SPT — Annual Report 2017

Dec 28, 2017

SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2017 AND 2016

-----------------------------------------------------------------------------------------------------------------------------------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.

SCINOPHARM TAIWAN, LTD.

Declaration of Consolidated Financial Statements of Affiliated Enterprises

For the year ended December 31, 2017, pursuant to “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises,” the entities that are required to be included in the consolidated financial statements of affiliates, are the same as the entities required to be included in the consolidated financial statements under International Financial Reporting Standards 10. In addition, information required to be disclosed in the consolidated financial statements of affiliates is included in the aforementioned consolidated financial statements. Accordingly, it is not required to prepare a separate set of consolidated financial statements of affiliates.

Hereby declare,

SCINOPHARM TAIWAN, LTD. By Alex Lo Chairman March 16, 2018

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

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

Opinion

We have audited the accompanying consolidated balance sheets of ScinoPharm Taiwan, Ltd. and subsidiaries (the “Group”) as at December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

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

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Group’s consolidated financial statements of 2017. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

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The key audit matters for the Group’s consolidated financial statements of the current period are stated as follows:

Cutoff of export revenue

Description

Please refer to Note 4(26) to the consolidated financial statements for accounting policy on revenue recognition.

The Group’s sales revenue mainly arise from manufacture and sale of Active Pharmaceutical Ingredient (“API”), which primarily consists of export sales. The Group recognises export sales revenue based on the terms and conditions of transactions which vary with different customers. As revenue recognition involves manual processes, and is material to the financial statements, we consider the cutoff of export revenue a key audit matter.

How our audits addressed the matter

We performed the following key audit procedures in respect of the above key audit matter:

1. Understood and assessed the effectiveness of internal controls over cutoff of sales revenue, and tested the effectiveness of internal controls over shipping and billing.

2. Checked the completeness of the export sales details for a certain period around balance sheet date, and performed cutoff tests on a random basis, which include checking the terms and conditions of transactions, verifying against supporting documents, and checking whether inventory movements and costs of sales were recognised in the appropriate period.

Inventory valuation

Description

Please refer to Note 4(11) for accounting policies on inventory valuation, Note 5(2) for the uncertainty of accounting estimates and assumptions applied in inventory valuation, and Note 6(3) for details of inventories. As of December 31, 2017, the balances of inventory and allowance for inventory valuation losses were $2,229,437 thousand and $554,349 thousand, respectively.

The Group is primarily engaged in the manufacture and sales of API. As the manufacturing process is relatively complicated and time consumming, materials require longer lead time, the waiting period for product registration is long, and the timing of the product launch may be deferred, there is higher risk of

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incurring loss on inventory valuation. For inventories sold under normal terms, the Group measures inventories at the lower of cost and net realisable value. For inventories aging over a certain period of time and are individually identified as obsolete inventories, the net realisable value is calculated based on the historical information of inventory turn-over. Since the calculation of net realisable value involves subjective judgement and the ending balance of inventory is material to the financial statements, we consider the valuation of inventory a key audit matter.

How our audits addressed the matter

We performed the following key audit procedures in respect of the above key audit matter:

1. Evaluated the reasonableness of provision policies and procedures on allowance for inventory valuation losses, including the historical data of inventory turn-over and judgement of obsolete inventory.

2. Verified whether the date used in the inventory aging reports that the Group applied to value inventories were accurate. Recalculated and evaluated the reasonableness of allowance for inventory valuation losses in order to confirm that the reported information was in line with the Group’s policies.

3. Selected samples from inventory items by each sequence number to verify its realisable value and to evaluate the reasonableness of allowance for inventory valuation loss.

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion on the parent company only financial statements of ScinoPharm Taiwan, Ltd. as at and for the years ended December 31, 2017 and 2016.

Responsibilities of management and those charged with governance for the consolidated financial statements

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

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

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

Auditor’s responsibilities for the audit of the consolidated financial statements

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

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

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

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

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

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

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

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

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

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

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

Lin, Yung-Chih

Independent Accountants

Liu, Tzu-Meng

PricewaterhouseCoopers, Taiwan

Republic of China March 16, 2018

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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. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 5(2) and 6(3) 3(2) and 6(4) 6(5)(7)(26) 5(2) and 6(24) 6(5)(26) 8 6(6)	December 31, 2017 AMOUNT % $ 3,910,791 31 567,318 4 197,620 2 1,675,088 13 116,310 1 6,467,127 51 391,097 3 5,088,713 40 23,334 - 503,570 4 110,529 1 9,179 - 28,831 - 79,009 1 6,234,262 49 $ 12,701,389 100	December 31, 2016	December 31, 2016
		AMOUNT $ 3,910,791 567,318 197,620 1,675,088 116,310 6,467,127 391,097 5,088,713 23,334 503,570 110,529 9,179 28,831 79,009 6,234,262 $ 12,701,389	AMOUNT $ 3,707,151 638,405 197,897 1,829,710 212,212 6,585,375 364,089 5,208,898 24,078 414,414 65,466 9,739 28,831 82,110 6,197,625 $ 12,783,000	%
Current assets 1100 Cash and cash equivalents 1170 Accounts receivable, net 1200 Other receivables 130X Inventory 1410 Prepayments 11XX Total current assets Non-current assets 1543 Financial assets carried at cost- non-current 1600 Property, plant and equipment 1780 Intangible assets 1840 Deferred income tax assets 1915 Prepayments for equipment 1920 Guarantee deposits paid 1980 Other financial assets - non- current 1985 Long-term prepaid rents 15XX Total non-current assets 1XXX Total assets				29 5 2 14 2
				52
				3 41 - 3 - - - 1
				48
				100

(Continued)

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December 31, 2017 December 31, 2016 Notes AMOUNT % AMOUNT % 6(8) $ 374,713 3 $ 982,705 8 6(9) - - 2,822 - 1,161 - 1,001 - 90,784 1 69,730 1 6(10)(26) 350,117 3 430,020 3 6(24) 50,251 - 110,911 1 28,896 - 62,384 - 6(11) and 9 219,536 2 32,120 - 1,115,458 9 1,691,693 13 6(11) and 9 1,097,682 9 770,873 6 6(24) - - 877 - 6(12) 69,312 - 70,053 1 1,712 - 21,711 - 1,168,706 9 863,514 7 2,284,164 18 2,555,207 20 6(13)(16) 7,907,392 62 7,603,262 59 6(14)(15) 1,286,872 10 1,275,660 10 6(13)(16)(24) 526,065 4 460,196 4 22,829 - 22,829 - 693,832 6 869,300 7 6(17) ( 19,765) - ( 3,454) - 10,417,225 82 10,227,793 80 9 11 $ 12,701,389 100 $ 12,783,000 100	December 31, 2016	December 31, 2016
			%
Current liabilities 2100 Short-term borrowings 2120 Financial liabilities at fair value through profit or loss - current 2150 Notes payable 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2310 Advance receipts 2320 Long-term liabilities, current portion 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2640 Net defined benefit liabilities 2645 Guarantee deposits received 25XX Total non-current liabilities 2XXX Total liabilities Equity attributable to owners of parent Share capital 3110 Share capital - common stock 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated earnings 3400 Other equity interest 3XXX Total equity Significant contingent liabilities and unrecognized contract commitments Significant events after balance sheet date 3X2X Total liabilities and equity			8 - - 1 3 1 - -
			13
			6 - 1 -
			7
			20
			59 10 4 - 7 -
			80
			100

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

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

Items

Year ended December 31 2017 2016 Notes AMOUNT % AMOUNT % 6(18) $ 3,516,481 100 $ 4,030,921 100 6(3)(12)(22)(23) and 9 ( 1,966,324) ( 56)( 2,224,960) ( 55) 1,550,157 44 1,805,961 45 6(6)(12)(22)(23), 7 and 9 ( 145,756) ( 4) ( 169,971) ( 4) ( 531,163) ( 15) ( 488,139) ( 12) ( 314,276) ( 9)( 279,575) ( 7) ( 991,195) ( 28)( 937,685) ( 23) 558,962 16 868,276 22 6(2)(19) 39,522 1 40,705 1 6(7)(9)(20) and 12 ( 46,551) ( 1) ( 62,265) ( 1) 6(5)(21)(26) ( 76,631) ( 2)( 36,116) ( 1) ( 83,660) ( 2)( 57,676) ( 1) 475,302 14 810,600 21 6(24) ( 52,935) ( 2)( 151,907) ( 4) $ 422,367 12 $ 658,693 17 6(12) $ 316 - ($ 7,393) - 6(24) ( 54) - 1,258 - 6(17) ( 16,311) - ( 72,549) ( 2) ($ 16,049) - ($ 78,684) ( 2) $ 406,318 12 $ 580,009 15 $ 422,367 12 $ 658,693 17 $ 406,318 12 $ 580,009 15 6(25) $ 0.53 $ 0.83 $ 0.53 $ 0.83

4000 Operating 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 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the year Other comprehensive income (loss) 8311 Actuarial gains (losses) on defined benefit plans 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive income that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations 8300 Total other comprehensive loss for the year 8500 Total comprehensive income for the year Profit attributable to: 8610 Owners of the parent Comprehensive income attributable to: 8710 Owners of the parent Earnings per share (in dollars) 9750 Basic 9850 Diluted

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

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of New Taiwan dollars)

For the year ended December 31, 2016 Balance at January 1, 2016 Distribution of 2015 net income: Legal reserve Cash dividends Stock dividends Employee stock option compensation cost Net income for the year ended December 31, 2016 Other comprehensive loss for the year ended December 31, 2016 Balance at December 31, 2016 For the year ended December 31, 2017 Balance at January 1, 2017 Distribution of 2016 net income: Legal reserve Cash dividends Stock dividends Employee stock option compensation cost Net income for the year ended December 31, 2017 Other comprehensive loss for the year ended December 31, 2017 Balance at December 31, 2017	Notes				Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent	Equity attributable to owners ofthe parent				Totalequity
			Share capital - commonstock		Capital reserve			Retained earnings					Other equity Currency translation differences
							Legal reserve		Special reserve	Unappropriated earnings
	6(16) 6(13)(16) 6(14)(15) 6(17) 6(16) 6(13)(16) 6(14)(15) 6(17)		$ 7,310,829 - - 292,433 - - - $ 7,603,262 $ 7,603,262 - - 304,130 - - - $ 7,907,392		$ 1,265,544 - - - 10,116 - - $ 1,275,660 $ 1,275,660 - - - 11,212 - - $ 1,286,872		$ 396,699 63,497 - - - - - $ 460,196 $ 460,196 65,869 - - - - - $ 526,065		$ 22,829 - - - - - - $ 22,829 $ 22,829 - - - - - - $ 22,829	$ 791,997 ( 63,497) ( 219,325) ( 292,433) - 658,693 ( 6,135) $ 869,300 $ 869,300 ( 65,869) ( 228,098) ( 304,130) - 422,367 262 $ 693,832	$ 69,095 - - - - - ( 72,549) ($ 3,454) ($ 3,454) - - - - - ( 16,311) ($ 19,765)			$ 9,856,993 - ( 219,325) - 10,116 658,693 ( 78,684) $10,227,793 $10,227,793 - ( 228,098) - 11,212 422,367 ( 16,049) $10,417,225

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

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) (Gain) loss on valuation of financial assets and liabilities (Reversal of allowance) provision for doubtful accounts Loss on inventory market price decline Provision for obsolescence of supplies Depreciation Loss on disposal of property, plant and equipment (Gain on reversal) impairment loss Amortization Amortization of long-term prepaid rent Employee stock option compensation cost Interest income Interest expense Changes in operating assets and liabilities Changes in operating assets Accounts receivable Other receivables Inventory Prepayments Changes in operating liabilities Notes payable Accounts payable Other payables Advance receipts Net defined benefit liabilities - non-current Cash inflow generated from operations Interest received Interest paid Income tax paid Net cash flows from operating activities

For the years ended December 31, Notes 2017 2016 $ 475,302 $ 810,600 ( 2,822 ) 2,677 6(2)(19) ( 516 ) 596 6(3) 53,212 110,571 11,088 11,167 6(5)(22) 423,322 435,391 6(20) 300 626 6(5)(7)(20) ( 3,741 ) 889 6(22) 9,217 9,450 6(6) 1,835 1,977 6(14)(15) 11,212 10,116 6(19) ( 25,083 ) ( 27,844 ) 6(21) 76,631 36,116 71,604 228,232 422 10,058 101,410 234,501 83,456 ( 54,776 ) 160 6 21,054 ( 21,330 ) ( 34,800 ) 34,117 ( 33,488 ) 18,848 ( 425) ( 194) 1,239,350 1,851,794 24,938 27,844 ( 87,051 ) ( 21,337 ) ( 205,523) ( 193,277) 971,714 1,665,024

(Continued)

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Decrease in other financial assets - current Increase in financial assets measured at cost - non-current Cash paid for acquisition of property, plant and equipment Interest paid for acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of intangible assets Increase in prepayment for equipment Decrease in guarantee deposits paid Increase in other financial assets - non-current Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term borrowings Increase in long-term borrowings Decrease in long-term borrowings Decrease in guarantee deposits received Payment of cash dividents Net cash flows used in financing activities Effect of foreign exchange rate changes Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

For the years ended December 31, Notes 2017 2016 $ - $ 284,216 ( 27,008 ) ( 25,182 ) 6(26) ( 289,479 ) ( 395,633 ) 6(5)(21)(26) ( 10,964 ) ( 22,847 ) 50 555 ( 8,625 ) ( 11,416 ) ( 101,859 ) ( 28,623 ) 560 709 - ( 4,097 ) ( 437,325 ) ( 202,318 ) ( 583,878 ) ( 719,601 ) 572,084 802,993 ( 54,023 ) - ( 19,999 ) ( 1,686 ) 6(16) ( 228,098 ) ( 219,325 ) ( 313,914 ) ( 137,619 ) ( 16,835 ) 46,367 203,640 1,371,454 6(1) 3,707,151 2,335,697 6(1) $ 3,910,791 $ 3,707,151

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

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

1. HISTORY AND ORGANISATION

• (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 Active Pharmaceutical Ingredients (“API”), albumin medicines, oligonucleotide medicines, peptide medicines, injections and new small molecule drugs, as well as the provision of related consulting and technical services.

• (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 AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on March 16, 2018.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

• (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)

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

follows:
New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board(“IASB”)
Amendments to IFRS 10, IFRS 12 and IAS 28, ‘Investment entities: applying the consolidation exception’ Amendments to IFRS 11, ‘Accounting for acquisition of interests in joint operations’ IFRS 14, ‘Regulatory deferral accounts’ Amendments to IAS 1, ‘Disclosure initiative’ Amendments to IAS 16 and IAS 38, ‘Clarification of acceptable methods of depreciation and amortisation’	January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016 January 1, 2016

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New Standards,Interpretations and Amendments

Effective date by International Accounting Standards Board(“IASB”)

Amendments to IAS 16 and IAS 41, ‘Agriculture: bearer plants’ Amendments to IAS 19, ‘Defined benefit plans: employee contributions’ Amendments to IAS 27, ‘Equity method in separate financial statements’ Amendments to IAS 36, ‘Recoverable amount disclosures for non- financial assets’ Amendments to IAS 39, ‘Novation of derivatives and continuation of hedge accounting’ IFRIC 21, ‘Levies’ Annual improvements to IFRSs 2010-2012 cycle Annual improvements to IFRSs 2011-2013 cycle Annual improvements to IFRSs 2012-2014 cycle

January 1, 2016 July 1, 2014 January 1, 2016 January 1, 2014 January 1, 2014 January 1, 2014 July 1, 2014 July 1, 2014 January 1, 2016

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

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

the Group

New standards, interpretations and amendments as endorsed by the FSC effective from 2018 are as follows:

follows:
New Standards,Interpretations and Amendments	Effective date by IASB
Amendments to IFRS 2, ‘Classification and measurement of share- based payment transactions’ Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with IFRS 4 Insurance contracts’ IFRS 9, ‘Financial instruments’ IFRS 15, ‘Revenue from contracts with customers’ Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from contracts with customers’ Amendments to IAS 7, ‘Disclosure initiative’ Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised losses’ Amendments to IAS 40, ‘Transfers of investment property’ IFRIC 22, ‘Foreign currency transactions and advance consideration’	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018

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New Standards,Interpretations andAmendments	Effective date by IASB
Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IFRS 12, ‘Disclosure of interests in other entities’ Annual improvements to IFRSs 2014-2016 cycle-Amendments to IAS 28, ‘Investments in associates and joint ventures’	January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete. IFRS 9, ‘Financial instruments’

• A. Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.

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

When adopting the new standards endorsed by the FSC effective from 2018, the Group will apply the new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. The significant effects of applying the standard as of January 1, 2018 are summarised below:

In accordance with IFRS 9, the Group expects to reclassify financial assets at cost in the amount of $391,097, and make an irrevocable election at initial recognition on equity instruments not held for dealing or trading purpose, by increasing financial assets at fair value through other comprehensive income and other equity interest in the amounts of $539,572 and $148,475, respectively.

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

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

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by IASB
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 16, ‘Leases’ IFRS 17, ‘Insurance contracts’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 To be determined by IASB January 1, 2019 January 1, 2021 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

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

IFRS 16, ‘Leases’

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation

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

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

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

• B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement 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 structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

• (b) Inter-company transactions, balances and unamosed 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 noncontrolling 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 recognised 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. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised 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 recognised in other 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.

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B. Subsidiaries included in the consolidated financial statements:

Percentage owned by the Company

		Percentage owned by the Company
Name of Investors	Name of Subsidiaries	Business December 31, December 31, activities 2017 2016 Professional investment 100.00 100.00 Professional investment 100.00 100.00 Research, development and manufacture of API and new drug, etc. 100.00 100.00 Research, development and manufacture of API and new drug, sale produced products, etc. 100.00 100.00 Import, export and sales of API and intermediates, etc. 100.00 100.00	Note
ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. SPT International, Ltd. SPT International, Ltd. SPT International, Ltd.	SPT International, Ltd. ScinoPharm Singapore Pte Ltd. SciAnda (Kunshan) Biochemical Technology Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda Shanghai Biochemical Technology, Ltd.		－ － － － －

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

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

• E. Significant restrictions: None.

• F. Subsidiaries that have non-controlling interests that are material to the Group: 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 recognised in profit or loss in the period in which they arise.

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

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

• (d) All other foreign exchange gains and losses 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 joint arrangements that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

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

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

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

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

• (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 realised, or are intended to be sold or consumed within the normal operating cycle;

• (b)Assets held mainly for trading purposes;

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

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

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

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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 and bills under repurchase agreements 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) Receivables

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

(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 recognised and derecognised using trade date accounting.

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

(9) 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.

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• 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, 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 cost

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

• (b) Financial assets measured at amortised cost

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

(10) Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to cash flows from the

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financial asset expire.

(11) Inventories

Inventories are stated at the lower of cost and net realisable value. The standard cost method is applied, and 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 realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses. When the cost of inventories exceeds the realisable value, the amount of any write-down of inventories is recognised as cost of sales during the period and the amount of any reversal of inventory write-down is recognised as a reduction in the cost sales during the period.

(12) 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 recognised 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 derecognised. 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 financial year-end 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:

equipment are as follows:
Assets Buildings and structures 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 ～ 19 years

(13) Intangible assets

Professional skills and computer software, etc. are stated at cost and amortised on a straight-line

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basis over their estimated useful lives of 3 ~ 5 years.

• (14) Operating Leases (lessee)

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

(15) 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 recognised 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 recognising 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 recognised in profit or loss. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

• (16) Borrowings

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

• (17) 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:

  • (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 recognised 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 recognised in profit or loss.

• (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 recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. However, short-term

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accounts payable that bear no interest are subsequently measured at initial invoice amount as the effect of discounting is insignificant.

(19) Derecognition of financial liabilities

Afinancial liability is derecognised when the obligation under the liability specified in the contract is discharged, cancelled or expires.

(20) 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 recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

(21) Employee benefits

• A. Short-term employee benefits

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

• B. Pensions

• (a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

• (b) Defined benefit plans

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

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

• C. Employees’ compensation and directors’ remuneration

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

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- (22) Employee share based payment

• 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 recognised 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 recognised is based on the number of equity instruments that eventually vest.

(23) Income tax

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

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group 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 recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the 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 realised or the deferred income tax liability is settled.

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

• E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an

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intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.

• F. Deferred tax asset shall be recognised for the carry forward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures, 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 utilized.

(24) Share capital

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

• (25) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved 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.

• (26) Revenue recognition

• A. Sales of goods

The Group manufactures and sells 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 recognised 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 recognised 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.

(27) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the

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chief operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

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. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, and the related information is addressed below:

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

• 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 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 realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. As the manufacturing process is relatively complicated and time consumming, materials require longer lead time, the waiting period for product registration is long, and the timing of product launch may be deferred, 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 realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

• (b) As of December 31, 2017, the carrying amount of inventories was $1,675,088.

• B. Realisability of deferred income tax assets

• (a) Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. 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

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tax assets.

• (b) As of December 31, 2017, the Group recognised deferred income tax assets amounting to $503,570.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

$503,570. TAILS OF SIGNIFICANT ACCOUNTS CASH AND CASH EQUIVALENTS
Cash: Cash on hand Checking accounts and demand deposits Cash equivalents: Time deposits Bill under repurchase agreements	December31,2017 235 $ 287,317 287,552 3,385,448 237,791 3,623,239 3,910,791 $	December31,2016
		75 $ 516,801
		516,876
		2,904,500 285,775
		3,190,275
		3,707,151 $

• 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.

• B. Details of the Group’s time deposits pledged to others as collateral (listed as “Other financial assets

• non-current”) as of December 31, 2017 and 2016 are provided in Note 8.

(2) ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET
	December 31,2017		December 31,2016
Accounts receivable	$	567,448	$	639,052
Less: Allowance for doubtful accounts	(	130)	(	647)
	$	567,318	$	638,405
A. As of December 31, 2017 and 2016, the Group had no		accounts receivable classified as “past d
but not impaired”.
B. Movements on the provision for impairment of accounts receivable are as follows:
		For theyears ended		December31,
		2017		2016
	Group provision		Group provision
At January 1	$	647	$	53
(Reversal) provision for impairment (Note)	(	516)		596
Effect of exchange rate	(	1)	(	2)
At December 31	$	130	$	647

• A. As of December 31, 2017 and 2016, 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:

Note: Reversal for impairment listed as “Other income”.

• C. The Group’s accounts receivable that were neither past due nor impaired were fully performing in line with the credit standards prescribed based on the counterparties’ industry characteristics, business scale and profitability.

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D. As of December 31, 2017 and 2016, the Group does not hold any collateral as security. (3) INVENTORIES

INVENTORIES
Raw materials Supplies Work in process Finished goods Raw materials Supplies Work in process Finished goods		December31,2017
	Allowance for Cost marketprice decline 464,031 $ 127,213) ($ 34,786 2,171) ( 660,329 157,157) ( 1,070,291 267,808) ( 2,229,437 $ 554,349) ($ December31,2016		Bookvalue
			336,818 $ 32,615 503,172 802,483
			1,675,088 $
	Allowance for Cost marketprice decline 377,494 $ 81,670) ($ 14,946 1,097) ( 896,557 125,933) ( 1,041,850 292,437) ( 2,330,847 $ 501,137) ($		Bookvalue
			295,824 $ 13,849 770,624 749,413
			1,829,710 $

The Group recognised expense and loss of inventories for the year:

Cost of goods sold Loss on physical inventory Loss on inventory scrap Under applied manufacturing overhead Provision for inventory market price decline Total cost of goods sold	For theyears ended December31,	For theyears ended December31,
	2017 1,509,589 $ 6,198 42,367 291,135 53,212 1,902,501 $	2016 1,707,118 $ 8,910 53,811 311,983 110,571 2,192,393 $

(4) FINANCIALASSETS MEASURED AT COST - NON-CURRENT

	December31,2017	December31,2017	December31,2016	December31,2016
Unlisted stocks
Tanvex Biologics, Inc.	$	167,673	$	167,673
SYNGEN, INC.		4,620		4,620
Foresee Pharmaceuticals, Co., Ltd.		223,424		196,416
		395,717		368,709
Less: Accumulated impairment	(	4,620)	(	4,620)
	$	391,097	$	364,089

A. The Group classified some of its equity investments as available-for-sale financial assets, based on its intention. However, as these stocks are not traded in an active market, and there is no sufficient information of similar companies in the industry, fair value of the investments cannot

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be measured reliably. Accordingly, the Group classified those stocks as “financial assets measured at cost”.

• B. As of December 31, 2017 and 2016, no financial assets measured at cost held by the Group were pledged to others.

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(5) PROPERTY, PLANT AND EQUIPMENT

												Construction in progress	Construction in progress
				Machinery and		Transportation			Office		Other	and equipment before
January 1, 2017		Buildings			equipment		equipment		equipment		equipment	acceptance inspection				Total
Cost	$	2,948,766	$		4,853,501	$	28,601	$	213,075	$	154,986	$	1,610,548	$		9,809,477
Accumulated depreciation	(	820,361)	(		3,491,593)	(	22,848)	(	152,407)	(	98,730)		-	(		4,585,939)
Accumulated impairment		-	(		14,640)		-		-		-		-	(		14,640)
	$	2,128,405		$	1,347,268	$	5,753	$	60,668	$	56,256	$	1,610,548		$	5,208,898
For the year ended December 31, 2017
At January 1	$	2,128,405	$		1,347,268	$	5,753	$	60,668	$	56,256	$	1,610,548	$		5,208,898
Additions		340			2,875		-		80		11		262,454			265,760
Reclassified from prepayments
for equipment		-			-		-		-		-		56,122			56,122
Reclassified upon completion		585,165			256,234		-		6,411		2,424	(	850,234)			-
Depreciation charge	(	138,369)	(		243,242)	(	2,344)	(	24,171)	(	15,196)		-	(		423,322)
Disposals－Cost		-	(		23,600)	(	1,266)	(	4,430)	(	783)		-	(		30,079)
' －Accumulated
depreciation		-			23,467		1,177		4,380		705		-			29,729
Reversal of impairment loss		-			3,741		-		-		-		-			3,741
Net currency exchange differences		1,993	(		3,292)	(	31)	(	258)	(	1,014)	(	19,534)	(		22,136)
At December 31	$	2,577,534		$	1,363,451	$	3,289	$	42,680	$	42,403	$	1,059,356		$	5,088,713
December 31, 2017
Cost	$	3,535,840	$		5,084,982	$	27,185	$	214,262	$	154,389	$	1,059,356	$		10,076,014
Accumulated depreciation	(	958,306)	(		3,710,632)	(	23,896)	(	171,582)	(	111,986)		-	(		4,976,402)
Accumulated impairment		-	(		10,899)		-		-		-		-	(		10,899)
	$	2,577,534		$	1,363,451	$	3,289	$	42,680	$	42,403	$	1,059,356		$	5,088,713

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											Construction in progress	Construction in progress
			Machinery and		Transportation			Office		Other	and equipment before
January 1, 2016		Buildings		equipment		equipment		equipment		equipment	acceptance inspection			Total
Cost	$	2,499,181	$	4,689,690	$	29,690	$	202,695	$	141,302	$	1,803,046	$	9,365,604
Accumulated depreciation	(	723,268)	(	3,226,643)	(	20,677)	(	128,570)	(	81,981)		-	(	4,181,139)
Accumulated impairment		-	(	13,751)		-		-		-		-	(	13,751)
	$	1,775,913	$	1,449,296	$	9,013	$	74,125	$	59,321	$	1,803,046	$	5,170,714
For the year ended December 31, 2016
At January 1	$	1,775,913	$	1,449,296	$	9,013	$	74,125	$	59,321	$	1,803,046	$	5,170,714
Additions		-		-		-		-		-		462,672		462,672
Reclassified from prepayments
for equipment		-		-		-		-		-		121,118		121,118
Reclassified upon completion		485,874		203,159		-		15,558		25,589	(	730,180)		-
Depreciation charge	(	101,112)	(	278,715)	(	3,113)	(	27,896)	(	24,555)		-	(	435,391)
Disposals－Cost		-	(	8,619)	(	405)	(	895)	(	1,233)		-	(	11,152)
' －Accumulated
depreciation		-		7,543		405		847		1,176		-		9,971
Impairment loss		-	(	889)		-		-		-		-	(	889)
Net currency exchange differences	(	32,270)	(	24,507)	(	147)	(	1,071)	(	4,042)	(	46,108)	(	108,145)
At December 31	$	2,128,405	$	1,347,268	$	5,753	$	60,668	$	56,256	$	1,610,548	$	5,208,898
December 31, 2016
Cost	$	2,948,766	$	4,853,501	$	28,601	$	213,075	$	154,986	$	1,610,548	$	9,809,477
Accumulated depreciation	(	820,361)	(	3,491,593)	(	22,848)	(	152,407)	(	98,730)		-	(	4,585,939)
Accumulated impairment		-	(	14,640)		-		-		-		-	(	14,640)
	$	2,128,405	$	1,347,268	$	5,753	$	60,668	$	56,256	$	1,610,548	$	5,208,898

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• A. Amount of borrowing costs capitalized as part of property, plant and equipment and the range of the interest rates for such capitalization are as follows:

Amount capitalized Interest rate	Forthe years endedDecember31,	Forthe years endedDecember31,
	2017 10,964 $ 4.09%～4.70%	2016
		22,847 $
		1.72%～4.74%

• B. Information about reversal of impairment and impairment loss on property, plant and equipment is provided in Note 6(7).

• C. As of December 31, 2017 and 2016, the Group has not pledged any property, plant and equipment as collateral.

(6) LONG-TERM PREPAID RENT

Land use right

December31,2017 79,009 $	December31,2016 82,110 $

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 recognised rental expenses of $1,835 and $1,977 for the years ended December 31, 2017 and 2016, respectively (listed as “General and administrative expenses”).

(7) IMPAIRMENT OF NON-FINANCIALASSETS

• －

• A. The Group reversed the impairment loss amounting to $3,741 and $ for the years ended December 31, 2017 and 2016, respectively, and the Group recognised impairment loss for the －

• years ended December 31, 2017 and 2016 in the amount of $ and $889, respectively, (listed as “Other gains and losses”) as some of the idle machineries were again utilized in production. For details of accumulated impairment, please refer to Note 6(5).

• B. The impairment loss and the reversal of impairment reported by operating segments is as follows:

For the years ended December 31,

			2017		2016
			Recognized in other		Recognized in other
	Recognized in		comprehensive	Recognized in	comprehensive
Segments	profit	or loss	income	profit or loss	income
ScinoPharm Taiwan	($	3,741)	- $	889 $	- $

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(8) SHORT-TERM BORROWINGS

Type of borrowings Bank loans Unsecured loans Type of borrowings Bank loans Unsecured loans	December31,2017 374,713 $ December31,2016 982,705 $	Interest rate range Collateral 4.79%～4.85% None Interest rate range Collateral 4.35%～4.44% None

(9) FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Items December 31, 2017 December 31, 2016 Current items: Financial liabilities held for trading - Non-hedging derivatives $ $ 2,822

Current items:

• A. The Group recognised net gain of $10,917 and $3,981 on financial liabilities held for trading (listed as “Other gains and losses”) for the years ended December 31, 2017 and 2016, respectively.

• B. The non-hedging derivative instruments transaction and contract information are as follows (Unit in thousands of currencies indicated):

December 31,2016
Items Contract Amount Contract Period
Forward foreign exchange contracts USD 6,940,000 11.2016～2.2017
As of December 31,2017, there are no financial instruments at fair value through profit or loss.
The Group entered into forward foreign contracts to hedge exchange rate risk of operating
activities. However, these forward foreign exchange contracts are not accounted for under hedge
accounting.

(10) OTHER PAYABLES

accounting. OTHER PAYABLES
Accrued salaries and bonuses Payables on equipment Others	December31,2017 126,492 $ 54,326 169,299 350,117 $	December31,2016
		151,650 $ 89,009 189,361 430,020 $

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(11) LONG-TERM BORROWINGS

Type of borrowings Borrowing period December31,2017 Long-term bank loans Secured bank loans CNY 288,000 thousands 1,317,218 $ 6.14.2016～ 6.14.2019 Less: Current portion 219,536) ( 1,097,682 $ Type of borrowings Borrowing period December31,2016 Long-term bank loans Secured bank loans CNY 172,924 thousands 802,993 $ 6.14.2016～ 6.14.2019 Less: Current portion 32,120) ( 770,873 $	Interest rate Collateral 4.85% Guaranteed by the Company Interest rate Collateral 4.85% Guaranteed by the Company

(12) PENSIONS

A. (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 to 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 one 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. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the

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following year, the Company will make contribution for the deficit by end of March next year.

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

			December	December	31,2017	31,2017	December	December	December	31,2016
Present value of defined benefit obligations			$		119,272		$			118,242
Fair value of plan assets			(			49,960)	(			48,189)
Net defined benefit liability			$			69,312	$			70,053
Movements in net defined benefit liabilities			are as follows:
		Present	value of
For the year ended		defined benefit				Fair value	of		Net defined
December31,2017		obligations				plan assets			benefit liability
At January 1	$		118,242	($		48,189)			$	70,053
Current service cost			1,654				-			1,654
Interest expense (income)			1,656	(			675)			981
			121,552	(		48,864)				72,688
Remeasurements:
Return on plan assets
(excluding amounts
included in interest
income or expense)			-				161			161
Change in financial
assumptions			2,566				-			2,566
Experience adjustments	(		3,043)				-	(		3,043)
	(		477)				161	(		316)
Pension fund contribution			-	(		3,060)		(		3,060)
Paid pension	(		1,803)			1,803				-
At December 31	$		119,272	($		49,960)		$		69,312

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

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		Present value of	Present value of
For the year ended		defined benefit			Fair value of	Net defined
December31,2016			obligations		plan assets	benefit liability
At January 1	$		111,292	($	48,438)	$	62,854
Current service cost			1,926		-		1,926
Interest expense (income)			1,892	(	823)		1,069
			115,110	(	49,261)		65,849
Remeasurements:
Return on plan assets
(excluding amounts
included in interest
income or expense)			-		379		379
Change in financial
assumptions			3,950		-		3,950
Experience adjustments			3,064		-		3,064
			7,014		379		7,393
Pension fund contribution			-	(	3,189)	(	3,189)
Paid pension	(		3,882)		3,882		-
At December 31	$		118,242	($	48,189)	$	70,053

(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2017 and 2016 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

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

For the years ended December 31,

Discount rate Future salary increases	2017 1.20% 3.00%	2016
		1.40%
		3.00%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience according to Taiwan Life Insurance Industry 5th Mortality Table for the years ended December 31, 2017 and 2016.

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

Increase 0.25% Decrease 0.25% December 31, 2017 Effect on present value of defined benefit obligation 3,195) ($ 3,319 $ December 31, 2016 Effect on present value of defined benefit obligation 3,304) ($ 3,438 $ Discount rate	Future salaryincreases	Future salaryincreases
	Increase 0.25% Decrease 0.25% 2,955 $ 2,866) ($ 3,081 $ 2,982) ($	Decrease 0.25%

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

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

• (f) Expected contributions to the defined benefit pension plan of the Company for 2018 is $2,938.

• (g) As of December 31, 2017, the weighted average duration of that retirement plan is 11 years. The analysis of timing of the future pension payment was as follows:

The analysis of timing of the future pension payment was as follows:
Within 1 year 2~5 years Over 6 years	3,001 $ 28,748 116,469
	148,218 $

• 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

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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 (SciAnda (Kunshan) Biochemical Technology, Ltd., SciAnda (Changshu) Pharmaceuticals, Ltd., and SciAnda (Shanghai) Biochemical Technology, Ltd.) 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. The other subsidiaries, SPT International, Ltd. and ScinoPharm Singapore Pte Ltd., had no employees. For the years ended December 31, 2017 and 2016, the pension costs recognised under the aforementioned defined contribution pension plans were $33,162 and $31,464, respectively.

(13) SHARE CAPITAL

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

thousands of shares):
At January 1 Capitalization of retained earnings At December 31	For theyears ended December31,
	2017 760,326 30,413 790,739	2016
		731,083 29,243
		760,326

• B. On June 27, 2016, the Company’s shareholders adopted a resolution to issue shares of common stock due to capitalization of retained earnings of $292,433 and obtained approval from the SFC. The effective date of capitalization was set on August 16, 2016. After the capitalization mentioned above, the Company’s total authorized capital was $10,000,000 and the paid-in capital was $7,603,262 (760,326 thousand shares) with a par value of $10 (in dollars) per share.

• C. On June 27, 2017, the Company’s shareholders adopted a resolution to issue shares of common stock due to capitalization of retained earnings of $304,130 and obtained approval from the SFC. The effective date of capitalization was set on August 18, 2017. After the capitalization mentioned above, the Company’s total authorized capital was $10,000,000 and the paid-in capital was $7,907,392 (790,739 thousand shares) with a par value of $10 (in dollars) per share.

• D. As of December 31, 2017, the Company’s authorized capital was $10,000,000 and the paid-in capital was $7, 907,392 (790,739 thousand shares) with a par value of $10 (in dollars) per share. All proceeds from shares issued have been collected.

(14) CAPITAL RESERVES

• 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 stocks 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

~40~

requires that the capital reserve to be capitalized mentioned above should not exceed 10% of the 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, 2017

At January 1 Employee stock options compensation cost - Company - Subsidiaries Employee stock options forfeited At December 31	Sharepremium 1,233,286 $ - - 1,862 1,235,148 $	Stock options 42,374 $ 11,036 176 1,862) ( 51,724 $	Total
			1,275,660 $ 11,036 176 -
			1,286,872 $

For the year ended December 31, 2016

At January 1 Employee stock options compensation cost - Company - Subsidiaries At December 31	Sharepremium 1,233,286 $ - - 1,233,286 $	Stock options 32,258 $ 10,025 91 42,374 $	Total
			1,265,544 $ 10,025 91
			1,275,660 $

(15) SHARE-BASED PAYMENT

• A. The Company issued 1 million units, 1.5 million units and 1.5 million units of employee stock options on December 3, 2013, November 6, 2015 and October 14, 2016, respectively (the ‘Grant Date’). The exercise price of the options was set at $91.70 (in dollars), $41.65 (in dollars) and $40.55 (in dollars), respectively, which was based on the closing market price of the Company's common shares on the Grant Dates. 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 the number of shares of the Company's common stocks after the Grant Date. (As of December 31, 2017, for the issued 1 million units, 1.5 million units and 1.5 million units of employee stock options, the exercise price was adjusted based on the specific formula to $77.10 (in dollars) per share, $38.50 (in dollars) per share and $39.00 (in dollars) per share, respectively.) Contract period of the employee stock option plans is 10 years, and options are exercisable in 2 years after the Grant Date. The Group recognised compensation costs relating to the employee stock options plan of $11,212 and $10,116 for the years ended December 31, 2017 and 2016, respectively.

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

For the year ended December 31, 2017

			For theyear ended	December31,2017	December31,2017
				Weighted-average
			Number of options		exercise price
			(in thousand units)		(in dollars)
Options	outstanding at beginning of the year		3,457	$	48.03
Options	forfeited	(	382)		46.10
Options	outstanding at end of the year		3,075		46.53
Options	exercisable at end of the year		1,198		80.20
			For theyear ended	December31,2016
				Weighted-average
			Number of options		exercise price
			(in thousand units)		(in dollars)
Options	outstanding at beginning of the year		2,348	$	56.92
Options	granted		1,500		40.55
Options	forfeited	(	391)		62.47
Options	outstanding at end of the year		3,457		48.03
Options	exercisable at end of the year		503		80.20

• C. The expiry date and exercise prices of the employee stock options outstanding at balance sheet date are as follows:

re as follows:
Grant date 12.3.2013 11.6.2015 10.14.2016	Expirydate 12.2.2023 11.5.2025 10.13.2026	December 31, 2017	December 31, 2016
		No. of stocks Exercise price (unit in thousands) (in dollars) 624 77.10 $ 1,147 38.50 1,304 39.00	No. of stocks Exercise price (unit in thousands) (in dollars) 670 80.20 $ 1,299 40.00 1,488 40.55

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

Type of arrangement Grant date Employee 12.3.2013 stock options Employee 11.6.2015 stock options Employee 10.14.2016 stock options	Stock Exercise price price (in dollars) (in dollars) 91.70 $ 91.70 $ 41.65 41.65 40.55 40.55	Price volatility	Option life 10 years 10 years 10 years	Expected dividends	Interest rate 1.7145% 1.2936% 0.9223%	Fair value per unit (in dollars)
		28.50% (Note) 37.63% (Note) 37.20% (Note)		1.5% 1.5% 1.5%		26.045 $ 13.799 13.171

Note: According to daily returns of the Company's stock for the previous year, the annualized

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volatility is 28.50%, 37.63% and 37.20%, respectively.

(16) RETAINED EARNINGS

• A. Pursuant to the 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.

• 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.

• 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 April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently.

• D. The Company recognised cash dividends and stock dividends distributed to owners amounting to $228,098 ($0.30 (in dollars) per share) and $304,130 ($0.40 (in dollars) per share) for the year ended December 31, 2017, respectively, and $219,325 ($0.30 (in dollars) per share) and $292,433 ($0.40 (in dollars) per share) for the year ended December 31, 2016, respectively. On March 16, 2018, the Board of Directors proposed for the distribution of cash dividends of $379,555 ($0.48 (in dollars) per share) for the year 2017.

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(17) OTHER EQUITY ITEMS

For the years ended December 31,

		2017			2016
At January 1	($		3,454)	$	69,095
Currency translation differences - group	(		16,311)	(	72,549)
At December 31	($		19,765)	($	3,454)

(18) OPERATING REVENUE

For the years ended December 31,

		2017		2016
Sales revenue	$	3,436,755	$	3,912,641
Less: Sales returns	(	224,923)	(	64,812)
Sales discounts		-	(	6,984)
Net sales revenue		3,211,832		3,840,845
Technical service revenue		164,596		190,076
Others		140,053		-
	$	3,516,481	$	4,030,921

(19) OTHER INCOME

For the years ended December 31,

Interest income from bank deposits Reversal of provision for doubtful accounts Compensation revenue Others	2017 25,083 $ 516 6,003 7,920 39,522 $	2016 27,844 $ - 7,404 5,457 40,705 $

(20) OTHER GAINS AND LOSSES

For the years ended December 31,

		2017			2016
Net gain on financial assets/liabilities
at fair value through profit or loss	$	10,917		$	3,981
Loss on disposal of property, plant and
equipment	(	300)	(		626)
Gain on reversal (impairment loss)		3,741	(		889)
Net currency exchange loss	(	45,595)	(		42,982)
Miscellaneous	(	15,314)	(		21,749)
	($	46,551)	($		62,265)

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(21) FINANCE COSTS

For the years ended December 31,

		2017		2016
Interest expense:
Bank loans	$	87,595	$	58,963
Less: Capitalization of qualifying assets	(	10,964)	(	22,847)
	$	76,631	$	36,116

(22) EXPENSES BY NATURE

For the year ended December 31, 2017

	For theyear ended December31,2017	For theyear ended December31,2017	,2017
Employee benefit expenses Depreciation Amortization Employee benefit expenses Depreciation Amortization	Operatingcosts Operatingexpenses Total 443,259 $ 377,655 $ 820,914 $ 292,640 130,682 423,322 3,380 5,837 9,217 739,279 $ 514,174 $ 1,253,453 $ Forthe yearendedDecember31,2016		Total
			820,914 $ 423,322 9,217
			1,253,453 $
	Operatingcosts 448,862 $ 328,259 3,208 780,329 $	Operatingexpenses 389,091 $ 107,132 6,242 502,465 $	Total
			837,953 $ 435,391 9,450
			1,282,794 $

(23) EMPLOYEE BENEFIT EXPENSES

For the year ended December 31, 2017

EMPLOYEE BENEFIT EXPENSES	For theyear ended December31,2017	For theyear ended December31,2017	1,2017
Salaries and wages Labor and health insurance expenses Pension costs Other personnel expenses Salaries and wages Labor and health insurance expenses Pension costs Other personnel expenses	Operatingcosts Operatingexpenses Total 370,547 $ 322,875 $ 693,422 $ 31,219 21,162 52,381 21,905 13,892 35,797 19,588 19,726 39,314 443,259 $ 377,655 $ 820,914 $ For theyear ended December31,2016		Total
	Operatingcosts 380,263 $ 32,626 21,562 14,411 448,862 $	Operatingexpenses 337,437 $ 21,065 12,897 17,692 389,091 $	Total
			717,700 $ 53,691 34,459 32,103 837,953 $

A. According to the Articles of Incorporation of the Company, a ratio of profit of the current year distributable, after covering accumulated losses, shall be distributed as employees’compensation

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and directors’ remuneration. The ratio shall not be lower than 2% for employees’ compensation and shall not be higher than 2% for directors’ remuneration.

• B.For the years ended December 31, 2017 and 2016, the employees’ compensation was accrued at $48,877 and $83,181, respectively, while the directors’ remuneration was accrued at $7,608 and $11,733, respectively. The aforementioned amounts were recognised in salary expenses. The expenses recognised for each year was accrued based on the earnings of current year and the percentage specified in the Articles of Incorporation of the Company.

• On March 16, 2018, the Board of Directors resolved to distribute employees’ compensation and directors’ remuneration of $48,877 and $7,608, respectivily, and the employees’ compensation will be distributed in the form of cash.

The actual amount approved at the Board of Directors’ meeting for employees’ compensation and directors’ remuneration for 2016 was $93,915, which was different from the estimated amount of $93,914 recognised in the 2016 financial statements by $1. Such difference mainly resulted from estimation, and was recognised in profit or loss for 2017.

Information about the appropriation of employees’ compensation and directors’ remuneration by the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(24) INCOME TAX

A. Income tax expense

(a) Components of income tax expense:

For the years ended December 31,

		2017		2016
Current income tax:
Income tax in current year	$	141,200	$	185,902
10% tax on unappropriated retained earnings		5,446		6,537
(Over) under provision of prior year's income
tax	(	3,624)		2,471
Total current tax		143,022		194,910
Deferred income tax:
Origination and reversal of temporary
differences	(	90,087)	(	43,003)
Income tax expense	$	52,935	$	151,907

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

For the years ended December 31,

Remeasurement of defined benefit obligations	2017 2016 54 $ 1,258) ($

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B. Reconciliation between income tax expense and accounting profit:

For the years ended December 31,

		2017		2016
Income tax at statutory tax rate	$	80,801	$	137,802
Effect of items disallowed by tax regulation	(	9,946)		7,386
Effect of net operating loss carryforward	(	19,309)	(	2,519)
Effect of investment tax credits	(	433)		230
10% tax on unappropriated retained earnings		5,446		6,537
(Over) under provision of prior year's income tax	(	3,624)		2,471
Income tax expense		52,935		151,907

C. Amounts of deferred tax assets or liabilities as a result of temporary differences, loss carryforward and investment tax credits are as follows:

For the year ended December 31, 2017

Recognized in other Recognized in comprehensive January1 profit or loss income Temporary differences Deferred tax assets: Unrealized loss on inventory market value decline - $ 73,417 $ - $ Investment loss 242,415 6,603 - Technology know-how 17,872 3,698) ( - Pensions 11,910 73) ( 54) ( Employee benefits - unused compensated absences 2,686 1,310 - Impairment of assets 2,489 636) ( - Unrealized loss on financial liabilities 480 480) ( - Loss carryforward 128,885 19,309 - Investment tax credits 7,677 7,677) ( - Unrealized exchange loss - 1,135 - 414,414 $ 89,210 $ 54) ($ Temporary differences Deferred tax liabilities: Unrealized exchange gain 877) ($ 877 $ - $ 413,537 $ 90,087 $ 54) ($	December31
	73,417 $ 249,018 14,174 11,783 3,996 1,853 - 148,194 - 1,135
	503,570 $
	- $
	503,570 $

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For the year ended December 31, 2016

					Recognized	Recognized
						in other
			Recognized in		comprehensive
	January1		profit or loss			income	December31
Temporary differences
Deferred tax assets:
Investment loss	200,515 $		$	41,900	$	-	$	242,415
Technology know - how		21,570	(	3,698)		-		17,872
Pensions		10,685	(	33)		1,258		11,910
Employee benefits - unused		2,888	(	202)		-		2,686
compensated absences
Impairment of assets		2,337		152		-		2,489
Unrealized loss on
financial liabilities		25		455		-		480
Loss carryforward	126,366			2,519		-		128,885
Investment tax credits		8,258	(	581)		-		7,677
	372,644 $		$	40,512	$	1,258	$	414,414
Temporary differences
Deferred tax liabilities:
Unrealized exchange gain	($	3,368)	$	2,491	$	-	($	877)
	369,276 $		$	43,003	$	1,258	$	413,537

• D. According to “Regulation on the Implementation of the Enterprise Income Tax Law of the People’s Republic of China”, details of investment tax credits and unrecognised deferred tax assets are as follows:

December 31, 2017

December31,2017	December31,2017
Qualifyingitems Unused tax credits Research and development expenditures 7,677 $ December31,2016		Unrecognized deferred tax assets 7,677 $	Expiry year
			2018
Qualifyingitems Research and development expenditures	Unused tax credits 7,677 $	Unrecognized deferred tax assets - $	Expiry year
			2018

E. Expiration dates of unused operating loss carryforward and amounts of unrecognised deferred tax assets are as follows:

December 31, 2017

Year incurred 2013～2017	Amount filed /assessed 1,267,104 $	Unused amount 1,267,104 $	Unrecognized deferred tax assets 674,327 $	Expiry year
				2018～2022

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		December31,2016
Year incurred 2012～2016	Amount filed /assessed 1,247,509 $	Unused amount 1,247,509 $	Unrecognized deferred tax assets 731,971 $	Expiry year
				2017～2021

• F. The Group has not recognised taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities. As of December 31, 2017 and 2016, the amounts of temporary differences unrecognised as deferred tax liabilities were $ － and $277,644, respectively.

• G. The Company’s income tax returns through 2015 have been assessed and approved by the Tax Authority, and there were no disputes existing between the Company and the Authority as of March 16, 2018.

• H. With the abolishment of the imputation tax system under the amendments to the Income Tax Act promulgated by the President of the Republic of China in February, 2018, the information on unappropriated retained earnings and the balance of the imputation credit account as of December 31, 2017, as well as the estimated creditable tax rate for the year ended December 31, 2017 is no longer disclosed.

• I. The Company’s unappropriated retained earnings listed on the balance sheet as of December 31, 2016 was generated after the year 1998.

• J. As of December 31, 2016, the balance of the Company’s imputation tax credit account was $240,761. The earnings distribution for 2016 was approved at the stockholders’meeting on June 27, 2017, and the date of dividend distribution was set on August 18, 2017, by the Board of Directors. The creditable tax rate was 23.81%.

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(25) EARNINGS PER SHARE (“EPS”)

)EARNINGS PER SHARE (“EPS”)	PS”)	PS”)
Weighted average number of shares Amount after tax outstanding (shares in thousands) Basic earnings per share Profit attributable to ordinary stockholders of the parent 422,367 $ 790,739 Diluted earnings per share Profit attributable to ordinary stockholders of the parent 422,367 $ 790,739 Assumed conversion of all dilutive potential ordinary shares Employees' stock option - - Employees' compensation - 1,839 Profit attributable to ordinary stockholders of the parent plus assumed conversion of all dilutive potential ordinary shares 422,367 $ 792,578 For theyear ended December31,2017 Weighted average number of shares Amount after tax outstanding (shares in thousands) Basic earnings per share Profit attributable to ordinary stockholders of the parent 658,693 $ 790,739 Diluted earnings per share Profit attributable to ordinary stockholders of the parent 658,693 $ 790,739 Assumed conversion of all dilutive potential ordinary shares Employees' stock option - 263 Employees' compensation - 2,718 Profit attributable to ordinary stockholders of the parent plus assumed conversion of all dilutive potential ordinary shares 658,693 $ 793,720 For theyear ended December31,2016	For theyear ended December31,2017
			EPS (in dollars)
			0.53 $
			0.53 $
		Weighted average number of shares outstanding (shares in thousands) 790,739 790,739 263 2,718 793,720	EPS (in dollars)
			0.83 $
			0.83 $

• A. The abovementioned stock options issued in 2013, 2015 and 2016 are anti-dilutive; therefore they were not included in the EPS calculation in 2017.

• B. The abovementioned stock options issued in 2013 are anti-dilutive; therefore they were not included

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in the EPS calculation in 2016.

• C. 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, 2016.

(26) SUPPLEMENTAL CASH FLOW INFORMATION

• A. Investing activities with partial cash payments

Investing activities with partial cash payments
		For theyears ended			December31,
		2017			2016
Purchase of property, plant and	$	265,760	$		462,672
equipment
Add: Beginning balance of payable on
equipment (listed as “Other payables”)		89,009			44,817
Less: Ending balance of payable on
equipment (listed as “Other payables”)	(	54,326)	(		89,009)
Capitalization of interest	(	10,964)	(		22,847)
Cash paid for acquisition of property,
plant and equipment	$	289,479		$	395,633
Investing activities with no cash flow effects
		For theyears ended			December31,
		2017			2016
Prepayments for equipment reclassified to
property, plant and equipment	$	56,122		$	121,118

B. Investing activities with no cash flow effects

7. RELATED PARTY TRANSACTIONS

• (1) Parent and ultimate controlling party

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

• (2) Names of related parties and relationship

Names of related parties Relatinship with the Company

Uni-President Enterprises Corp. Ultimate parent company President Tokyo Corp. An entity controlled by key management individuals President Chain Store Tokyo Marketing An entity controlled by key management individuals Corp.

President Securities Corp. Associate of ultimate parent company

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• (3) Significant transactions and balances with related parties

Other expenses

For the years ended December 31,

Rental expense: －Entities controlled by key management individuals Management service fees: －Ultimate parent company －Associate of ultimate parent company	2017 1,443 $ 5,439 $ 2,051 7,490 $	2016
		1,583 $
		5,397 $ 2,186
		7,583 $

• (4) Key management compensation

For the years ended December 31,

Salaries and other short-term employee benefits Share-based payments Post-employmant benefits Termination benefits	2017 54,722 $ 4,156 621 1,450 60,949 $	2016
		58,939 $ 3,039 517 1,450
		63,945 $

8. PLEDGED ASSETS

Details of the Group’s assets pledged as collateral are as follows:

Assets Time deposits (Note)	December31,2017 28,831 $	December31,2016 Purpose of collateral 28,831 $ Customs duty and performance guarantee

Note: Listed as “Other financial assets - non-current”.

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

• (1) As of December 31, 2017 and 2016, the Group’s unused letters of credit amounted to $4,952 and $ － , respectively.

• (2) As of December 31, 2017 and 2016, the Group’s remaining balance due for construction in progress and prepayments for equipment was $132,783 and $312,008, 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, and the new lease agreement has been signed in March with a new period from March 1, 2018 to February 28, 2038. The lease period of the lease agreement cannot be over 20 years and 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

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such adjustment. The rent expense of $22,276 (listed as “operating costs” and “operating expenses”) was recognised in profit or loss for the years ended December 31, 2017 and 2016, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

		December31,2017	December31,2017	December31,2016	December31,2016
Within one year		$	23,577	$	22,276
Later than one year but	not exceeding five years		94,308		3,713
Later than five years			357,586		-
		$	475,471	$	25,989
The amounts of endorsements and guarantees for		subsidiaries	were as follows:
	Nature	December31,2017		December31,2016
SciAnda (Changshu)	Guarantee for financing
Pharmaceuticals, Ltd.	amount	$	2,543,275	$	1,625,270

• (4)The amounts of endorsements and guarantees for subsidiaries were as follows:

As of December 31, 2017 and 2016, the actual amount drawn down for endorsements and guarantees to subsidiaries was $1,317,219 and $802,993, respectively.

10. SIGNIFICANT DISASTER LOSS: None.

11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE:

Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate will be raised from 17% to 20% effective from January 1, 2018. This will increase the Company’s deferred tax assets and income tax benefits by $62,173, which will be adjusted in the first quarter of 2018.

12. OTHERS

(1) Capital 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 equipment. 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.

(2) Financial instruments

• A. Fair value information of financial instruments

The Group’s financial instruments which are not measured at fair value (including cash and cash equivalents, accounts receivable, other receivables, guarantee deposits paid, other financial assets - non-current, short-term borrowings, notes payable, accounts payable, other payables, long-term borrowings (including current portion) and guarantee deposits received) 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.

• B. Financial risk management policies

• (a)The Group’s activities expose it to a variety of financial risks: market risk (including foreign

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exchange risk, price risk and interest rate 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)The Group’s 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 use of 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 and recognised assets and liabilities.

    • (ii) To manage their foreign exchange risk arising from future commercial transactions and recognised 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.

    • (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:

December 31, 2017

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD EUR:NTD CNY:NTD Financial liabilities Monetary items USD:NTD CNY:NTD	Foreign currency amount(in thousands) 24,138 $ 65 60 685 506	Exchange rate 29.76 35.57 4.574 29.76 4.574	Book value (NTD)
			718,347 $ 2,312 274 20,386 2,314

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(Foreign currency functional currency) Financial assets Monetary items USD:NTD EUR:NTD CNY:NTD Financial liabilities Monetary items USD:NTD EUR:NTD CNY:NTD		December31,2016	December31,2016	Book value (NTD)
		Foreign currency amount(in thousands) 21,996 $ 413 510 1,582 49 435	Exchange rate 32.25 33.90 4.644 32.25 33.90 4.644
				709,371 $ 14,001 2,368 51,020 1,661 2,020

• (iv)As of December 31, 2017 and 2016, if the NTD:USD exchange rate appreciates/depreciates by 5% with all other factors remaining constant, the Group’s net profit after tax for the years ended December 31, 2017 and 2016 would increase/decrease by $28,965 and $32,918, respectively. If the NTD:EUR exchange rate appreciates/depreciates by 5% with all other factors remaining constant, the Group’s net profit after tax for the years ended December 31, 2017 and 2016 would increase/decrease by $96 and $617, respectively. If the NTD:CNY exchange rate appreciates/depreciates by 5% with all other factors remaining constant, the Group’s net profit after tax for the years ended December 31, 2017 and 2016 would increase/decrease by $85 and $17, respectively.

• (v)Total exchange loss including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2017 and 2016 amounted to $45,595 and $42,982, respectively.

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 (listed as ‘financial assets measured at cost - non-current’). 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

• (i)The Group’s interest rate risk arises from short-term borrowings and long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk which is partially offset by cash and cash equivalents held at variable rates.

• (ii)At December 31, 2017 and 2016, if interest rates had been 10% higher/lower with all other variables held constant, post-tax profit for the years ended December 31, 2017 and

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2016 would have been $362 and $1,227 lower/higher, respectively, mainly as a result of higher/lower interest expense on floating rate borrowings.

• (b) Credit risk

• I. Credit risk refers to the risk of financial loss to the 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, 2017 and 2016.

• 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.

• (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 Group has undrawn borrowing facilities amounting to $2,974,463 and $3,082,497 as of December 31, 2017 and 2016, respectively.

• III.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. Nonderivative 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.

cash flows.
December31,2017 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings Guarantee deposits received Non-derivative financial liabilities:	Less than 1year 384,670 $ 1,161 90,784 350,117 281,712 -	Between 1 and 2years - $ - - - 1,122,058 1,712	Between 2 and5 years - $ - - - - -	More than 5 years
				- $ - - - - -

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December31,2016 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings Guarantee deposits received Derivative financial liabilities: Forward exchange contracts Non-derivative financial liabilities:	Less than 1year 1,001,072 $ 1,001 69,730 430,020 71,096 21,711 2,822	Between 1 and 2years - $ - - - 164,866 - -	Between 2 and5 years - $ - - - 656,660 - -	More than 5 years
				- $ - - - - - -

(3) Fair value estimation

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

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

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Amarket is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The fair value of the Group’s investment in foreign exchange contracts is included in Level 2.

• Level 3: Unobservable inputs for the asset or liability.

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

December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Recurring fair value measurements Financial liabilities at fair value through profit or loss - - Forward foreign contracts $ $ 2,822 $ $ 2,822 December 31, 2017: None.

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

• (a)Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be

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referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date.

• (b)When assessing non-standard and low-complexity financial instruments, for example, debt instruments without active market, interest rate swap contracts, foreign exchange swap contracts and options, the Group adopts valuation technique that is widely used by market participants. The inputs used in the valuation method to measure these financial instruments are normally observable in the market.

• (c)Forward foreign exchange contracts are usually valued based on the current forward exchange rate.

• E. For the years ended December 31, 2017 and 2016, there was no transfer between Level 1 and Level 2.

• F. The Group did not have financial instruments that meet the definition of Level 3 instruments as of December 31, 2017 and 2016.

13. SUPPLEMENTARY DISCLOSURES

According to the current regulatory requirements, the Group is only required to disclose the information for the year ended December 31, 2017.

(1) Significant transactions information

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

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

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

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

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

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

• G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 4.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 5.

• I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Note 6(8).

• J. Significant inter-company transactions during the reporting periods: Please refer to table 6.

(2) Information on investees

• Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 7.

(3) Information on investments in Mainland China

• A. Basic information: Please refer to table 8.

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• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 9.

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 focuses 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 meet the disclosure threshold as “Others”.

(2) Measurement of segment information

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

(3) Segment information

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

For the year ended December 31, 2017

Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortization Interest expense Income (loss) from segment before income tax Segment assets Other acquisition of non-current assets Segment liabilities	ScinoPharm SciAnda (Changshu) Taiwan,Ltd. Pharmaceuticals Ltd. Others 3,449,175 $ 309,288 $ 13,425 $ 2,878 241,727 10,802 3,446,297 67,561 2,623 18,612 235 6,236 334,045 98,241 253 22 76,609 - 805,257 331,464) ( 4,298) ( 10,320,695 2,267,126 216,681 261,160 115,084 - 567,588 2,006,197 722	Total
		3,771,888 $ 255,407 3,516,481 25,083 432,539 76,631 469,495 12,804,502 376,244 2,574,507

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For the year ended December 31, 2016

	For theyear ended December31,2016
Segment revenue Revenue from internal customers Revenue from external customers Interest income Depreciation and amortization Interest expense Income (loss) from segment before income tax Segment assets Other acquisition of non-current assets Segment liabilities	ScinoPharm SciAnda (Changshu) Taiwan,Ltd. Pharmaceuticals Ltd. Others 3,888,611 $ 324,111 $ 23,882 $ - 182,176 23,507 3,888,611 141,935 375 13,371 2,900 11,573 356,628 88,068 145 11 36,105 - 1,078,510 265,797) ( 9,522) ( 10,145,420 2,358,119 369,234 365,803 136,908 - 734,481 1,949,789 849	Total
		4,236,604 $ 205,683 4,030,921 27,844 444,841 36,116 803,191 12,872,773 502,711 2,685,119

(4) Reconciliation for segment

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

For the years ended December 31,

				2017			2016
	Reportable segments profit before
	income tax	$		473,793	$		812,713
	Other segments loss before income tax	(		4,298)	(		9,522)
	Internal segments profit			5,807			7,409
	Profit before income tax	$		475,302		$	810,600
B.	The amount of total assets provided to	the	chief	operating decision-maker adopts the same
	measurement for assets in the Group's	financial		statements. A reconciliation of assets of
	reportable segments and total assets is as	follows:
			December31,2017				December31,2016
	Assets of reportable segments		$	12,587,821	$		12,503,539
	Assets of other operating segments			216,681			369,234
	Internal segment transaction elimination	(		103,113)	(		89,773)
	Total assets		$	12,701,389		$	12,783,000

• C. The amount of total liabilities provided to the chief operating decision-maker adopts the same measurement for liabilities in the Group's financial statements. A reconciliation of liabilities of reportable segments and total liabilities is as follows:

~60~

		December31,2017		December31,2016
Liabilities of reportable segments	$	2,573,785	$	2,684,270
Liabilities of other operating segments		722		849
Internal segment transaction elimination	(	290,343)	(	129,912)
Total liabilities	$	2,284,164	$	2,555,207

(5) Information on product and service

The Group is engaged in the research and development and manufacture of API, 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	2017 3,211,832 $ 164,596 140,053 3,516,481 $	2016
		3,840,755 $ 190,076 90
		4,030,921 $

(6) Geographical information

Geographical information for the years ended December 31, 2017 and 2016 is as follows:

For the year ended December 31, 2017 For the year ended December 31, 2016

Taiwan USA India Asia Europe Others	Revenue 102,032 $ 1,343,964 388,386 521,445 1,126,095 34,559 3,516,481 $	Non-current assets 3,686,153 $ - - 1,615,432 - - 5,301,585 $	Revenue 166,644 $ 1,985,533 400,738 529,415 839,776 108,815 4,030,921 $	Non-current assets
				3,755,409 $ - - 1,625,143 - -
				5,380,552 $

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2017 and 2016 is as follows:

For the year ended December 31, 2017 For the year ended December 31, 2016

A

Revenue 1,008,847 $	Segment ScinoPharm Taiwan, Ltd.	Revenue 1,716,484 $	Segment
			ScinoPharm Taiwan, Ltd.

~61~

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

Loans to others

For the year ended December 31, 2017

Table 1

Nature of Allowance Maximum Actual financial Total Reason for Loan limit amount Name of Related Maximum Ending amount Interest activity transaction for doubtful Assets pledged per entity available for loan Number Name counterparty Account parties balance balance drawn down rate (Note 1) amount financing accounts Item Value (Note 2) (Note 2) Footnote 1 SciAnda SciAnda Other receivables Y $ 359,112 $ 228,684 $ 228,684 2.00 2 $ - Additional $ - － $ - $ 421,960 $ 421,960 － (Kunshan) (Changshu) operating Biochemical Pharmaceuticals, capital Technology, Ltd. and loan Ltd. repayment

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

• 1.Trading partner.

• 2.Short-term financing.

Note 2: (1) For trading partner: the maximum amount for individual trading partner shall not exceed the higher of purchase or sales amount of the most recent year or the current year, the maximum amount for total loan is 20% of its net worth.(2) For short-term financing: the maximum amount for individual is 20% of its net worth, the maximum amount for total loan is 40% of its net worth. If the Company loans to foreign subsidiaries, which the Company holds 100% ownership directly or indirectly, the maximum amount for the subsidiary is 100% of the Company's net worth.

Note 3: 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 (CNY:NTD 1:4.574).

Table 1, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries Provision of endorsements and guarantees to others

Table 2

Expressed in thousands of NTD

For the year ended December 31, 2017

Number	Endorser/ guarantor	Party being endorsed/guaranteed	Party being endorsed/guaranteed	Limit on endorsements/ guarantees provided for a single party （Note 2）	Maximum outstanding endorsement/ guarantee amount during theyear	Outstanding endorsement/ guarantee amount at December 31, 2017	Actual amount drawn down	Amount of endorsements/ guarantees secured with collateral	Ratio of accumulated endorsement/ guarantee amount to net asset value of the endorser/ guarantor company	Ceiling on total amount of endorsements/ guarantees provided （Note 2）	Provision of endorsements/ guarantees by parent company to subsidiary	Provision of endorsements/ guarantees by subsidiary to parent company	Provision of endorsements/ guarantees to the party in Mainland China	Footnote
		Companyname	Relationship with the endorser/ guarantor （Note 1）
0	ScinoPharm Taiwan, Ltd.	SciAnda (Changshu) Pharmaceuticals, Ltd.	1	10,417,225 $	2,543,275 $	2,543,275 $	1,317,219 $	- $	24.41%	10,417,225 $	Y	N	Y	－

Note 1: The following code represents the relationship with the Company:

• 1.The endorsed/ guaranteed parent company and its subsidiaries jointly own more than 50% voting shares of the endorser/ guarantor subsidiary.

• Note 2: 1.The limit of total amount of endorsement is 50% of the Company's net worth, for 100% directly or indirectly owned subsidiaries, the maximum amount is 100% of its net worth.

• The limit of total amount of the Group's endorsement and guarantee is 100% of the Group's net worth.

• For any endorsement or guarantee provided by the Company due to business dealings, the amount of endorsement or guarantees shall be limited to the business dealing amount of the most recent year or the current year. The business dealing amount is product purchase or sale amount between the entities, whichever is higher.

Note 3: 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 (CNY:NTD 1:4.574 ；USD:NTD 1:29.76).

Table 2, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Expressed in thousands of NTD

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

December 31, 2017

Table 3

Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account		As of December31,2017	As of December31,2017		Footnote
				Number of shares	Bookvalue	Ownership (%)	Fairvalue
ScinoPharm Taiwan, Ltd.	Stocks: Tanvex Biologics, Inc. SYNGEN, INC. Foresee Pharmaceuticals Co., Ltd.	The Company is a director of Tanvex Biologics, Inc. － －	Financial assets measured at cost- non-current Financial assets measured at cost- non-current Financial assets measured at cost- non-current	28,800,000 245,000 4,793,828	167,673 $ - 223,424	16.84% 7.40% 5.99%	$ - - -	－ － －

Table 3, Page 1

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more For the year ended December 31, 2017

Table 4

Purchaser/seller	Counterparty	Relationship with the counterparty			Transactions		Differences in t compared t trans	ransaction terms o third party actions	Balance Notes/account	Percentage of total notes/accounts receivable(payable) s receivable (payable)	Footnote
			Purchases(sales)	Amount	Percentage of total purchases(sales)	Credit term	Unitprice	Credit term
ScinoPharmTaiwan, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd.	SciAnda (Changshu) Pharmaceuticals, Ltd. ScinoPharm Taiwan, Ltd.	Subsidary (SPT International, Ltd.) The Company	Purchases (Sales)	226,163 $ 226,163) (	27% (74%)	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	$ - -	－ －	53,928) ($ 53,928	(42%) 99%	－ －

Table 4, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

- Receivables from related parties reaching $100 million or 20% of paid in capital or more December 31, 2017

Table 5

Expressed in thousands of NTD

Purchaser/seller	Counterparty	Relationship with the counterparty	Balance as at December31,2017	Balance as at December31,2017	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
			Items	Amount		Amount	Action taken
SciAnda (Kunshan) Biochemical Technology, Ltd.	SciAnda (Changshu) Pharmaceuticals, Ltd.	An investee company of SPT Interrnationl Ltd. accounted for under the equity method	Other receivables	228,824 $	－	$ -	－	$ -	$ -

Note : Foreign currencies were translated into New Taiwan Dollars using the following exchanges: Ending balances of receivable and payable and subsequent collections were translated using the exchange rate as at December 31, 2017 (CNY:NTD 1:4.574).

Table 5, Page 1

Table 6

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

- Significant inter company transactions during the reporting period

For the year ended December 31, 2017

Number (Note 2)	Companyname	Counterparty	Relationship (Note3)		Transactions	Transactions
				General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets(Note 4)
0 0 0 1	ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. SciAnda (Kunshan) Biochemical Technology, Ltd.	SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd.	1 1 1 3	Purchases Accounts payable Endorsements and guarantees Other receivables	226,163 $ 53,928) ( 2,543,275 228,824	Closes its accounts 90 days from the end of each month after acceptance － － －	6% － 20% 2%

Note 1: Significant inter-company transactions during the reporting periods are not disclosed since these were corresponding transactions. Only transactions over NT$10 million are material.

Note 2: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:

• (1) Parent company is ‘0’.

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

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

• (1) Parent company to subsidiary.

• (2) Subsidiary to parent company.

• (3) Subsidiary to subsidiary.

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

based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.

Note 5: 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 (CNY:NTD 1:4.574).

Table 6, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Table 7

Expressed in thousands of NTD

Names, locations and other information of investee companies ( not including investees in Mainland china)

For the year ended December 31, 2017

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held	as at December 31,2017	as at December 31,2017	Net profit (loss) of the investee for the year ended December 31,2017	Investment income (loss) recognized by the Company for the year ended December 31,2017	Footnote
				Balance as at December 31,2017	Balance as at December 31,2016	Number of shares	Ownership (%)	Book value
ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd.	SPT International, Ltd. ScinoPharm Singapore Pte Ltd.	Tortola, British Virgin Islands Singapore	Professional investment Professional investment	2,013,184 $ -	1,833,304 $ -	66,524,644 2	100.00 100.00	664,038 $ 80	322,302) ($ 14	316,495) ($ 14	Subsidary Subsidary

Table 7, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Information on investments in Mainland China － Basic information

For the year ended December 31, 2017

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Table 8
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Expressed in thousands of NTD

Investee in Mainland China	Main business activities	Paid-in capital	Investment method	Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2017	Amount remitted from Taiwan to Mainland China/ Amount remitted back to Taiwan for the year ended December 31,2017	Amount remitted from Taiwan to Mainland China/ Amount remitted back to Taiwan for the year ended December 31,2017	Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2017	Net income of investee for the year ended December 31, 2017	Ownership held by the Company (direct or indirect)	Investment income (loss) recognized by the Company for the year ended December 31, 2017 （Note 2）	Book value of investments in Mainland China as of December 31, 2017	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2017	Footnote
					Remitted to Mainland China	Remitted back to Taiwan
SciAnda (Kunshan) Biochemical Technology, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda Shanghai Biochemical Technology, Ltd. Companyname	Research, development, and manufacture of API and new drugs, etc. Research, development, and manufacture of API and new drugs, sale produced products, etc. Import, export and sales of API and intermediates, etc. Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2017	119,040 $ （Note 1） 1,800,480 （Note 1） 35,712 （Note 1） Investment amount approved by the Investment Commission of the Ministry of Economic Affairs(MOEA)		110,839 $ - $ 1,621,920 178,560 35,712 - Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA (Note 3)		- $ - -	110,839 $ 1,800,480 35,712	2,957) ($ 317,948) ( 936) (	100 100 100	2,957) ($ 317,948) ( 936) (	421,958 $ 260,930 18,818	- $ - -	Subsidary Subsidary Subsidary
ScinoPharm Taiwan, Ltd.	$ 1,983,460	2,400,100 $		6,250,335 $

Note 1: Indirect investment in Mainland China through company set up in a third region, SPT International, Ltd. Note 2: The investment income (loss) recognized by the Company for the year ended December 31, 2017 was based on audited financial statements of investee companies as of and for the year ended December 31, 2017. Note 3: The ceiling amount is 60% of the higher of net worth or consolidated 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 1:29.76).

Table 8, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Table 9

Expressed in thousands of NTD

Significant transactions conducted with investees in Mainland China directly or indirectly through other companies in the third areas

For the year ended December 31, 2017

Investee in Mainland China	Sale(purchase)	Sale(purchase)	Propertytransaction	Propertytransaction	Accounts receivable (payable)	Accounts receivable (payable)	Provision of endorsements/guarantees or collaterals	Provision of endorsements/guarantees or collaterals		Financing			Others
	Amount	%	Amount	%	Balance at December 31, 2017	%	Balance at December 31, 2017	Purpose	Maximum balance during the year ended December 31,2017	Balance at December 31,2017	Interest rate	Interest during the year ended December 31,2017
SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda Shanghai Biochemical Technology, Ltd.	226,163) ($ -	(27%) -	- -	- -	53,928) ($ -	(42%) -	2,543,275 $ -	Secured financing amount -	- -	- -	- -	- -	Management service revenue $ 8,662 Joint loan guaratee revenue $ 2,806 Research and development expense $ 385 Other receivables $ 2,597 Management consultancy fee $ 7,208

Table 9, Page 1