,506,386
(739,330)
(1,818,198)
1,818,198
(4,970,150)
4,970,150
(3,025,966)
3,025,966
Purchases
(Sales)		 Sales
Purchases
Purchases
Sales
Sales
Purchases
Sales
Purchases
Sales
Purchases
Nature of Relationships The Company’s subsidiary
Parent company of Standard
Dairy Products Taiwan
Limited
Brother company of Shanghai
Standard Foods Co., Ltd.
Brother company of Standard
Investment (China) Co., Ltd.
Parent company of Standard
Foods (China) Co., Ltd.
Standard Investment (China)
Co., Ltd.’s subsidiary
Parent company of Standard
Foods (Xiamen) Co., Ltd.
Standard Investment (China)
Co., Ltd.’s subsidiary
Related Party Standard Dairy Products
Taiwan Limited
Standard Foods Corporation
Standard Investment
(China) Co., Ltd.
Shanghai Standard Foods
Co., Ltd.
Standard Investment
(China) Co., Ltd.
Standard Foods (China)
Co., Ltd.
Standard Investment
(China) Co., Ltd.
Standard Foods (Xiamen)
Co., Ltd.
Company Name Standard Foods Corporation
Standard Dairy Products
Taiwan Limited
Shanghai Standard Foods
Co., Ltd.
Standard Investment (China)
Co., Ltd.
Standard Foods (China)
Co., Ltd.
Standard Investment (China)
Co., Ltd.
Standard Foods (Xiamen)
Co., Ltd.
Standard Investment (China)
Co., Ltd.

-259-

Note Note Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2
Note 2		 Note 1:
Amounts received before March 22, 2019.
Note 2:
The amounts presented above were eliminated upon consolidation.
Allowance for
Bad Debts		 $ -
-
$ -
$ -
$ -
-
$ -
$ -
-
-
$ -
$ -
-
$ -
$ -
-
-
$ -
$ -
-
-
$ -
Amounts Received in
Subsequent Period
$ 174,492
(Note 1)
3,819 (Note 1)
$ 178,311
$ -
(Note 1)
$ 531,325
(Note 1)
-
(Note 1)
16,042
(Note 1)
$ 547,367
$ 1,166
(Note 1)
-
(Note 1)
-
(Note 1)
$ 1,166
$ 1,233,918
(Note 1)
26,812
(Note 1)
$ 1,260,730
$ 101
(Note 1)
-
(Note 1)
9,656
(Note 1)
$ 9,757
$ 30
(Note 1)
-
(Note 1)
-
(Note 1)
$ 30
Overdue Actions Taken -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Amount $ -
-
$ -
$ -
$ -
-
-
$ -
$ -
-
-
$ -
$ -
-
$ -
$ -
-
-
$ -
$ -
-
-
$ -
Turnover
Rate		 8.60
3.01
20.65
3.65
6.08
2.94
Ending Balance for Account Receivable -
Related Parties		 Trade receivables
$ 174,492
Other receivables
3,819
$ 178,311
Financing receivables
$ 184,290
Trade receivables
$ 531,325
Financing receivables
603,964
Other receivables
16,042
$ 1,151,331
Trade receivables
$ 4,551
Financing receivables
443,055
Other receivables
16,495
$ 464,101
Trade receivables
$ 1,706,611
Other receivables
48,913
$ 1,755,524
Trade receivables
$ 171
Financing receivables
190,451
Other receivables
9,656
$ 200,278
Trade receivables
$ 30
Financing receivables
287,064
Other receivables
23,549
$ 310,643
Nature of Relationships The Company’s subsidiary
Accession Limited’s subsidiary
Brother company of Shanghai
Standard Foods Co., Ltd.
Brother company of Shanghai
Standard Foods Co., Ltd.
Parent company of Standard
Foods (China) Co., Ltd.
Standard Investment (China)
Co., Ltd.’s subsidiary
Standard Investment (China)
Co., Ltd.’s subsidiary
Related Party Standard Dairy Products
Taiwan Limited
Shanghai Standard Foods
Co., Ltd.
Standard Investment (China)
Co., Ltd.
Standard Foods (China)
Co., Ltd.
Standard Investment (China)
Co., Ltd.
Standard Foods (China)
Co., Ltd.
Standard Foods (Xiamen)
Co., Ltd.
Company Name Standard Foods Corporation
Accession Limited
Shanghai Standard Foods Co., Ltd.
Standard Foods (China) Co., Ltd.
Standard Investment (China)
Co., Ltd.

-260-

TABLE 7

STANDARD FOODS CORPORATION

DERIVATIVES TRADING INFORMATION FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

The Company was not engaged in derivatives trading during 2018.

Shanghai Standard Foods Co., Ltd. (“Shanghai Standard”) entered into foreign exchange swap contracts during 2018 to manage exposures to exchange rate fluctuation risk of foreign currency denominated assets and liabilities.

As of December 31, 2018, Shanghai Standard did not have outstanding foreign exchange swap contracts.

Standard Investment (China) Co., Ltd. (“China Standard Investment”), Standard Foods (Xiamen) Co., Ltd. (“Xiamen Standard”), Shanghai Standard, and Shanghai Le Ben De Health Technology Co., Ltd. (“Shanghai Le Ben De”) entered into structured time deposits in 2018 mainly to have earnings from favorable effects on fluctuations of interest rates.

As of December 31, 2018, China Standard Investment, Standard Foods (Xiamen) Co., Ltd. (“Xiamen Standard”), Shanghai Standard, and Shanghai Le Ben De did not have outstanding structured time deposits.

The net loss from derivative transactions of China Standard Investment, Standard Foods (Xiamen) Co., Ltd. (“Xiamen Standard”), Shanghai Standard and Shanghai Le Ben De was $19,220 thousand in 2018.

-261-

Note Note Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary
Indirect subsidiary		 Note 1:
This amount was the share of profit of the investee of $94,907 thousand minus the unrealized gain on sidestream transactions of $1,976 thousand.
Note 2:
This amount was the share of profit of the investee of $440,456 thousand minus the unrealized gain on sidestream transactions of $6,107 thousand.
Note 3:
This amount was the share of profit of the investee of $1,168 thousand plus the realized gain on upstream transactions of $352 thousand.
Note 4:
This is a limited company with no issued shares.
Share of
Profits (Loss)		 $ 92,931
(Note 1)
186,208
434,349
(Note 2)
1,765
20,789
1,520
(Note 3)
585
Net Income
(Loss) of the
Investee		 $ 94,907
186,208
440,456
15,104
39,972
1,168
585
3,674
-
-
186,412
As of December 31,2018 Carrying
Amount		 $ 3,450,370
4,772,853
950,516
252,543
210,974
80,577
12,288
105,014
-
-
4,771,781

%		 100
100
100
100
52
100
100
100
100
100
100

Shares		 123,600,000
150,060,815
30,000,000
24,100,000
10,374,399
7,907,000
Note 4
400
10,000
3,000
150,012,815
Original Investment Amount
December 31,
2017		 $ 3,936,267
4,708,891
300,853
230,000
114,116
79,072
14,350
206,905
39
96
4,707,394

December 31,
2018		 $ 3,936,267
4,710,865
300,853
230,000
114,116
79,072
14,350
266,587
39
96
4,708,566
Main Businesses and Products Investment business
Investment business
Manufacture and sale of dairy products and beverages
Investment business
Manufacture and sale of computer peripherals and
computer and information products
Manufacture and sale of beverages
Sale of health foods
Development and sale of cosmetics
Sale of cosmetics
Sale of cosmetics
Investment business
Location Tortola, British Virgin Islands
Grand Cayman, Cayman Islands
Taipei, Taiwan
Taipei, Taiwan
Hsinchu, Taiwan
Taipei, Taiwan
Yilan, Taiwan
Switzerland
Hong Kong
Spain
Hong Kong
Investee Company Accession Limited
Standard Investment (Cayman) Limited
Standard Dairy Products Taiwan
Limited
Charng Hui Ltd.
Domex Technology Corporation
Standard Beverage Company Limited
Le Bonta Wellness International
Corporation
Dermalab S.A.
Swiss Line Cosmetics China Limited
Swissderma SL
Standard Corporation (Hong Kong)
Limited
Investor Company Standard Foods Corporation
Accession Limited
Dermalab S.A.
Standard Investment
(Cayman) Limited

-262-

Note Note
$8,919,525
$8,919,525
Unlimited amount of investment (Note 10)
Note 1:
The methods for engaging in investment in mainland China include the following:
a.
Direct investment in mainland China.
b.
Indirect investment in mainland China through companies registered in a third region.
c.
Other methods.
Accumulated
Repatriation of
Investment
Income as of
December 31,
2018		 $ -
-
-
-
-
-
-
-
-
Carrying Amount
as of
December 31,
2018		 $ 3,050,302
3,885,350
1,759,800
(29,778)
263,687
29,125
1,217,367
545,148
340,237
Investment
Gain (Loss)
(Note 2)		 $ 85,797
(Note 9)
185,333
(Note 9)
158,263
(Note 9)
(11,826)
(Note 9)
(57,568)
(Note 9)
653
(Note 9)
90,047
(Note 9)
510
(Note 9)
779
(Note 9)

% Ownership
of Direct or
Indirect
Investment		 100.0
99.0
99.0
99.0
99.5
100.0
99.0
100.0
100.0
Net Income (Loss)
of the Investee		 $ 80,043
187,205
146,474
(11,945)
(57,851)
653
84,641
510
779
Accumulated
Outward
Remittance for
Investment from
Taiwan as of
December 31, 2018
$ 3,949,575
(Note 4)
3,718,677
(Note 5)
-
(Note 6)
-
(Note 6)
181,048
(Note 7)
31,220
(Note 4)
-
(Note 6)
607,717
(Note 5)
378,009
(Note 5)
Remittance of Funds Inward $ -
-
-
-
-
-
-
-
-
Outward $ -
-
-
-
-
-
-
-
-
Upper Limit on the Amount of Investment
Stipulated by Investment Commission, MOEA		 Unlimited amount of investment (Note 10)
Accumulated
Outward
Remittance for
Investment from
Taiwan as of
January 1, 2018
$ 3,949,575
(Note 4)
3,718,677
(Note 5)
-
(Note 6)
-
(Note 6)
181,048
(Note 7)
31,220
(Note 4)
-
(Note 6)
607,717
(Note 5)
378,009
(Note 5)
Method of
Investment
(Note 1)		 b.
(Note 3)
b.
(Note 5)
c.
(Note 6)
c.
(Note 6)
a. and c.
(Note 7)
c.
(Notes 4
and 8)
c.
(Note 6)
b.
(Note 5)
b.
(Note 5)
Paid-in Capital $ 3,949,575
3,755,530
1,631,668
29,949
380,418
31,220
1,307,582
607,717
378,009
Investment Amounts Authorized by
Investment Commission, MOEA		 $8,919,525
Main Businesses and Products Manufacture and sale of edible oil
products and nutritional foods
Investment and sales of edible oil
products and nutritional foods
Manufacture and sale of edible oil
products and nutritional foods
Sale of nutritional foods,
cosmetics and international
trading
Sale of nutritional foods and
international trading
Sale of nutritional foods and
international trading
Manufacture and sale of edible oil
products and nutritional foods
Property management
Property management
Accumulated Outward Remittance for
Investment in Mainland China as of
December 31, 2018
$8,919,525
Investee Company Shanghai Standard Foods Co., Ltd.
Standard Investment (China) Co., Ltd.
Standard Foods (China) Co., Ltd.
Shanghai Dermalab Corporation
Shanghai Le Ben Tuo Health
Technology Co., Ltd.
Shanghai Le Ben De Health
Technology Co., Ltd.
Standard Foods (Xiamen) Co., Ltd.
Shanghai Le Ho Industrial Co., Ltd.
Shanghai Le Min Industrial Co., Ltd.

-263-

-264-

STANDARD FOODS CORPORATION

THE CONTENTS OF SCHEDULES OF MAJOR ACCOUNTING ITEMS

Item
Major Accounting Items in Assets, Liabilities and Equity
Schedule of cash and cash equivalents
Schedule of financial assets at fair value through profit or loss - current
Schedule of financial assets at fair value through other comprehensive income - current
Schedule of financial assets at amortized cost - current
Schedule of trade receivables
Schedule of inventories
Schedule of financial assets at fair value through profit or loss - non-current
Schedule of financial assets at fair value through other comprehensive income -
non-current
Schedule of changes in investments accounted for using the equity method
Schedule of trade payables
Major Accounting Items in Profit or Loss
Schedule of operating revenue
Schedule of operating costs
Schedule of operating expenses
Schedule of labor, depreciation and amortization by function		 Schedule Index
1
2
3
4
5
6
7
8
9
10
11
12
13
14

-265-

SCHEDULE 1

STANDARD FOODS CORPORATION

SCHEDULE OF CASH AND CASH EQUIVALENTS DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

Item
Description
Interest Rate
Cash on hand
Cash in banks
Checking account deposits
Demand deposits
0.010%-0.350%
Foreign currency demand
deposits
Including RMB572 thousand @4.47,
EUR1,660 thousand @35.2 and
US$1,685 thousand @30.72
0.001%-0.480%
Cash equivalents
Time deposits
Expired in February 2019
0.700%
Foreign time deposits
Including RMB4,500 thousand @4.47,
US$7,500 thousand @30.72 and
AUD1,500 thousand @21.67 expired
in January 2019
2.100%-3.600%		 Amount
$ 1,434
31,270
254,791
128,216
414,277
100,000
282,984
382,984
$ 798,695

-266-

DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)		 Fair Value
Changes in Fair
Value Attributed
Name of Financial Assets
Shares/Units
Par Value (NT$)
Total Amount
Acquisition Cost
Unit Price
Total Amount
to Credit Risk
Note
Mutual fund
Jih Sun Money Market Fund
6,770,618.23
$14.79
$ 100,161
$ 100,000
$14.79
$ 100,161
$ 161
Taishin 1699 Money Market Fund
5,928,855.19
13.51
80,084
80,004
13.51
80,084
80
Hua Nan Phoenix Money Market Fund
13,259,603.70
16.23
215,238
215,00
16.23
215,238
238
CTBC Hwa-Win Money Market Fund
5,635,846.70
11.00
62,017
62,000
11.00
62,017
17
31,594,923.82
$ 457,500
$ 457,004
$ 457,500
$ 496

-267-

DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)		 Accumulated
Fair Value
Name of Financial Assets
Shares
Par Value (NT$)
Total Amount
Acquisition Cost
Impairment
Unit Price
Total Amount
Listed shares
Fur Eastern International Commercial Bank Co., Ltd.
1,343,427
$ 10
$ 13,434
$ 17,114
$ -
$ 10
$ 13,434
Chunghwa Telecom Co., Ltd.
48,600
10
486
4,063
-
113
5,492
$ 13,920
$ 21,177
$ -
$ 18,926

-268-

SCHEDULE OF FINANCIAL ASSETS AT AMORTIZED COST - CURRENT
DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Name
Description
Number
Par Value
Currencies
Total Amount
Annual
Interest Rate
Book Value
Remark
Far Eastern International Bank time deposit
Expired in October 2019, maturity interest
5
$ 2,900
NTD
$ 14,500
1.06%
$ 14,500
Floating
Far Eastern International Bank time deposit
Expired in November 2019, maturity interest
9
4,900
NTD
44,100
1.06%
44,100
Floating
Far Eastern International Bank time deposit
Expired in December 2019, maturity interest
6
4,900
NTD
29,400
1.06%
29,400
Floating
Far Eastern International Bank time deposit
Expired in January 2019, maturity interest
1
2,500
NTD
2,500
1.06%
2,500
Floating
Far Eastern International Bank time deposit
Expired in January 2019, maturity interest
1
2,000
NTD
2,000
1.06%
2,000
Floating
Far Eastern International Bank time deposit
Expired in February 2019, maturity interest
7
2,900
NTD
20,300
1.06%
20,300
Floating
Far Eastern International Bank time deposit
Expired in March 2019, maturity interest
8
2,900
NTD
23,200
1.06%
23,200
Floating
Far Eastern International Bank time deposit
Expired in August 2019, maturity interest
9
4,900
NTD
44,100
1.06%
44,100
Floating
The Shanghai Commercial & Saving Bank time deposit
Expired in February 2019, maturity interest
70
4,990
NTD
349,300
0.79%
349,300
Floating
The Shanghai Commercial & Saving Bank time deposit
Expired in May 2019, maturity interest
40
4,990
NTD
199,600
0.79%
199,600
Floating
The Shanghai Commercial & Saving Bank time deposit
Expired in March 2019, maturity interest
40
4,990
NTD
199,600
0.79%
199,600
Floating
HSBC Bank (Taiwan) Limited foreign currency time deposit
Expired in March 2019, maturity interest
1
1,000
AUD
21,665
1.97%
21,665
Fixed (@21.67)
HSBC Bank (Taiwan) Limited foreign currency time deposit
Expired in March 2019, maturity interest
1
1,500
AUD
32,498
1.97%
32,498
Fixed (@21.67)
$ 982,763
$ 982,763

-269-

SCHEDULE 5

STANDARD FOODS CORPORATION

SCHEDULE OF TRADE RECEIVABLES DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Client Name
Unrelated parties
Company A
Company B
Company C
Company D
Others (Note)
Less: Allowance for impairment loss
Related party
Standard Dairy Products Taiwan Limited		 Amount
$ 634,621
379,094
108,820
403,420
459,639
1,985,594
(1,428)
$ 1,984,166
$ 174,492

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

-270-

SCHEDULE 6

STANDARD FOODS CORPORATION

SCHEDULE OF INVENTORIES DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Merchandise
Finished goods
Work in progress
Raw materials
Packaging materials		 Amount
Cost
Net Realizable
Value
$ 471,073
$ 643,794
782,158
1,441,465
104,106
193,573
425,645
694,648
50,022
71,648
$ 1,833,004
$ 3,045,128

-271-

Remark Note 2 Notes 1, 2 - - - - - - - - - - - - - - -
Accumulated Impairment - - - - - - - - - - - - - - - - - -
Collateral Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Accumulated Reversal of Balance, January 1, 2018
Addition
Deduction
Impairment
Balance, December 31, 2018		 Investees
Shares/Units
Fair Value
Shares/Units
Amount
Shares/Units
Amount
Loss
Shares/Units
Fair Value		 Global Strategic Investment Co., Ltd.
850,500
$ 4,433
-
$ 772
-
$ -
$ -
850,500
$ 5,205		 Paradigm Venture Capital Corporation
200,418
1,935
-
375
20,042
200
-
180,376
2,110		 Authenex, Inc.
2,424,242
-
-
-
-
-
-
2,424,242
-		 Techgains Pan-Pacific Corporation
500,000
-
-
-
-
-
-
500,000
-		 U-Teck Environment Corporation, Ltd.
11,200
-
-
-
-
-
-
11,200
-		 Octamer, Inc. - Series E preferred stock
800,000
-
-
-
-
-
-
800,000
-		 Octamer, Inc. - Series F preferred stock
107,815
-
-
-
-
-
-
107,815
-		 ForteMedia, Inc. - Series D preferred stock
3,455
-
-
-
-
-
-
3,455
-		 ForteMedia, Inc. - Series E preferred stock
71,397
-
-
-
-
-
-
71,397
-		 ForteMedia, Inc. - Series F preferred stock
29,173
-
-
-
-
-
-
29,173
-		 ForteMedia, Inc. - Series G preferred stock
31,135
-
-
-
-
-
-
31,135
-		 ForteMedia, Inc. - Series I preferred stock
29,102
-
-
-
-
-
-
29,102
-		 ForteMedia - common stock
12,938
-
-
-
-
-
-
12,938
-		 Verisilicon Holdings Co., Ltd. - series A preferred stock
21,393
-
-
-
-
-
-
21,393
-		 Verisilicon Holdings Co., Ltd. - series B preferred stock
2,756
-
-
-
-
-
-
2,756
-		 Verisilicon Holdings Co., Ltd. - series C preferred stock
2,157
-
-
-
-
-
-
2,157
-		 Verisilicon Holdings Co., Ltd. - series E preferred stock
3,431
-
-
-
-
-
-
3,431
-		 Verisilicon Holdings Co., Ltd. - common stock
324
-
-
-
-
-
-
324
-		 $ 6,368
$ 1,147
$ 200
$ -
$ 7,315		 Note 1:
The number of shares was reduced this year due to the investee’s reduction in capital; the amount of investment in the investee decreased because of the investee’s return of investment in cash.		 Note 2:
The amount of investment in the investee increased due to the changes in the fair value.

-272-

FOR THE YEAR ENDED DECEMBER 31, 2018
(In Thousands of New Taiwan Dollars)		 Balance, January 1, 2018
Addition
Deduction
Unrealized
Balance, December 31, 2018
Accumulated
Item
Shares
Fair Value
Shares
Amount
Shares
Amount
Gain (Loss)
Shares
Fair Value
Impairment
Collateral
Remark
Emerging market shares
GeneFerm Biotechnology
Co., Ltd.
2,168,110
$ 118,943
-
$ -
23,000
$ 220
$ (28,628)
2,145,110
$ 90,095
$ -
Nil
Dah Chung Bills Finance Corp
1,243,213
14,496
-
-
-
-
(1,691)
1,243,213
12,805
-
Nil
$ 133,439
$ -
$ 220
$ (30,319)
$ 102,900
$ -

-273-

Net Assets Value Balance, January 1, 2018
Addition
Decrease
Balance, December 31, 2018
Unit Price		 Investees
Shares/Unit
Amount
Shares/Unit
Amount
Shares/Unit
Amount
Shares/Unit
%
Amount
(NT$)
Total Price
Collateral
Remark		 Accession Limited
123,600,000
$ 3,416,802
-
$ 93,873
-
$ 60,305
123,600,000
100.00
$ 3,450,370
$ 28.04
$ 3,466,096
Nil
Note 1		 Standard Dairy Products Taiwan Limited
30,000,000
944,177
-
435,854
-
429,515
30,000,000
100.00
950,516
32.18
965,466
Nil
Note 2		 Charng Hui Ltd.
24,100,000
251,912
-
15,103
-
14,472
24,100,000
100.00
252,543
24.23
584,016
Nil
Note 3		 DOMEX Technology Corporation
10,374,399
202,614
-
41,790
-
33,430
10,374,399
52.00
210,974
20.28
210,376
Nil
Note 4		 Standard Beverage Company Limited
7,907,000
80,353
-
1,619
-
1,395
7,907,000
100.00
80,577
10.13
80,089
Nil
Note 5		 Standard Investment (Cayman) Limited
150,060,815
4,668,537
-
188,182
-
83,866
150,060,815
100.00
4,772,853
31.81
4,772,853
Nil
Note 6		 Le Bonta Wellness International Corporation
13,564
-
585
-
1,861
-
100.00
12,288
-
12,029
Nil
Notes 7 and 9		 Shanghai Le Ben Tuo Health Technology Co., Ltd.
-
167,345
-
-
-
32,027
-
51.00
135,318
-
135,318
Nil
Notes 8 and 9		 $ 9,745,304
$ 777,006
$ 656,871
$ 9,865,439
$ 10,226,243		 Note 1:
The total amount of increase was $93,873 thousand of which $942 thousand was the investment and $92,931 thousand was the equity method adopted for the accounting of the investment income. The decrease of $58,834 thousand recognized this year was due to the translation adjustment.		 The other comprehensive income of $689 thousand and $782 thousand was the result of changes in adjustment on initial application of IFRS 9. Note 2:
The amount increased this year due to the investment income accounted for under the equity method of $434,349 thousand and $1,505 thousand was the result of the effect of change in tax rate. The amount decreased this year due to the receipt of the cash dividend of $423,200 thousand		 issued by the investee and the decrease of $6,315 thousand recognized this year was due to the other comprehensive income. Note 3:
This is a subsidiary of the Company, and because it held the shares of the Company, it received cash dividend from the Company. Therefore, an increase in the aggregate was $15,103 thousand of which $13,338 thousand was the adjustment to the capital surplus and $1,765 thousand was the		 investment income accounted for under the equity method. The amount decreased this year due to the receipt of the cash dividend of $9,772 thousand issued by the investee and the other comprehensive income of $4,700 thousand. Note 4:
The amount increased this year due to the investment income accounted for under the equity method of $20,789 thousand and $20,905 thousand was the result of changes in adjustment on initial application of IFRS 9 and $96 thousand was the result of the effect of change in tax rate. The		 amount decreased this year due to the receipt of the cash dividend of $31,123 thousand issued by the investee and of other comprehensive income of $2,307 thousand. Note 5:
The increase of $1,619 thousand recognized this year was due to the equity method adopted for the accounting of the investment income of $1,520 thousand and of the other comprehensive income of $99 thousand. The amount decreased this year due to the receipt of the cash dividend of		 $1,395 thousand issued by the investee. Note 6:
The total amount of increase was $188,182 thousand of which $1,974 thousand was the investment and $186,208 thousand was the equity method adopted for the accounting of the investment income. The decrease of $83,866 thousand recognized this year was due to the translation		 adjustment. Note 7:
The amount increased this year due to the investment income accounted for under the equity method of $585 thousand. The amount decreased this year due to the receipt of the cash dividend of $1,861 thousand issued by the investee.		 Note 8:
The decrease of $32,027 thousand recognized this year was due to the equity method adopted for the accounting of the investment loss of $29,540 thousand and the translation adjustment of $2,487 thousand.		 Note 9:
This is a limited company with no issued shares.

-274-

SCHEDULE 10

STANDARD FOODS CORPORATION

SCHEDULE OF TRADE PAYABLES DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Vendor Name
Unrelated parties
Company A
Company B
Others (Note)
Related party
Standard Beverage Company
Dermalab S.A.
GeneFerm Biotechnology Co., Ltd.		 Amount
$ 185,999
53,805
645,374
$ 885,178
$ 307
4,747
8,602
$ 13,656

Note: The amount of individual vendor included in others does not exceed 5% of the account balance.

-275-

SCHEDULE 11

STANDARD FOODS CORPORATION

SCHEDULE OF OPERATING REVENUES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Quantity (Tons)
Nutritious foods
90,169
Cooking products
23,560
Others
12,817
Total sales
Less: Sales returns
Sales allowances
Net sales		 Amount
$ 11,383,107
2,169,204
448,760
14,001,071
(110,443)
(1,702,721)
$ 12,187,907

-276-

SCHEDULE 12

STANDARD FOODS CORPORATION

SCHEDULE OF OPERATING COSTS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Cost of goods sold - finished goods
Raw materials, beginning of year
Add: Raw materials purchased
Transferred from other accounts
Gain on physical inventory of raw materials
Less: Sales of raw materials
Raw materials scrapped
Raw materials, end of year
Raw materials consumed
Direct labor
Manufacturing expenses
Manufacturing costs
Work in progress, beginning of year
Less: Work in progress scrapped
Loss on physical inventory of work in progress
Other use
Cost of finished goods
Work in progress, end of year
Finished goods, beginning of year
Less: Transferred to other accounts
Loss on physical inventory of finished goods
Finished goods scrapped
Finished goods, end of year
Cost of goods sold - finished goods
Cost of goods sold - merchandise
Merchandise, beginning of year
Add: Merchandise purchased
Less: Other use
Merchandise scrapped
Loss on physical inventory of merchandise
Merchandise, end of year
Cost of goods sold - merchandise
Cost of sales of raw materials
Loss on physical inventory
Inventory scrap losses		 Amount
$ 420,509
4,803,483
7,530
616
(53,212)
(2,395)
(475,667)
4,700,864
227,117
893,784
5,821,765
124,365
(568)
(47)
(12,144)
5,933,371
(104,106)
786,643
(75,516)
(1)
(1,842)
(782,158)
5,756,391
557,156
2,215,208
(9,521)
(626)
(16)
(471,073)
2,291,128
53,212
(552)
5,431
$ 8,105,610

-277-

SCHEDULE 13

STANDARD FOODS CORPORATION

SCHEDULE OF OPERATING EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Item
Advertising expenses
Salaries and pensions
Freight expenses
Taxes
Professional service fees
Rental
Insurance premiums
Amortization
Depreciation
Traveling expenses
Repair and maintenance expenses
Computer expenses
Meal expenses
Postage and telephone charges
Entertainment expenses
Employee welfare
Utilities
Donations
Others
Cost-sharing sectors (Note)		 Selling and
Marketing
Expenses
General and
Administrative
Expenses
Research and
Development
Expenses
$ 761,437
$ -
$ -
251,281
206,729
33,933
103,052
-
-
21,470
168
17
1,163
17,740
1,131
15,619
11,392
118
24,787
13,534
2,996
1,500
5,924
-
12,780
8,143
15,001
21,485
3,384
739
10,291
411
5,809
1,272
15,817
447
6,789
2,039
698
1,265
906
200
1,719
7,941
413
7,626
2,677
753
5,162
1,826
1,606
2,356
21,275
-
28,238
27,353
40,332
-
(18,511)
-
$ 1,279,292
$ 328,748
$ 104,193		 Amount
$ 761,437
491,943
103,052
21,655
20,034
27,129
41,317
7,424
35,924
25,608
16,511
17,536
9,526
2,371
10,073
11,056
8,594
23,631
95,923
(18,511)(Note)
$ 1,712,233

Note: Transferred to manufacturing expenses.

-278-

Total 740,549 66,620 35,421 15,449 54,864 54,864 912,903 912,903 175,239 175,239 14,181 14,181
$ $ $ $
2017 Classified as Classified as
Non-operating		 Operating
Income and		 Expenses
Expense		 $ 383,780
$ -		 31,272
-		 18,518
-		 15,449
-		 24,168
-		 $ 473,187
$ -		 $ 36,878
$ 426		 $ 8,721
$ -
Year Ended December 31 2018 Classified as Classified as
Classified as
Non-operating
Classified as		 Operating
Operating
Income and
Operating		 Item
Costs
Expenses
Expenses
Total
Costs		 Labor cost Salary and bonus
$ 400,577
$ 450,390
$ -
$ 850,967
$ 356,769		 Labor and health insurance
36,922
34,623
-
71,545
35,348		 Pension
17,806
20,593
-
38,399
16,903		 Remuneration of directors
-
20,960
-
20,960
-		 Others
28,385
25,483
-
53,868
30,696		 $ 483,690
$ 552,049
$ -
$ 1,035,739
$ 439,716		 Depreciation
$ 151,294
$ 35,924
$ 222
$ 187,440
$ 137,935		 Amortization
$ 2,899
$ 7,424
$ -
$ 10,323
$ 5,460		 As of December 31, 2018 and 2017, the Company had 976 and 922 employees, respectively, of which 5 directors were not concurrently appointed as employees.

-279-

  • VI. Financial difficulties of the company and related parties in the current year and up to the printing of the annual report: None.

-280-

Seven. Review of Financial Position, Financial Performance, and Risk Management

I. Financial position

Comparative financial analysis

Comparative financial analysis Comparative financial analysis Comparative financial analysis
Unit: NTD Thousand
Date
Item
As of December
31, 2017		 As of December
31, 2018		 Difference
Amount %
Current Assets 15,496,940 17,107,047 1,610,107 10.39
Property, Plant and
Equipment		 5,676,084 5,478,238 (197,846)
(3.49)
Intangible Assets 78,066 73,050 (5,016) (6.43)
Other Assets 1,458,398 1,339,321 (119,077) (8.16)
Total Assets 22,709,488 23,997,656 1,288,168 5.67
Current Liabilities 7,137,271 7,510,934 373,663 5.24
Noncurrent Liabilities 548,609 446,397 (102,212) (18.63)
Total Liabilities 7,685,880 7,957,331 271,451 3.53
Equity attributable to
owners of theparent		 14,785,740 15,806,926 1,021,186 6.91
Capital Stock 9,150,897 9,150,897 -
-
Capital Surplus 83,124 93,045 9,921 11.94
Retained Earnings 5,833,327 6,915,111 1,081,784 18.54
Other equity (260,426) (330,945) (70,519) (27.08)
TreasuryStock (21,182) (21,182) -
-
Non-controllinginterest 237,868 233,399 (4,469) (1.88)
Total equity 15,023,608 16,040,325 1,016,717 6.77
Remark:
1. The decrease in other equity in 2018 was primarily a result of the decrease in exchange
differences on translation of foreign financial statements by NT$105 million from the same period
of last year.
  1. The decrease in other equity in 2018 was primarily a result of the decrease in exchange differences on translation of foreign financial statements by NT$105 million from the same period of last year.

-281-

II. Financial performance

(I) Comparative analysis of operational results

(I) Comparative analysis of operational results (I) Comparative analysis of operational results (I) Comparative analysis of operational results (I) Comparative analysis of operational results (I) Comparative analysis of operational results
Unit: NT$ Thousand
Fiscal year
Item		 2017 2018 Increase
(decrease)
amount		 Increase
(decrease)
Sales revenue 26,477,924 27,340,587 862,663 3.26%
Gross Profit 7,399,955 8,254,345 854,390 11.55%
OperatingIncome 2,794,878 3,149,836 354,958 12.70%
Non-operatingIncome/expense (49,475) 526,396 575,871 1,163.96%
Earnings before tax 2,745,403 3,676,232 930,829 33.91%
Income tax expense 535,494 707,925 172,431 32.20%
Net income from continuingoperations 2,209,909 2,968,307 758,398 34.32%
Loss from discontinued operations - -
-
-
Net income(loss) 2,209,909 2,968,307 758,398 34.32%
Other comprehensive profit and loss for
theperiod(Net amount after tax)		 (214,628) (138,749)
75,879		 35.35%
Current comprehensive income/loss 1,995,281 2,829,558 834,277 41.81%
Analysis of financial ratio change:
1. The increase in non-operating revenue and expenditure in 2018 was primarily a result of the
increase in disposition of the Wugu Factory by NT$369 million from the same period of last
year.
2. The increase in net income before tax in 2018 was primarily a result of the increase in
non-operating revenue and expenditures by NT$576 million this year, the increase in
operating revenue of Standard Foods by NT$928 million from the same period of last year,
and the increase in operating revenue of Standard Foods (Xiamen) by NT$2.014 billion.
3. The increase in income tax expenses in 2018 was primarily a result of the increase in
income tax expenses derived from the net income before tax calculated at the statutory tax
rate by NT$345 million this year.
4. The increase in income from continuing operations in 2018, increase in net income, and the
total comprehensive income were primarily a result of the increase in non-operating revenue
and expenditures by NT$576 million this year, the increase in operating revenue of Standard
Foods by NT$928 million from the same period of last year, and the increase in operating
revenue of Standard Foods (Xiamen) by NT$2.014 billion.
5. The decrease in other comprehensive income in 2018 was primarily a result of the decrease
in defined benefit plan remeasurement and the decrease in unrealized evaluation income on
equity instrument under other comprehensive income at fair value from the unrealized income
on available-for-sale financial assets of lastyear.

  1. The decrease in other comprehensive income in 2018 was primarily a result of the decrease in defined benefit plan remeasurement and the decrease in unrealized evaluation income on equity instrument under other comprehensive income at fair value from the unrealized income on available-for-sale financial assets of last year.

  2. (II) Potential impact on and significant change of the future business operations of the Company: None.

-282-

III. Analysis of cash flows

(I) Cash flow analysis of the current year

Unit: NT$ Thousand Unit: NT$ Thousand
Cash and cash
equivalents
beginning of
the year
(1)		 Net cash inflows
from operating
activities during
the year
(2)		 Other cash
outflows
(3)(Note)		 Cash surplus
(Deficit)
(1)＋(2) - (3)		 Remedy for cash
shortfall
Investing
plans		 Financing
plans
3,152,682 2,639,247 3,201,977 2,589,952 N/A N/A

  1. Operating activities: Net cash inflow in the current period amounted to NT$2,639,247 thousand mainly from operating income.

  2. Investing activities: The net cash outflow, NT$560,463 thousand, was primarily a result of the purchase of the financial assets at amortized cost.

  3. Financing activities: The net cash outflow, NT$2,477,714 thousand, was primarily a result of the decrease in short-term borrowing and payment of cash dividends.

Note: It includes the effect of exchange rate on cash and cash equivalents.

(II) Corrective action for insufficient liquidity and liquidity analysis

  1. No insufficient liquidity occurred for the year.

  2. Analysis of liquidity over the past two years

Fiscal year
Item
2017(1)		 2018(2) Increase (decrease)
(2)-(1) / (1)
Cash flow ratio 35.62 35.14 (1.35) %
Cash flow adequacy
ratio		 88.34 101.02 14.35%
Cash reinvestment
ratio		 5.88 3.93 (33.16) %
Analysis of financial ratio change:
Cash Reinvestment Ratio: The decrease in cash reinvestment ratio in 2018 was
primarily a result of the increase in cash dividends from last year.

-283-

(III) Forecast of cash liquidity for the next fiscal year

Unit: NT$Thousand Unit: NT$Thousand
Cash and cash
equivalents
beginning of the
year
(1)
Net cash
inflows from
operating
activities
during the year
(2)		 Other cash
outflows
(3)		 Cash surplus
(deficit)
(1)＋(2) - (3)		 Remedyfor cash shortfall
Investing
Plans		 Financing
Plans
2,589,952 1,456,124 2,500,055 1,546,021 N/A N/A

1. Cash flow analysis for the next fiscal year

  • (1) Sales activities: Estimated cash inflows were the results of estimated operating profit.

  • (2) Investment activities: It was mainly due to the increase of property, plant and equipment.

  • (3) Investment activities: Mainly due to cash dividend distribution.

2. Corrective action for insufficient cash liquidity and liquidity analysis: N/A.

IV. Impact of major capital expenditure on finance and business in the current year.

(I) Major capital expenditure and the funding sources of the year

Unit: NT$ Thousand

Projects Item Actual or
Expected
Sources of
Capital		 Actual or
Expected
Dates of
Completion		 Total
Capital
Needed		 Actual or expected capital Actual or expected capital Actual or expected capital expenditures expenditures
2018 2019 2020 2021 2022
Procurement of
machinery,
transportation and
office equipment and
computer software;
betterment projects for
premises and buildings
and land use		 Self-sufficient
capital
2019		 647,402 386,244 261,158 - - -

(II) Expected effectiveness from expansion plans:

1. Expected increase in production and sales volume, value and gross profit: Annual production volume increased by 8% with annual sales increased by 9% and annual gross margin up by 12%.

2. Other effects: The upgrade of plant and equipment could help to increase production capacity and reduce the dependence on outsourcing. In addition, demand in nearby market could be met efficiently that helped to reduce the cost of logistics and improve the overall profit of the Company.

-284-

V. Reasons and remedial plans for investment gain or loss occurred in the current year and the investment plan for the next year

Unit: NT$ Thousand

Remark
Item
2018
Income
(Loss)
Amount		 Policies Reasons for gain or
loss		 Remedial plans Investment plan in
one year
Shanghai
Standard
Foods Co.		 80,043
Investment had been
mainly focusing on the
food-related industry and
has shifted to production
for the group’s cooking
oil brands in China in
recentyears.
Increased market
demand and rising
capacity utilization.		 Work with the team
together to integrate
all resources.		 Will be based on
future market
development.
Standard Dairy
Products
Taiwan Ltd.
440,456
Focus on the product
development and sales of
food-related industry for
increasing market share
and generating profits.
Stable sales growth
and high production
capacity utilization.		 Grasp the pulse of the
market, continue to
develop new products
to meet customer
needs with innovative
ideas, and manage
costs and expenses to
maintainprofits.		 No defined
investment plan is
made so far.
Standard
Investment
(China) Ltd.		 187,205
Established as Standard
Food Group's investment
and sales head office in
China to expand sales
from the local market and
generate profits.
Stable growth in sale
performance with
profit increased
incrementally.		 Initiates focused
marketing by market
segmentation,
optimizing product
structure, and
expanding marginal
contribution.		 Depends on future
changes in market
demand to enhance
multi-channel
development and
improve
competitive
advantages.
Standard
Foods (China)
Ltd.		 146,474
Establish as the
production base for
edible oil and nutritious
food products.		 Increased market
demand and rising
capacity utilization.		 Expand product lines
to fully utilize
production capacity
and reduce fixed cost
amortization.		 Continue to
implement relevant
product expansion
plans.
Standard
Foods
(Xiamen) Co.,
Ltd.		 84,641
Designed as the base for
the production of edible
oil and nutritional foods.		 Demand in market
surged with improved
use of capacity
utilization rate.
Expansion of product
lines for full utilization
of production capacity
and reduced the
allocation of fixed
cost.

Continue the
implementation of
related product
development plans.
Dermalab S.A.
3,674
Plan all-rounded
development and
products to cater the
change of market
structure and consumer
habits.		 Going under
development planning
and market expanding
stage.

Actively expand the
market reach and
strengthen internal
control mechanism.		 Continue to
develop the beauty
and cosmetic
market.

-285-

VI. Risk management in the most recent year and up to the printing of the annual report:

(I) The impact of interest rates, foreign exchange rates, and inflation on the Company’s profit and loss and the remedial measures:

1. Interest rate: The consolidated companies’ interest rate risk primarily derived from bank loans. In 2018, the interest expenses on bank loans accounted for about 2.2% of the net income before tax. Therefore, the changes in interest rate are not expected to render material effect to the consolidated companies’ income. In the future, the Company will continue to observe the interest rate movement, and adjust the assets and liabilities to mitigate the interest rate risk.

2. Exchange rate: As most ingredients of the combined business were imported overseas, any change in the exchange rate will affect profitability. In addition to establishing defined operational strategies and strict risk control processes, Standard Food will respond to the changes in the spot exchange rate to reduce exchange volatility risk timely.

3. Inflation: The combined business keeps abreast of global political and economic changes and the fluctuation of the prices of terminal products in market, and keeps positive interactions with the suppliers, channel marketers, and customers. In addition, it also adopted adjustable strategies in procurements and marketing to tackle with the impact from inflation effectively. As such, there will be no significant influence on the profitability and operation of the combined business.

  • (II) High-risk investments, highly-leveraged investments, loans to other parties, endorsements, guarantees, and derivatives transactions; the main reasons for the profits/losses generated thereby, and response measures to be taken in the future:

The combined business did not engage in any high-risk and high-leverage investment in 2018 to the day this Report was printed. For hedging the risk deriving from the fluctuation of prices of raw materials and exchange rate in China, the combined business used futures contracts and FX swap contracts, which could help to reduce the risk deriving from the fluctuation of prices of raw materials and exchange rate. Yet, the risk of price and exchange rate fluctuation cannot be fully eliminated.

In the loaning of funds to third parties by the combined business in 2018 to the day this Report was printed, the combined business only loaned to direct or indirect subsidiaries in which they hold more than 50% of their stakes. Loaning to the aforementioned subsidiaries served the purpose of working capital for these business entities.

The endorsements/guarantees made by the consolidated companies in 2018 until the date of publication of the Annual Report refers to those made by the Company to the subsidiaries wholly owned by the Company. The undertaking of endorsement/guarantee in favor of the aforementioned subsidiaries served the purpose of guarantee for these business entities in access to financing.

-286-

  • (III) Major factor to impact research projects and the expected research expenditures in the future:
the future:
Research projects Completion Expected
research
expenditure in
the future		 Expected
completion time		 Major factors to impact
future success
The research and
development of
health foods		 Completed
26.17%		 NT$5,992
thousand		 Q4 2019 Product development and
clinical test result

  • (IV) The impact of changes in domestic and foreign policy and law on the Company’s financial operations and the response measures: The Ministry of Health and Welfare launched the new system of 8 measures including food traceability and labelling with effect on January 1 2017 to fortify food hygiene and safety management and protect the rights of the consumers. The combined business will continue to pay close attention to dynamics of essential policies at home and abroad for proper responses, and persists to its commitment of “Quality and Safety”. The combined business will exercise strict control over every facets of food production for the proper performance of supply chain management and make the health of the consumers as the foremost concern.

  • (V) The impact of technological change on the Company’s financial operations and the response measures: Standard Foods highly treasures technological development and industrial change and has committed to the use of information technology such as the introduction of the ERP system, the installation of the videoconferencing system of the whole group, the installation of Internet phones, online management system of the employees, and the human resources management system for the effective use of information technology in a positive stance so as to reduce costs and enhance the competitiveness of the entity.

  • (VI) Impact of changes in corporate image on business crisis management and response measures: Standard Foods believes in repaying society in multiple ways, in addition to making donations or sponsoring the activities of educational, charitable and minority groups from time to time, product quality and safety are also closely monitored. The Company has obtained GMP Good Manufacturing Practice, CAS Premium Agricultural Products and ISO 22000 Food Safety and Health Certification, and the long-lasting trust of consumers.

  • (VII) Expected benefits or risks and responsive measures associated with merger and acquisition plans: N/A.

  • (VIII) The expected effect and possible risk of plant expansion and the response measures: Replacement for new facilities will be necessary for the improvement of production capacity and quality. The construction of Standard Foods (Xiamen) Co., Ltd. was completed and could utilize its geographic advantage for the integration of regional resources for lowering the cost of products and transportation. In the future, expansion will be introduced to other product lines for meeting the needs of sales of Standard Foods in China with the expectation of enlarging the scale of sale and enhancing the operation performance in China. No risk will be anticipated.

  • (IX) Risk of centralized purchase or sales, and the response measures: The major

-287-

individual vendor of Standard Foods, Vendor A, accounted for 13.5% of the total purchase amount in 2018, while the other individual vendors were less than 10% of the total purchase amount in 2018. In addition, Company A was the major sales customer who accounted for 16.6% of the net sales. The other sales customers accounted for less than 10% of the total sales. Therefore, there was no centralized purchase or sales.

  • (X) The impact, risk and response measures of material shares transfers or conversions by directors, supervisors, or major shareholders with over 10% shareholdings: Directors or shareholders holding more than 10% of the shares did not have massive transfer or replacement of equity. There is not significant influence of risk to the Company.

  • (XI) The impact of changes in the company’s operation rights, risk and response measures: None, as shares transferred from the Chairman (CEO) are held under trust; therefore, no operation rights are impacted.

  • (XII) The risk of the finalized or pending major litigation, non-litigation, or administrative disputes involving the company and its directors, supervisors, President, person-in-charge, shareholders with over 10% shareholdings, and subsidiaries significantly affecting shareholder equity or security price: None.

(XIII) Other important risks and responsive measures:

  1. Risk management policy:

Standard Foods’ risk management policy is to identify, measure, monitor, and control the mechanisms of risk management, to install an overall risk management system, and promote an appropriate risk management-oriented business model in order to achieve business goals and enhance shareholder value.

For the risks deriving from business marketing, production operations, human resources planning, new product development and financial and accounting control, Standard Foods responded with the rules, regulations, and system already established. In addition, Standard Foods actively developed more advanced and highly sensitive procedures and standards for the monitoring, assessment, and control of risks with equal balance of safety and efficiency to build a more efficient business model economically such as the fortification of the information system and reinforcement of the early warning, monitoring, and control capacity.

  1. Organizational structure for risk management:

Standard Foods has established a Risk Response Organization with the vertical division of labor in effect under the centralized control of the President. There are several functional units empowered with relevant authority for the advocacy of risk management in all aspects of the operation.

  • (1) Financial risk, liquidity risk, credit risk, and legal risk: The Finance & Accounting and Compliance units are responsible for strategy formation and enforcement. In addition, they analyze and assess the responsive measures adopted for changes in laws, policies, and market development, which are audited and monitored though the risk assessment by the auditing unit.

  • (2) Market risk: The department heads of Standard Foods are to have strategies formed and enforced in accordance with the job responsibilities. In addition, they analyze and assess the responsive measures for changes in laws,

-288-

policies, and market development.

  • (3) Auditing Office: It is under the direct administration of the Board of Directors. It regulates the Company’s risk assessment and control operating procedures to help complete the overall risk management action plans. In addition, it also applies a risk assessment and audit model to examine high risk items that affect the goal achievement of the Company and affiliated companies; also manages an internal control system to increase the value of the organization and improve management and operational risk.

VII. Other important matters: None.

-289-

==> picture [342 x 588] intentionally omitted <==

-290-

(2) Related party information
Unit: NTD Thousand, unless otherwise stated
Major business or products		 Production and sales of dairy
products and beverage		 Production and sales of beverages Investment Selling of health supplement products Manufacture and sale of computer
peripherals and computer appliances		 Investment Investment Investment Development and sales of cosmetics
and skincare products		 Sales of cosmetics and skincare
products		 Production and sales of edible oil and
nutritious products		 Investments/selling of cooking oil
and nutriments		 Making and selling cooking oil and
nutriments		 Sales of nutrition foods and
import/export trade.		 Sales of nutrition foods and
import/export trade.		 Technological transfer, technical
consultation, and technical service in
health technology.

Total paid-in capital		 300,000 79,070 241,000 10,000 199,471 US$123,600 thousand
US$150,125 thousand		 US$150,051 thousand CHF 400 thousand €3 thousand US$123,500 thousand US$121,213 thousand US$55,000 thousand RMB6,000 thousand RMB80,100 thousand US$1,000 thousand
Address 5F., No.136, Sec. 3, Ren’ai Rd., Da’an Dist., Taipei City 5F., No.136, Sec. 3, Ren’ai Rd., Da’an Dist., Taipei City 5F., No.136, Sec. 3, Ren’ai Rd., Da’an Dist., Taipei City 3F., No.136, Sec. 3, Ren’ai Rd., Da’an Dist., Taipei City No.6, Hsinan Road, Hsinchu Science Industrial Park,
Hsinchu City		 Portcullis Chambers, 4th Floor, Ellen Skelton
Building, 3076 Sir Francis Drake Highway, Road
Town, Tortola, British Virgin Islands VG1110		 P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West
Bay Road, Grand Cayman, KY1– 1205, Cayman Islands		 Room 1004, AXA Centre, 151 Gloucester Road,
Wanchai, Hong Kong.		 Seestrasse 59,8703 Erlenbach, Switzerland CalleBalmes 177, 08006 Barcelona, Spain 3rdfloor, Building 8, o.1128, Wuzhong Road, Shanghai No. 88, Dalien W. Rd., Economy and Technology
Development District (New District), Taicang Port		 No. 88, Dalian W. Rd., Economy and Technology
Development District (New District), Taicang Port		 418 Futer E. Rd Sec one., Room 703, Level 7, Shanghai
Free-Trade Zone		 29 Chiatai Rd., 1stBuilding West Wing, Room 558,
Shanghai Free-Trade Zone		 1128 Wuzhong Road, 2ndFloor, Block 8, Shanghai City

Date of
Establishment		 April 16,
1999		 March 24,
1998		 April 28,
1997		 February 23,
2005		 July 30, 1986 May 17,2000 August 5,
2011		 August 30,
2011		 October 31,
1989		 July 5,2012 September 11,
2001		 December 26,
2011		 January 21,
2012		 July 25, 2014 December 2,
2014		 May 11,2015

Corporation		 Standard Dairy Products Taiwan Ltd. Standard Beverage Ltd. Charng Hui Ltd. Le Bonta Wellness International Co. Domex Technology Corporation Accession Limited Standard Investment (Cayman) Limited Standard Corporation (Hong Kong) Ltd. Dermalab S.A. Swissderma, SL Shanghai Standard Foods Co. Standard Investment (China) Ltd. Standard Foods (China) Ltd. Shanghai Dermalab Corporation Le Bonta Wellness Co., Ltd.. Shanghai Le Ben De Health Technology
Co., Ltd.

-291-

Major business or products Manufacture and sales of cooking oil
and nutrition supplements		 Property management Property management (3) Shareholders of the Company who are also the shareholders of the wholly owned subsidiaries or the subsidiaries:None.
(4) The division of business operations of affiliated companies and the related business of the affiliated companies:
Standard Foods Corporation and its affiliated companies are principally engaged in food production, trading, investment, and the
manufacturing of computer peripherals and IT product manufacturing.
Fresh milk, yogurt, and flavored milk of Standard Foods Corporation are sold to Standard Dairy Products Taiwan Ltd. through which these
products will be distributed to the market;
Standard Diary Products Taiwan Limited sells its cereal beverages, liquid milk for infants, and Quaker Complete Nutrition Food to
Standard Foods Corporation for resale to market;
The beverages of Standard Beverage Ltd. were sold to Standard Foods Corporation for resale to market.
The sunflower seeds of Inner Mongolia Jia Tai Agriculture Science and Technology Development Co. are sold to Shanghai Standard
Foods Co. as the raw material for edible oil. Standard Investment (China) Ltd. sells edible oil products purchased from the Shanghai
Standard Foods Co. and Standard Foods (China) Ltd., for resale. Standard Foods (Xiamen) Co., Ltd. will manufacture and sell edible oil
and nutrition supplement.
Le Bonta Wellness Co., Ltd. sells nutrition supplements and engages in import-export trade;
Shanghai Le Ben De Health Technology Co., Ltd. makes technology transfer, consulting and service within the field of health technology.
Shanghai Dermalab Corporation sells nutrition supplements and cosmetics and engages in import-export trade.
Dermalab S.A and Swissderma, SL sell cosmetics and skincare products.
Shanghai Le Ho Industrial Co., Ltd. and Shanghai Le Min Industrial Co., Ltd. engage in property management;
Le Bonta Wellness International Co. mainly distributes health supplement products.
Total paid-in capital US$40,000 thousand
US$18,600 thousand
US$11,600 thousand
Address No. 99 Sandu Rd. Xiamen Pian District, Pilot Free Trade
Zone		 Room BN 138, Building No. 22, Alley No. 88, No. 1~30,
Minbei Road, Shanghai.		 Room BN 139, Building No. 22, Alley No. 88, No. 1~30,
Minbei Road, Shanghai.
Date of
Establishment		 Sep 2,2015 Jun 8,2015 Jun 8,2015
Corporation Standard Foods (Xiamen) Co., Ltd. Shanghai Le Ho Industrial Co., Ltd. Shanghai Le Min Industrial Co., Ltd.

-292-

Shareholding Shareholding
ratio (Capital
investment
ratio)		 100.00%
─
─
─		 100.00%
─		 ─ 100.00%
─
─
─		 100.00%
─		 100.00%
─
─
─		 100.00%
─		 100.00%
─
Shares (Invested capital) 30,000,000 shares
─
─
─		 30,000,000 shares
─		 ─ 7,907,000 shares
─
─
─		 7,907,000shares
─		 24,100,000shares
─
─
─		 24,100,000shares
─		 NT$ 10,000 thousand founded
─
Name or Representative Standard Foods Corporation
Representative: Ter-Fung Tsao
Yao Steven Yih Chun
Chris Hong		 Standard Foods Corporation
Representative: Sophia Huang		 Kenny Dai Standard Foods Corporation
Representative: Ter-Fung Tsao
Glendy Chiang
Chris Hong		 Standard Foods Corporation
Representative: Sophia Huang		 Standard Foods Corporation
Representative: Yao Steven Yih Chun
Wendy Tsao
Smart Hsu		 Standard Foods Corporation
Representative: Sophia Huang		 Standard Foods Corporation
Representative: Yao Steven Yih Chun
Title Director Supervisor President Director Supervisor Director Supervisor Director
Corporation Standard Dairy Products Taiwan Ltd. Standard Beverage Ltd. Charng Hui Ltd. Le Bonta Wellness International Co.

-293-

Shareholding Shareholding
ratio (Capital
investment
ratio)		 52.01%
─
2.72%
─		 0.02% 2.72% ─
100.00%		 ─
100.00%		 ─
100.00%		 ─
─
─
─
─
100.00%
Shares (Invested capital) 10,374,399shares
─
542,513shares
─		 3,794shares 542,513shares ─
Standard Foods Corporation
holds 123,600,000 shares		 ─
Standard Foods Corporation holds
150,124,814 shares.		 ─
Standard Investment (Cayman)
Limited holds 150,050,814 shares.		 ─
─
─
─
─
Accession Limited holds 400
shares.
Name or Representative Standard Foods Corporation
Representative: Ter-Fung Tsao
Chun-Hsin Ku
Chris Hong		 Sophia Huang Chun-Hsin Ku Ter-Fung Tsao Ter-Fung Tsao Ter-Fung Tsao Michael Massalsky
Arthur Tsao
Yao Steven Yih-Chun
Glendy Chiang
Kelly Yao
Title Director Supervisor President Director Director Director Chairman
Director
Director
Director
Director
Corporation Domex Technology Corporation Accession Limited Standard Investment
(Cayman) Limited		 Standard Corporation (Hong Kong)
Ltd.		 Dermalab S.A.

-294-

Shareholding Shareholding
ratio (Capital
investment
ratio)		 ─
─
─
─
100.00%		 ─ ─ ─
─
─
─
99.00%		 ─ ─ ─
─
─
─
100.00%		 ─
Shares (Invested capital) ─
─
─
─
US$ 123,500 thousand founded
through Accession Limited		 ─ ─ ─
─
─
─
US$ 120,000 thousand founded
through Standard Corporation (Hong
Kong) Limited		 ─ ─ ─
─
─
─
US$55,000 thousand founded through
Standard Investment (China) Ltd.		 ─
Name or Representative Jason Hsuan
Arthur Tsao
Kelly Yao
Wei-Lun Tang		 Chris Hong Arthur Tsao Jason Hsuan
Ter-Fung Tsao
Arthur Tsao
Glendy Chiang		 Chris Hong Arthur Tsao Jason Hsuan
Arthur Tsao
Kelly Yao
Wei-Lun Tang		 Chris Hong
Title Chairman
Director
Director
Director		 Supervisor President Chairman
Director
Director
Director		 Supervisor President Chairman
Director
Director
Director		 Supervisor
Corporation Shanghai Standard Foods Co. Standard Investment (China) Ltd. Standard Foods (China) Ltd.

-295-

Shareholding Shareholding
ratio (Capital
investment
ratio)		 ─ ─
─
─
100.00%		 ─ ─ ─
─
─
─
51.00%
49.00%		 ─ ─ ─
─
─
100.00%		 ─
Shares (Invested capital) ─ ─
─
─
Founded by Standard Investment
(China) Ltd. with RMB 6,000 thousand		 ─ ─ ─
─
─
─
Founded by Standard Foods
Corporation with RMB 40,900
thousand
Founded by Standard Investment
(China) Ltd. with RMB39,200
thousand		 ─ ─ ─
─
─
Accession Limited funded USD1,000
thousand		 ─
Name or Representative Arthur Tsao Arthur Tsao
Kelly Yao
Guo-Long Chen		 Chris Hong Arthur Tsao Jason Hsuan
Arthur Tsao
Kelly Yao
Hui-Min Fang		 Chris Hong Arthur Tsao Arthur Tsao
Kelly Yao
Guang-Yao Yu		 Wei-Lun Tang
Title President Chairman
Director
Director		 Supervisor President Chairman
Director
Director
Director		 Supervisor President Chairman
Director
Director		 Supervisor
Corporation Shanghai Dermalab Corporation Le Bonta Wellness Co., Ltd. Shanghai Le Ben De Health
Technology
Co., Ltd.

-296-

Shareholding Shareholding
ratio (Capital
investment
ratio)		 ─ ─
─
─
─
100.00%		 ─ ─ ─
─
─
100.00%		 ─ ─ ─
─
─
100.00%		 ─ ─
Shares (Invested capital) ─ ─
─
─
─
Founded by Standard Foods (China)
Ltd. With USD40,000 thousand		 ─ ─ ─
─
─
USD 18,600 thousand founded by
Standard Corporation (Hong Kong)
Ltd.		 ─ ─ ─
─
─
USD 11,600 thousand founded by
Standard Corporation (Hong Kong)
Ltd.		 ─ ─
Name or Representative Arthur Tsao Jason Hsuan
Arthur Tsao
Kelly Yao
Wei-Lun Tang		 Chris Hong Arthur Tsao Arthur Tsao
Kelly Yao
Wei-Lun Tang		 Chris Hong Arthur Tsao Arthur Tsao
Kelly Yao
Wei-Lun Tang		 Chris Hong Arthur Tsao
Title President Chairman
Director
Director
Director		 Supervisor President Chairman
Director
Director		 Supervisor President Chairman
Director
Director		 Supervisor President
Corporation Standard Foods (Xiamen) Co., Ltd. Shanghai Le Ho Industrial Co., Ltd. Shanghai Le Min Industrial Co., Ltd.

-297-

Unit: NT$ Thousand Earnings per
share ($)
(after-tax)		 14.68 0.15 0.63 2.00 (Note 1) 0.77 (Note 1) (Note 1) 9.19 1.24 1.24 (Note1) (Note1) (Note1) (Note1) (Note1) (Note1)
Net income
(loss)		 440,456 1,168 15,104 39,972 586 94,907 80,043 653 3,674 186,208 186,412 187,205 146,474 (11,945) (57,851) 84,641 510
Operating
Income (loss)		 540,783 (2,966) (5,165) 34,601 284 (2,854) 9,384 (55) 3,408 (226) (218) (170,244) 200,479 (9,572) (59,930) 147,113 (957)
Sales revenue 3,354,972 1,759 - 1,671,826 8,029 - 1,935,496 - 158,377 - - 11,948,854 4,992,645 87,921 3,905 3,761,952 -
Net worth 965,465 80,089 584,016 404,570 12,030 3,466,097 3,050,389 29,125 45,150 4,772,852 4,771,781 3,924,596 1,777,856 (30,079) 265,012 1,229,855 545,147
Total
Liabilities		 761,749 120,763 337 990,007 826 2,276 492,881 123 129,191 22 107 3,946,352 1,652,329 70,209 101,188 1,154,855 271
Total Assets
1,727,214
200,852		 584,353
1,394,577		 12,856
3,468,373
3,543,270		 29,248 174,341 4,772,874 4,771,888 7,870,948 3,430,185 40,130 366,200 2,384,710 545,418
Stock capital 300,000 79,070 241,000 199,471 10,000 3,979,085 3,949,575 31,220 13,023 4,710,865 4,708,566 3,755,530 1,631,668 29,949 380,418 1,307,582 607,717
Corporation Standard Dairy Products Taiwan Ltd. Standard Beverage Ltd. Charng Hui Ltd. Domex Technology Corporation Le Bonta Wellness International Co. Accession Limited Shanghai Standard Foods Co. Shanghai Le Ben De Health
Technology Co., Ltd.		 Dermalab S.A. Standard investment
(Cayman) Limited
Standard Corporation (Hong Kong)
Ltd.		 Standard Investment (China) Ltd. Standard Foods (China) Ltd. Shanghai Dermalab Corporation Le Bonta Wellness Co., Ltd.. Standard Foods (Xiamen) Co., Ltd. Shanghai Le Ho Industrial Co., Ltd.

-298-

Earnings per Corporation
Stock capital
Total Assets
Total
Liabilities
Net worth
Sales revenue
Operating
Income (loss)
Net income
(loss)
share ($)
(after-tax)		 Shanghai Le Min Industrial Co., Ltd.
378,009
340,493
256
340,237
-
(621)
779
(Note1)		 Note 1: The Company held no stock share. (II) Consolidated financial statements of the related parties:Same as the Consolidated Financial Statements of the parent company and subsidiaries. For the Consolidated Financial Statements 2018, please see pages 76-173 of the Annual Report. (III)
Relationship report of the related parties:N/A.		 II. Private subscription of marketable security in the most recent years and up to the printing of the annual report:N/A. III. The stock shares of the Company held or disposed of by the subsidiary in the most recent years and up to the printing of the annual report: Unit: NTD Thousand; Shares; % Name of
Subsidiary
Total paid-in
capital
Fund source
Shareholding
ratio of the
Company
Date of acquisition or
disposition
Shares and amount acquired
Shares and
amount
disposed
Investment
gain (loss)
Shareholdings &
amount up to the
printing date of the
annual report
Under
pledge
Endorsement
amount made
for the
subsidiary
Amount
loaned to the
subsidiary		 Bought 166,000 shares 2000
for NT$4,938
-
-		 thousand Charng Hui
Ltd
241,000
Self-sufficient
capital
100%
6,669,471 shares
NT$21,182
thousand
-
-
-
2000
9,960 shares from
stock dividend
-
-
Bought 2,163,000		 shares for 2001
NT$16,244
-
-		 thousand 2009
11,694 shares from
-
-

-299-

Amount
loaned to the
subsidiary
Endorsement
amount made
for the
subsidiary
Under
pledge
Shareholdings &
amount up to the
printing date of the
annual report
Investment
gain (loss)		 - - - - - - - - -
Shares and
amount
disposed		 - - - - - - - - -
Shares and amount acquired stock dividend 352,598 shares from
stock dividend		 675,813 shares from
stock dividend		 810,975 shares from
stock dividend		 628,506 shares from
stock dividend		 433,669 shares from
stock dividend		 525,221 shares from
stock dividend		 635,517 shares from
stock dividends		 256,518 shares from
stock dividends		 -
Date of acquisition or
disposition		 2010 2011 2012 2013 2014 2015 2016 2017 Until the report
publication
date this year
Shareholding
ratio of the
Company
Fund source
Total paid-in
capital
Name of
Subsidiary

-300-

IV. Other disclosures:

(I) Provision for asset and liability impairments

  1. Accounts receivable allowance for doubtful accounts

Purpose: To assess the risk of accounts and notes receivables collection, the impairment of assets is assessed and appropriated in accordance with the collection experience of the customers and the collection rate derived from a depreciation analysis of each sample group.

Provision basis:

  • (1) Recording allowance for bad debt:

    • 1.1 The Company may classify the accounts and notes receivable account by the number of transactions or by the credit limit of each customer in accordance with the internal accounts receivable management mechanism:

      • A. The Company classifies all the uncollected transactions at the closing date of the fiscal year into different groups and assesses the impairment amount for each uncollected transaction and group.

      • B. The Company divided the aforementioned groups further into four categories based on the risk features.

    • 1.2. Three customer categories:

      • A. General accounts: The impairment amount is assessed through the recovery rates of each account age for individual account and channel group.

      • B. Special accounts: These are the invested subsidiaries under Standard Foods Group. No bad debt provision will be made out of receivables owed by these accounts.

      • C. Insolvent accounts: Assess the collectable amount according to the collaterals placed by the customers and set up a separate bad-debt provision ratio to make the provision.

    • 1.3 Accounting Department adjusts “Bad Debt Allowance” according to the asset impairment amounts derived as above.

  • (2) Write-off of bad debt allowance:

    • 2.1. Bad debt determination:

      • A. Receivables are deemed not collectable in part or in full due to insolvency, settlement, bankruptcy declaration or other reasons.

      • B. Outstanding principal or interests that are due for more than two years and the efforts of collection have failed.

    • 2.2. Write-off:

      • A. Upon the occurrence of loss from bad debt, the supporting documents are to be submitted to make the write-off, according to Article #94 of “Guidelines for Examination of Profit-Seeking Enterprise Income Tax”.

      • B. When writing off bad debts, the allowance account shall be reduced accordingly in the year the bad debt is determined. If the actual bad debt is larger than the allowance balance, the discrepancy shall be recorded as bad debt loss for the year.

  • Allowance for loss on inventories

  • Inventories consist of raw materials, packing materials, work-in-process, finished goods and merchandise and are stated at the lower of cost or net realizable value. Inventory write-downs are made item by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price under normal course of business net of the estimated cost needed to complete the project and estimate cost needed to make the sale after completion. Inventory cost is calculated in accordance with the weighted average method.

-301-

  • (II) Key Performance Indicator (KPI): Standard Foods’ KPI includes Finance KPI and Non-Finance KPI. In addition to examining the finance KPI of sales revenue, debt ratio, business cycle, return on equity, and earnings per share within the industry periodically, non-finance KPI are set to understand Standard Foods’’ competitive advantages and industry momentum.

  • (III) Licenses or certificates acquired by financial personnel: Republic of China (CPA): 1 person.

  • V. The impacts to shareholders’ equity or security price due to events defined in Securities Transaction Law Article #36.3.2 on in the current recent year and up to the printing of the annual report:

  • Mr. Ter-Fung Tsao retired as the general manager on May 01, 2017 Mr. Yao Steven Yih-Chun, the former associated president, was therefore promoted to manage the company afterward. Mr. Ter-Fung Tsao was later elected, on May 05, 2017, as the first director through the resolution of the board to cope with the rising business in the China region, strengthen corporate governance and prepare the future business development through the new management system and arrangement.

  • The Board Meeting resolved on March 22, 2019 to appoint the Group CFO, Chris Hong to serve as the Corporate Governance Officer.

  • The Board Meeting resolved on March 22, 2019 to transfer the CEO, and the new CEO will be the President of Standard Foods (China), Arthur Tsao.

-302-

==> picture [589 x 717] intentionally omitted <==

More from SFC

Annual Report 2026
May 27
Annual Report 2026
May 27
Regulatory Filings 2026
May 27
Interim / Quarterly Report 2026
May 15
Interim / Quarterly Report 2026
May 15
Regulatory Filings 2026
May 15
Interim / Quarterly Report 2026
May 15
Interim / Quarterly Report 2026
May 15
Interim / Quarterly Report 2026
May 15
Interim / Quarterly Report 2026
May 15
View all filings →