SPT — Audit Report / Information 2017

Dec 28, 2017

SCINOPHARM TAIWAN, LTD.

PARENT COMPANY ONLY 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.

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

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

Opinion

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

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of ScinoPharm Taiwan, Ltd. as at December 31, 2017 and 2016, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers”.

Basis for opinion

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

Key audit matters

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

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The key audit matters for the parent company only financial statements of the current period are stated as follows:

Cutoff of export revenue

Description

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

The Company’s sales revenue mainly arise from manufacture and sale of Active Pharmaceutical Ingredient (“API”), which primarily consists of export sales. The Company 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(10) 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 $1,932,445 thousand and $431,864 thousand, respectively.

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The Company 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 incurring loss on inventory valuation. For inventories sold under normal terms, the Company 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 Company 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 Company’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.

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

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

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

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

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

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

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

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

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

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

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

4. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only financial statements. We are responsible for the direction, supervision and performance of the 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 parent company only financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Lin, Yung-Chih

Independent Accountants

Liu, Tzu-Meng

PricewaterhouseCoopers, Taiwan Republic of China March 16, 2018

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The accompanying parent company only 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 parent company only 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. PARENT COMPANY ONLY BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) 7 5(2) and 6(3) 3(2) and 6(4) 6(5) 6(6)(7)(24) 5(2) and 6(22) 6(6)(24) 8	December 31, 2017 AMOUNT % $ 3,675,824 33 567,122 5 12,441 - 2,597 - 1,500,581 14 99,444 1 5,858,009 53 391,097 4 664,118 6 3,609,589 33 10,752 - 355,376 3 65,812 1 1,229 - 28,831 - 5,126,804 47 $ 10,984,813 100	December 31, 2016	December 31, 2016
		AMOUNT $ 3,675,824 567,122 12,441 2,597 1,500,581 99,444 5,858,009 391,097 664,118 3,609,589 10,752 355,376 65,812 1,229 28,831 5,126,804 $ 10,984,813	AMOUNT $ 3,261,712 587,329 12,018 6,780 1,652,432 198,023 5,718,294 364,089 816,854 3,722,375 12,633 277,852 20,401 945 28,831 5,243,980 $ 10,962,274	%
Current assets 1100 Cash and cash equivalents 1170 Accounts receivable, net 1200 Other receivables 1210 Other receivables - related parties 130X Inventory 1410 Prepayments 11XX Total current assets Non-current assets 1543 Financial assets carried at cost - non-current 1550 Investments accounted for under equity method 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 15XX Total non-current assets 1XXX Total assets				30 5 - - 15 2
				52
				3 8 34 - 3 - - -
				48
				100

(Continued)

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SCINOPHARM TAIWAN, LTD. PARENT COMPANY ONLY BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	December 31, 2017 December 31, 2016 Notes AMOUNT % AMOUNT % 6(8) $ - - $ 2,822 - 1,161 - 1,001 - 73,943 1 56,926 1 7 53,928 - 33,100 - 6(9)(24) 294,007 3 374,790 3 6(22) 50,251 - 110,910 1 23,366 - 62,384 1 496,656 4 641,933 6 6(22) - - 877 - 6(10) 69,312 1 70,053 1 1,620 - 21,618 - 70,932 1 92,548 1 567,588 5 734,481 7 6(11)(14) 7,907,392 72 7,603,262 69 6(12)(13) 1,286,872 12 1,275,660 12 6(11)(14)(22) 526,065 5 460,196 4 22,829 - 22,829 - 693,832 6 869,300 8 6(15) ( 19,765) - ( 3,454) - 10,417,225 95 10,227,793 93 7 and 9 11 $ 10,984,813 100 $ 10,962,274 100	December 31, 2016	December 31, 2016
			%
Current liabilities 2120 Financial liabilities at fair value through profit or loss - current 2150 Notes payable 2170 Accounts payable 2180 Accounts payable - related parties 2200 Other payables 2230 Current income tax liabilities 2310 Advance receipts 21XX Total current liabilities Non-current liabilities 2570 Deferred income tax liabilities 2640 Net defined benefit liabilities 2645 Guarantee deposits received 25XX Total non-current liabilities 2XXX Total liabilities Equity 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 the balance sheet date 3X2X Total liabilities and equity			- - 1 - 3 1 1
			6
			- 1 -
			1
			7
			69 12 4 - 8 -
			93
			100

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

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SCINOPHARM TAIWAN, LTD. PARENT COMPANY ONLY STATEMENTS OF COMPREHENSIVE INCOME

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

Items

Year ended December 31 2017 2016 Notes AMOUNT % AMOUNT % 6(16) $ 3,449,175 100 $ 3,888,611 100 6(3)(10)(20)(21), 7 and 9 ( 1,777,982) ( 52)( 2,040,535) ( 53) 1,671,193 48 1,848,076 47 6(2)(10)(20)(21), 7 and 9 ( 146,006) ( 4) ( 177,964) ( 5) ( 459,538) ( 13) ( 400,236) ( 10) ( 264,331) ( 8)( 203,680) ( 5) ( 869,875) ( 25)( 781,880) ( 20) 801,318 23 1,066,196 27 6(2)(17) and 7 42,981 1 40,029 1 6(6)(7)(8)(18) and 12 ( 39,020) ( 1) ( 27,704) ( 1) 6(19) ( 22) - ( 11) - 6(5) ( 316,481) ( 9)( 256,704) ( 6) ( 312,542) ( 9)( 244,390) ( 6) 488,776 14 821,806 21 6(22) ( 66,409) ( 2)( 163,113) ( 4) $ 422,367 12 $ 658,693 17 6(10) $ 316 - ($ 7,393) - 6(22) ( 54) - 1,258 - 6(15) ( 16,311) - ( 72,549) ( 2) ($ 16,049) - ($ 78,684) ( 2) $ 406,318 12 $ 580,009 15 6(23) $ 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 7070 Share of loss of associates and joint ventures accounted for using equity method. 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) Components of other comprehensive income (loss) that will not be reclassified to profit or 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 operation 8300 Other comprehensive loss for the year 8500 Total comprehensive income for the year Earnings per share (in dollars) 9750 Basic 9850 Diluted

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

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SCINOPHARM TAIWAN, LTD. PARENT COMPANY ONLY 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 (Note): 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 (Note): Legal reserve Cash dividends Stock dividends Employee stock option compensation cost Net income for the year ended December 31, 2017 Other comprehensive income for the year ended December 31, 2017 Balance at December 31, 2017	Notes		Share capital - commonstock		Capital reserves			Retained earnings	Retained earnings	Retained earnings	Otherequity	Totalequity
							Legal reserve		Special reserve	Unappropriated earnings	Currency translation differences
	6(14) 6(11)(14) 6(12)(13) 6(15) 6(14) 6(11)(14) 6(12)(13) 6(15)		$ 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

(Note) The employees' compensation were $77,011 and $82,181, and directors' remuneration were $11,543 and $11,734 in 2015 and 2016, respectively, which has been deducted from net income for the years.

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

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SCINOPHARM TAIWAN, LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments Adjustments to reconcile profit (loss) (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 Share of loss of subsidiaries, associates and joint ventures accounted for under equity method Depreciation Loss on disposal of property, plant and equipment (Gain on reversal) impairment loss Amortization Employee stock option compensation cost Interest income Interest expense Changes in operating assets and liabilities Changes in operating assets Accounts receivable Other receivables Other receivables - related parties Inventory Prepayments Changes in operating liabilities Notes payable Accounts payable Accounts payable - related parties 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

Forthe years endedDecember31 Notes 2017 2016 $ 488,776 $ 821,806 ( 2,822 ) 2,677 6(2)(17) ( 488 ) 564 6(3) 24,970 58,489 9,677 9,648 6(5) 316,481 256,704 6(6)(20) 329,007 351,428 6(18) 62 744 6(6)(7)(18) ( 3,741 ) 889 6(20) 5,038 5,200 6(12)(13) 11,036 10,025 6(17) ( 18,612 ) ( 13,371 ) 6(19) 22 11 20,695 252,586 ( 423 ) 4,217 4,183 ( 1,512 ) 126,881 231,260 88,902 ( 64,640 ) 160 6 17,017 24,287 20,828 33,100 ( 43,467 ) 35,067 ( 39,018 ) 31,188 ( 425) ( 194) 1,354,739 2,050,179 18,612 13,371 ( 22 ) ( 11 ) ( 205,523) ( 193,277) 1,167,806 1,870,262

(Continued)

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SCINOPHARM TAIWAN, LTD. PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES Increase in financial assets measured at cost - non-current Cash paid for acquisition of investments accounted for under the equity method - subsidiary Proceeds from disposal of property, plant and equipment Cash paid for acquisition of property, plant and equipment Acquisition of intangible assets Increase in prepayment for equipment (Increase) 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 guarantee deposits received Payment of cash dividends Net cash flows used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

Forthe years endedDecember31 Notes 2017 2016 ($ 27,008 ) ($ 25,182 ) ( 179,880 ) - 6(24) ( 217,006 ) ( 315,517 ) 50 484 ( 3,157 ) ( 5,177 ) ( 78,313 ) ( 19,421 ) ( 284 ) 168 - ( 4,097 ) ( 505,598 ) ( 368,742 ) ( 19,998 ) ( 1,779 ) 6(14) ( 228,098 ) ( 219,325 ) ( 248,096 ) ( 221,104 ) 414,112 1,280,416 6(1) 3,261,712 1,981,296 6(1) $ 3,675,824 $ 3,261,712

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

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SCINOPHARM TAIWAN, LTD. NOTES TO THE PARENT COMPANY ONLY 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 is 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 PARENT COMPANY ONLY

FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORISATION

• These parent company only financial statements were authorised for issuance by the Board of Directors on March 16, 2018.

• 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 FSC effective from 2017 are as 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’ Amendments to IAS 16 and IAS 41, ‘Agriculture: bearer plants’ Amendments to IAS 19, ‘Defined benefit plans: employee contributions’

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

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New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board(“IASB”)
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 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 Company’s financial condition and financial performance based on the Company’s assessment.

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

the Company

New standards, interpretations and amendments as endorsed by 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’ 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, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

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Except for the following, the above standards and interpretations have no significant impact to the Company’s financial condition and financial performance based on the Company’s assessment. The quantitative impact will be disclosed when the assessment is complete. 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 Company 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 Company 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 increasing other equity interest in the amounts of $539,572 and $148,475, respectively.

(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:

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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 Company’s financial condition and financial performance based on the Company’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 parent company only financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

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

(2) Basis of preparation

• A. Except for the following items, these parent company only 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.

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

The preparation of financial statements in compliance with International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”) requires the use of certain

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critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the parent company only financial statements are disclosed in Note 5.

(3) Foreign currency translation

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

• 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.

• 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, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.

• D. All foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within “other gains and losses”.

• (4) Classification of current and non-current items

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

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

  • (b) Assets held mainly for trading purposes;

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

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

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

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

• (b) Liabilities arising mainly from trading activities;

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

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

(5) Cash equivalents

• A. Cash equivalents refer to short-term highly liquid investments that are readily convertible to known 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.

(6) 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 amortized cost using the effective interest method, less provision for impairment. However, short-term accounts receivable that bear no interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(7) 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’.

(8) Impairment of financial assets

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

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

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

• (a) 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 amortized cost

  • The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is 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.

(9) Derecognition of financial assets

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

(10) Inventories

Inventories are stated at the lower of cost and net realizable value. The standard cost method is

~19~

applied, and cost is determined using the weighted-average method. The cost of finished goods and work in process comprises raw materials, direct labor, other direct costs and related production overheads (allocated based on normal operating capacity). It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses. When the cost of inventories exceeds the net realizable value the amount of any write-down of inventories is recognised as cost of sales during the period; and the amaunt of any reversal of inventory write-down is recognised as a reduction in the cost of sales during the period.

(11) Investments accounted for under the equity method - subsidiaries

• A. A subsidiary is an entity where the Company has the right to dominate its finance and operating policies (including special purpose entities), normally the Company owns more than 50% of the voting rights directly or indirectly in that entity. Subsidiaries are accounted for under the equity method in the Company's non-consolidated financial statements.

• B. Unrealised gains or losses resulting from inter-company transactions with subsidiaries are eliminated. To meet the consistency of accounting policies of the Company, necessary adjustments are made to the accounting policies of the subsidiaries.

• C. After acquisition of subsidiaries, the Company recognises proportionately the share of profit and loss and other comprehensive income in the income statement as part of the Company’s profit and loss and other comprehensive income, respectively. When the share of loss from a subsidiary exceeds the carrying amount of Company’s interest in that subsidiary, the Company continues to recognise its share in the subsidiary's loss proportionately.

• D. According to “Regulations Governing the Preparation of Financial Statements by Securities Issuers”, ‘profit for the year’ and ‘other comprehensive income for the year’ reported in an entity's parent company only statement of comprehensive income, shall equal to ‘profit for the year’ and ‘other comprehensive income’ attributable to owners of the parent reported in that entity’s consolidated statement of comprehensive income. Total equity reported in an entity’s parent company only financial statements, shall equal to equity attributable to owners of parent reported in that entity’s consolidated financial statements.

• (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 Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

• C. Except for land, other property, plant and equipment apply cost model and are depreciated using

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the straight-line method to allocate their cost over their estimated useful lives. If each component of property, plant and equipment is significant, it is depreciated separately.

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

re 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 amortized on a straight-line basis over its estimated useful life 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 Company assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss shall be reversed to the extent of the loss previously recognised in profit or loss. The increased carrying amount due to reversal should not exceed the depreciated or amortized historical cost if the impairment had not been recognised.

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

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

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• (a) Hybrid (combined) contracts; or

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

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

• B. Financial liabilities at fair value through profit or loss are initially 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.

(17) 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 amortized cost using the effective interest method. However, short-term accounts payable that bear no interest are subsequently measured at initial invoice amount as the effect of discounting is insignificant.

(18) Financial guarantee contracts

• A financial guarantee contract is a contract that requires the Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. A financial guarantee contract is initially recognised at its fair value adjusted for transaction costs on the trade date. After initial recognition, the financial guarantee is measured at the higher of the initial fair value less cumulative amortization and the best estimate of the amount required to settle the present obligation on each balance sheet date.

• (19) Derecognition of financial liabilities

A financial 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 expense in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plan

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

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

  - (b) Defined benefit plan

     - i.Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Company in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension 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 liability, 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 Company calculates the number of shares based on the closing market price at the previous day of the board meeting resolution.

• (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 nonmarket 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 Company operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect

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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 Company 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 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.

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(26) Revenue recognition

• A. Sales of goods

• The Company 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 Company’s activities. Revenue arising from the sales of goods is recognised when the Company has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control 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 Company 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.

5. CRITICALACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF

ASSUMPTION UNCERTAINTY

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

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

• Financial assets - impairment of equity investments

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

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(2) Critical accounting estimates and assumptions

• A. Evaluation of inventories

• (a) As inventories are stated at the lower of cost and net realizable value, the Company must determine the net realizable value of inventories on balance sheet date using judgments and estimates. As the manufacturing process is long and complex, causing longer materials lead time, the waiting period for product registration is long, and the timing of customers’ product launch may be deferred, the Company evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realizable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

• (b) As of December 31, 2017, the carrying amount of inventories was $1,500,581.

• B. Realizability of deferred 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 realizability of deferred tax assets involves critical accounting judgments and estimates of the management, including the assumptions of expected future sales revenue growth rate and profit rate, tax exempt duration, available tax credits, tax planning, etc. Any variations in global economic environment, industrial environment, and laws and regulations might cause material adjustments to deferred income tax assets.

• (b) As of December 31, 2017, the Company recognised deferred income tax assets amounting to $355,376.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

$355,376. TAILS OF SIGNIFICANT ACCOUNTS CASH AND CASH EQUIVALENTS
Cash: Cash on hand Cash Equivalents: Time deposits Checking accounts and demand deposits Bill under repurchase agreements	December31,2017 69 $ 52,516 52,585 3,385,448 237,791 3,623,239 3,675,824 $	December31,2016
		34 $ 71,403
		71,437
		2,904,500 285,775
		3,190,275
		3,261,712 $

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

• B. Details of the Company’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.

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(2) ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET
	December	31,2017	December	31,2016
Accounts receivable	$	567,251	$	587,946
Less: Allowance for doubtful accounts	(	129)	(	617)
	$	567,122	$	587,329

• A. As of December 31, 2017 and 2016, the Company had no accounts receivable classified as ‘past due but not impaired’.

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

For the years ended December 31,

2017 Group provision At January 1 617 $ (Reversal) provision for impairment (Note) 488) ( At December 31 129 $	2016 Group provision
	53 $ 564 617 $

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

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

• D. As of December 31, 2017 and 2016, the Company does not hold any collateral as security.

(3) INVENTORIES

NVENTORIES
Raw materials Supplies Work in process Finished goods Raw materials Supplies Work in process Finished goods		December31,2017
	Allowance for Cost marketprice decline 440,385 $ 110,654) ($ 29,386 1,482) ( 525,834 103,557) ( 936,840 216,171) ( 1,932,445 $ 431,864) ($ December31,2016		Bookvalue
			329,731 $ 27,904 422,277 720,669 1,500,581 $
	Allowance for Cost marketprice decline 327,360 $ 66,508) ($ 9,139 593) ( 765,869 83,745) ( 956,958 256,048) ( 2,059,326 $ 406,894) ($		Bookvalue
			260,852 $ 8,546 682,124 700,910 1,652,432 $

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

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		For theyears ended December31,	For theyears ended December31,	For theyears ended December31,
		2017		2016
Cost of goods sold	$	1,494,432	$	1,687,721
Loss on scrap inventory		40,894		53,811
Loss on physical inventory		6,209		8,910
Under applied manufacturing overhead		164,862		199,752
Provision for inventory market price decline		24,970		58,489
Total cost of goods sold	$	1,731,367	$	2,008,683
FINANCIALASSETS MEASURED AT COST–NON-CURRENT
	December31,2017		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

(4) FINANCIALASSETS MEASURED AT COST – NON-CURRENT

• A. The Company 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 same industry, fair value of the investments cannot be measured reliably. Accordingly, the Company 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 Company were pledged to others.

(5) INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD

were pledged to others. NVESTMENTS ACCOUNTED FOR UNDER THE	EQUITY METHOD
SPT International, Ltd. ScinoPharm Singapore Pte Ltd.	December31,2017 664,038 $ 80 664,118 $	December31,2016
		816,788 $ 66 816,854 $

• A. For information relating to the Company’s subsidiaries, please refer to Note 4(3), “Basis of consolidation” of the Company and its subsidiaries’ consolidated financial statements for the year ended December 31, 2017.

• B. The share of loss of subsidiaries, associates and joint ventures accounted for under the equity method amounted to ($316,481) and ($256,704) for the years ended December 31, 2017 and 2016, respectively.

• C. As of December 31, 2017 and 2016, the Company does not hold any investment accounted for under the equity method as collateral for the years ended December 31, 2017 and 2016.

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(6) PROPERTY, PLANT AND EQUIPMENT

												Construction in
												progress and
			Machinery and		Transportation			Office		Other		equipment before
January1,2017		Buildings		equipment		equipment		equipment		equipment	acceptance inspection			Total
Cost	$	2,469,028	$	4,387,790	$	19,557	$	154,162	$	3,956	$	970,493	$	8,004,986
Accumulated depreciation	(	757,971)	(	3,385,636)	(	15,268)	(	107,512)	(	1,584)		-	(	4,267,971)
Accumulated impairment		-	(	14,640)		-		-		-		-	(	14,640)
	$	1,711,057	$	987,514	$	4,289	$	46,650	$	2,372	$	970,493	$	3,722,375
For the year ended December 31, 2017
At January 1	$	1,711,057	$	987,514	$	4,289	$	46,650	$	2,372	$	970,493	$	3,722,375
Additions		340		2,875		-		-		-		176,475		179,690
Reclassified from prepayment
for equipment		-		-		-		-		-		32,902		32,902
Reclassified upon completion		33,605		81,925		-		5,126		-	(	120,656)		-
Depreciation charge	(	105,999)	(	201,020)	(	1,840)	(	19,943)	(	205)		-	(	329,007)
Disposals－Cost		-	(	23,551)	(	380)	(	3,929)		-		-	(	27,860)
' －Accumulated
depreciation		-		23,439		380		3,929		-		-		27,748
Reversal of impairment loss		-		3,741		-		-		-		-		3,741
At December 31	$	1,639,003	$	874,923	$	2,449	$	31,833	$	2,167	$	1,059,214	$	3,609,589
December 31,2017
Cost	$	2,502,973	$	4,449,039	$	19,177	$	155,359	$	3,956	$	1,059,214	$	8,189,718
Accumulated depreciation	(	863,970)	(	3,563,217)	(	16,728)	(	123,526)	(	1,789)		-	(	4,569,230)
Accumulated impairment		-	(	10,899)		-		-		-		-	(	10,899)
	$	1,639,003	$	874,923	$	2,449	$	31,833	$	2,167	$	1,059,214	$	3,609,589

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																	Construction in
																	progress and
				Machinery and		Transportation					Office			Other			equipment before
January1,2016		Buildings			equipment			equipment			equipment			equipment		acceptance inspection			Total
Cost	$	1,983,537	$		4,314,922	$		19,962	$		145,368	$		4,832	$		1,194,610	$	7,663,231
Accumulated depreciation	(	680,341)	(		3,148,185)	(		13,782)	(		86,661)	(		2,254)			-	(	3,931,223)
Accumulated impairment		-	(		13,751)			-			-			-			-	(	13,751)
	$	1,303,196		$	1,152,986		$	6,180		$	58,707		$	2,578		$	1,194,610	$	3,718,257
For the year ended December 31, 2016
At January 1	$	1,303,196	$		1,152,986	$		6,180	$		58,707	$		2,578	$		1,194,610	$	3,718,257
Additions		-			-			-			-			-			341,205		341,205
Reclassified from prepayment
for equipment		-			-			-			-			-			16,458		16,458
Reclassified upon completion		485,491			87,074			-			9,215			-	(		581,780)		-
Depreciation charge	(	77,630)	(		250,429)	(		1,891)	(		21,272)	(		206)			-	(	351,428)
Disposals－Cost		-	(		14,206)	(		405)	(		421)	(		876)			-	(	15,908)
' －Accumulated
depreciation		-			12,978			405			421			876			-		14,680
Impairment loss		-	(		889)			-			-			-			-	(	889)
At December 31	$	1,711,057		$	987,514		$	4,289		$	46,650		$	2,372		$	970,493	$	3,722,375
December 31,2016
Cost	$	2,469,028	$		4,387,790	$		19,557	$		154,162	$		3,956	$		970,493	$	8,004,986
Accumulated depreciation	(	757,971)	(		3,385,636)	(		15,268)	(		107,512)	(		1,584)			-	(	4,267,971)
Accumulated impairment		-	(		14,640)			-			-			-			-	(	14,640)
	$	1,711,057		$	987,514		$	4,289		$	46,650		$	2,372		$	970,493	$	3,722,375

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• A. As of and for the years ended December 31, 2017 and 2016, the Company has not capitalized any interest.

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

• C. As of December 31, 2017 and 2016, no property, plant and equipment were pledged to others as collateral.

(7) IMPAIRMENT OF NON-FINANCIALASSETS

• －

• A. The Company reversed the impairment loss amounting to $3,741 and $ for the years ended December 31, 2017 and 2016, respectively. The Company 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(6).

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

For the years ended Deceber 31,

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

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

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

• A.The Company 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 instrument transactions and contract information are as follows (Unit in thousands of currencies indicated):

Items Forward foreign exchange contracts	Contract Amount Contract Period USD 6,940,000 11.2016～2.2017 December 31,2016

As of December 31, 2017, there were no financial instruments at fair value through profit or loss. The Company 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.

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(9) OTHER PAYABLES

OTHER PAYABLES
Accrued salaries and bonuses Payables on equipment Others	December31,2017 109,813 $ 33,189 151,005 294,007 $	December31,2016
		137,962 $ 70,505 166,323
		374,790 $

(10) PENSIONS

A. The Company has set up a defined benefit pension plan in accordance with the Labor Standards Law, which applies to all regular employees’ service years prior to the enforcement of the Labor Pension Act (the “Act”) on July 1, 2005 and service years thereafter of employees who chose to continue 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 six months prior to retirement. Calculation of average salary is in accordance with the Labor Standards Law of the R.O.C. The Company contributes monthly an amount equal to 2% of the employees' monthly salaries and wages to the retirement fund deposited with Bank of Taiwan under the name of the independent retirement fund committee. 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 methods to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by the end of March next year.

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

	December	31,2017	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

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(b) Movements in net defined liabilities are as follows:

For the year ended December 31, 2017 At January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension At December 31 For the year ended December 31, 2016 At January 1 Current service cost Interest expense (income) Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) Change in financial assumptions Experience adjustments Pension fund contribution Paid pension At December 31		Present value of defined benefit obligations	Fair value of plan assets		Net defined benefit liability
	118,242 $ 1,654 1,656 121,552 - 2,566 3,043) ( 477) ( - 1,803) ( 119,272 $ Present value of defined benefit obligations		48,189) ($ - 675) ( 48,864) ( 161 - - 161 3,060) ( 1,803 49,960) ($ Fair value of plan assets	70,053 $ 1,654 981 72,688 161 2,566 3,043) ( 316) ( 3,060) ( - 69,312 $ Net defined benefit liability
	111,292 $ 1,926 1,892 115,110 - 3,950 3,064 7,014 - 3,882) ( 118,242 $		48,438) ($ - 823) ( 49,261) ( 379 - - 379 3,189) ( 3,882 48,189) ($	62,854 $ 1,926 1,069 65,849 379 3,950 3,064 7,393 3,189) ( - 70,053 $

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

• (d) 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 5[th] 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:

Discount rate Future salary increases

Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%

December 31, 2017 Effect on present value of defined benefit obligation 3,195) ($ December 31, 2016 Effect on present value of defined benefit obligation 3,304) ($	3,319 $ 3,438 $	2,955 $ 2,866) ($ 3,081 $ 2,982) ($

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

The method and types of assumptions used in preparing the sensitivity analysis did not

~34~

change compared to the previous year.

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

• (f) 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. Effective July 1, 2005, the Company has established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company contributes monthly an amount based on 6% of the employees’monthly salaries and wages to the employees’individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. The net pension costs recognised under the defined contribution plan were $23,827 and $22,661 for the years ended December 31, 2017 and 2016, respectively.

(11) SHARE CAPITAL

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

ousands 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 event of capitalization mentioned above, the Company’s total authorised 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 authorised 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 authorised 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.

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(12) CAPITAL REAERVE

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

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

For the year ended December 31, 2017

Movements in the Company’s	capital reserve are as follows: For theyear ended December31,2017	capital reserve are as follows: For theyear ended December31,2017	1,2017
At January 1 Employee stock options compensation cost －Company －Subsidiaries Employee stock options forfeited At December 31 At January 1 Employee stock options compensation cost －Company －Subsidiaries At December 31	Sharepremium Stock options Total 1,233,286 $ 42,374 $ 1,275,660 $ - 11,036 11,036 - 176 176 1,862 1,862) ( - 1,235,148 $ 51,724 $ 1,286,872 $ For theyear ended December31,2016		Total
			1,275,660 $ 11,036 176 -
			1,286,872 $
	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 $

(13) 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 prices of the options were set at $91.70 (in dollars), $41.65 dollars (in dollars) and $40.55 (in dollars), respectively, which were based on the closing market price of the Company’s common shares on the Grant Date. Each option was granted the right to purchase one share of the Company’s common stocks. The exercise price is subject to further adjustments when there is change in share numbers of 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

~36~

exercisable in 2 years after the Grant Date. The Company recognised compensation cost relating to the employee stock options plan of $11,036 and $10,025 for the years ended December 31, 2017 and 2016, respectively.

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

For the year ended December 31, 2017

			For theyear ended	December31,2017	December31,2017
				Weighted-average
		Number of options			exercise price
		(unit in thousands)			(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
			Forthe yearended	December31,2016
				Weighted-average
		Number of options			exercise price
		(unit in thousands)			(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 is as follows:

			December31,2017	December31,2017	December31,2017		December31,2016	December31,2016	December31,2016
		No. of stocks		Exercise price		No. of stocks		Exercise price
Grant date	Expirydate	(unit in thousands)		(in	dollars)	(unit in thousands)		(in	dollars)
12.3.2013	12.2.2023		624	$	77.10		670	$	80.20
11.6.2015	11.5.2025		1,147		38.50		1,299		40.00
10.14.2016	10.13.2026		1,304		39.00		1,488		40.55

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

~37~

Fair

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

Note: According to daily returns of the Company’s stock for the previous year, the annualized volatility is 28.50%, 37.63% and 37.20%, respectively.

(14) RETAINED EARNINGS

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

~38~

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.

(15) OTHER EQUITY ITEMS

For the years ended December 31,

At January 1 Currency translation differences-group At December 31

	2017		2016
($	3,454)	$	69,095
(	16,311)	(	72,549)
($	19,765)	($	3,454)

(16) OPERATING REVENUE

For the years ended December 31,

		2017			2016
Sales revenue	$	3,424,568	$		3,865,240
Less: Sales returns	(	224,923)	(		64,812)
Sales discounts		-	(		6,984)
Net sales revenue		3,199,645			3,793,444
Technical service revenue		109,477			95,167
Others		140,053			-
	$	3,449,175		$	3,888,611

(17) OTHER INCOME

For the years ended December 31,

Interest income from bank deposits Management service revenue Joint loan guarantee revenue Compensation revenue Reversal for doubtful accounts Others	2017 18,612 $ 8,662 2,806 6,003 488 6,410 42,981 $	2016
		13,371 $ 14,262 964 7,404 - 4,028 40,029 $

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(18) OTHER GAINS AND LOSSES

For the years ended December 31,

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

	2017		2016
$	10,917	$	3,981
(	62)	(	744)
	3,741	(	889)
(	40,340)	(	13,555)
(	13,276)	(	16,497)
($	39,020)	($	27,704)

(19) FINANCE COSTS

For the years ended December 31,

Interest expense:

Bank borrowings

2017 22 $	2016
	11 $

(20) EXPENSES BY NATURE

For the year ended December 31, 2017

Employee benefit expenses Depreciation Amortization

Operatingcosts 357,485 $ 220,241 2,284 580,010 $	Operatingexpenses 326,388 $ 108,766 2,754 437,908 $	Total
		683,873 $ 329,007 5,038
		1,017,918 $

For the year ended December 31, 2016

Employee benefit expenses Depreciation Amortization

Operatingcosts 374,908 $ 276,907 2,285 654,100 $	Operatingexpenses 322,577 $ 74,521 2,915 400,013 $	Total
		697,485 $ 351,428 5,200
		1,054,113 $

~40~

(21) EMPLOYEE BENEFIT EXPENSE

For the year ended December 31, 2017

Salaries and wages Labor and health insurance expenses Pension costs Other personnel expenses	Operatingcosts 302,357 $ 27,782 15,920 11,426 357,485 $	Operatingexpenses 283,230 $ 19,143 10,542 13,473 326,388 $	Total
			585,587 $ 46,925 26,462 24,899
			683,873 $

Salaries and wages Labor and health insurance expenses Pension costs Other personnel expenses	For theyear ended December31,2016	For theyear ended December31,2016	For theyear ended December31,2016
	Operatingcosts 321,631 $ 26,522 15,730 11,025 374,908 $	Operatingexpenses 282,020 $ 17,488 9,926 13,143 322,577 $	Total
			603,651 $ 44,010 25,656 24,168
			697,485 $

• A. As of December 31, 2017 and 2016, the Company had 635 and 610 employees, respectively.

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

• C. For the years ended December 31, 2017 and 2016, employees’ compensation was accrued at $48,877 and $82,181, 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, respectively, 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 of 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.

~41~

(22) INCOME TAX

A. Income tax expense

(a)Components of income tax expense:

A.	Income tax expense (a)Components of income tax expense:
				For theyears ended December31,
				2017			2016
	Current income tax:
	Income tax in the current year		$	143,042		$	195,170
	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			144,864			204,178
	Deferred income tax:
	Origination and reversal of temporary differences		(	78,455)		(	41,065)
	Income tax expense		$	66,409		$	163,113
	(b) The income tax relating to components of other comprehensive income					is as follows:
				For theyears ended December 31,
				2017			2016
	Remeasurement of defined benefit obligations			54 $		($	1,258)
B.	Reconciliation between income tax expense and accounting profit :
			For theyears ended December31,
				2017			2016
	Income tax at statutory tax rate	$		83,092	$		139,707
	Effect of items disallowed by tax regulation	(		18,072)			14,749
	Effect of investment tax credits	(		433)	(		351)
	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	$		66,409		$	163,113

~42~

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

For the year ended December 31, 2017

									Recognised	Recognised
										in other
					Recognised in			comprehensive
	January1					profit or loss				income	December31
Temporary differences:
Deferred tax assets:
Unrealised loss on inventory
market value decline	$		-			$	73,417	$		-	$		73,417
Investment loss		242,415					6,603			-			249,018
Technology know-how		17,872			(		3,698)			-			14,174
Pensions		11,910			(		73)	(		54)			11,783
Employee benefits - unused
compensated absences		2,686					1,310			-			3,996
Impairment of assets		2,489			(		636)			-			1,853
Unrealised loss on
financial liabilities		480			(		480)			-			-
Unrealised exchange loss			-				1,135			-			1,135
	$	277,852				$	77,578	($		54)		$	355,376
Deferred tax liabilities:
Unrealised exchange gain	($	877)				$	877		$	-		$	-
	$	276,975				$	78,455	($		54)		$	355,376
		For			the		year ended December31,2016
								Recognised
									in other
				Recognised 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
compensated absences		2,888		(			202)			-			2,686
Impairment of assets		2,337					152			-			2,489
Unrealised loss on
financial liabilities		25					455			-			480
	238,020 $				$		38,574	$		1,258	$		277,852
Deferred tax liabilities:
Unrealised exchange gain	($	3,368)			$		2,491	$		-	($		877)
	234,652 $				$		41,065	$		1,258	$		276,975

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• D. The Company 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.

• E. 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.

• F. 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.

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

• H. 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%.

(23) EARNINGS PER SHARE (“EPS”)

For the year ended December 31, 2017

Basic earnings per share Profit attributable to ordinary stockholders Diluted earnings per share Profit attributable to ordinary stockholders Assumed conversion of all dilutive potential ordinary shares Employees' stock option Employees' compensation Profit attributable to ordinary stockholders plus assumed conversion of all dilutive potential ordinary shares	Amount after tax 422,367 $ 422,367 $ - - 422,367 $	Weighted average number of shares outstanding (shares in thousands) 790,739 790,739 - 1,839 792,578	EPS (in dollars)
			0.53 $
			0.53 $

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Basic earnings per share Profit attributable to ordinary stockholders Diluted earnings per share Profit attributable to ordinary stockholders Assumed conversion of all dilutive potential ordinary shares Employees' stock option Employees' compensation Profit attributable to ordinary stockholders plus assumed conversion of all dilutive potential ordinary shares	For theyear ended December31,2016	For theyear ended December31,2016	For theyear ended December31,2016
	Amount after tax 658,693 $ 658,693 $ - - 658,693 $	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 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.

(24) SUPPLEMENTAL CASH FLOW INFORMATION

• A. Investing activities with partial cash payments

		For theyears ended	For theyears ended	December31,
		2017		2016
Purchase of property, plant and
equipment	$	179,690	$	341,205
Add : Beginning balance of payable
on equipment		70,505		44,817
Less : Ending balance of payable on
equipment	(	33,189)	(	70,505)
Cash paid for purchase of property,
plant and equipment	$	217,006	$	315,517

~45~

B. Investing activities with no cash flow effects

For the years ended December 31,

Prepayments for equipment reclassified to property, plant and equipment

2017 32,902 $	2016
	16,458 $

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

Relationship with the Company

Uni-President Enterprises Corp.

Ultimate parent company

SciAnda (Changshu) Pharmaceuticals, Ltd. Subsidary ScinoPharm Singapore Pte Ltd. Subsidary SciAnda Shanghai Biochemical Technology, Subsidary

SciAnda Shanghai Biochemical Technology, Subsidary Ltd. President Tokyo Corp. An entity controlled by key management individuals

President Chain Store Tokyo Marketing An entity controlled by key management Corp. individuals President Securities Corp. Associate of ultimate parent company

• (3) Significant transactions and balances with related parties

• A. Purchases

For the years ended December 31,

SciAnda (Changshu) Pharmaceuticals, Ltd. Subsidiaries	2017 226,163 2,141 228,304 $	2016
		171,470 9,861
		181,331 $

The terms of purchases and payment of the Company from related paties were the same with third parties. Payments are made in 90 days after receipt of goods.

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B. Other expenses

For the years ended December 31,

B.	Other expenses	For theyears ended December31,	For theyears ended December31,	For theyears ended December31,	For theyears ended December31,
C. D. E. F.	Other revenue Other receivables Accounts payable Endorsements and guarantees provided to related Rental expenses: －Entities controlled by key management individuals Management service fees: －Subsidiaries －Ultimate parent company －Associates of ultimate parent company Research and development expenses －Subsidiaries Management consultancy revenue: －Subsidiaries Joint loan guarantee revenue: －Subsidiaries Subsidiaries Subsidiaries	parties 2017 2016 1,443 $ 1,583 $ 7,573 $ 12,791 $ 5,439 5,397 2,051 2,186 15,063 $ 20,374 $ 385 $ 2,791 $ 2017 2016 8,662 $ 14,262 $ 2,806 $ 964 $ For theyears ended December31, December31,2017 December31,2016 2,597 $ 6,780 $ December31,2017 December31,2016 53,928 $ 33,100 $ December31,2017 December31,2016 2,543,275 $ 1,625,270 $	2017 2016 1,443 $ 1,583 $ 7,573 $ 12,791 $ 5,439 5,397 2,051 2,186 15,063 $ 20,374 $ 385 $ 2,791 $ For theyears ended December31,
			2017	2016 14,262 $ 964 $ December31,2016 6,780 $ December31,2016 33,100 $ December31,2016 1,625,270 $	2016 14,262 $ 964 $ December31,2016
			8,662 $
			2,806 $
			December31,2017
			2,597 $		6,780 $
			December31,2017
	Details of endorsement and guarantees: Nature of suretyship SciAnda (Changshu) Pharmaceuticals, Ltd. Financial gurantee

As of December 31, 2017 and 2016, the actual drawn amounts, which are guaranteed by the Company to the subsidiaries, were $1,317,219 and $802,993, respectively.

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(4) Key management compensation

For the years ended December 31,

Salaries and other short-term employee benefits Share-based payments Post-employment benefits Termination benetfits	2017 52,679 $ 4,156 621 1,450 58,906 $	2016
		56,191 $ 3,039 517 1,450
		61,197 $

8. PLEDGED ASSETS

Details of the Company’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	Purpose of collateral

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 Company’s unused letters of credit amounted to $4,952 and －

• $ , respectively.

• (2) As of December 31, 2017 and 2016, the Company’s remaining balance due for construction in progress and prepayments for equipment was $101,799 and $274,146, 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 such adjustment. The rent expense of $22,276 (listed as ‘operating cost’ and ‘operating expense’) was recognised in profit or loss for the years ended December 31, 2017 and 2016. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

Within one year Later than one year but not exceeding five years Exceeding five years	December31,2017 23,577 $ 94,308 357,586 475,471 $	December31,2016
		22,276 $ 3,713 -
		25,989 $

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(4) Information about endorsement and guarantee to others is provided in Note 7(3) F.

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 $62,713, which will be adjusted in the first quarter of 2018.

12. OTHERS

(1) Capital risk management

The Company’s objectives on managing capital are to safeguard the Company’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 Company 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 Company’s financial instruments which are not measured at fair value (including cash and cash equivalents, accounts receivable, other receivables (including related parties), guarantee deposits paid, other financial assets - non-currant, notes payable, accounts payable (including related parties), other payables 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 Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company’s financial position and financial performance.

• (b) The Company’s treasury identifies, evaluates and hedges financial risks closely with the Company’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as 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 risk

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

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• (ii) To manage the foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, the Company is required to hedge the 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 Company’s businesses involve some non-functional currency operations (the Company’s functional currency: NTD). The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD EUR:NTD CNY:NTD Financial liabilities Monetary items USD:NTD CNY:NTD (Foreign currency: functional currency) Financial assets Monetary items USD:NTD EUR:NTD CNY:NTD Financial liabilities Monetary items USD:NTD CNY:NTD		December31,2017	December31,2017	Book value (NTD)
		Foreign currency amount(in thousands) Exchange rate 21,967 $ 29.76 65 35.57 60 4.574 2,392 29.76 506 4.574 December31,2016
				653,738 $ 2,312 274 71,186 2,314 Book value (NTD)
		Foreign currency amount(in thousands) 19,467 $ 413 510 1,567 435	Exchange rate 32.25 33.90 4.644 32.25 4.644
				627,811 $ 14,001 2,368 50,536 2,020

~50~

  - (iv)As of December 31, 2017 and 2016, if the USD:NTD exchange rate had appreciated/depreciated by 5% with all other factors remaining constant, the Company’s net profit after tax for the years ended December 31, 2017 and 2016 would have increased/decreased by $24,176 and $28,864, respectively. If the EUR:NTD exchange rate had appreciated/depreciated by 5% with all other factors remaining constant, the Company’s net profit after tax for the years ended December 31, 2017 and 2016 would have increased/decreased by $96 and $700, respectively. If the CNY:NTD exchange rate had appreciated/depreciated by 5% with all other factors remaining constant, the Company’s net profit after tax for the years ended December 31, 2017 and 2016 would have increased/decreased 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 Company for the years ended December 31, 2017 and 2016 amounted to $40,340 and $13,555, respectively.

• II. Price risk

  • The Company 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 Company is exposed to price risk on equity instruments investments. To manage this risk, the Company has set stop-loss amounts for these instruments. Therefore, the Company is not to exposed to significant market risk.

• III. Interest rate risk

  • For the years ended December 31, 2017 and 2016, the Company’s liabilities bear little significance and a small range of interest rate, thus, the Company does not bear significant interest rate risk.

• (b) Credit risk

• I. Credit risk refers to the risk of financial loss to the Company arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Company’s credit policy, each local entity in the Company is responsible for managing and 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 Company 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 Company’s credit ratings on its financial assets, please refer to detailed explanation on financial assets in Note 6.

• (c). Liquidity risk

• I. Cash flow forecasting is performed by the Company’s treasury department which monitors

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rolling forecasts of the Company’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Company does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.

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

undiscounted cash flows.
December31,2017 Notes payable Accounts payable Accounts payable －related parties Other payables Guarantee deposits received Non-derivative financial liabilities: December31,2016 Notes payable Accounts payable Accounts payable －related parties Other payables Guarantee deposits received Forward exchange contracts Non-derivative financial liabilities: Derivative financial liabilities:	Less than 1year	Between 1 and 2years	Between 2 and5 years	More than 5 years
	1,161 $ 73,943 53,928 294,007 - Less than 1year	- $ - - - 1,620 Between 1 and 2years	- $ - - - - Between 2 and5 years	- $ - - - - More than 5 years
	1,001 $ 56,926 33,100 374,790 21,618 2,822	- $ - - - - -	- $ - - - - -	- $ - - - - -

(3) Fair value estimation

• A. Details of the fair value of the Group’s financial 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. A market is regarded as active where a

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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:

31, 2016. is as follows:
December 31, 2017: None. December31,2016 Liabilities: Financial liabilities at fair value through profit or loss – forward foreign exchange contracts	Level 1 - $	Level 2 2,822 $	Level3 - $	Total
				2,822 $

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

• (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 Company 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 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 Company 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 current regulatory requirements, the Company 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.

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• 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. General information: Please refer to table 8.

• 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

Not applicable.

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Table 1

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd.

Loans to others

For the year ended December 31, 2017

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.

Table 2

Expressed in thousands of NTD

Provision of endorsements and guarantees to others

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.

1. 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.

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

Table 4

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd.

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

Purchaser/seller	Counterparty	Relationship with the counterparty			Transaction		Differences in t compared t trans	ransaction terms o third party actions	Notes/account	s receivable(payable)	Footnote
			Purchases(sales)	Amount	Percentage of total purchases(sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
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.

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

			December 31, 2017	December 31, 2017
Table 5 Purchaser/seller	Counterparty	Relationship with the counterparty	Balance as at December31,2017		Turnover rate	Overdue receivables		Expressed in thousands of NTD 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.

- Significant inter company transactions during the reporting period

For the year ended December 31, 2017

Number (Note 2)	Companyname	Counterparty	Relationship (Note3)		Transaction	Transaction
				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.

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.

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

Table 9

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd.

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 guarantee revenue $2,806 Reasearch and development expense $ 385 Other receivables $2,597 Management consultancy fee $ 7,208

Table 9, Page 1