SPT — Annual Report 2013

Nov 13, 2013

SCINOPHARM TAIWAN, LTD.

CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2013 AND 2012

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

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

To the Board of Directors and Stockholders of ScinoPharm Taiwan, Ltd.

We have audited the accompanying consolidated balance sheets of ScinoPharm Taiwan, Ltd. and its subsidiaries as of December 31, 2013, December 31, 2012, and January 1, 2012, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the “Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ScinoPharm Taiwan, Ltd. and its subsidiaries as of December 31, 2013, December 31, 2012 and January 1, 2012, and their financial performance and cash flows for the years ended December 31, 2013 and 2012 in conformity with the “Rules Governing the Preparations of Financial Statements by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

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We have also audited the parent company only financial statements of ScinoPharm Taiwan, Ltd. as of and for the years ended December 31, 2013 and 2012, and have expressed an unqualified opinion on those financial statements.

PricewaterhouseCoopers, Taiwan

Republic of China

March 21, 2014

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

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

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SCINOPHARM TAIWAN, LTD. CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

1100 1110 1150 1170 1180 1200 130X 1410 1476 11XX 1543 1550 1600 1780 1840 1915 1980 1985 1990 15XX 1XXX	Assets	Notes	December 31, 2013 AMOUNT % $ 2,289,428 20 - - 230 - 969,523 8 1,118 - 161,496 1 2,512,318 22 193,763 2 15,552 - 6,143,428 53 167,673 1 90,455 1 4,213,982 37 28,709 - 305,089 3 399,306 4 24,667 - 92,994 1 17,925 - 5,340,800 47 $ 11,484,228 100 (Continued)	December 31, 2012 AMOUNT % $ 3,035,012 30 473 - - - 841,334 8 - - 96,300 1 1,870,275 18 214,261 2 - - 6,057,655 59 167,673 2 - - 3,559,228 34 17,521 - 153,940 2 237,535 2 39,369 - 90,018 1 16,937 - 4,282,221 41 $ 10,339,876 100	January 1, 2012	January 1, 2012
				AMOUNT $ 3,035,012 473 - 841,334 - 96,300 1,870,275 214,261 - 6,057,655 167,673 - 3,559,228 17,521 153,940 237,535 39,369 90,018 16,937 4,282,221 $ 10,339,876	AMOUNT $ 3,293,681 2,066 - 843,902 - 47,983 1,465,462 179,883 15,552 5,848,529 - 172,107 2,890,760 13,330 84,394 346,322 23,817 100,158 8,453 3,639,341 $ 9,487,870	%
	Current assets Cash and cash equivalents Financial assets at fair value through profit or loss - current Notes receivable, net Accounts receivable, net Accounts receivable - related parties Other receivables Inventories Prepayments Other financial assets-current Current Assets Non-current assets Financial assets carried at cost - non-current Investments accounted for under equity method Property, plant and equipment Intangible assets Deferred income tax assets Prepayments for equipment Other financial assets - non-current Long-term prepaid rent Other non-current assets Non-current assets Total assets	6(1) 6(2) 6(3) 7 5(2) and 6(4) 8 6(5) 6(5)(6) 6(7)(9) and 7 5(2) and 6(24) 8 6(8)				35 - - 9 - 1 15 2 -
						62
						- 2 30 - 1 4 - 1 -
						38
						100

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SCINOPHARM TAIWAN, LTD. CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

2100 2120 2150 2170 2200 2230 2310 2355 2399 21XX 2570 2640 2645 25XX 2XXX 3110 3200 3310 3320 3350 3400 31XX 36XX 3XXX	Liabilities and Equity	Notes	December 31, 2013 December 31, 2012 AMOUNT % AMOUNT % $ 689,785 6 $ 263,676 3 1,138 - - - 1,080 - 1,045 - 264,437 2 223,074 2 594,800 5 536,155 5 147,735 1 177,539 2 75,812 1 2,183 - - - - - - - - - 1,774,787 15 1,203,672 12 639 - - - 65,548 1 65,462 - - - - - 66,187 1 65,462 - 1,840,974 16 1,269,134 12 6,759,272 59 6,499,300 63 1,247,796 11 1,246,977 12 220,944 2 103,897 1 22,829 - 22,829 - 1,348,058 12 1,231,176 12 44,355 - ( 35,040) - 9,643,254 84 9,069,139 88 - - 1,603 - 9,643,254 84 9,070,742 88 $ 11,484,228 100 $ 10,339,876 100	January 1, 2012	January 1, 2012
			AMOUNT $ 689,785 1,138 1,080 264,437 594,800 147,735 75,812 - - 1,774,787 639 65,548 - 66,187 1,840,974 6,759,272 1,247,796 220,944 22,829 1,348,058 44,355 9,643,254 - 9,643,254 $ 11,484,228	AMOUNT $ - - 83 299,250 405,808 114,937 16,946 964 19,804 857,792 - 62,739 250 62,989 920,781 6,310,000 1,246,977 7,962 30,419 970,012 - 8,565,370 1,719 8,567,089 $ 9,487,870	%
	Current liabilities Short-term borrowings Financial liabilities at fair value through profit or loss - current Notes payable Accounts payable Other payables Current income tax liabilities Advance receipts Finance lease liabilities - current Other current liabilities Current Liabilities Non-current liabilities Deferred income tax liabilities Accrued pension liabilities Refundable deposits received Non-current liabilities Total Liabilities Equity attributable to owners of parent Share capital Share capital - common stock Capital surplus Capital surplus Retained earnings Legal reserve Special reserve Undistributed earnings Other equity interest Other equity interest Equity attributable to owners of the parent Non-controlling interest Total equity Contingent liabilities and Commitments Total liabilities and equity	6(10) 6(2) 6(11) 6(24) 6(24) 5(2) and 6(12) 6(14)(16) 6(13)(15)( 26) 6(16)(24) 6(17)(26) 9			- - - 3 5 1 - - -
					9
					- 1 -
					1
					10
					67 13 - - 10 -
					90 -
					90
					100

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

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SCINOPHARM TAIWAN, LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Expressed in thousands of New Taiwan dollars, except for earnings per share amounts)

Items

For the years ended December 31 2013 2012 Notes AMOUNT % AMOUNT % 6(18) and 7 $ 5,088,245 100 $ 4,572,509 100 6(4)(12)(22)(23) ( 2,545,712)( 50)( 2,259,081) ( 49) 2,542,533 50 2,313,428 51 6(12)(22)(23) and 7 ( 188,443) ( 4) ( 185,346) ( 4) ( 538,715) ( 10) ( 565,321) ( 12) ( 417,875)( 8)( 303,023) ( 7) ( 1,145,033)( 22)( 1,053,690) ( 23) 1,397,500 28 1,259,738 28 6(19) 51,909 1 98,830 2 6(2)(9)(20) ( 16,189) - 18,052 - 6(21) ( 7,916) - ( 29) - 6(6) ( 16,791)( 1)( 4,434) - 11,013 - 112,419 2 1,408,513 28 1,372,157 30 6(24) ( 135,109)( 3)( 201,328) ( 4) $ 1,273,404 25 $ 1,170,829 26 $ 79,395 2 ($ 35,040) ( 1) 6(12) 498 - ( 1,286) - 6(24) ( 85) - 219 - $ 79,808 2 ($ 36,107) ( 1) $ 1,353,212 27 $ 1,134,722 25 $ 1,273,404 25 $ 1,170,876 26 - - ( 47) - $ 1,273,404 25 $ 1,170,829 26 $ 1,353,212 27 $ 1,134,769 25 - - ( 47) - $ 1,353,212 27 $ 1,134,722 25 6(25) $ 1.88 $ 1.73 6(25) $ 1.88 $ 1.73

4000 Sales revenue 5000 Operating costs 5900 Net operating margin Operating expenses 6100 Selling expenses 6200 General and administrative expenses 6300 Research and development expenses 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7060 Share of profit/(loss) of associates and joint ventures accounted for under equity method 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense (benefit) 8200 Profit for the year Other comprehensive income 8310 Financial statements translation differences of foreign operations 8360 Actuarial gain (loss) on defined benefit plans 8399 Income tax relating to the components of other comprehensive income 8300 Total other comprehensive income for the year 8500 Total comprehensive income for the year Profit (loss) attributable to: 8610 Owners of the parent 8620 Non-controlling interest Profit for the year Comprehensive income attributable to: 8710 Owners of the parent 8720 Non-controlling interest Total comprehensive income for the year Basic earnings per share (in dollars) 9750 Net income Diluted earnings per share (in dollars) 9850 Net income

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

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SCINOPHARM TAIWAN, LTD. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars)

For the year ended December 31, 2012 Balance at January 1, 2012 Appropriations of 2011 net income: Legal reserve Cash dividends Stock dividends Consolidated net income for 2012 Other comprehensive income for 2012 Reversal of special reserve Change in non-controlling interest Balance at December 31, 2012 For the year ended December 31, 2013 Balance at January 1, 2013 Appropriations of 2012 net income: Legal reserve Cash dividends Stock dividends Employee stock option compensation cost Consolidated net income for 2012 Other comprehensive income for 2013 Difference between acquisition or disposal price and carrying amount of subsidiaries: Acquisition of subsidiaries Disposal of subsidiaries Change in non-controlling interest Balance at December 31, 2013	Notes						Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent			Non-controlli nginterest	Totalequity
			Share capital - common stock		Total capital surplus, additional paid-in capital			RetainedEarnings		Financial statements translation differences of foreign operations	Total
							Legal reserve	Special reserve	Total unappropriated retained earnings
	6(16) 6(14)(16) 6(17) 15 6(16) 6(14)(16) 6(15) 6(17) 6(15)(26)		$6,310,000 - - 189,300 - - - - $6,499,300 $6,499,300 - - 259,972 - - - - - - $6,759,272	$1,246,977 - - - - - - - $1,246,977 $1,246,977 - - - 819 - - 188 ( 188 ) - $1,247,796			$ 7,962 95,935 - - - - - - $ 103,897 $ 103,897 117,047 - - - - - - - - $ 220,944	$ 30,419 - - - - - ( 7,590 ) - $ 22,829 $ 22,829 - - - - - - - - - $ 22,829	$ 970,012 ( 95,935 ) ( 631,000 ) ( 189,300 ) 1,170,876 ( 1,067 ) 7,590 - $ 1,231,176 $ 1,231,176 ( 117,047 ) ( 779,916 ) ( 259,972 ) - 1,273,404 413 - - - $ 1,348,058	$ - - - - - ( 35,040 ) - - ($ 35,040) ($ 35,040 ) - - - - - 79,395 - - - $ 44,355	$8,565,370 - ( 631,000 ) - 1,170,876 ( 36,107 ) - - $9,069,139 $9,069,139 - ( 779,916 ) - 819 1,273,404 79,808 188 ( 188 ) - $9,643,254	$ 1,719 - - - ( 47 ) - - ( 69) $ 1,603 $ 1,603 - - - - - - - - ( 1,603) $ -	$8,567,089 - ( 631,000 ) - 1,170,829 ( 36,107 ) - ( 69) $9,070,742 $9,070,742 - ( 779,916 ) - 819 1,273,404 79,808 188 ( 188 ) ( 1,603) $9,643,254

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

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SCINOPHARM TAIWAN, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Consolidated profit before tax for the year Adjustments to reconcile net income to net cash provided by operating activities Income and expenses having no effect on cash flows Loss on valuation of financial assets and liabilities Provision for doubtful accounts Doubtful accounts as other income Loss on inventory market price decline Provision (Reversal of) allowance obsolescence of supplies Share of loss of associates and joint ventures accounted for under the equity method Depreciation (Loss) gain on disposal of property, plant and equipment Gain on reversal of impairment loss Amortization Employee stock option cost Interest income Interest expense Changes in assets/liabilities relating to operating activities Net changes in assets relating to operating activities Notes receivable Accounts receivable Accounts receivable - related parties Other receivables Inventories Prepayments Net changes in liabilities relating to operating activities Notes payable Accounts payable Other payables Advance receipts Accrued pension liabilities Other current liabilities Cash generated from operations Interest received Interest paid Income tax paid Net cash provided by operating activities

Forthe years endedDecember31, Notes 2013 2012 $ 1,408,513 $ 1,372,157 1,611 1,593 6(3) 5 - 6(3) - ( 4,115 ) 6(4) 4,678 37,209 5,899 ( 11,009 ) 6(6) 16,791 4,434 6(7)(22) 437,569 357,884 ( 3,338 ) 357 6(9)(20) ( 3,185 ) ( 5,857 ) 6(22) 9,949 5,384 6(13) 819 - 6(19) ( 37,646 ) ( 29,797 ) 6(21) 7,916 29 ( 230 ) - ( 128,194 ) 6,683 ( 1,118 ) - ( 65,196 ) ( 48,317 ) ( 647,254 ) ( 441,576 ) 14,599 ( 23,369 ) 35 962 41,363 ( 76,176 ) 81,974 45,206 73,629 ( 14,763 ) 86 2,723 - ( 19,804) 1,219,275 1,159,838 37,646 29,797 ( 7,916 ) ( 29 ) ( 309,532) ( 208,053) 939,473 981,553

(Continued)

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SCINOPHARM TAIWAN, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Increase in pledged time deposits Acquisition of investments accounted for under equity method Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Proceeds from disposal of other intangible assets Increase in prepayment for equipment Increase in other non-current assets - refundable deposits paid Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Decrease in finance lease liabilities Decrease in refundable deposits received Payment of cash dividends Decrease in non-controlling interest Net cash used in financing activities Effect of foreign exchange rate changes on cash and cash equivalents Decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Forthe years endedDecember31, Notes 2013 2012 ($ 850 ) $ - ( 107,388 ) - 6(27) ( 738,918 ) ( 493,806 ) 6,984 24,741 ( 18,215 ) ( 7,905 ) - 5,046 ( 487,112 ) ( 379,479 ) ( 988 ) ( 8,503 ) ( 1,346,487 ) ( 859,906 ) 426,109 263,676 - ( 964 ) - ( 250 ) 6(16) ( 779,916 ) ( 631,000 ) ( 1,603 ) ( 69 ) ( 355,410 ) ( 368,607 ) 16,840 ( 11,709 ) ( 745,584 ) ( 258,669 ) 6(1) 3,035,012 3,293,681 6(1) $ 2,289,428 $ 3,035,012

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

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SCINOPHARM TAIWAN, LTD.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANIZATION

• (1) ScinoPharm Taiwan, Ltd. (the Company) was incorporated as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.) on November 11, 1997. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the manufacture of western medicines and other chemical materials, biological technology services, intellectual property rights, international trade and research, development and manufacture of materials for medicines, albumin medicines, oligonucleotide medicines, peptide medicines, injections and small molecule drugs, as well as the provision of related consulting and technical services. The Company’s investment plan for the manufacturing of medicine materials was approved by the Industrial Development Bureau of MOEA on May 13, 1998 and complies with the standards of important technical industry application.

• (2) The common shares of the Company have been listed on the Taiwan Stock Exchange since September 2011.

• (3) Uni-President Enterprises Corp., the Company’s ultimate parent company, holds 37.94% equity interest in the Company.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL

STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 21, 2014.

1. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”) Not applicable as it is the first-time adoption of IFRSs by the Group this year.

2. 甲、 Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

IFRS 9, ‘Financial Instruments: Classification and measurement of financial assets’

• A. The International Accounting Standards Board (“IASB”) published IFRS 9, ‘Financial Instruments’, in November, 2009, which will take effect on January 1, 2013 with early application permitted (Through the amendments to IFRS 9 published on November 19, 2013, the IASB has removed the previous mandatory effective date, but the standard is available for immediate application). Although the FSC has endorsed IFRS 9, FSC does not permit early application of IFRS 9 when IFRSs are adopted in R.O.C. in 2013. Instead, enterprises should apply International Accounting Standard No. 39 (“IAS 39”), ‘Financial Instruments: Recognition and Measurement’ reissued in 2009.

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• B. IFRS 9 was issued as the first step to replace IAS 39. IFRS 9 outlines the new classification and measurement requirements for financial instruments, which might affect the accounting treatments for financial instruments of the Group.

• C. The Group has not evaluated the overall effect of the IFRS 9 adoption. However, based on preliminary evaluation, it was noted that the IFRS 9 adoption might have an impact on those instruments classified as ‘available-for-sale financial assets’ held by the Group, as IFRS 9 specifies that the fair value changes in the equity instruments that meet certain criteria may be reported in other comprehensive income, and such amount that has been recognized in other comprehensive income should not be reclassified to profit or loss when such assets are derecognized. The Group did not recognize any gain or loss on debt instruments and on equity instruments in other comprehensive income for the year ended December 31, 2013.

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

The following are the assessment of new standards, interpretations and amendments issued by IASB that are effective but not yet endorsed by the FSC and have not been adopted by the Group ：

New Standards, Interpretations and Amendments Main Amendments Limited exemption from comparative IFRS 7 disclosures for first-time adopters (amendment to IFRS 1) The amendment provides first-time adopters of IFRSs with the same transition relief that existing IFRS preparer received in IFRS 7, ‘ Financial Instruments: Disclosures ’ and exempts first-time adopters from providing the additional comparative disclosures. Improvements to IFRSs 2010 Amendments to IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 34 and IFRIC 13.

IASB Effective Date

July 1, 2010 January 1, 2011

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New Standards, Interpretations and Amendments Main Amendments Severe hyperinflation and removal of fixed dates for first-time adopters (amendment to IFRS 1) When an entity’s date of transition to IFRSs is on, or after, the functional currency normalisation date, the entity may elect to measure all assets and liabilities held before the functional currency normalisation date at fair value on the date of transition to IFRSs. First time adopters are allowed to apply the derecognition requirements in IAS 39, ‘ Financial instruments: Recognition and measurement’, prospectively from the date of transition to IFRSs, and they are allowed not to retrospectively recognise related gains on the date of transition to IFRSs. Disclosures - transfers of financial assets (amendment to IFRS 7) The amendment enhances qualitative and quantitative disclosures for all transferred financial assets that are not derecognised and for any continuing involvement in transferred assets, existing at the reporting date. Deferred tax: recovery of underlying assets (amendment to IAS 12) The amendment gives a rebuttable presumption that the carrying amount of investment properties measured at fair value is recovered entirely by sale, unless there exists any evidence that could rebut this presumption. The amendment also replaces SIC 21, ‘ Income taxes-recovery of revalued non-depreciable assets’. Presentation of items of other comprehensive income (amendment to IAS 1) The amendment requires profit or loss and other comprehensive income (OCI) to be presented separately in the statement of comprehensive income. Also, the amendment requires entities to separate items presented in OCI into two groups based on whether or not they may be recycled to profit or loss subsequently.

IASB Effective Date

July 1, 2011 July 1, 2011 January 1, 2012 July 1, 2012

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New Standards, Interpretations and Amendments Main Amendments Government loans (amendment to IFRS 1) The amendment provides exception to first- time adopters to apply the requirements in IFRS 9, ‘Financial instruments’, and IAS 20,‘ Accounting for government grants and disclosure of government assistance ’ , prospectively to government loans that exist at the date of transition to IFRS. Further, the profit of government loans lower than market interest rate should not be recognized for government assistance existing at the date of transition to IFRS. Improvements to IFRSs 2009- 2011 Amendments to IFRS 1 and IAS 1, IAS 16, IAS 32 and IAS 34. Disclosures-offsetting financial assets and financial liabilities (amendment to IFRS 7) The amendment requires disclosures to include quantitative information that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements. IFRS 10, ‘Consolidated financial statements’ The standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where it is difficult to assess. IFRS 11, ‘Joint arrangements’ Judgments applied when assessing the types of joint arrangements-joint operations and joint ventures, the entity should assess the contractual rights and obligations instead of the legal form only. The standard also prohibits the proportional consolidation for joint ventures.

IASB Effective Date

January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013

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New Standards, Interpretations and Amendments Main Amendments IFRS 12, ‘Disclosure of interests in other entities’ The standard requires the disclosure of interests in other entities including subsidiaries, joint arrangements, associates and unconsolidated structured entities. Consolidated financial statements, joint arrangements and disclosure of interests in other Entities: Transition guidance (amendments to IFRS 10, IFRS 11 and IFRS 12) The amendment clarifies that the date of initial application is the first day of the annual period in which IFRS 10, 11 and 12 is adopted. IFRS 13, ‘Fair value measurement’ IFRS 13 aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. IAS 19 revised, ‘Employee benefits’ (as amended in 2011) The revised standard eliminates corridor approach and requires actuarial gains and losses to be recognised immediately in other comprehensive income. Past service costs will be recognised immediately in the period incurred. Net interest expense or income, calculated by applying the discount rate to the net defined benefit asset or liability, replace the finance charge and expected return on plan assets. The return of plan assets, excluding net interest expenses, is recognised in other comprehensive income. IAS 27, ‘Separate financial statements’ (as amended in 2011) The standard removes the requirements of consolidated financial statements from IAS 27 and those requirements are addressed in IFRS 10, ‘Consolidated financial statements’.

IASB Effective Date

January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013

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New Standards, Interpretations and Amendments Main Amendments IAS 28, ‘Investments in associates and joint ventures’ (as amended in 2011) As consequential amendments resulting from the issuance of IFRS 11 , ‘Joint arrangements ’, IAS 28 (revised) sets out the requirements for the application of the equity method when accounting for investments in joint ventures. IFRIC 20, ‘Stripping costs in the production phase of a surface mine’ Stripping costs that meet certain criteria should be recognised as the ‘stripping activity asset’. To the extent that the benefit from the stripping activity is realised in the form of inventory produced, the entity shall account for the costs of that stripping activity in accordance with IAS 2, ‘Inventories’. IFRS 9, ‘Financial instruments: Classification and measurement of financial liabilities’ IFRS 9 requires gains and losses on financial liabilities designated at fair value through profit or loss to be split into the amount of change in the fair value that is attributable to changes in the credit risk of the liability, which shall be presented in other comprehensive income, and cannot be reclassified to profit or loss when derecognizing the liabilities; and all other changes in fair value are recognized in profit or loss. The new guidance allows the full amount of change in the fair value in profit or loss only if there is reasonable evidence showing on initial recognition that the recognition of changes in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch (inconsistency) in profit or loss. (That determination is made at initial recognition and is not reassessed subsequently.) IFRS 9, ‘Financial 1. IFRS 9 relaxes the requirements for hedged assets : hedge accounting’ and amendments to and hedging instruments and removes the bright line of effectiveness to better align IFRS 9, IFRS 7 and hedge accounting with the risk management IAS 39 activities of an entity in ‘ other comprehensive income’.

IASB Effective Date

January 1, 2013 January 1, 2013 November 19, 2013 (Not mandatory) November 19, 2013 (Not mandatory)

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New Standards, Interpretations and Amendments Main Amendments 2. An entity can elect to early adopt the requirement to recognize the changes in fair value attributable to changes in an entity's own credit risk from financial liabilities that are designated under the fair value. Investment entities (amendments to IFRS 10, IFRS 12 and IAS 27) The amendments define ‘Investment Entities’ and their characteristics. The parent company that meets the definition of investment entities should measure its subsidiaries using fair value through profit or loss instead of consolidating them. Offsetting financial assets and financial liabilities (amendment to IAS 32) The amendment clarifies criterion that an entity ‘currently has a legally enforceable right to set off the recognised amounts’ and gross settlement mechanisms with features that both (i) eliminate credit and liquidity risk and (ii) process receivables and payables in a single settlement process, are effectively equivalent to net settlement; they would therefore satisfy the IAS 32 criterion in these instances. Recoverable amount disclosures for non-financial assets (amendments to IAS 36) The amendments remove the requirement to disclose recoverable amount when a cash generating unit (CGU) contains goodwill or intangible assets with indefinite useful lives that were not impaired. Novation of derivatives and continuation of hedge accounting (amendments to IAS 39) The amendment states that the novation of a hedging instrument would not be considered an expiration or termination giving rise to the discontinuation of hedge accounting when the hedging instrument that is being novated complies with specified criteria. IFRIC 21, ‘Levies’ The interpretation addresses the accounting for levies imposed by governments in accordance with legislation (other than income tax). A liability to pay a levy shall be recognised in accordance with IAS 37, ‘ Provisions, contingent liabilities and contingent assets’.

IASB Effective Date

January 1, 2014 January 1, 2014 January 1, 2014 January 1, 2014 January 1, 2014

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New Standards, Interpretations and Amendments Main Amendments Services related contributions from employees or third parties (amendments to IAS 19R) The amendment allows contributions from employees or third parties that are linked to service, and do not vary with the length of employee service, to be deducted from the cost of benefits earned in the period that the service is provided. Contributions that are linked to service, and vary according to the length of employee service, must be spread over the service period using the same attribution method that is applied to the benefits. Improvements to IFRSs 2010- 2012 Amendments to IFRS 2, IFRS 3, IFRS 8, IFRS 13,IAS 16, IAS 24 and IAS 38. Improvements to IFRSs 2011- 2013 Amendments to IFRS 1, IFRS 3, IFRS 13 and IAS 40.

IASB Effective Date

July 1, 2014 July 1, 2014 July 1, 2014

The Group is assessing the potential impact of the new standards, interpretations and amendments above and has not yet been able to reliably estimate their impact on the consolidated financial statements.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

• A.These consolidated financial statements are the first consolidated financial statements prepared by the Group in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers”, and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

• B.In the preparation of the balance sheet as of January 1, 2012 (the Group’s date of transition to IFRSs, the Group has adjusted the amounts that were reported in the consolidated financial statements in accordance with previous R.O.C. GAAP. Please refer to Note 15 for the impact of transitioning from R.O.C. GAAP to IFRSs on the Group’s financial position, financial performance and cash flows.

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(2) Basis of preparation

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

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

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

• (3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

  • a)All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies. In general, control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. The existence and effect of potential voting rights that are currently exercisable or convertible have been considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

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

  • c)Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

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

  • e)When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss. All amounts previously recognized in other comprehensive income in relation to the subsidiary are reclassified to profit or loss, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognized in other

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comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

B. Subsidiaries included in the consolidated financial statements ：

Business Name of Investor Name ofSubsidiary activities ScinoPharm Taiwan, Ltd. SPT International, Ltd. Professional investment ScinoPharm Taiwan, Ltd. ScinoPharm Singapore Pte Ltd. Professional investment ScinoPharm Taiwan, Ltd. President ScinoPharm (Cayman), Ltd. Professional investment SPT International, Ltd. ScinoPharm (Kunshan) Biochemical Technology Co., Ltd. Research, development and manufacture of API and new medicine, etc. SPT International, Ltd. ScinoPharm (Changshu) Pharmaceuticals, Ltd. Research, development and manufacture of API and new medicine, etc. SPT International, Ltd. ScinoPharm (Shanghai) Biochemical Technology, Ltd. Import, export and sales of Active Pharmaceutical Ingredients and intermediates, etc.	December 31, December 31, 2013 2012 Note 100.00 100.00 － 100.00 100.00 － 0.00 60.00 (Note A) 100.00 100.00 － 100.00 100.00 － 100.00 100.00 (Note B) Percentage owned by the Company	Note

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Name of Business Name of Investor Subsidiary activities ScinoPharm Taiwan, Ltd. SPT International, Ltd. Professional investment ScinoPharm Taiwan, Ltd. ScinoPharm Singapore Pte Ltd. Professional investment ScinoPharm Taiwan, Ltd. President ScinoPharm (Cayman), Ltd. Professional investment SPT International, Ltd. ScinoPharm (Kunshan) Biochemical Technology Co., Ltd. Research, development and manufacture of API and new medicine, etc. SPT International, Ltd. ScinoPharm (Changshu) Pharmaceuticals, Ltd. Research, development and manufacture of API and new medicine, etc.	Percentage owned by the Company January 1, 2012 100.00 100.00 60.00 100.00 100.00	Note
		－ － － － －

(Note A) Liquidated in September, 2013.

• (Note B) New entity incorporated during 2012.

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

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

• E. Nature and extent of the restrictions on fund remittance from subsidiaries to the parent company: None.

(4) Foreign currency translation

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

A.Foreign currency transactions and balances

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

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

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

• d) Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within “interest income or finance costs”. All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within “other gains and losses”.

• B.Translation of foreign operations

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

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

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

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

• b) When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. However, when the Group loses significant influence over the former foreign associate, such transactions should be accounted for as disposal of all interest in these foreign operations.

• c) When a foreign operation as an associate or jointly controlled entity is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, when the Group still retains partial interest in the former foreign associate or jointly controlled entity after losing significant influence over the former foreign associate, or losing joint control of the former jointly controlled entity, such transactions should be accounted for as disposal of all interest in these foreign operations.

• d) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, if the Group still retains partial interest in the former foreign subsidiary after losing control of the former foreign

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subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

(5) Classification of current and non-current items

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

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

• b) Assets held mainly for trading purposes;

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

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

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

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

• b) Liabilities arising mainly from trading activities;

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

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

(6) Cash equivalents

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

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

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

• A.Financial assets at fair value through profit or loss are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

• a) Hybrid (combined) contracts; or

• b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

• c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

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

• C.Financial assets at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial assets are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial assets are recognized in profit or loss.

(8) Available-for-sale financial assets

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

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

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

• (9) Loans and receivables

• Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. Accounts receivable are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. However, short-term accounts receivable that bear no interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(10) Impairment of financial assets

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

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

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

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

• c) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group,

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including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;

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

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

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

• a)Financial assets measured at amortized cost

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

• b)Financial assets measured at cost

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

(11) Derecognition of financial assets

The Group derecognises a financial asset when one of the following conditions is met ：

• A. The contractual rights to receive cash flows from the financial asset expire.

• B. The contractual rights to receive cash flows from the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

• C. The contractual rights to receive cash flows from the financial asset have been transferred; however the Group has not retained control of the financial asset.

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(12) Inventories

• Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average cost method. The cost of finished goods and work in process comprises raw materials, direct labor, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

(13) Investments accounted for under the equity method / associates

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

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

• C.When changes in an associate’s equity that are not recognized in profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognizes the Group’s share of change in equity of the associate in ‘capital reserve’ in proportion to its ownership.

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

• E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital reserve’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognized in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.

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• F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognized in profit or loss.

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

• H. When the Group disposes its investment in an associate and loses significant influence over this associate, the amounts previously recognized as capital reserve in relation to the associate are transferred to profit or loss. If it still retains significant influence over this associate, then the amounts previously recognized as capital surplus in relation to the associate are transferred to profit or loss proportionately.

• (14) Property, plant and equipment

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

• B.Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C.Except for land, other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives. If each component of property, plant and equipment is significant, it is depreciated separately.

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

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Assets Buildings Machinery and equipment Transportation equipment Office equipment Other equipment	Estimated useful lives
	2 ～ 35 years 2 ～ 12 years 2 ～ 6 years 2 ～ 9 years 2 ～ 7 years

(15) Intangible assets

Professional skills, computer software, etc. are stated at cost and amortized on a straight-line basis over its estimated useful life of 3 ~ 10 years.

(16) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss shall be reversed to the extent of the loss previously recognized in profit or loss. The increased carrying amount due to reversal should not be more than what the depreciated or amortized historical cost would have been if the impairment had not been recognized.

(17) Borrowings

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

(18) Notes and accounts payable

Notes and accounts payable are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. They are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. However, short-term accounts payable that bear no interest are subsequently measured at initial invoice amount as the effect of discounting is insignificant.

(19) Financial liabilities at fair value through profit or loss

A.Financial liabilities at fair value through profit or loss are financial liabilities held for trading or financial liabilities designated as at fair value through profit or loss on initial recognition. Financial liabilities are classified in this category of held for trading if acquired principally for the purpose of repurchasing in the short-term. Derivatives are also categorized as financial liabilities held for trading unless they are designated as hedges. Financial liabilities that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:

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• a) Hybrid (combined) contracts; or

• b) They eliminate or significantly reduce a measurement or recognition inconsistency; or

• c) They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management policy.

• B.Financial liabilities at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognized in profit or loss.

(20) Derecognition of financial liabilities

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

• B. The Group derecognizes an original financial liability and recognizes a new financial liability if the terms of an existing financial liability have substantial modifications and such modifications make significant differences (10%) to the original terms. The difference between the carrying amount of the financial liability derecognized and the consideration paid is recognized in profit or loss.

(21) Offsetting financial instruments

Financial assets and liabilities are offset and reported in the net amount in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

(22) Employee benefits

• A. Short-term employee benefits

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

• B.Pensions

• (a)Defined contribution plans

• For defined contribution plans, the Group pays fixed contributions to an independent, publicly or privately administered pension fund. The Group has no further legal or constructive obligations once the contributions have been paid. The contributions are recognized as pension expenses when they are due on an accrual basis. Prepaid contributions are recognized as an asset to the extent of a cash refund or a reduction in the future payments.

• (b)Defined benefit plans

• i.The liability recognized in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for unrecognized past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is

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determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in such corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.

     - ii.Actuarial gains and losses arising on defined benefit plans are recognized in other comprehensive income in the period in which they arise, and presented in retained earnings.

     - iii.Past service costs are recognized immediately in profit or loss if vested immediately; if not, the past service costs are amortized on a straight-line basis over the vesting period.

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

  • Employees’ bonus and directors’ and supervisors’ remuneration are recognized as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. However, if the accrued amounts for employees’ bonus and directors’ and supervisors’ remuneration are different from the actual distributed amounts as resolved by the stockholders at their stockholders’ meeting subsequently, the differences should be recognized based on the accounting for changes in estimates. The Group calculates the number of shares of employees’ stock bonus based on the fair value per share at the previous day of the stockholders’ meeting held in the year following the financial reporting year, and after taking into account the effects of ex-rights and ex-dividends.

• (23) Employee share based payment

• A.For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-market vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. Ultimately, the amount of compensation cost recognized is based on the number of equity instruments that eventually vest.

• B.For the cash-settled share-based payment arrangements, the employee services received and the liability incurred are measured at the fair value of the liability to pay for those services, and are recognized as compensation cost and liability over the vesting period. The fair value of the liability shall be remeasured at each balance sheet date until settled at the settlement date, with any changes in fair value recognized in profit or loss.

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(24) Income tax

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

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

• C.Deferred income tax is recognized, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated statements. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

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

• E.The Group operates in jurisdictions where current tax assets and current tax liabilities are not legally enforceable to be offsetted against each other. As a result, the Group recognizes its deferred income tax assets and liabilities on the gross basis.

• F. A deferred tax asset shall be recognized for the carry forward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures, employees’ training costs and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

(25) Dividends

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

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(26) Revenue recognition

A.Sales of goods

The Group manufactures and sells Active Pharmaceutical Ingredients (API), intermediates, etc. Revenue is measured at the fair value of the consideration received or receivable taking into account value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods is recognized when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

• B.Sales of services

The Group provides biochemical technology development consultation and processing services. Revenue from rendering services is recognized under the percentage-of-completion method when the outcome of services provided can be estimated reliably. The stage of completion of a service contract is measured by the percentage of the actual services performed as of the financial reporting date to the total services to be performed by surveys of work performed. If the outcome of a service contract cannot be estimated reliably, contract revenue should be recognized only to the extent that contract costs incurred are likely to be recoverable.

• (27) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the General Manager that makes strategic decisions.

5. CRITICALACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgments in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. The above information is addressed below:

• (1)Critical judgments in applying the Group’s accounting policies

• －

• A.Financial assets impairment of equity investments

The Group follows the guidance of IAS 39 to determine whether a financial asset—equity investment is impaired. This determination requires significant judgment. In making this

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judgment, the Group evaluates, among other factors, the duration and extent to which the fair value of an equity investment is less than its cost and the financial health of and short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

• (2)Critical accounting estimates and assumptions

• A.Evaluation of inventories

  • a) As inventories are stated at the lower of cost and net realizable value, the Group must determine the net realizable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material change to the evaluation.

  • b) As of December 31, 2013, the carrying amount of inventories was $2,512,318.

• B.Impairment assessment of tangible and intangible assets (excluding goodwill) The Group assesses impairment based on its subjective judgment and determines the separate cash flows of a specific group of assets, useful lives of assets and the future possible income and expenses arising from the assets depending on how assets are utilised and industrial characteristics. Any changes of economic circumstances or estimates due to the change of Group strategy might cause material impairment on assets in the future.

• C.Realisability of deferred income tax assets

  • a) Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised. Assessment of the realisability of deferred income tax assets involves critical accounting judgments and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, tax exempt duration, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred income tax assets.

  • b) As of December 31, 2013, the Group recognized deferred income tax assets amounting to $305,089.

• D.Calculation of accrued pension obligations

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

~31~

• b) As of December 31, 2013, the carrying amount of accrued pension obligations was $65,548. If the adopted discount rate used in the actuarial valuation had increased/decreased by 1%, the Group’s accrued pension liabilities would decrease/increase by $13,373 and $15,997, respectively.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

Cash: Cash on hand Cash Equivalents: Time deposits Cash and cash equivalents as per Checking accounts and demand deposits Bill under repurchase agreements consolidated balance sheet and statement of cash flows	December31,2013 304 $ 456,017 456,321 1,700,203 132,904 1,833,107 2,289,428 $	December31,2012 250 $ 472,413 472,663 2,416,593 145,756 2,562,349 3,035,012 $	January1,2012
			101 $ 206,142
			206,243
			3,027,604 59,834
			3,087,438
			3,293,681 $

• A.The Group associates with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote. The Group’s maximum exposure to credit risk at balance sheet date is the carrying amount of all cash and cash equivalents.

• B.Details of the Group’s time deposits pledged to others as collateral (listed as “Other financial assets - current” and “Other financial assets - non-current”) as of December 31, 2013, December 31, 2012 and January 1, 2012 are provided in Note 8.

(2) FINANCIALASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Assets Current items: Financial assets held for trading Non-hedging derivatives Liabilities Current items: Financial assets held for trading Non-hedging derivatives	December31,2013 - $ December 31,2013 1,138 $	December31,2012 473 $ December 31,2012 - $	January1,2012
			2,066 $ January1,2012
			- $

~32~

• A.The Group recognized net gain (loss) on financial assets and liabilities held for trading amounting to ($11,966) and $13,300 for the years ended December 31, 2013 and 2012, respectively (listed as “other gains and losses”).

• B.The contract information of non-hedging derivative instrument transactions is as follows:

	December	31,2013	December 31,2012	December 31,2012
Derivative Instruments	Contract amount	Contractperiod	Contract amount	Contractperiod
Forward exchange	USD14,915,000	11.2013～3.2014	USD14,820,000	11.2012～2.2013
contracts
			January	1,2012
Derivative Instruments			Contract amount	Contractperiod
Forward exchange			USD 7,323,000	11.2011～2.2012
contracts			EUR 1,100,000	11.2011～1.2012

The Group entered into forward foreign exchange contracts to hedge exchange rate risk of operations. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

• C.The Group has no financial assets at fair value through profit or loss pledged to others.

(3) ACCOUNTS RECEIVABLE, NET

	December 31,2013	December 31,2013	December 31,2012	December 31,2012		January1,2012
Accounts receivable	$	969,553	$	841,359	$	848,042
Less: Allowance for doubtful
accounts	(	30)	(	25)	(	4,140)
	$	969,523	$	841,334	$	843,902

• A. As of December 31, 2013, December 31, 2012 and January 1, 2012, the Group had no accounts receivable classified as “past due but not impaired”.

• B. Movements on the provision for impairment of accounts receivable are as follows:

At January 1 Reversal of impairment Provision for impairment At December 31	2013 Individualprovision 25 $ - 5 30 $	2012 Individualprovision 4,140 $ 4,115) ( - 25 $

• C.Accounts receivable that were neither past due nor impaired were from customers with good credit quality.

• D. The maximum exposure to credit risk at December 31, 2013, December 31, 2012 and January 1, 2012 was the carrying amount of each class of accounts receivable.

• E.The Group does not hold any collateral as security.

~33~

(4) INVENTORIES, NET

December 31, 2013

INVENTORIES, NET	December 31,2013
Raw materials Supplies Work in process Finished goods Raw materials Supplies Work in process Finished goods	Allowance for Cost market price decline 635,989 $ 32,803) ($ 46,766 1,660) ( 948,703 44,474) ( 1,135,550 175,753) ( 2,767,008 $ 254,690) ($ December 31,2012	Bookvalue
		603,186 $ 45,106 904,229 959,797
		2,512,318 $
	Allowance for Cost market price decline 518,604 $ 40,057) ($ 20,480 857) ( 773,779 40,515) ( 806,891 168,050) ( 2,119,754 $ 249,479) ($	Bookvalue
		478,547 $ 19,623 733,264 638,841 1,870,275 $

Raw materials Supplies Work in process Finished goods		January1,2012
	Allowance for Cost market price decline 441,619 $ 48,431) ($ 10,353 1,167) ( 614,824 31,685) ( 611,382 131,433) ( 1,678,178 $ 212,716) ($		Bookvalue
			393,188 $ 9,186 583,139 479,949
			1,465,462 $

The cost of inventories recognized as expense for the years ended December 31, 2013 and 2012 was $2,536,661 and $2,245,784, respectively, including provision for allowance for price decline of inventory of $4,678 and $37,209, respectively, due to inventory market price decline. Such provision was recognized as “cost of goods sold”.

－ － (5) FINANCIALASSETS MEASURED AT COST NON CURRENT

	December	31,2013	December31,2012	December31,2012		January1,2012
Unlisted stocks
Tanvex Biologics, Inc.	$	167,673	$	167,673	$	-
SYNGEN, INC.		4,620		4,620		4,620
		172,293		172,293		4,620
Less: Accumulated impairment	(	4,620)	(	4,620)	(	4,620)
	$	167,673	$	167,673	$	-

A. Based on the Group’s intension, its investment in Tanvex Biologics, Inc. and SYNGEN, INC. should be classified as available-for-sale financial assets. However, as Tanvex Biologics, Inc. and SYNGEN, INC. are not traded in an active market and no sufficient industry information

~34~

and financial information of similar companies can be obtained, the fair value of the investments in Tanvex Biologics, Inc. and SYNGEN, INC. cannot be measured reliably. Accordingly, the Group classified those stocks as ‘financial assets measured at cost’.

• B. As of December 31, 2013, December 31, 2012 and January 1, 2012, no financial assets measured at cost held by the Group were pledged to others.

• C. Tanvex Biologics, Inc. (“Tanvex”) increased its capital on January 19, 2012. The Company did not subscribe to the capital increase proportionately, resulting to a decrease in ownership percentage from 36.36% to 17.02%. After a comprehensive assessment on various indicators, the Group concluded that it has lost significant influence in Tanvex and accordingly reclassified Tanvex from long-term investment accounted for under the equity method of $167,673 to financial assets measured at cost.

(6) INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD

Investee Company Tanvex Biologics, Inc. Foreseeacer Pharmaceuticals, Inc.	December 31,2013 - $ 90,455 90,455 $	December 31,2012 - $ - - $	January1,2012
			172,107 $ -
			172,107 $

• A. The Group purchased the shares of Foreseeacer Pharmaceuticals, Inc. in May, 2013 and gained significant influence over the investee company. The investment was accounted for under the equity method from the acquisition date.

• B. Group’s principal associates

• (a)The financial information of the Group’s principal associates is summarized below:

December31,2013 Foreseeacer Pharmaceuticals, Inc. January1,2012 Tanvex Biologics, Inc.	Assets 638,939 $ 229,998 $	Liabilities 30,883 $ 18,727 $	Profit/ Revenues (Loss) - $ 92,000) ($ - $ - $	Ownership Percentage
				15.32% 36.36%

• (b)The share of loss of associates and joint ventures accounted for under the equity method amounted to $16,791 and $4,434 for the years ended December 31, 2013 and 2012, respectively.

• (c)Please refer to Note 6(5) for the details of long-term investment accounted for under the equity method reclassified to financial assets carried at cost-non-current.

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(7) PROPERTY, PLANT AND EQUIPMENT

											Construction in progress	Construction in progress
			Machinery and		Transportation			Office				and prepayments
January1,2013		Buildings		equipment		equipment		equipment		Others		forequipment		Total
Cost	$	2,024,781	$	3,749,060	$	18,421	$	78,758	$	135,980	$	613,004	$	6,620,004
Accumulated depreciation	(	487,046)	(	2,474,962)	(	8,814)	(	45,283)	(	23,402)		-	(	3,039,507)
Accumulated impairment		-	(	21,269)		-		-		-		-	(	21,269)
	$	1,537,735	$	1,252,829	$	9,607	$	33,475	$	112,578	$	613,004	$	3,559,228
Year ended December 31, 2013
At January 1, 2013	$	1,537,735	$	1,252,829	$	9,607	$	33,475	$	112,578	$	613,004	$	3,559,228
Additions		-		15,631		-		481		-		699,477		715,589
Disposals－Cost	(	22,416)	(	99,738)		-	(	341)	(	38)		-	(	122,533)
' －Accumulated
depreciation		22,416		96,273		-		188		10		-		118,887
Reclassification (note)		166,046		608,683		9,269		57,981	(	5,350)	(	503,367)		333,262
Depreciation charge	(	80,670)	(	310,163)	(	3,457)	(	22,648)	(	20,631)		-	(	437,569)
Reversal of impairment loss		-		3,185		-		-		-		-		3,185
Net exchange differences		13,277		8,312		291		1,040		5,782		15,231		43,933
At December 31, 2013	$	1,636,388	$	1,575,012	$	15,710	$	70,176	$	92,351	$	824,345	$	4,213,982
December31,2013
Cost	$	2,182,097	$	4,282,898	$	28,090	$	143,456	$	132,499	$	824,345	$	7,593,385
Accumulated depreciation	(	545,709)	(	2,689,802)	(	12,380)	(	73,280)	(	40,148)		-	(	3,361,319)
Accumulated impairment		-	(	18,084)		-		-		-		-	(	18,084)
	$	1,636,388	$	1,575,012	$	15,710	$	70,176	$	92,351	$	824,345	$	4,213,982

~36~

																		Construction in progress	Construction in progress
			Machinery and		Transportation					Office			Leased						and prepayments
January1,2012		Buildings		equipment		equipment			equipment				assets				Others		forequipment			Total
Cost	$	1,735,466	$	3,483,347	$		11,930	$		57,991	$		14,970		$		63,793	$	316,664	$	5,684,161
Accumulated depreciation	(	425,680)	(	2,258,997)	(		7,764)	(		36,424)	(		14,970)		(		22,440)		-	(		2,766,275)
Accumulated impairment		-	(	27,126)			-			-				-			-		-	(		27,126)
	$	1,309,786	$	1,197,224		$	4,166		$	21,567		$		-		$	41,353	$	316,664	$		2,890,760
Year ended December 31, 2012
At January 1, 2012	$	1,309,786	$	1,197,224	$		4,166	$		21,567	$		-		$		41,353	$	316,664	$	2,890,760
Additions		-		26,471			5,234			18,409				-			15,099		512,770			577,983
Disposals－Cost	(	22,973)	(	47,413)	(		928)	(		2,342)	(		14,970)		(		19,955)		-	(		108,581)
'' －Accumulated
depreciation		7,294		43,642			771			1,745			14,970				15,061		-			83,483
Reclassification (note)		314,328		288,999			2,302			8,487			-				75,605	(	209,072)			480,649
Depreciation charge	(	68,855)	(	259,983)	(		1,862)	(		14,980)				-	(		12,204)		-	(		357,884)
Reversal of impairment loss		-		5,857			-			-				-			-		-			5,857
Net exchange differences	(	1,845)	(	1,968)	(		76)			589				-	(		2,381)	(	7,358)	(		13,039)
December 31, 2012	$	1,537,735	$	1,252,829		$	9,607		$	33,475		$		-		112,578 $		$	613,004	$		3,559,228
December 31,2012
Cost	$	2,024,781	$	3,749,060	$		18,421		$	78,758		$		-		135,980 $		$	613,004	$		6,620,004
Accumulated depreciation	(	487,046)	(	2,474,962)	(		8,814)	(		45,283)				-	(		23,402)		-	(		3,039,507)
Accumulated impairment		-	(	21,269)			-			-				-			-		-	(		21,269)
	$	1,537,735	$	1,252,829		$	9,607		$	33,475		$		-		112,578 $		$	613,004	$		3,559,228

(Note) Reclassified from “prepayment for equipment” and “other assets” to “office equipment”.

~37~

• A. As of and for the years ended December 31, 2013 and 2012, the Group has not capitalized any interest.

• B. Please refer to Note 6 (9) for details of prior years’ impairment provision and reversal of impairment on property, plant and equipment.

• C. As of December 31, 2013, December 31, 2012, and January 1, 2012, no property, plant and equipment were pledged to others as collaterals.

- (8) Long term prepaid rent

December 31, 2013 December 31, 2012 January 1, 2012 Long-term prepaid rent $ 92,994 $ 90,018 $ 100,158

In 2008, the Group’s Mainland China subsidiary entered into a land use right contract with the local government relating to the acquisition of the right to use the land located in Changshu, Jiangsu province, with a lease term of 50 years. The subsidiary had prepaid all rental expenses on the contract date, and recognized rental expenses of $1,962 and $1,944 for the years ended December 31, 2013 and 2012, respectively.

(9) IMPAIRMENT OF NON-FINANCIALASSETS

• A.The Group reversed the impairment loss recognized in prior period amounting to $3,185 and $5,857 for the years ended December 31, 2013 and 2012, respectively, which was recognized in profit or loss for the corresponding periods, as some of the idle machineries were again utilized in production. For details of accumulated impairment, please refer to Note 6(7) Property, plant and equipment.

• B.The impairment loss reported by operating segments is as follows:

		For the	year ended	For the	year ended	year ended
		December31,2013		December31,2012
			Recognised in other		Recognised in other
	Recognised in		comprehensive	Recognised in		comprehensive
	profit	or loss	income	profit or loss		income
ScinoPharm Taiwan	$	3,185	- $	5,857 $	$	-
SHORT-TERM BORROWINGS
Type ofborrowings		December31,2013		Interestraterange		Collateral
Bank loans
Unsecured loans		$	689,785	1.16%～2.20%		None
Type ofborrowings		December31,2012		Interestraterange		Collateral
Bank loans
Unsecured loans		$	263,676	1.31%～1.35%		None

(10) SHORT-TERM BORROWINGS

As of January 1, 2012, there were no short-term borrowings.

~38~

(11) OTHER PAYABLES

OTHER PAYABLES
Accrued expenses Payables on equipment Others	December 31,2013 409,220 $ 99,367 86,213 594,800 $	December 31,2012 385,939 $ 122,696 27,520 536,155 $	January1,2012
			355,936 $ 37,555 12,317
			405,808 $

(12) PENSIONS

A.The Company has set up a defined benefit pension plan in accordance with the Labor Standards Law, which applies to all regular employees’ service years prior to the enforcement of the Labor Pension Act (the “Act”) on July 1, 2005 and service years thereafter of employees who chose to continue be covered under the pension scheme of the Labor Standards Law after the enforcement of the Act. In accordance with the Company's retirement plan, an employee may retire when the employee either (i) attains the age of 55 with 15 years of service, (ii) has more than 25 years of service, (iii) has reached the age of 65, or (iv) is incapacitated to work (compulsory retirement).

The employees earn two units for each year of service for the first 15 years, and one unit for each additional year thereafter up to a maximum of 45 units. Any fraction of a year equal to or more than six months shall be counted as one year of service, and any fraction of a year less than six months shall be counted as half a year. According to the provisions employees who retired due to their duties shall get additional 20%. Pension payments are based on the number of units earned and the average salary of the last six months prior to retirement. Calculation of average salary is in accordance with the Labor Standards Law of the R.O.C. The Company contributes monthly an amount equal to 2% of the employees' monthly salaries and wages to the retirement fund deposited with Bank of Taiwan under the name of the independent retirement fund committee.

(a) The amounts recognized in the balance sheets are determined as follows:

	December 31,2013	December 31,2013	December 31,2012	December 31,2012	December 31,2012			January1,2012
Present value of funded	$	107,309	$		114,343	$		108,046
obligations
Fair value of plan assets	(	40,966)	(		48,020)	(		44,380)
		66,343			66,323			63,666
Unrecognised past service
cost	(	795)	(		861)	(		927)
Net liability in the balance
sheets	$	65,548		$	65,462		$	62,739

~39~

(b) Changes in present value of funded obligations are as follows:

			2013		2012
Present value of funded obligations
At January 1		$	114,343	$	108,046
Service cost			2,825		3,500
Interest expense			1,715		1,891
Actuarial (profit) and loss	(		623)		906
Benefits paid	(		10,951)		-
At December 31	$		107,309	$	114,343
Changes in fair value of plan assets are as follows:
			2013		2012
Fair value of plan assets
At January 1	($		48,020)	($	44,380)
Expected return on plan assets	(		720)	(	777)
Actuarial (profit) and loss			125		380
Employer contributions	(		3,302)	(	3,243)
Benefits paid			10,951		-
At December 31	($		40,966)	($	48,020)

(c) Changes in fair value of plan assets are as follows:

(d) Amounts of expenses recognized in statements of comprehensive income are as follows:

			2013			2012
Service cost		$		2,825	$		3,500
Interest cost				1,715			1,891
Expected return on plan assets	(			720)	(		777)
Past service cost				66			66
Pension costs	$			3,886	$		4,680

Details of cost and expenses recognized in statements of comprehensive income are as follows:

follows:
Cost of sales Selling expenses General and administrative expenses Research and development expenses	2013 1,947 $ 198 850 891 3,886 $	2012
		2,016 $ 173 1,667 824
		4,680 $

~40~

(e) Amounts recognized under other comprehensive income are as follows:

		2013		2012
Current period	$	498	($	1,286)
Accumulated amount	($	788)	($	1,286)

• (f) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilization plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund” (Article 6: The scope of utilization for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilization of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. The constitution of fair value of plan assets as of December 31, 2013 and 2012 is given in the Annual Labor Retirement Fund Utilization Report published by the government.

• Expected return on plan assets was a projection of overall return for the obligations period, which was estimated based on historical returns and by reference to the status of Labor Retirement Fund utilization by the Labor Pension Fund Supervisory Committee and taking into account the effect that the Fund’s minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks.

Actual contributions to the defined benefit pension plans of the Group within one year from December 31, 2013 and 2012 are $595 and $397, respectively.

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

Discount rate Future salary increases Expected return on plan assets	2013 2.00% 2.00% 3.00%	2012 1.50% 3.00% 1.50%	2011
			1.75%
			3.00%
			1.75%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory.

~41~

• (h) Historical information of experience adjustments was as follows:

		2013		2012
Present value of defined benefit	$	107,309	$	114,343
obligations
Fair value of plan assets	(	40,966)	(	48,020)
Plan deficit	$	66,343	$	66,323
Experience adjustments on plan liabilities	$	7,013	($	5,927)
Experience adjustments on plan assets	($	125)	($	380)

• (i) The Group’s expected contributions to the pension plans for the period from January 1, 2014 to December 31, 2014 amounted to $3,399.

• B.As a result of the enforcement of the Act, the Company set up a defined contribution pension plan which took effect on July 1, 2005. The local employees are eligible for the defined contribution plan. For employees who choose to be covered under the pension scheme of the Act, the Company contributes monthly an amount of not less than 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. Pensions are paid by monthly installments or in lump sum based on the accumulated balances of the employees’ individual pension accounts. The subsidiaries in Mainland China are subject to a government sponsored defined contribution plan. In accordance with the related Laws of the People’s Republic of China, the subsidiaries in Mainland China contribute monthly 18% of the employees’ monthly salaries and wages to an independent fund administered by the government. Other than the monthly contributions, these subsidiaries do not have further obligations. For the years ended December 31, 2013 and 2012, the pension cost recognized under the aforementioned defined contribution pension plan were $34,310 and $28,666, respectively.

(13) Share-based payment

• A. The Company issued 1,000 thousand units of employee stock options on December 3, 2013 (the ‘Grant Date’). The exercise price of the options was set at $91.7 dollars, which was based on the closing market price of the Company's common shares on the Grant Date. Each option was granted the right to purchase one share of the Company's common stocks. The exercise price is subject to further adjustments when there is change in share numbers of Company's common stocks after the Grant Date. Contract period of the employee stock option plan is 10 years, and options are exercisable in 2 years after the Grant Date. The Company recognized compensation costs relating to the employee stock options plan of $819 for the year ended December 31, 2013.

~42~

B. Details of the share-based payment arrangements are as follows:

For the year ended December 31,2013

Options outstanding at beginning of the period Options granted Options outstanding at end of the period Options exercisable at end of the period	No. of options (unit in thousand) - 1,000 1,000 -	Weighted-average exercise price (in dollars)
		$ - 91.7 - -

• C. As of December 31, 2013, the exercise price of stock options outstanding was $91.7 (in dollars); and the weighted-average remaining contractual period was 10 years.

• D. The fair value of Company's employee stock option on Grant Date was evaluated using the combination the Hull & White and the Ritchken trinomial option valuation model. Related information is as follows:

Type of arrangement Grant date	Stock price (in dollars)	Fair Exercise value price Price Option Interest per unit (in dollars) volatility life Dividends rate (in dollars) 91.7 $ 28.50% 10 years 1.5% 1.7145% 26.045 $ (Note)
Employee 12.3.2013 stock options	91.7 $

Note: According to daily returns of the Company's stock for the past one year, the annualized volatility is 28.5%.

(14) SHARE CAPITAL

• A. As of December 31, 2013, the Company’s authorized capital was $10,000,000, and the paid-in capital was $6,759,272, consisting of 675,927 thousand shares of common stock, with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

• B. Movements in the number of the Company’s ordinary shares outstanding are as follows:

At January 1 Issuance of shares through capitalisation of retained earnings At December 31	2013 649,930 25,997 675,927	2012
		631,000 18,930
		649,930

(15) CAPITAL RESERVE

• A.Pursuant to the R.O.C. Company Act, capital reserve arising from paid-in capital in excess of par value on issuance of common stock and donations shall be exclusively used to cover accumulated deficit or, distribute cash or stocks in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the capital reserve to be capitalized mentioned above should not exceed 10% of the

~43~

paid-in capital each year. Capital reserve should not be used to cover accumulated deficit unless the legal reserve is insufficient.

• B. Movements on the Company’s capital reserve are as follows:

For the year ended December 31, 2013

						Difference between	the
						acquisition or disposal
		Share		Stock		price and carrying
		premium		options		amount of subsidiaries			Total
At January 1		1,233,286 $		13,691 $		$	-	1,246,977 $
Employee Stock Options	Plan	-			819		-		819
Acquisition or disposal
of subsidiaries:
－Acquisition of
subsidiaries		-			-	188			188
－Disposal of
subsidiaries		-			-	188) (		(	188)
At December 31		1,233,286 $		14,510 $		$	-	1,247,796 $
		Foryear ended December 31,2012
					Difference between the
					acquisition or disposal
		Share	Stock			price and carrying
		premium	options		amount ofsubsidiaries			Total
At January 1 and
December 31	$	1,233,286	$	13,691		- $	$	1,246,977

Please refer to Note 6(26) for details of difference between the acquisition or disposal price and carrying amount of subsidiaries and the related changes in disposal gain or loss through liquidated subsidiaries.

(16) RETAINED EARNINGS

A.Pursuant to the amended R.O.C. Company Act, the current year's after-tax earnings should be used initially to cover any accumulated deficit; thereafter 10% of the remaining earnings should be set aside as legal reserve until the balance of legal reserve is equal to that of paid-in capital. The legal reserve shall be exclusively used to cover accumulated deficit, to issue new stocks, or to distribute cash to shareholders in proportion to their share ownership. The use of legal reserve for the issuance of stocks or cash dividends to shareholders in proportion to their share ownership is permitted provided that the balance of such reserve exceeds 25% of the Company’s paid-in capital.

~44~

• B.Since the Company is in a changeable industry environment and the life cycle of the Company is in a stable growth, the appropriation of earnings should consider fund requirements and capital budget to decide how much earnings will be kept or distributed and how much cash dividends will be distributed. According to the Company’s Articles of Incorporation, 10% of the annual net income, after offsetting any loss of prior years and paying all taxes and dues, shall be set aside as legal reserve. The remaining net income and the unappropriated retained earnings from prior years can be distributed in accordance with a resolution passed during a meeting of the Board of Directors and approved at the stockholders' meeting. Of the amount to be distributed by the Company, stockholders’ dividends shall comprise 50% to 100% of the unappropriated retained earnings, and the percentage of cash dividends shall not be less than 30% of dividends distributed. Directors' and supervisors' remuneration shall comprise 2% and at least 0.2% for employees' bonuses.

• C.In accordance with the regulations, the Company shall set aside special reserve for the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings. The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated July 9, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently.

• D. For the years ended December 31, 2013 and 2012, employees’ bonus and directors’ and supervisors’ remuneration were accrued at $25,223 and $23,180, respectively, which were estimated based on certain percentages (prescribed by the Company’s Articles of Incorporation) of net profit in the corresponding periods after taking into account the legal reserve and other factors. The employees’ bonus and directors’ and supervisors’ remuneration was resolved to be $23,175 in the 2012 stockholders’ meeting, which was different from the estimated amount recognized in the 2012 financial statements by $5. Such difference was recognized in the 2013 consolidated statement of comprehensive income. Information about the appropriation of employees’ bonus and directors’ and supervisors’ remuneration by the Company as proposed by the Board of Directors and resolved by the stockholders will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

• E. The Company recognized cash dividends and stock dividends distributed to owners amounting to $631,000 ($1.00 dollar per share) and $189,300 ($0.3 dollar per share) for the year ended December 31, 2012, respectively. On June 21, 2013, the shareholders at the shareholders’ meeting resolved to distribute cash dividends and stock dividends amounting to $779,916 ($1.20 dollars per share) and $259,972 ($0.4 dollar per share) from the 2012 earnings respectively. On March 21, 2014, the Board of Directors during its meeting proposed cash dividends and stock dividends of $811,113 ($1.20 dollars per share) and $270,371 ($0.4 dollar per share) for the year ended December 31, 2013, respectively.

~45~

(17) OTHER EQUITY ITEMS

For the years ended December 31,

At January 1 － Currency translation differences group At December 31

	2013			2012
($		35,040)	$		-
		79,395	(		35,040)
$		44,355	($		35,040)

(18) OPERATING REVENUE

For the years ended December 31,

Sales revenue Less: Sales returns Sales discounts Technical service revenue

	2013			2012
$	5,176,234	$		4,677,270
(	98,217)	(		58,552)
(	18,617)	(		83,706)
	28,845			37,497
$	5,088,245		$	4,572,509

(19) OTHER INCOME

For the years ended December 31,

Interest income from bank deposits Others

For theyears ended	December 31,
2013 37,646 $ 14,263 51,909 $	2012
	29,797 $ 69,033 98,830 $

(20) OTHER GAINS AND LOSSES

For the years ended December 31,

Net (loss) gain on financial assets/liabilities through profit or loss Net currency exchange gain (loss) Gain (loss) on disposal of property, plant, and equipment Reversal of impairment loss Miscellaneous

	2013				2012
($		11,966)		$		13,300
		22,542	(			42,709)
		3,338	(			357)
		3,185				5,857
(		33,288)				41,961
($		16,189)		$		18,052

(21) FINANCE COSTS

For the years ended December 31,

Interest expense: Bank loans Amortization of lease payable

For theyears ended	December 31,
2013 7,916 $ - 7,916 $	2012
	- $ 29 29 $

~46~

(22) EXPENSES BY NATURE

For the years ended December 31, 2013

Employee benefit expense Depreciation Amortization Employee benefit expense Depreciation Amortization	Operatingcost Operatingexpense 549,918 $ 410,237 $ 348,427 89,142 752 9,197 899,097 $ 508,576 $ Forthe years endedDecember	Operatingcost Operatingexpense 549,918 $ 410,237 $ 348,427 89,142 752 9,197 899,097 $ 508,576 $ Forthe years endedDecember	Total
			960,155 $ 437,569 9,949
			1,407,673 $
			31,2012
	Operatingcost 453,397 $ 290,875 285 744,557 $	Operatingexpense 389,070 $ 67,009 5,099 461,178 $	Total
			842,467 $ 357,884 5,384
			1,205,735 $

(23) EMPLOYEE BENEFIT EXPENSE

EMPLOYEE BENEFIT EXPENSE
Salaries and wages Labor and health insurance expenses Pension costs Other personnel expenses	Forthe years ended	December31,
	2013 844,313 $ 48,849 38,196 28,797 960,155 $	2012
		739,744 $ 47,594 33,346 21,783
		842,467 $

~47~

(24) INCOME TAX

A. Income tax expense

• (a)Components of income tax expense:

Current tax: Current period income tax Under provision of prior year's income tax Total current tax Deferred tax: Temporary differences Income tax expense	2013 280,936 $ 4,768 285,704 150,595) ( 135,109 $ Forthe years ended	2012 250,309 $ 20,346 270,655 69,327) ( 201,328 $ December31,

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

Actuarial gains/losses on defined benefit obligations	For theyears ended	2012 219) $ December 31,
	2013 85 $ (

B.Reconciliation between income tax expense and accounting profit

Reconciliation between income tax expense and accounting profit	nd accounting profit
2013 2012 Income tax on statutory tax rate 259,118 $ 253,124 $ Effect of items disallowed by tax regulation 9,799) ( 21,553) ( Effect of net operating loss carryforward 112,209) ( 43,494) ( Effect of investment tax credit 3,124) ( 6,675) ( Effect of five year tax exemption 4,998) ( 4,732) ( Under provision of prior year's income tax 4,768 20,346 10% tax on unappropriated earnings 1,353 4,312 Income tax expense 135,109 $ 201,328 $ For theyears ended December 31,	For theyears ended	December 31,
		2012

~48~

• C. Amounts of deferred tax assets or liabilities as a result of temporary differences, loss

carryforward and investment tax credit are as follows:

Temporary differences: Investment loss Technology know-how Pensions Impairment of assets Employee benefits - unused compensated absences Others Loss carryforward Total Deferred tax liabilities: Unrealized gain on foreign currency exchange Deferred tax assets:	Recognized in Recognized other in profit comprehensive January1 or loss income December31 59,405 $ 43,439 $ - $ 102,844 $ 32,664 3,698) ( - 28,966 11,128 100 85) ( 11,143 3,616 542) ( - 3,074 2,779 386 - 3,165 854 660) ( - 194 43,494 112,209 - 155,703 153,940 $ 151,234 $ 85) ($ 305,089 $ - $ 639) ($ - $ 639) ($ 153,940 $ 150,595 $ 85) ($ 304,450 $ For theyear ended December 31,2013
	Recognized in profit January1 or loss 59,405 $ 43,439 $ 32,664 3,698) ( 11,128 100 3,616 542) ( 2,779 386 854 660) ( 43,494 112,209 153,940 $ 151,234 $ - $ 639) ($ 153,940 $ 150,595 $

~49~

For the year ended December 31, 2012

Temporary differences: Investment loss Technology know-how Pensions Impairment of assets Emplyee benefits -unused compensated absences Unrealized gain between affliated companies Others Loss carryforward Investment tax credit Deferred tax assets	Recognized in profit January1 or loss 16,259 $ 43,146 $ 36,362 3,698) ( 10,665 244 4,611 995) ( 2,523 256 3,367 3,367) ( 194 660 - 43,494 10,413 10,413) ( 84,394 $ 69,327 $		Recognized in other comprehensive income - $ - 219 - - - - - 219 $	December 31
				59,405 $ 32,664 11,128 3,616 2,779 - 854 43,494 -
				153,940 $

D. According to “Act for Industrial Innovation” and “Statute for Upgrading Industries” (before its abolishment), details of the Group’s investment tax credit and unrecognized deferred tax assets are as follows:

January 1, 2012

Qualifyingitems		Unused taxcredits		Unrecognized deferred taxassets - $	Yearofexpiry
Research and development expenditures		10,413 $			2013

There were no such items as of December 31, 2013 and 2012.

~50~

• E.Expiration dates of unused net operating loss carry forward and amounts of unrecognized deferred tax assets are as follows:

		December 31,2013	December 31,2013
Year incurred 2011～2013	Amount assessed 611,982 $	Unrecognised UnusedAmount deferred taxassets 611,982 $ - $ December 31,2012		Yearofexpiry 2016～2018
Year incurred 2011～2012	Amount assessed 286,581 $	Unrecognised Unused Amount deferred tax assets 286,581 $ - $ January1,2012		Year of expiry 2016～2017
Year incurred 2011	Amount assessed 64,088 $	Unused Amount 64,088 $	Unrecognised deferred tax assets 16,022 $	Year of expiry 2016

• F. The Company's raw materials for medicine and active pharmaceutical ingredients qualified the definition in "Regulations for Encouraging Manufacturing Enterprises and Technical Service Enterprises in the Newly Emerging, Important and Strategic Industries" and is entitled to a tax exemption period of 5 years (expired in December 2014).

• G.The Company’s income tax returns through 2011 have been assessed and approved by the Tax Authority.

• H.The Company’s unappropriated retained earnings listed on the balance sheet as of December 31, 2013, December 31, 2012 and January 1, 2012 were all generated after the year 1998.

• I. As of December 31, 2013, December 31, 2012 and January 1, 2012, the balance of the Company’s imputation tax credit account was $155,353, $11,793 and $65,847, respectively. The earnings distribution for 2012 and 2011 were approved at the stockholders’ meeting on June 21, 2013 and June 13, 2012, respectively and the dates of dividend distribution were set by the Board of Directors on August 15, 2013 and August 16, 2012, respectively. The creditable tax rate for 2012 and 2011 were 21.06% and 18.47%, respectively. The creditable tax rate for 2013 is expected to be 21.23%.

~51~

(25) EARNINGS PER SHARE (“EPS”)

Basic earnings per share Profit attributable to ordinary stockholders of the parent Diluted earnings per share Profit attributable to ordinary stockholders of the parent Assumed conversion of all dilutive potential ordinary Employees' bonus Profit attributable to ordinary stockholders of the parent plus assumed conversion of all dilutive potential ordinary shares Basic earnings per share Profit attributable to ordinary stockholders of the parent Diluted earnings per share Profit attributable to ordinary stockholders of the parent Assumed conversion of all dilutive potential ordinary Employees' bonus Profit attributable to ordinary stockholders of the parent plus assumed conversion of all dilutive potential ordinary shares	For theyear ended December 31,2013
	Weighted average number of shares Amount after tax outstanding (shares in thousands) 1,273,404 $ 675,927 1,273,404 $ 675,927 - 25 1,273,404 $ 675,952 For theyear ended December 31,2012	EPS (in dollars)
		1.88 $ 1.88 $
	Weighted average number of share Amount after tax outstanding (shares in thousands) 1,170,876 $ 675,927 1,170,876 $ 675,927 - 32 1,170,876 $ 675,959	EPS (in dollars)
		1.73 $ 1.73 $

~52~

• A. The abovementioned weighted average number of ordinary shares outstanding have been adjusted to unappropriated retained earnings as proportional increase in capital for the year ended December 31, 2012.

• B. As employees’ bonus could be distributed in the form of stock, the diluted EPS computation shall include those estimated shares that would increase from employees’ stock bonus issuance in the weighted-average number of common shares outstanding during the reporting year, taking into account the dilutive effects of stock bonus on potential common shares; whereas, basic EPS shall be calculated based on the weighted-average number of common shares outstanding during the reporting year that include the shares of employees’ stock bonus for the appropriation of prior year earnings, which have already been resolved at the stockholders’ meeting held in the reporting year. Since capitalization of employees’ bonus no longer belongs to distribution of stock dividends (or retained earnings and capital reserve capitalized), the calculation of basic EPS and diluted EPS for all periods presented shall not be adjusted retrospectively.

(26) Transactions with non-controlling interest

• A. In April, 2013, the Group purchased additional 40% of outstanding share interests of President ScinoPharm (Cayman), Ltd. The transaction had been settled and the Group paid $1,647. The carrying amount of these shares on the acquisition date was $4,588. This transaction reduced non-controlling interest and increased the equity of owners of the parent by $1,835. The difference between the proceeds for acquisition of the interests and book value of the interests was included in capital reserve.

was included in capital reserve.
			For the year ended
			December 31,2013
Carrying amount of non-controlling	$		1,835
interest acquired
Consideration paid to non-
controlling interest	(		1,647)
Capital reserve－
Difference between the acquisition
or disposal price and carrying
amount of subsidiaries		$	188

• B. The Group has finished liquidation procedure for President ScinoPharm (Cayman), Ltd. in September 2013, and the capital reserve resulted from above mentioned transaction was reclassified to current period profit or loss.

~53~

(27) Non-cash transactions

A. Investing activities with partial cash payments

			For theyears ended December 31,	For theyears ended December 31,
			2013	2012
Purchase of property, plant and	$		715,589	$	577,983
equipment
Add：Begining balance of payable
on equipment			122,696		37,555
Begining balance of finance
lease liabilities			-		964
Less：Ending balance of payable on
equipment	(		99,367)	(	122,696)
Cash paid for purchase of property,
plant and equipment	$		738,918	$	493,806
B. Investing activities with no cash flow		effects
			For theyears ended December 31,
			2013	2012
Prepayment for equipment
reclassified to property, plant
and equipment		$	333,262	$	480,649

7. RELATED PARTY TRANSACTIONS

(1) Parent and ultimate controlling party

The ultimate parent and the ultimate controlling party of the Company is Uni-President Enterprises Corp.

• (2) Significant transactions and balances with related parties

A. Technical service revenues

.Technical service revenues
Sales of services: －Associates	For theyears ended	December 31,
	2013 2,579 $	2012
		2,615 $

The terms of providing technical services to related parties were the same with regular customers. The collection period for related parties was 60 days after sales, which is the same with regular customers.

~54~

B.Other expenses:

For the years ended December 31,

.Accounts receivable: Repairs and maintenance fees: －An entity controlled by key management individuals $ Management service fees: －Ultimate parent company $ －The Company’s key management individual $ Outsourcing service fees: －Ultimate parent company $ December 31,2013 Receivables from related parties: -Associates 1,118 $		2013 3,009 $ 5,280 $ 476 5,756 $ 1,592 $ December 31,2012 - $		2012
	$		$	2,919
	$		$	3,015 2,281
	$		$	5,296
	$		$	1,484
				January1,2012
				- $

C.Accounts receivable:

D.Property transactions:

(a)Purchase of property:

For the years ended December 31,

－An entity controlled by key management individuals Purchase of property, plant and equipment:	2013 1,750 $	2012
		- $

(b)Purchase of stock equity:

In April, 2013, the Company purchased additional 40% of outstanding share interests of President ScinoPharm (Cayman), Ltd. from an entity controlled by key management individuals. Please refer to Note 6(26) for detailed information.

(3) Key management compensation

For the years ended December 31,

Salaries and other short-term employee benefits	2013 83,162 $	2012
		77,027 $

~55~

8. PLEDGED ASSETS

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

Assets December 31, 2013 December 31, 2012 January 1, 2012 Purpose of collateral Customs duty and performance Time deposits (note) $ 40,219 $ 39,369 $ 39,369 guarantee Note: Recorded as “other financial assets - current” and “other financial assets - non-current.”

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT

COMMITMENTS

• (1) As of December 31, 2013, December 31, 2012 and January 1, 2012, the Group’s unused letters of credit amounted to $6,855, $8,203 and $42,028, respectively.

• (2) As of December 31, 2013, December 31, 2012 and January 1, 2012, the Group’s remaining balance due for construction in progress and prepayments for equipment was $720,902, $636,466 and $269,993, respectively.

• (3)The Company entered into a non-cancellable operating lease agreement for the period from June 1, 2011 to February 28, 2018 for the land in Tainan Science Park. The lease agreement is renewable at the end of the lease term. The Company pays monthly rent. If the announced land values, state-owned land rent rate, or other factors change, the monthly rent paid by the Company will be adjusted accordingly on the following month. The Company may have to pay additional rent or get a refund on its last rental payment because of such adjustment. The rent expense of $21,291 and $18,516 were recognized in profit or loss for the years ended December 31, 2013 and 2012, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

are as follows:
Within one year Later than one year but not exceeding five years More than five years	December 31,2013 21,291 $ 67,422 - 88,713 $	December 31,2012 18,516 $ 74,064 3,086 95,666 $	January1,2012
			18,516 $ 74,064 21,602
			114,182 $

10. SIGNIFICANT DISASTER LOSS: None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE: None.

~56~

12. OTHERS

(1) Capital risk management

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

~57~

(2) Financial instruments

A.Fair value information of financial instruments

Except those in the table below, the Group’s financial instruments which are not measured at fair value (including cash and cash equivalents, notes receivable, accounts receivable (including related parties), other receivables, short-term borrowings, notes payable, accounts payable and other payables) is approximate to their fair value. Please refer to Note 12 (3) for details of fair value information of financial instruments measured at fair value.

Financial assets: Other financial assets Refundable deposits paid (Note) Financial liabilities: Refundable deposits received	December	Fair value 40,219 $ 17,925 - 31,2013	December	Fair value 39,369 $ 16,937 - 31,2012	January1,2012	January1,2012
	Book value 40,219 $ 17,925 -		Book value 39,369 $ 16,937 -		Book value 39,369 $ 8,453 250	Fair value
						39,369 $ 8,453 250

Note ： Recorded as 「 other non-current assets – others 」 .

~58~

• B. Financial risk management policies

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

• b)Group treasury identifies, evaluates and hedges financial risks closely with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

• C.Significant financial risks and degrees of financial risks a)Market risk

• I.Foreign exchange rate risk

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

• ii)To manage their foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the Group are required to hedge their foreign exchange risk exposure using forward foreign exchange contracts. However, hedge accounting is not applied as transactions did not meet all criteria of hedge accounting. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.

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

~59~

Foreign currency amount(in thousands) Exchange rate (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 32,046 $ 29.805 EUR:NTD 78 41.09 CNY:NTD 5,700 4.919 Non-monetary items USD:NTD 3,153 29.805 Financial liabilities Monetary items USD:NTD 2,575 29.805 EUR:NTD 88 41.09 CNY:NTD 835 4.919 Foreign currency amount (inthousands) Exchangerate (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 31,791 $ 29.04 EUR:NTD 232 38.49 Financial liabilities Monetary items USD:NTD 690 29.04 EUR:NTD 135 38.49 December 31,2013 December31,2012 Foreign currency amount (inthousands) Exchangerate (Foreign currency: functional currency) Financial assets Monetary items USD:NTD 27,254 $ 30.28 EUR:NTD 2,354 39.18 Financial liabilities Monetary items USD:NTD 2,257 30.28 January1,2012		December 31,2013	December 31,2013	Book value (NTD)
				955,131 $ 3,205 28,038 93,975 76,748 3,616 4,107 Book value (NTD)
				923,211 $ 8,930 20,038 5,196
			Exchangerate 30.28 39.18 30.28	Book value (NTD)
				825,251 $ 92,230 68,342

As of December 31, 2013 and 2012, if the NTD:USD exchange rate appreciates/depreciates by

~60~

5% with all other factors remaining constant, the Group’s net profit after tax for the year ended December 31, 2013 and 2012 would increase/decrease by $48,618 and $45,149, respectively. If the EUR:NTD exchange rate appreciates/depreciates by 5% with all other factors remaining constant, the Group’s net profit after tax for the year ended December 31, 2013 and 2012 would increase/decrease by $20 and $186, respectively. If the CNY:NTD exchange rate appreciates/depreciates by 5% with all other factors remaining constant, the Group’s net profit after tax for the year ended December 31, 2013 would increase/decrease by $1,196.

• II. Price risk

The Group has investments classified as financial assets and liabilities at fair value through profit or loss and available-for-sale financial assets (shown in ‘financial assets measured at cost-noncurrent’). Therefore, the Group is exposed to price risk on equity instruments investments. To manage this risk, the Group has set stop-loss amounts for these instruments. The Group expects no significant market risk.

• III. Interest rate risk

The Group analyses its interest rate exposure on a dynamic basis. Thus, the interest rate of the Group’s liabilities fluctuates accordingly with the market interest rate, creating divergence in the Group’s future cash flow. However, as the Group’s liabilities bear little significance and a small range of interest rate, the Group does not bear significant interest rate risk.

• b)Credit risk

• I.Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analyzing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors with limits set by the board of directors. The utilization of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, and outstanding receivables. The Group also transacts with many different banks and financial institutions to diversify risk.

• II.No credit limits were exceeded during the years ended December 31, 2013 and 2012.

• III.For more information regarding the Group’s credit ratings on its financial assets, please refer to detailed explanation of financial assets in Note 6.

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c)Liquidity risk

• I.Cash flow forecasting is performed by the Group’s treasury department which monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.

• II.The following table comprises the Group’s non-derivative financial liabilities and derivative financial liabilities with gross-amount settlement that are grouped by their maturity. Non-derivative financial liabilities are analyzed from the balance sheet date to the contract maturity date, and derivative financial liabilities are analyzed from the balance sheet date to the expected maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

ash flows.
December31,2013 Less than 1year Short-term borrowings 689,785 $ Notes payable 1,080 Accounts payable 264,437 Other payables 594,800 Non-derivative financial liabilities: December 31,2012 Less than 1year Short-term borrowings 263,676 $ Notes payable 1,045 Accounts payable 223,074 Other payables 536,155 Non-derivative financial liabilities: January1,2012 Less than 1year Notes payable 83 $ Accounts payable 299,250 Other payables 405,808 Non-derivative financial liabilities: December31,2013 Less than 1year Forward foreign contracts 1,138 $ Derivative financial liabilities:	Less than 1year 689,785 $ 1,080 264,437 594,800 Less than 1year	Between 1 and2years - $ - - - Between 1 and 2years - $ - - - Between 1 and 2years - $ - - and2years - $	Between 2 and 5 years - $ - - - Between 2 and 5years - $ - - - Between 2 and 5years - $ - - and 5 years - $	More than 5 years
				- $ - - - More than 5years - $ - - - More than 5years - $ - - 5 years - $

~62~

(3) Fair value estimation

• A.The table below analyses financial instruments measured at fair value, by valuation method. The different levels have been defined as follows:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

• Level 3: Inputs for the asset or liability that are not based on observable market data. The following table presents the Group’s financial assets and liabilities that are measured at fair value at December 31, 2013, December 31, 2012 and January 1, 2012.

December 31,2013		Level 1			Level 2	Level 2	Level 3			Total	Total
Financial liabilities:
Financial liabilities at fair value through
profit or loss – forward foreign
contracts	$		-		$	1,138	$	-		$	1,138
December 31,2012		Level	1			Level 2	Level	3			Total
Financial assets:
Financial assets at fair value through
profit or loss - forward foreign
contracts		$		-	$	473	$		-	$	473
January1,2012		Level 1			Level 2		Level 3				Total
Financial assets:
Financial assets at fair value through
profit or loss - forward foreign
contracts	$		-		$	2,066	$	-		$	2,066

• B. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the closing price. These instruments are included in level 1. Instruments included in level 1 comprise primarily equity instruments and debt instruments classified as financial assets/financial liabilities at fair value through profit or loss or available-for-sale financial assets.

• C.The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

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• D.If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

• E.Specific valuation techniques used to value financial instruments include:

• a) Quoted market prices or dealer quotes for similar instruments.

• b) The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value.

• c) Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

• F. The Group did not have financial instruments that met the definition of level 3 instruments as of December 31, 2013, December 31, 2012 and January 1, 2012.

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13. ADDITIONAL DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURES BUREAU

(1) Related information of significant transactions (For the year ended December 31, 2013)

• A.Financing activities with any company or person: None.

• B.The Company provided endorsements and guarantees to other entities: None.

C.The balance of securities held as of December 31, 2013 are summarized as follows (not including subsidiaries, associates and joint ventures):

Investor ScinoPharm Taiwan, Ltd.	Type andname ofsecurities Bill under repurchase agreements: International Bills Finance Co. China Bills Finance Co. Stocks: Tanvex Biologics, Inc. SYNGEN, INC.	Relationship withtheissuer － － The company is a director of Tanvex Biologics, Inc. －	Accounts Cash equivalents Cash equivalents Financial assets measured at cost Financial assets measured at cost	Number of shares (inthousands) Bookvalue Percentage of ownership - 82,933 $ - - 49,971 28,800 167,673 17.00% 245 - 7.40% As of December 31,2013	Number of shares (inthousands) Bookvalue Percentage of ownership - 82,933 $ - - 49,971 28,800 167,673 17.00% 245 - 7.40% As of December 31,2013	Number of shares (inthousands) Bookvalue Percentage of ownership - 82,933 $ - - 49,971 28,800 167,673 17.00% 245 - 7.40% As of December 31,2013	Market value	Note
					Bookvalue 82,933 $ 49,971 167,673 -	Percentage of ownership - 17.00% 7.40%
							82,933 $ 49,971 - -	─ ─ ─ ─

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D.The cumulative buying or selling amount of one specific security exceeding the lower of $300,000 or 20 percent of the contributed capital:

Name of the counter party - - - - Cash capital increase Cash capital increase	Relationship - - - - - -	Number of shares (in thousands) Amount - - $ - - - 85,794 - 59,962 43,545 1,239,905 - 895,290 Beginningbalance	Add	Amount 3,190,187 $ 3,419,848 3,226,344 621,777 399,205 385,040 iton		Disposal	Gain (loss) on disposal 354 $ 377 402 93 - -	Other increase
		Number of shares (in thousands) - - - - 43,545 -	Number of shares (in thousands) - - - - 13,480 -		Number of shares (in thousands) - - - - - -	Saleprice Book value 3,140,570 $ 3,140,216) ($ 3,337,292 3,336,915) ( 3,312,540 3,312,138) ( 681,832 681,739) ( - - - -

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E.Acquisition of real estate with an amount exceeding $300,000 or 20 percent of the contributed capital:

Companyname	Type of property	Transaction date	Payment	Satus of payment	Name of counterparty	Relationship	Prior transaction of related counterparty	Prior transaction of related counterparty	Prior transaction of related counterparty	Prior transaction of related counterparty	Price reference	Purpose of acquisition	Other items
							Owner	Relationship	Transfer date	Amount
ScinoPharm Taiwan, Ltd. ScinoPharm (Changshu) Pharmaceuticals, Ltd.	Plant Plant (Phase II)	6.2012～12.2013 11.2012～12.2013	Approximately 640,808 $ 546,182	72,063 $ 329,411	Cina Ecoteck Co., Ltd. etc. Jiangsu Qian Construction Group Co., Ltd. etc.	－ 〞	－ 〞	－ 〞	－ 〞	- $ 〞	Negotiation 〞	Building for operation use 〞	－ 〞

F.Disposal of real estate with an amount exceeding $300,000 or 20 percent of the contributed capital: None.

G.Purchases or sales transactions with related parties amounting to $100,000 or 20 percent of the contributed capital:

Companyname	Counterparty	Relationship		Description of transaction	Description of transaction		Differences in transaction terms compared to third partytransactions	Differences in transaction terms compared to third partytransactions	Notes or accounts	receivable/(payable)	Notes
			Purchases/(sales)	Amount	Percentage of net purchases/(sales)	Credit terms			Balance	Percentage of total notes or accounts receivable/(payable)
							Unitprice	Credit terms
ScinoPharm Taiwan, Ltd. ScinoPharm (Changshu) Pharmaceuticals, Ltd.	ScinoPharm (Changshu) Pharmaceuticals, Ltd. ScinoPharm Taiwan, Ltd.	An investee company of Purchases SPT International, Ltd. accounted for under the equity method The company (Sales)		228,243 $ 228,243) (	12% (99%)	Payable 90 days after acceptance 90 days after delivery	- $ -	－ －	53,868) ($ 53,868	(25%) 99%	－ －

H.Receivables from related parties exceeding $100,000 or 20 percent of the contributed capital: None.

I.Derivative financial instruments transactions : For the Company’s derivative financial instrument transactions, please refer to Note 6(2).

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J.Significant inter-company transactions during the year ended December 31, 2013:

Transaction

Number (Note 1)	Company name	Counterparty	Relationship (Note 2)	General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets (Note 3)
0	ScinoPharm Taiwan, Ltd.	ScinoPharm (KunShan) Biochemical Technology Co., Ltd. ScinoPharm (Changshu) Pharmaceuticals, Ltd. ScinoPharm (Shanghai) Biochemical Technology, Ltd.	1 1 1	Purchases Management consultancy revenue Other receivables Purchases Management consultancy revenue Outsourcing research fee Other receivables Accounts payable Outsourcing service fee Accrued expenses	$ 59,178 ( 3,999) 1,066 228,243 ( 26,309) 15,045 25,054 ( 53,868) 8,491 ( 1,869)	Closes its accounts 90 days from the end of each month after acceptance － － Closes its accounts 90 days from the end of each month after acceptance － － － － － －	1% － － 4% (1%) － － － － －

Note 1: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

• (1)Number 0 represents the Company.

• (2)The consolidated subsidiaries are in order from number 1.

Note 2: Relationship between transaction company and counterparty is classified into the following three categories:

• (1)The company to the consolidated subsidiary.

• (2)The consolidated subsidiary to the Company.

• (3)The consolidated subsidiary to another consolidated subsidiary.

• Note 3: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

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(2) Disclosure information of investee company

Related information on investee companies for the year ended December 31, 2013

Information about the investees’ name, locations, etc. (not including investees in Mainland China)

Investors	Investees	Address	Main business	Original investments	Original investments		Holdingstatu	s	Net profit (loss) of the investee company for the year ended December 31, 2013	Income (loss) recognised by the company for the year ended December 31, 2013 (Note 1)	Note
				Balance as at December 31, 2013	Balance as at January1,2013	Shares	Ownership (%)	Bookvalue
ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd.	SPT International, Ltd. ScinoPharm Singapore Pte Ltd. President ScinoPharm (Cayman), Ltd. (Note2) Foreseeacer Pharmaceuticals, Inc.	Tortola, British Virgin Islands Singapore Grand Cayman, Cayman Islands Grand Cayman, Cayman Islands	Professional investment Professional investment Professional investment Research and development of peptide injectable drugs	$ 1,727,867 - - 107,388	$ 1,328,662 - 3,541 -	57,024,644 2 - 3,600,000	100.00 100.00 - 15.32	$ 1,592,240 20 - 90,455	($ 170,389) 15 ( 46) ( 86,747)	($ 126,458) 15 ( 18) ( 16,791)	Subsidary Subsidary Subsidary －

Note 1: According to the related regulations, it is only required to disclose income (loss) of subsidiary recognized by the Company. Note 2 : Liquidated in September 2013.

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(3) Disclosure of information on indirect investments in Mainland China

Related information on investee companies for the year ended December 31, 2013.

• A.The basic information of investments in Mainland China:

Investment amount

Name of investee inChina	Main business	Capital	Investment method	Beginning investment balance from Taiwan	Remitted to China	Remitted back to Taiwan	Ending investment balance from Taiwan	Gain (loss) from the investee company	Ownership held by the company (direct or indirect)	Investment gain (loss) recognised (Note 2)	Book value of investments as of December 31,2013	Accumulated remittance	Note
ScinoPharm (KunShan) Biochemical Technology Co., Ltd. ScinoPharm (Changshu) Pharmaceuticals, Ltd. ScinoPharm (Shanghai) Biochemical Technology, Ltd.	Research, development, and manufacture of API and new medicine, etc. Research, development, and manufacture of API and new medicine, etc. Import, export and sales of Active Pharmaceutical Ingredients and intermediates, etc.	$ 119,220 1,520,055 35,766	(Note 1) (Note 1) (Note 1)	$ 110,994 1,132,590 21,460	$ - 387,465 14,306	$ - - -	$ 110,994 1,520,055 35,766	$ 12,060 ( 174,565) ( 4,894)	100.00 100.00 100.00	12,060 $ ( 174,565) ( 4,894)	$ 453,746 1,160,309 28,465	$ - - -	Subsidary of subsidary Subsidary of subsidary Subsidary of subsidary

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B.Ceiling amount of investment in Mainland China:

Ceiling amount of	investment in Mainland China:
Name of company	Accumulated amount of remittance from Taiwan to MainlandChina	Investment amount approved by the Investment Commission of the Ministryof Economic Affairs(MOEA)	Ceiling on investment amount in Mainland China imposed by the InvestmentCommission of MOEA(Note3)
ScinoPharm Taiwan, Ltd.	1,703,311 $	1,807,629 $	$ 5,785,952

Note 1: Setting up a company in the third area, which then invested in the investee in Mainland China.

Note 2: The Investment gain (loss) recognized by the Company for the year ended December 31, 2013 was based on audited financial statements of investee companies as of and for the year ended December 31, 2013.

Note 3: The ceiling amount is 60% of the higher of net worth or combined net worth.

Note 4:The numbers in the table that involves foreign currencies are expressed in New Taiwan Dollars according to the exchange rate posted on the date of the consolidated financial statements (USD:NTD 1:29.805).

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• C.Significant transactions with investees in Mainland China, directly, indirectly or through companies located in third region:

• (a)Purchase amount and percentage of net purchases, the ending balance of the respective accounts payable and percentage:

  • I. Purchases

Third region Company's name － －	Name of investee in Mainland China ScinoPharm (Changshu) Pharmaceuticals, Ltd. ScinoPharm (KunShan) Biochemical Technology Co., Ltd.	For the year ended December 31,2013
		228,243 $ 59,178
		287,421 $

Purchase prices from related parties are the same as that of general suppliers. The method of payment is agreed upon and closes its accounts 90 days from the end of each month, which is also similar to that of general suppliers.

II. Accounts payable

Third region Company's name －	Name of investee in Mainland China ScinoPharm (Changshu) Pharmaceuticals, Ltd.	December 31,2013
		53,868 $

• (b)Sales amount and percentage of net sales, the ending balance of respective accounts receivable and percentage: None.

• (c)Property transaction amount and related gain or loss: None.

• (d)Endorsements, guarantee and security’s ending balance and purpose: None.

• (e)Maximum balance, ending balance, range of interest rates and interest expense for financing transactions: None.

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(f)Other events having significant effects on the operating results and financial condition:

Transactiondescription Outsourcing research fees Outsourcing service fees Management consultancy revenue Management consultancy revenue Other receivables Other payables	Third region company'sname － － － － － －	Name of investee in Mainland China ScinoPharm (Changshu) Pharmaceuticals, Ltd. ScinoPharm (Shanghai) Biochemical Technology, Ltd. ScinoPharm (Changshu) Pharmaceuticals, Ltd. ScinoPharm (KunShan) Biochemical Technology Co., Ltd ScinoPharm (Changshu) Pharmaceuticals, Ltd. ScinoPharm (KunShan) Biochemical Technology Co., Ltd ScinoPharm (Shanghai) Biochemical Technology, Ltd.	For the year endedDecember31,2013 15,045 $ 8,491 $ 26,309 $ 1,066 26,120 $ 1,869 $ 25,054 $ 3,399 $

14. SEGMENT INFORMATION

(1) General information

The management of the Group has identified the operating segments based on how the company’s chief operating decision maker regularly reviews information in order to make decisions. The chief operating decision maker manages the Group’s business from geographical and functional perspectives. Geographically, the Group focus on its sales business in the U.S., Europe and Asia. In addition, the Group categorized its business units into manufacture, sales, research and development and investment management functions, and combines its segments that do the meet the disclosure threshold as “Other”.

(2) Measurement of segment information

The chief operating decision-maker evaluates the performance of operating segments based on pre-tax income excluding non-recurring income. For details of operating segments’ accounting policies, please refer to Note 4.

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(3) Segment information

The segment information provided to the chief operating decision-maker for the reportable segments is as follows:

segments is as follows:
Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortisation Interest expense Income from segment before income tax Segment assets Other acquisition of non-current asset (excluding financial instruments and deferred tax assets) Segment liabilities Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortisation Interest expense Income from segment before income tax Segment assets Other acquisition of non-current assets (excluding financial instruments and deferred tax assets) Segment liabilities	Forthe yearendedDecember31,	2013
	ScinoPharm Taiwan,Ltd. Others 5,083,603 $ 320,539 $ - 315,897 5,083,603 4,642 21,140 16,506 376,706 70,812 1 7,915 1,514,746 276,608) ( 10,706,170 2,508,081 661,985 558,931 1,062,916 860,970 Forthe yearendedDecember31,	Total
		5,404,142 $ 315,897 5,088,245 37,646 447,518 7,916 1,238,138 13,214,251 1,220,916 1,923,886 2012
	ScinoPharm Taiwan,Ltd. Others 4,572,198 $ 368,042 $ - 367,731 4,572,198 311 24,111 5,686 326,697 36,571 29 - 1,400,884 120,277) ( 9,956,519 1,760,737 734,724 230,643 887,380 417,763	Total
		4,940,240 $ 367,731 4,572,509 29,797 363,268 29 1,280,607 11,717,256 965,367 1,305,143

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(4) Reconciliation for segment income (loss)

• A. The sales between segments were under the arms’ length principle. The external revenues reported to the chief operating decision maker adopt the same measurement for revenues in income statement. The reconciliations of pre-tax income between reportable segments and continuing operations were as follo ws:

continuing operations were as follows:
			Forthe years endedDecember31,
			2013			2012
Reportable segments profit before
income		$	1,514,746	$		1,400,884
Other segments profit before income tax	(		276,608)	(		120,277)
Inter segments profit and loss			170,375			91,550
Profit before income tax		$	1,408,513		$	1,372,157
A reconciliation of assets of reportable segment and total assets is as				follows:
			December 31,2013			December 31,2012
Assets of reportable segments	$		10,706,170		$	9,956,519
Assets of other operating segments			2,508,081			1,760,737
Internal segment transaction elimination	(		1,730,023)	(		1,377,380)
Total assets	$		11,484,228		$	10,339,876
A reconciliation of liabilities of reportable segment and total liabilities						is as follows:
			December 31,2013			December 31,2012
Liabilities of reportable segments		$	1,062,916		$	887,380
Liabilities of other operating segments			860,970			417,763
Internal segment transaction elimination	(		82,912)	(		36,009)
Total liabilities		$	1,840,974		$	1,269,134

• B.A reconciliation of assets of reportable segment and total assets is as follows:

• C.A reconciliation of liabilities of reportable segment and total liabilities is as follows:

(5) Information on product and service

The Group is engaged in the research and development and manufacture of materials for medicine, as well as the provision of related consulting and technical services. The

reconciliations of total segment and operating revenue were as follows:

For the years ended December 31,

Revenue from sales of products Revenue from technical services Others	2013 5,055,942 $ 28,845 3,458 5,088,245 $	2012
		4,528,859 $ 37,497 6,153
		4,572,509 $

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(6) Geographical information

Geographical information for the years ended December 31, 2013 and 2012 is as follows:

Geographical information Geographical information for	the years ended December 31, 2013	and 2012 is as follows:	and 2012 is as follows:
Taiwan USA Ireland India Italy Others	Non-current Revenue assets 166,413 $ 3,303,840 $ 1,975,307 - 747,145 - 614,232 - 441,729 - 1,143,419 1,449,076 5,088,245 $ 4,752,916 $ For the year ended and as at December 31,2013	For the year ended and as at December 31,2012
	Revenue 166,413 $ 1,975,307 747,145 614,232 441,729 1,143,419 5,088,245 $	Revenue 141,620 $ 1,458,368 934,166 452,577 596,263 989,515 4,572,509 $	Non-current assets
			3,019,331 $ - - - - 901,908 3,921,239 $

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2013 and 2012 is as follows:

as follows:
A B C	Revenue Segment 1,747,812 $ Whole 665,044 〞 441,687 〞 For the year ended and as at December 31,2013	For the year ended and as at December 31,2012
	Revenue 1,747,812 $ 665,044 441,687	Revenue 1,230,091 $ 887,971 596,263	Segment
			Whole 〞 〞

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15. INITIALAPPLICATION OF IFRSs

These consolidated financial statements are the first consolidated financial statements prepared by the Group in accordance with the IFRSs. The Group has adjusted the amounts as appropriate that are reported in the previous R.O.C. GAAP consolidated financial statements to those amounts that should be presented under IFRSs in the preparation of the opening IFRS balance sheet. Information about exemptions elected by the Group, exceptions to the retrospective application of IFRSs in relation to initial application of IFRSs, and how it affects the Group’s financial position, operating results and cash flows in transition from R.O.C. GAAP to the IFRSs is set out below:

• (1) Exemptions elected by the Group

• A. Share-based payment transactions

  • The Group has elected not to apply the requirements in IFRS 2, ‘Share-based Payment’, retrospectively to equity instruments and liabilities that were vested or settled arising from share-based payment transactions prior to the transition date.

• B. Employee benefits

  • The Group has elected to recognize all cumulative actuarial gains and losses relating to all employee benefit plans in ‘retained earnings’ at the transition date, and to disclose the information of present value of defined benefit obligation, fair value of plan assets, gain or loss on plan assets and experience adjustments under the requirements of paragraph 120A (P), IAS 19, ‘Employee Benefits’, based on their prospective amounts for financial periods from the transition date.

• C. Cumulative translation differences

  • The Group has elected to reset the cumulative translation differences arising on the translation of the financial statements of foreign operations under R.O.C. GAAP to zero at the transition date, and to deal with translation differences arising subsequent to the transition date in accordance with IAS 21, ‘The Effects of Changes in Foreign Exchange Rates’.

• D. Borrowing costs

  • The Group has elected to apply the transitional provisions in paragraphs 27 and 28 of IAS 23, ‘Borrowing Costs’, amended in 2007 and apply IAS 23 from the transition date.

• E. Transfers of assets from customers

  • The Group has elected to apply the transitional provisions in paragraph 22 of IFRIC 18, ‘Transfers of Assets from Customers’, and apply IFRIC 18 from the transition date.

• (2) Except for derecognition of financial assets and financial liabilities, and non-controlling interest to which exceptions to the retrospective application of IFRSs specified in IFRS 1 are not applied as they have no relation with the Group, other exceptions to the retrospective application are set out below:

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Accounting estimates

Accounting estimates made under IFRSs on January 1, 2012 are consistent with those made under R.O.C. GAAP on that day.

• (3) Requirement to reconcile from R.O.C. GAAP to IFRSs at the time of initial application IFRS 1 requires that the entity should make reconciliation for equity, comprehensive income and cash flows for the comparative periods. The Group’s initial application of IFRSs has no significant effect on cash flows from operating activities, investing activities and financing activities. Reconciliation for equity and comprehensive income for the comparative periods as to transition from R.O.C. GAAP to IFRSs is shown below:

• A. Reconciliation for equity on January 1, 2012

					Effect of
					transition
					from R.O.C.
	R.O.C.GAAP			GAAP to IFRSs			IFRSs	Remark
Current assets:
Cash and cash equivalents	$	3,293,681	$		-	$	3,293,681	－
Financial assets at fair value		2,066			-		2,066	－
through profit or loss - current
Accounts receivable		843,902			-		843,902	－
Other receivables		47,983			-		47,983	－
Inventories		1,465,462			-		1,465,462	－
Prepayments		179,883			-		179,883	－
Other current assets		29,526	(		13,974)		15,552	(3)
Total current assets		5,862,503	(		13,974)		5,848,529
Non-current assets
Investment accounted for under		172,107			-		172,107	－
the equity method
Property, plant, and equipment		3,227,233	(		336,473)		2,890,760	(1)(8)
Intangible assets		114,447	(		101,117)		13,330	(2)(5)
Deferred income tax assets		61,779			22,615		84,394	(3)(4)
								(5)
Prepayments for equipment		-			346,322		346,322	(8)
Other financial assets – non-
current		23,817			-		23,817	－
Long-term prepaid rent		-			100,158		100,158	(2)
Other non-current assets		18,302	(		9,849)		8,453	(1)
Total non-current assets		3,617,685			21,656		3,639,341
Total assets	$	9,480,188	$		7,682	$	9,487,870

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				Effect of
				transition
				from R.O.C.
		R.O.C. GAAP	GAAPtoIFRSs			IFRSs	Remark
Current liabilities
Notes payable	$	83	$	-	$	83	－
Accounts payable		299,250		-		299,250	－
Other payables		390,965		14,843		405,808	(4)
Current income tax liabilities		114,937		-		114,937	－
Other current liabilities		37,714		-		37,714	－
Total current liabilities		842,949		14,843		857,792
Non-current liabilities
Accrued pension liabilities		27,959		35,030		62,989	(5)
Total liabilities		870,908		49,873		920,781
Equity attributable to owners of
the parent
Share capital
Common stock		6,310,000		-		6,310,000	－
Capital Reserves
Additional paid-in capital in		1,233,286		-		1,233,286	－
excess of par - common stock
Employee share based		13,691		-		13,691	－
payments
Retained earnings
Legal reserve		7,962		-		7,962	－
Special reserve		-		30,419		30,419	(7)
Unappropriated retained		970,012		-		970,012	(4)(5)
earnings							(6)(7)
Other equity
Currency translation differences		72,610	(	72,610)		-	(6)
Non-controlling interest		1,719		-		1,719	－
Total equity		8,609,280	(	42,191)		8,567,089
Total liabilities and equity	$	9,480,188	$	7,682	$	9,487,870

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B. Reconciliation for equity on December 31, 2012:

Current assets Cash and cash equivalents Financial assets at fair value through profit or loss-current Accounts receivable Other receivables Inventories Prepayments Other current assets Total current assets Non-current assets Financial assets measured at cost- noncurrent Property, plant and equipment Intangible assets Deferred income tax assets Prepayment for equipment Other financial assets -non-current Long-term prepaid rents Other non-current assets Total non-current assets Total assets	R.O.C.GAAP 3,035,012 $ 473 841,334 96,300 1,870,275 214,261 854 6,058,509 149,555 3,790,318 107,539 144,309 - 39,369 - 23,382 4,254,472 10,312,981 $	Effect of transition from R.O.C. GAAP to IFRSs - $ - - - - - 854) ( 854) ( 18,118 231,090) ( 90,018) ( 9,631 237,535 - 90,018 6,445) ( 27,749 26,895 $	IFRSs 3,035,012 $ 473 841,334 96,300 1,870,275 214,261 - 6,057,655 167,673 3,559,228 17,521 153,940 237,535 39,369 90,018 16,937 4,282,221 10,339,876 $	Remark
				－ － － － － － (3) (9) (1)(8) (2)(5) (3)(4) (5) (8) － (2) (1)

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R.O.C.GAAP Current liabilities Short-term borrowings 263,676 $ Notes payable 1,045 Accounts payable 223,074 Other payable 519,810 Current income tax liailities 177,539 Other current liabilities 2,183 Total current liabilities 1,187,327 Non-current liabilities Accrued pension liabilities 30,179 Total liabilities 1,217,506 Share capital Common stock 6,499,300 Capital reserves Additional paid-in capital in excess of par - common stock 1,233,286 Employee share based payments 13,691 Retained earnings Legal reserve 103,897 Special reserve - Unappropriated retained earnings 1,224,246 Other equity Currency translation differences 19,452 Non-controlling interest 1,603 Total equity 9,095,475 Total liabilities and equity 10,312,981 $ Equity attributable to owners of the parent	Effect of transition from R.O.C. GAAP to IFRSs IFRSs - $ 263,676 $ - 1,045 - 223,074 16,345 536,155 - 177,539 - 2,183 16,345 1,203,672 35,283 65,462 51,628 1,269,134 - 6,499,300 - 1,233,286 - 13,691 - 103,897 22,829 22,829 6,930 1,231,176 54,492) ( 35,040) ( - 1,603 24,733) ( 9,070,742 26,895 $ 10,339,876 $	Remark
		－ － － (4) － － (5) － － － － (7)(9) (4)(5) (6)(7) (9) (6)(9) －
Share capital Common stock Capital reserves Additional paid-in capital in excess of par - common stock Employee share based payments Retained earnings Legal reserve Special reserve Unappropriated retained earnings Other equity Currency translation differences Non-controlling interest Total equity Total liabilities and equity

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C.Reconciliation for comprehensive income for the year ended December 31, 2012:

R.O.C.GAAP Operating revenue 4,572,509 $ Operating costs 2,259,081) ( Gross profit 2,313,428 Operating expenses Selling expenses 185,346) ( General and administrative expenses 565,811) ( Research and development expenses 303,023) ( Operating profit 1,259,248 Non-operating income and expenses Other income 98,830 Other gains and losses 18,052 Finance costs 29) ( Share of (loss)/ profit of associates and joint ventures accounted for under equity method 4,434) ( Profit before income tax 1,371,667 Income tax expense 201,245) ( Profit for the year 1,170,422 $ Other comprehensive income Currency translation difference - $ Actuarial gain (loss) on defined benefit plan - Income tax relating to the components of other comprehensive income - Other comprehensive income for the year, net of tax - $ Total comprehensive income for the year 1,170,422 $	Effect of transition from R.O.C. GAAP to IFRSs IFRSs - $ 4,572,509 $ - 2,259,081) ( - 2,313,428 - 185,346) ( 490 565,321) ( - 303,023) ( 490 1,259,738 - 98,830 - 18,052 - 29) ( - 4,434) ( 490 1,372,157 83) ( 201,328) ( 407 $ 1,170,829 $ 35,040) ($ 35,040) ($ 1,286) ( 1,286) ( 219 219 36,107) ($ 36,107) ($ 35,700) ($ 1,134,722 $	Remark
		－ － － (4)(5) － － － － － (4)(5) (10) (5) (5)

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Reasons for reconciliation ：

Reasons f	or reconciliation：
Note	Reasons for reconciliation	Item	Increase/decrease	in accounts affected
			January 1, 2012 (Date of Transition)	Comprehensive income for the year ended December 31,2012
(1) (2) (3)	equipment” at the date of transition to IFRSs and increased “Property, plant and equipment”. be treated as long-term prepaid rent. asset or liability as current. In accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers”, idle assets are presented in “Other Assets”. The Group reclassified “Idle assets” to “Property, plant and In accordance with current accounting standards in R.O.C., the Group's payments to obtain the land use rights and prepayments for leased lands are presented in “Other intangible assets”. However, in accordance with IAS 17, “Leases”, such long operating lease should In accordance with current accounting standards in R.O.C., a deferred tax asset or liability should, according to the classification of its related asset or liability, be classified as current or non-current. However, a deferred tax asset or liability that is not related to an asset or liability for financial reporting should be classified as current or non-current according to the expected period to realize or settle a deferred tax asset or liability. However, under IAS 1, “Presentation of Financial Statements ” , an entity should not classify a deferred tax	Property, plant and equipment Other non-current assets Intangible assets Long-term prepaid rent Other current assets Deferred income tax assets	9,848 $ 9,848) ( 100,158) ( 100,158 13,974) ( 13,974	6,445 $ 6,445) ( 90,018) ( 90,018 854) ( 854

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Note	Reasons for reconciliation	Item	Increase/decrease	in accounts affected
			January 1, 2012 (Date of Transition)	Comprehensive income for the year ended December 31,2012
(4) (5)	costs of accumulated unused compensated absences should be accrued as expenses at the end of the reporting period. duration of its pension plan. A. The discount rate used to calculate pensions shall be determined with reference to the factors specified in R.O.C. SFAS 18, paragraph 23. However, IAS 19, “Employee Benefits”, requires an entity to determine the rate used to discount employee benefits with reference to market yields on high quality corporate bonds that match the currency at the end day of the reporting period and The current accounting standards in R.O.C. do not specify the rules on the cost recognition for accumulated unused compensated absences. The Group recognized such costs as expenses upon actual payment. However, IAS 19, “Employee Benefits”, requires that the	Deferred income tax assets Other payables Undistributed earnings General and administrative expenses Income tax expense Intangible assets Deferred income tax assets Other non-current liabilities Undistributed earnings General and administrative Income tax expense	2,523 $ 14,843 12,320) ( - - 959) ( 6,118 35,030 29,871) ( - -	2,779 $ 16,345 12,320) ( 1,502 256) ( - 5,998 35,283 29,871) ( 1,992) ( 339

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Note	Reasons for reconciliation	Item	Increase/decrease	in accounts affected
			January 1, 2012 (Date of Transition)	Comprehensive income for the year ended December 31,2012
(6) (7)	Exchange Rates. “Retained earnings” account. B. The Group selected to recognize all unrecognized transitional net benefit obligation and cumulative actuarial gains and losses relating to employee benefits at the date of transition to IFRSs. C. In accordance with accounting standards in R.O.C., actuarial pension gain or loss of the Group is recognised in net pension cost of current period using the ‘corridor’ method. However, in accordance with IAS 19, ‘Employee Benefits’, the Group selects to recognize immediately actuarial pension gain or loss in other comprehensive income. The Group selected to reset the cumulative translation differences from foreign operations to zero at the date of transition to IFRSs, in accordance with IAS 21 - The Effects of Changes in Foreign In accordance with the Jin-Guan-Zheng-Fa-Zi Order No.1010012865, dated April 6, 2012, the Group sets aside special reserve on the date of transition to IFRSs and December 31, 2012, as the Group selected to reclassify the transition differences of items 12 and 13 above to	Actuarial gain (loss) on defined benefit plan Income tax relating to the components of other comprensine income Undistributed earnings Currency translation difference Special reserve Undistributed earnings	- $ - 72,610 72,610) ( 30,419 30,419) (	1,286) ($ 219) ( 72,610 72,610) ( 30,419 30,419) (

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Note	Reasons for reconciliation	Item	Increase/decrease	in accounts affected
			January 1, 2012 (Date of Transition)	Comprehensive income for the year ended December 31,2012
(8) (9)	prepayments should be recognized as “Prepayment for equipment”. No.1010012865, dated April 6, 2012. The Group lost its significant influence in Tanvex Biologics, Inc. ( “ Tanvex ” ), and reclassified the carrying amount of Tanvex from “ Long-term investment accounted for under the equity method ” amounting to $167,673 and related “ Cumulative translation differences” associated with Tanvex of $18,118 to “Financial assets carried at cost ” . However, as the Group had selected to reset the cumulative translation differences from foreign operations to zero at the date of transition to IFRSs, it increased both “ Financial assets carried at cost” and “Cumulative translation differences” by $18,118 at December 31, 2012. On the same date, the Group reversed proportionately the special reserve back to “ Retained earnings ” by $7,590, in accordance with the Jin-Guan-Zheng-Fa-Zi Order The Group purchased fixed assets and made payments in advance. Pursuant to the “ Rules Governing the Preparation of Financial Statements by Securities Issuers”, such prepayments are presented as “ Fixed assets ” . Based on the nature of the transactions, the	Property, plant and equipment Financial assets carried at cost-non-current Special reserve Undistributed earnings Currency translation difference Prepayment for equipment	346,322) ($ 346,322 - - - -	237,555) ($ 237,555 18,118 7,590) ( 7,590 18,118) (

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Note	Reasons for reconciliation	Item	Increase/decrease	in accounts affected
			January 1, 2012 (Date of Transition)	Comprehensive income for the year ended December 31,2012
(10)	R.O.C GAAP does not provide any guidance regarding other comprehensive income, and the ending balance of other comprehensive accounts are presented, net of tax, as equity components in the balance sheets. However, under IAS 1, “Presentation of Financial Statements”, an entity shall disclose the amount of income tax relating to each component of other comprehensive income, including reclassification adjustments, either in the statement of comprehensive income or in the notes.	Currency translation difference	- $	35,040) ($

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• D.Major adjustments for the consolidated statements of cash flows for the year ended December 31, 2012:

• (a)The transition of R.O.C. GAAP to IFRSs has no effect on the Group’s cash flows reported.

• (b)The reconciliation between R.O.C. GAAP and IFRSs has no net effect on the Group’s cash

• flows reported.

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