SPT — Audit Report / Information 2018

Dec 28, 2018

SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS DECEMBER 31, 2018 AND 2017

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

SCINOPHARM TAIWAN, LTD.

Declaration of Consolidated Financial Statements of Affiliated Enterprises

For the year ended December 31, 2018, pursuant to “Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises,” the entities that are required to be included in the consolidated financial statements of affiliates, are the same as the entities required to be included in the consolidated financial statements under International Financial Reporting Standards 10. In addition, information required to be disclosed in the consolidated financial statements of affiliates is included in the aforementioned consolidated financial statements. Accordingly, it is not required to prepare a separate set of consolidated financial statements of affiliates.

Hereby declare,

SCINOPHARM TAIWAN, LTD.

By Alex Lo Chairman March 25, 2019

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REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

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

Opinion

We have audited the accompanying consolidated balance sheets of ScinoPharm Taiwan, Ltd. and subsidiaries (the “Group”) as at December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

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

Basis for opinion

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

Key audit matters

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

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

Cutoff of export revenue from Taiwan

Description

Refer to Note 4(27) for accounting policy on revenue recognition.

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

Refer to Note 4(13) for accounting policies on inventory valuation, Note 5(2)1 for the uncertainty of accounting estimates and assumptions applied in inventory valuation, and Note 6(5) for details of inventories. As of December 31, 2018, the balances of inventory and allowance for inventory valuation losses were $1,889,295 thousand and $525,498 thousand, respectively.

The Group is primarily engaged in the manufacture and sales of API. As the manufacturing process is relatively complicated and time consuming, 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 Group measures

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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 turnover. 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 turnover and judgement of obsolete inventory.

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

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

Other matter – Parent company only financial reports

We have audited and expressed an unmodified opinion on the parent company only financial statements of ScinoPharm Taiwan, Ltd. as at and for the years ended December 31, 2018 and 2017.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Lin, Yung-Chih Independent Accountants

Liu, Tzu-Meng

PricewaterhouseCoopers, Taiwan Republic of China March 25, 2019

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

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

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(2) and 12 6(3) 6(4) and 12 5 and 6(5) 6(6) and 12 12 6(7)(9)(27) 5 and 6(25) 6(7)(27) 8 6(8)	December 31, 2018 AMOUNT % $ 4,203,338 34 409 - 178,615 1 558,950 4 104,021 1 1,363,797 11 97,037 1 6,506,167 52 468,117 4 - - 4,758,846 38 16,753 - 593,103 5 108,869 1 6,885 - 29,270 - 75,318 - 6,057,161 48 $ 12,563,328 100	December 31, 2017	December 31, 2017
		AMOUNT $ 4,203,338 409 178,615 558,950 104,021 1,363,797 97,037 6,506,167 468,117 - 4,758,846 16,753 593,103 108,869 6,885 29,270 75,318 6,057,161 $ 12,563,328	AMOUNT $ 3,910,791 - - 567,318 197,620 1,675,088 116,310 6,467,127 - 391,097 5,088,713 23,334 503,570 110,529 9,179 28,831 79,009 6,234,262 $ 12,701,389	%
Current assets 1100 Cash and cash equivalents 1110 Financial assets at fair value through profit or loss - current 1136 Financial assets at amortised cost - current 1170 Accounts receivable, net 1200 Other receivables 130X Inventories 1410 Prepayments 11XX Total current assets Non-current assets 1517 Financial assets at fair value through other comprehensive income - non-current 1543 Financial assets carried at cost - non-current 1600 Property, plant and equipment 1780 Intangible assets 1840 Deferred income tax assets 1915 Prepayments for equipment 1920 Guarantee deposits paid 1980 Other financial assets - non- current 1985 Long-term prepaid rents 15XX Total non-current assets 1XXX Total assets				31 - - 4 2 13 1
				51
				- 3 40 - 4 1 - - 1
				49
				100

(Continued)

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity	Notes 6(10)(28) 6(19) and 12 6(11)(27) 6(25) 6(19) 6(12)(28) and 9 6(12) and 9 6(25) 6(13) 6(28) 6(14)(17) 6(15)(16) 6(6)(14)(17)(24) 6(18) and 12 9	December 31, 2018 December 31, 2017 AMOUNT % AMOUNT % $ 233,290 2 $ 374,713 3 30,617 - - - 1,148 - 1,161 - 89,393 1 90,784 1 347,319 3 350,117 3 65,374 - 50,251 - - - 28,896 - 1,178,503 9 219,536 2 1,945,644 15 1,115,458 9 - - 1,097,682 9 81 - - - 76,863 1 69,312 - 1,708 - 1,712 - 78,652 1 1,168,706 9 2,024,296 16 2,284,164 18 7,907,392 63 7,907,392 62 1,292,555 10 1,286,872 10 568,302 4 526,065 4 22,829 - 22,829 - 708,338 6 693,832 6 39,616 1 ( 19,765) - 10,539,032 84 10,417,225 82 $ 12,563,328 100 $ 12,701,389 100	December 31, 2017	December 31, 2017
		AMOUNT $ 233,290 30,617 1,148 89,393 347,319 65,374 - 1,178,503 1,945,644 - 81 76,863 1,708 78,652 2,024,296 7,907,392 1,292,555 568,302 22,829 708,338 39,616 10,539,032 $ 12,563,328		%
Current liabilities 2100 Short-term borrowings 2130 Contract liabilities - current 2150 Notes payable 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2310 Advance receipts 2320 Long-term liabilities, current portion 21XX Total current liabilities Non-current liabilities 2540 Long-term borrowings 2570 Deferred income tax liabilities 2640 Net defined benefit liabilities 2645 Guarantee deposits received 25XX Total non-current liabilities 2XXX Total liabilities Equity attributable to owners of parent Share capital 3110 Share capital - common stock 3200 Capital surplus Retained earnings 3310 Legal reserve 3320 Special reserve 3350 Unappropriated earnings 3400 Other equity interest 3XXX Total equity Significant contingent liabilities and unrecognised contract commitments 3X2X Total liabilities and equity				3 - - 1 3 - - 2
				9
				9 - - -
				9
				18
				62 10 4 - 6 -
				82
				100

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

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

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

Items

Year ended December 31 2018 2017 Notes AMOUNT % AMOUNT % 6(19) and 12 $ 3,524,263 100 $ 3,516,481 100 6(5)(23)(24) and 9 ( 1,981,749 ) ( 56) ( 1,966,324) ( 56) 1,542,514 44 1,550,157 44 6(8)(23)(24), 7, 9 and 12 ( 146,931 ) ( 4) ( 145,756) ( 4) ( 524,047 ) ( 15) ( 531,163) ( 15) ( 313,208 ) ( 9) ( 314,276) ( 9) 84 - - - ( 984,102 ) ( 28) ( 991,195) ( 28) 558,412 16 558,962 16 6(20) and 12 48,597 1 39,522 1 6(2)(9)(21) and 12 ( 36,299 ) ( 1) ( 46,551) ( 1) 6(7)(22)(27) ( 80,169 ) ( 2) ( 76,631) ( 2) ( 67,871 ) ( 2) ( 83,660) ( 2) 490,541 14 475,302 14 6(25) ( 47,563 ) ( 1) ( 52,935) ( 2) $ 442,978 13 $ 422,367 12 6(13) ($ 8,328 ) - $ 316 - 6(6)(18) ( 67,722 ) ( 2) - - 6(25) 1,763 - ( 54) - 6(18) ( 21,487 ) ( 1) ( 16,311) - ($ 95,774 ) ( 3) ($ 16,049) - $ 347,204 10 $ 406,318 12 $ 442,978 13 $ 422,367 12 $ 347,204 10 $ 406,318 12 6(26) $ 0.56 $ 0.53 $ 0.56 $ 0.53

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 6450 Gain on reversal of expected credit losses 6000 Total operating expenses 6900 Operating profit Non-operating income and expenses 7010 Other income 7020 Other gains and losses 7050 Finance costs 7000 Total non-operating income and expenses 7900 Profit before income tax 7950 Income tax expense 8200 Profit for the year Other comprehensive income (loss) Components of other comprehensive income (loss) that will not be reclassified to profit or loss 8311 Actuarial (losses) gains on defined benefit plans 8316 Unrealised losses from equity instrument measured at fair value through other comprehensive income 8349 Income tax related to components of other comprehensive income that will not be reclassified to profit or loss Components of other comprehensive loss that will be reclassified to profit or loss 8361 Financial statements translation differences of foreign operations 8300 Total other comprehensive loss for the year 8500 Total comprehensive income for the year Profit attributable to: 8610 Owners of the parent Comprehensive income attributable to: 8710 Owners of the parent Earnings per share (in dollars) 9750 Basic 9850 Diluted

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

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

(Expressed in thousands of New Taiwan dollars)

For the year ended December 31, 2017 Balance at January 1, 2017 Net income for the year ended December 31, 2017 Other comprehensive income (loss) for the year ended December 31, 2017 Total comprehensive income (loss) for the year ended December 31, 2017 Distribution of 2016 net income: Legal reserve Cash dividends Stock dividends Employee stock option compensation cost Balance at December 31, 2017 For the year ended December 31, 2018 Balance at January 1, 2018 Effect on retrospective application and restatement Balance after restatement on January 1, 2018 Net income for the year ended December 31, 2018 Other comprehensive loss for the year ended December 31, 2018 Total comprehensive income (loss) for the year ended December 31, 2018 Distribution of 2017 net income: Legal reserve Cash dividends Employee stock option compensation cost Disposal of equity instruments at fair value through other comprehensive income Balance at December 31, 2018	Notes						Equity a	tt	ributable to owners of	the parent				Total equity
		S	hare capital - common stock		Capital reserve				Retained earnings		Other equity interest
							Legal reserve		Special reserve	Unappropriated earnings	Financial statements translation differences of foreign operations	Unrealised gains (losses) from financial assets measured at fair value through other comprehensive income
	6(18) 6(17) 6(14)(17) 6(15)(16) 6(18) and 12 6(6)(18) 6(17) 6(15)(16) 6(6)(18)		$ 7,603,262 - - - - - 304,130 - $ 7,907,392 $ 7,907,392 - 7,907,392 - - - - - - - $ 7,907,392		$ 1,275,660 - - - - - - 11,212 $ 1,286,872 $ 1,286,872 - 1,286,872 - - - - - 5,683 - $ 1,292,555		$ 460,196 - - - 65,869 - - - $ 526,065 $ 526,065 - 526,065 - - - 42,237 - - - $ 568,302		$ 22,829 - - - - - - - $ 22,829 $ 22,829 - 22,829 - - - - - - - $ 22,829	$ 869,300 422,367 262 422,629 ( 65,869 ) ( 228,098 ) ( 304,130 ) - $ 693,832 $ 693,832 - 693,832 442,978 ( 6,565 ) 436,413 ( 42,237 ) ( 379,555 ) - ( 115 ) $ 708,338	($ 3,454 ) - ( 16,311 ) ( 16,311 ) - - - - ($ 19,765 ) ($ 19,765 ) - ( 19,765 ) - ( 21,487 ) ( 21,487 ) - - - - ($ 41,252 )	$ - - - - - - - - $ - $ - 148,475 148,475 - ( 67,722 ) ( 67,722 ) - - - 115 $ 80,868	$ 10,227,793 422,367 ( 16,049 ) 406,318 - ( 228,098 ) - 11,212 $ 10,417,225 $ 10,417,225 148,475 10,565,700 442,978 ( 95,774 ) 347,204 - ( 379,555 ) 5,683 - $ 10,539,032

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

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

(Expressed in thousands of New Taiwan dollars)

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

For the years ended December 31, Notes 2018 2017 $ 490,541 $ 475,302 ( 409 ) ( 2,822 ) 12 ( 84 ) - 6(20) and 12 - ( 516 ) 6(5) ( 28,851 ) 53,212 8,980 11,088 6(7)(23) 395,379 423,322 6(7) 14,349 - 6(21) 75 300 6(7)(9)(21) ( 2,273 ) ( 3,741 ) 6(23) 10,442 9,217 6(8) 1,858 1,835 6(15)(16) 5,683 11,212 6(20) ( 33,234 ) ( 25,083 ) 6(22) 80,169 76,631 8,453 71,604 92,033 422 340,142 101,410 7,320 83,456 1,721 - ( 13 ) 160 ( 1,391 ) 21,054 6,429 ( 34,800 ) - ( 33,488 ) ( 777 ) ( 425 ) 1,396,542 1,239,350 31,668 24,938 ( 76,487 ) ( 87,051 ) ( 120,129 ) ( 205,523 ) 1,231,594 971,714

(Continued)

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

(Expressed in thousands of New Taiwan dollars)

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

For the years ended December 31, Notes 2018 2017 ($ 1,214,112 ) $ - 1,035,497 - 6(6) 3,733 - - ( 27,008 ) 6(27) ( 51,290 ) ( 289,479 ) 6(7)(22)(27) - ( 10,964 ) 79 50 ( 4,076 ) ( 8,625 ) ( 71,681 ) ( 101,859 ) 2,294 560 ( 439 ) - ( 299,995 ) ( 437,325 ) 6(28) ( 137,723 ) ( 583,878 ) 6(28) 163,736 572,084 6(28) ( 273,493 ) ( 54,023 ) 6(28) ( 2 ) ( 19,999 ) 6(17) ( 379,555 ) ( 228,098 ) ( 627,037 ) ( 313,914 ) ( 12,015 ) ( 16,835 ) 292,547 203,640 6(1) 3,910,791 3,707,151 6(1) $ 4,203,338 $ 3,910,791

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

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SCINOPHARM TAIWAN, LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER31, 2018 AND 2017

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

1. HISTORY AND ORGANISATION

• (1) ScinoPharm Taiwan, Ltd. (the Company) was incorporated as a company limited by shares under the provisions of the Company Act of the Republic of China (R.O.C.) on November 11, 1997. The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the manufacture of western medicines and other chemical materials, biological technology services, intellectual property rights, international trade and research, development and manufacture of Active Pharmaceutical Ingredients (“API”), albumin medicines, oligonucleotide medicines, peptide medicines, injections and new small molecule drugs, as well as the provision of related consulting and technical services.

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

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

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

STATEMENTS AND PROCEDURES FOR AUTHORISATION

These consolidated financial statements were authorised for issuance by the Board of Directors on March 25, 2019.

3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS

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

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

follows:
New Standards,Interpretations andAmendments	Effective date by International Accounting StandardsBoard ("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’	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018

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New Standards,Interpretations and Amendments

Effective date by IASB

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, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. 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 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 subsequent changes in the fair value of an investment in an equity instrument that is not held for trading in other comprehensive income.

• 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 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 Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.

• C. The Group has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9. For details of the significant effect as at January 1, 2018, please refer to Note 12(4)B.

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

the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

New Standards,Interpretations andAmendments	Effective date by IASB January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. 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. The Group expects to recognise the lease contract of lessees in line with IFRS 16. Accordingly, on January 1, 2019, the Group expects to increase right-of-use asset by $975,606 and lease liability by $900,288, and decrease long-term prepaid rent by $75,318 using the modified retrospective approach.

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

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

endorsed by the FSC are as follows:
New Standards,Interpretations and Amendments	Effective date by IASB
Amendments to IAS 1 and IAS 8, ‘Disclosure Initiative - Definition of xMaterial’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’	January 1, 2020 January 1, 2020 To be determined by IASB January 1, 2021

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

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

(1) Compliance statement

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

(2) Basis of preparation

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

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

• (b) Financial assets at fair value through other comprehensive income.

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

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

• C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognised as other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 were not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. Please refer to Notes 12(4) and (5) for details of significant accounting policies and details of significant accounts.

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(3) Basis of consolidation

• A. Basis for preparation of consolidated financial statements:

• (a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls an entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

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

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

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

• (e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

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B. Subsidiaries included in the consolidated financial statements:

Name of Investors	Name of Subsidiaries	Business December 31, December 31, activities 2018 2017 Professional investment 100.00 100.00 Professional investment 100.00 100.00 Research, development and manufacture of API and new drug, etc. 100.00 100.00 Research, development and manufacture of API and new drug, sale of self-produced products, etc. 100.00 100.00 Import, export and sales of API and intermediates, etc. 100.00 100.00 Percentage owned by the Company	Note
ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. SPT International, Ltd. SPT International, Ltd. SPT International, Ltd.	SPT International, Ltd. ScinoPharm Singapore Pte Ltd. SciAnda (Kunshan) Biochemical Technology Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda Shanghai Biochemical Technology, Ltd.		＿ ＿ ＿ ＿ ＿

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

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

• E. Significant restrictions: None.

• F. Subsidiaries that have non-controlling interests that are material to the Group: None.

(4) Foreign currency translation

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

• A. Foreign currency transactions and balances

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

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

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

  - (d) All other foreign exchange gains and losses are presented in the statement of comprehensive income within “other gains and losses”.

• B. Translation of foreign operations

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

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

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

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

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

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

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

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

  • (b) Assets held mainly for trading purposes;

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

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

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

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

• (b) Liabilities arising mainly from trading activities;

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

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

(6) Cash equivalents

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

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

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

• A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.

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

• C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.

• D. The Group recognises the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

• (8) Financial assets at fair value through other comprehensive income

• A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognise changes in fair value in other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value. The changes in fair value of equity investments that were recognised in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognised as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of

~21~

the dividend can be measured reliably.

(9) Financial assets at amortised cost

• A. Financial assets at amortised cost are those that meet all of the following criteria:

• (a) The objective of the Group’s business model is achieved by collecting contractual cash flows.

• (b) The assets’ contractual cash flows represent solely payments of principal and interest.

• B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognised in profit or loss when the asset is derecognised or impaired.

• D. The Group’s structured deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.

(10) Accounts and notes receivable

• A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.

• B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(11) Impairment of financial assets

• For financial assets at amortised cost, at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

(12) Derecognition of financial assets

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

(13) Inventories

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

~22~

sales during the period and the amount of any reversal of inventory write-down is recognised as a reduction in the cost sales during the period.

(14) Property, plant and equipment

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

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

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

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

equipment are as follows:
Assets Buildings and structures Machinery and equipment Transportation equipment Office equipment Other equipment	Estimated useful lives
	2 ～ 35 years 2 ～ 12 years 2 ～ 5 years 2 ～ 9 years 2 ～ 19 years

(15) Intangible assets

Professional skills and computer software, etc. are stated at cost and amortised on a straight-line basis over their estimated useful lives of 3 ~ 5 years.

(16) Operating leases (lessee)

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

(17) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for recognising impairment loss for an asset in prior years no longer exist or diminish, the impairment

~23~

loss shall be reversed to the extent of the loss previously recognised in profit or loss. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(18) Borrowings

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

(19) Notes and accounts payable

• A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.

• B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

(20) Derecognition of financial liabilities

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

• (21) Offsetting financial instruments

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

(22) Employee benefits

• A. Short-term employee benefits

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

• B. Pensions

• (a) Defined contribution plans

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

(b) Defined benefit plans

• i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The net defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The

~24~

rate used to discount is determined by using interest of government bonds (at the balance sheet date) of a currency and term consistent with the currency and term of the employment benefit obligations.

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

• C. Employees’ compensation and directors’ remuneration

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

• (23) 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.

• (24) Income tax

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

• B. The current income tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional 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 financial 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

~25~

a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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

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

• (25) 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.

• (26) 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.

• (27) Revenue recognition

• A. Sales of goods

  • (a) The Group manufactures and sells API, intermediates, etc. Sales are recognised when control of the products has transferred, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.

  • (b) Revenue is recognised based on the price specified in the contract, net of the sales returns and discounts. Accumulated experience is used to estimate and provide for the sales returns and discounts, using the expected value method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. The estimation is subject to an

~26~

assessment at each reporting date. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Group does not adjust the transaction price to reflect the time value of money.

  - (c) A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due.

• B. Sales of services

  • (a) The Group provides technology development and consultation services. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the service rendered up to the end of the reporting period as a proportion of the total services to be provided. The customer pays at the time specified in the payment schedule. If the services rendered exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

  • (b) The Group’s estimate about revenue, costs and progress towards complete satisfaction of a performance obligation is subject to a revision whenever there is a change in circumstances. Any increase or decrease in revenue or costs due to an estimate revision is reflected in profit or loss during the period when the management become aware of the changes in circumstances.

• C. Incremental costs of obtaining a contract

  • Given that the contractual period lasts less than one year, the Group recognises the incremental costs (mainly comprised of sales commissions) of obtaining a contract as an expense when incurred although the Group expects to recover those costs.

• (28) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision-Maker. The Chief Operating Decision-Maker is responsible for allocating resources and assessing performance of the operating segments.

5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

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

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

None.

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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 realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. As the manufacturing process is relatively complicated and time consuming, materials require longer lead time, the waiting period for product registration is long, and the timing of product launch may be deferred, the Group evaluates the amounts of normal inventory consumption, obsolete inventories or inventories without market selling value on balance sheet date, and writes down the cost of inventories to the net realisable value. Since the calculation of net realisable value involves subjective judgement and the ending balance of inventory is material to the financial statements, there might be material changes to the evaluation.

  • (b) As of December 31, 2018, the carrying amount of inventories was $1,363,797.

• B. Realisability of deferred income tax assets

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

  • (b) As of December 31, 2018, the Group recognised deferred income tax assets amounting to $593,103.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) CASH AND CASH EQUIVALENTS

tax assets. (b) As of December 31, 2018, the Group recognised $593,103. TAILS OF SIGNIFICANT ACCOUNTS CASH AND CASH EQUIVALENTS	deferred income tax	assets amounting to
Cash: Cash on hand Checking accounts and demand deposits Cash equivalents: Time deposits Bill under repurchase agreements	December31,2018 138 $ 289,723 289,861 3,633,833 279,644 3,913,477 4,203,338 $	December31,2017
		235 $ 287,317
		287,552
		3,385,448 237,791
		3,623,239
		3,910,791 $

• A. The Group transacts 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.

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

  • non-current”) as of December 31, 2018 and 2017 are provided in Note 8.

• (2) FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Items Current items: Financial assets mandatorily measured at fair value through profit or loss Derivatives Non-current items: Financial assets mandatorily measured at fair value through profit or loss Unlisted stocks Valuation adjustment		December31,2018	December31,2018
	409 $ 4,620 $ 4,620) ( - $		409 $ 4,620 4,620) ( - $

• A. The Group recognised net loss of $18,000 on financial assets at fair value through profit or loss (listed as “ Other gains and losses”) for the year ended December 31, 2018.

• B. The Group entered into contracts relating to derivative financial liabilities which were not accounted for under hedge accounting. The information is listed below (Units in thousands of currencies indicated):

		December	31,2018
	Items	Contract amount	Contractperiod
Forward foreign exchange contracts		USD 8,870	11.2018~2.2019
The Group	entered into forward foreign contracts to hedge exchange rate		risk of operating
activities. However, these forward foreign exchange contracts are not accounted for under hedge
accounting.

• C. The Group has no financial assets at fair value through profit or loss pledged to others as of December 31, 2018.

• D. Information relating to credit risk of financial assets at fair value through profit or loss is provided in Note 12(2).

• E. Information on financial liabilities at fair value through profit or loss as of December 31, 2017 is provided in Note 12(4).

(3) FINANCIAL ASSETS AT AMORTISED COST - CURRENT

provided in Note 12(4). FINANCIAL ASSETS AT AMORTISED COST-CURRENT
Items Structured deposits	December31,2018
	178,615 $

• A. The Group entered into structured deposits, which are guaranteed yield financial products, with financial institutions.

• B. The Group recognised interest income of $10,166 from financial assets at amortised cost for the year ended December 31, 2018.

• C. The Group has no financial assets at amortised cost pledged to others as of December 31, 2018.

• D. Information relating to credit risk of financial assets at amortised cost is provided in Note 12(2).

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(4) ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET	ACCOUNTS RECEIVABLE, NET	ACCOUNTS RECEIVABLE, NET	ACCOUNTS RECEIVABLE, NET
A. The ageing analysis of accounts receivable is as follows: December31,2018 Accounts receivable 558,995 $ Less: Loss allowance 45) ( 558,950 $ December31,2018 Not past due 520,461 $ Less than 30 days 34,841 Between 31 to 90 days 3,693 558,995 $				December31,2017 567,448 $ 130) ( 567,318 $ December31,2017 437,913 $ 121,829 7,706 567,448 $
		520,461 $ 34,841 3,693 558,995 $

The above ageing analysis is based on past due date.

• B. As of December 31, 2018 and 2017, the Group does not hold any collateral as security.

• C. As at December 31, 2018 and 2017, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s accounts receivable were $558,950 and $567,318, respectively.

• D. Information relating to credit risk of accounts receivable is provided in Note 12(2).

• E. Information relating to credit risk of accounts receivable as of December 31, 2017 is provided in Note 12(4).

(5) INVENTORIES

Note 12(4). INVENTORIES
Raw materials Supplies Work in process Finished goods Raw materials Supplies Work in process Finished goods		December31,2018
	Allowance for Cost market price decline 291,883 $ 73,595) ($ 40,159 3,790) ( 689,639 160,350) ( 867,614 287,763) ( 1,889,295 $ 525,498) ($ December31,2017		Bookvalue
			218,288 $ 36,369 529,289 579,851
			1,363,797 $
	Allowance for Cost market price decline 464,031 $ 127,213) ($ 34,786 2,171) ( 660,329 157,157) ( 1,070,291 267,808) ( 2,229,437 $ 554,349) ($		Bookvalue
			336,818 $ 32,615 503,172 802,483
			1,675,088 $

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

			Forthe years endedDecember31,	Forthe years endedDecember31,	Forthe years endedDecember31,
			2018		2017
Cost of goods sold		$	1,682,408	$	1,509,589
Loss on physical inventory			4,018		6,198
Loss on inventory scrap			4,952		42,367
Under applied manufacturing overhead			246,150		291,135
(Reversal of allowance for) loss on inventory
market price decline (Note)	(		28,851)		53,212
Total cost of goods sold		$	1,908,677	$	1,902,501

Note: The Group reversed a previous inventory write-down which was accounted for as reduction of cost of goods sold because certain inventory which were previously provided with allowance were again utilised in production.

(6) FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME-

NON-CURRENT

NON-CURRENT
Items Equity instruments Listed stocks Unlisted stocks Valuation adjustment	December31,2018
	219,576 $ 167,673
	387,249 80,868
	468,117 $

• A. The Group has elected to classify investments that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $468,117 as at December 31, 2018.

• B. As the underlying share price of investment target is higher than the underwriting price of the over-allotment, the over-allotment shares was fully refunded. The Group sold $3,733 of Foresee Pharmaceuticals Co., Ltd. investment at fair value which resulted in cumulative loss of $115 on disposal and reclassified to retained earnings during the year ended December 31, 2018.

• C. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income are listed below:

Equity instruments at fair value through other For the year ended comprehensive income December 31, 2018 Fair value change recognised in other comprehensive income ($ 67,722) Cumulative losses reclassified to retained earnings due to derecognition $ 115

~31~

• D. The Group has no financial assets at fair value through other comprehensive income pledged to others as of December 31, 2018.

• E. Information relating to credit risk of financial assets at fair value through other comprehensive income is provided in Note 12(2).

• F. Information on financial assets carried at cost as of December 31, 2017 is provided in Note 12(4).

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(7) PROPERTY, PLANT AND EQUIPMENT

Machinery and Transportation Office Other January 1, 2018 Buildings equipment equipment equipment equipment Cost 3,535,840 $ 5,084,982 $ 27,185 $ 214,262 $ 154,389 $ Accumulated depreciation 958,306) ( 3,710,632) ( 23,896) ( 171,582) ( 111,986) ( Accumulated impairment - 10,899) ( - - - 2,577,534 $ 1,363,451 $ 3,289 $ 42,680 $ 42,403 $ At January 1 2,577,534 $ 1,363,451 $ 3,289 $ 42,680 $ 42,403 $ Additions - 6,287 - - - Reclassified from prepayments for equipment - - - - - Reclassified upon completion 9,858 73,691 732 6,995 2,496 Transferred to loss - - - - - Depreciation charge 147,766) ( 219,079) ( 1,727) ( 16,956) ( 9,851) ( Disposals－Cost - 2,551) ( 1,059) ( 721) ( 1,083) ( ' －Accumulated depreciation - 2,551 1,059 676 974 Reversal of impairment loss - 2,322 - 34) ( 15) ( Net currency exchange differences 21,465) ( 10,987) ( 19) ( 214) ( 804) ( At December 31 2,418,161 $ 1,215,685 $ 2,275 $ 32,426 $ 34,120 $ December 31, 2018 Cost 3,521,175 $ 5,147,057 $ 26,668 $ 219,135 $ 152,211 $ Accumulated depreciation 1,103,014) ( 3,922,795) ( 24,393) ( 186,675) ( 118,076) ( Accumulated impairment - 8,577) ( - 34) ( 15) ( 2,418,161 $ 1,215,685 $ 2,275 $ 32,426 $ 34,120 $ For the year ended December 31, 2018

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

~34~

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

the interest rates for such capitalisation are as	follows:	follows:
Amount capitalised Interest rate	Forthe years endedDecember31,
	2018 - $ －	2017
		10,964 $
		4.09%～4.70%

• B. Information about reversal of impairment and impairment loss on property, plant and equipment is provided in Note 6(9).

• C. As of December 31, 2018 and 2017, the Group has not pledged any property, plant and equipment as collateral.

(8) LONG-TERM PREPAID RENT

equipment as collateral. LONG-TERM PREPAID RENT
Land use right	December31,2018 75,318 $	December31,2017
		79,009 $

In 2008, the Group’s Mainland China subsidiary entered into a land use right contract with the local government relating to the acquisition of the right to use the land located in Changshu, Jiangsu province, with a lease term of 50 years. The subsidiary had prepaid all rental expenses on the contract date, and recognised rental expenses of $1,858 and $1,835 for the years ended December 31, 2018 and 2017, respectively (listed as “General and administrative expenses”).

(9) IMPAIRMENT OF NON-FINANCIAL ASSETS

• A. The Group reversed the impairment loss amounting to $2,273 and $3,741 for the years ended December 31, 2018 and 2017, respectively, (listed as “Other gains and losses”) as some of the idle machineries were again utilised in production. For details of accumulated impairment, please refer to Note 6(7).

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

			Forthe years endedDecember31,	Forthe years endedDecember31,	Forthe years endedDecember31,	Forthe years endedDecember31,
			2018			2017
			Recognised in other			Recognised in other
	Recognised in		comprehensive		Recognised in	comprehensive
Segments	profit	or loss	income		profit or loss	income
ScinoPharm Taiwan	$	2,322	$	-	3,741 $	$	-
SciAnda (Changshu)	(	49)		-	-		-
	$	2,273	$	-	3,741 $	$	-

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(10) SHORT-TERM BORROWINGS

Type ofborrowings Bank loans Unsecured loans Type of borrowings Bank loans Unsecured loans	December31,2018 233,290 $ December31,2017 374,713 $	Interestraterange 3.17%～4.35% Interestraterange 4.79%～4.85%	Collateral
			None Collateral
			None

Please refer to Note 6(22) for interest expense recognised in profit or loss for the years ended December 31, 2018 and 2017, respectively.

(11) OTHER PAYABLES

December 31, 2018 and 2017, respectively. OTHER PAYABLES
Accrued salaries and bonuses Payables on equipment Others	December31,2018 126,736 $ 41,417 179,166 347,319 $	December31,2017
		126,492 $ 54,326 169,299
		350,117 $

(12) LONG-TERM BORROWINGS

Type ofborrowings	Borrowing period December31,2018 Interestrate CNY 263,921 thousand 1,178,503 $ 4.60%~4.85% 6.14.2016～ 12.7.2019 1,178,503) ( - $ Borrowing period December31,2017 Interestrate CNY 288,000 thousand 1,317,218 $ 4.85% 6.14.2016～ 6.14.2019 219,536) ( 1,097,682 $	Collateral Guaranteed by the Company Collateral Guaranteed by the Company
Long-term bank loans Secured bank loans Less: Current portion Type ofborrowings
Long-term bank loans Secured bank loans Less: Current portion

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(13) 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 one months prior to retirement. Calculation of average salary is in accordance with the Labor Standards Law of the R.O.C. The Company contributes monthly an amount equal to 2% of the employees' monthly salaries and wages to the retirement fund deposited with Bank of Taiwan under the name of the independent retirement fund committee. Also, the Company would assess the balance in the aforementioned labor pension reserve account by December 31, every year. If the account balance is not enough to pay the pension calculated by the aforementioned method to the employees expected to qualify for retirement in the following year, the Company will make contribution for the deficit by end of March next year.

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

	December	31,2018	December	31,2017
Present value of defined benefit obligations	$	121,105	$	119,272
Fair value of plan assets	(	44,242)	(	49,960)
Net defined benefit liability	$	76,863	$	69,312

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

		Present value of	Present value of
For the year ended			defined benefit		Fair value of			Net defined
December31,2018			obligations		planassets			benefitliability
At January 1		$	119,272	($	49,960)		$	69,312
Current service cost			1,425		-			1,425
Interest expense (income)			1,431	(	600)			831
			122,128	(	50,560)			71,568
Remeasurements:
Return on plan assets			-	(	1,417)	(		1,417)
Change in financial
assumptions			2,606		-			2,606
Experience adjustments			7,139		-			7,139
			9,745	(	1,417)			8,328
Pension fund contribution			-	(	3,033)	(		3,033)
Paid pension	(		10,768)		10,768			-
At December 31		$	121,105	($	44,242)		$	76,863
		Present value of
For the year ended			defined benefit		Fair value of			Net defined
December31,2017			obligations		planassets			benefitliability
At January 1		$	118,242	($	48,189)		$	70,053
Current service cost			1,654		-			1,654
Interest expense (income)			1,656	(	675)			981
			121,552	(	48,864)			72,688
Remeasurements:
Return on plan assets			-		161			161
Change in financial
assumptions			2,566		-			2,566
Experience adjustments	(		3,043)		-	(		3,043)
	(		477)		161	(		316)
Pension fund contribution			-	(	3,060)	(		3,060)
Paid pension	(		1,803)		1,803			-
At December 31		$	119,272	($	49,960)		$	69,312

~38~

(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 utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being 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, 2018 and 2017 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

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

Discount rate Future salary increases	Forthe years endedDecember31,	Forthe years endedDecember31,
	2018 1.00% 3.00%	2017
		1.20%
		3.00%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience according to Taiwan Life Insurance Industry 5th Mortality Table for the years ended December 31, 2018 and 2017.

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

obligation is affected. The analysis was as follows:
Increase 0.25% Decrease 0.25% December 31, 2018 Effect on present value of defined benefit obligation 3,246) ($ 3,367 $ December 31, 2017 Effect on present value of defined benefit obligation 3,195) ($ 3,319 $ Discountrate	Future salaryincreases
	Increase 0.25% Decrease 0.25% 2,991 $ 2,905) ($ 2,955 $ 2,866) ($	Decrease 0.25%

~39~

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

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

• (f) Expected contributions to the defined benefit pension plan of the Company for 2019 is $3,066.

• (g) As of December 31, 2018, the weighted average duration of that retirement plan is 11 years. The analysis of timing of the future pension payment was as follows:

Within 1 year 2~5 years Over 6 years	4,085 $ 19,302 121,364
	144,751 $

• B. As a result of the enforcement of the Act, the Company set up a defined contribution pension plan which took effect on July 1, 2005. The local employees are eligible for the defined contribution plan. For employees who choose to be covered under the pension scheme of the Act, the Company contributes monthly an amount of not less than 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. Pensions are paid by monthly installments or in lump sum based on the accumulated balances of the employees’ individual pension accounts. The subsidiaries in Mainland China (SciAnda (Kunshan) Biochemical Technology, Ltd., SciAnda (Changshu) Pharmaceuticals, Ltd., and SciAnda Shanghai Biochemical Technology, Ltd.) are subject to a government sponsored defined contribution plan. In accordance with the related Laws of the People’s Republic of China, the subsidiaries in Mainland China contribute monthly 18% of the employees’ monthly salaries and wages to an independent fund administered by the government. Other than the monthly contributions, these subsidiaries do not have further obligations. The other subsidiaries, SPT International, Ltd. and ScinoPharm Singapore Pte Ltd., had no employees. For the years ended December 31, 2018 and 2017, the pension costs recognised under the aforementioned defined contribution pension plans were $30,958 and $33,162, respectively.

(14) SHARE CAPITAL

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

~40~

At January 1 Capitalisation of retained earnings At December 31	For theyears ended December31,	For theyears ended December31,
	2018 790,739 - 790,739	2017
		760,326 30,413
		790,739

• B. On June 27, 2017, the Company’s shareholders adopted a resolution to issue shares of common stock due to capitalisation of retained earnings of $304,130 and obtained approval from the SFC. The effective date of capitalisation was set on August 18, 2017. After the capitalisation 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.

• C. As of December 31, 2018, 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.

(15) CAPITAL RESERVES

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

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

At January 1 Employee stock options compensation cost - Company Employee stock options forfeited At December 31	Forthe yearendedDecember31,2018	Forthe yearendedDecember31,2018
	Share premium Stockoptions 1,235,148 $ 51,724 $ - 5,683 2,639 2,639) ( 1,237,787 $ 54,768 $	Total
		1,286,872 $ 5,683 -
		1,292,555 $

~41~

At January 1 Employee stock options compensation cost - Company - Subsidiaries Employee stock options forfeited At December 31	Forthe yearendedDecember31,2017	Forthe yearendedDecember31,2017
	Share premium Stockoptions 1,233,286 $ 42,374 $ - 11,036 - 176 1,862 1,862) ( 1,235,148 $ 51,724 $	Total
		1,275,660 $ 11,036 176 -
		1,286,872 $

~42~

(16) SHARE-BASED PAYMENT

• A. The Company issued 1 million units, 1.5 million units and 1.5 million units of employee stock options on December 3, 2013, November 6, 2015 and October 14, 2016, respectively (the ‘Grant Date’). The exercise price of the options was set at $91.70 (in dollars), $41.65 (in dollars) and $40.55 (in dollars), respectively, which was based on the closing market price of the Company's common shares on the Grant Dates. Each option was granted the right to purchase one share of the Company's common stocks. The exercise price is subject to further adjustments when there is change in the number of shares of the Company's common stocks after the Grant Date. (As of December 31, 2018, 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 $75.90 (in dollars) per share, $37.90 (in dollars) per share and $38.40 (in dollars) per share, respectively.) Contract period of the employee stock option plans is 10 years, and options are exercisable in 2 years after the Grant Date. The Group recognised compensation costs relating to the employee stock options plan of $5,683 and $11,212 for the years ended December 31, 2018 and 2017, respectively.

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

Options outstanding at beginning of the year Options forfeited Options outstanding at end of the year Options exercisable at end of the year Options outstanding at beginning of the year Options forfeited Options outstanding at end of the year Options exercisable at end of the year		Forthe yearendedDecember31,2018	Forthe yearendedDecember31,2018
		Weighted-average Number of options exercise price (inthousand units) (indollars) 3,075 $ 46.53 350) ( 44.56 2,725 46.08 1,908 54.00 Forthe yearendedDecember31,2017
		Number of options (inthousand units) 3,457 382) ( 3,075 1,198	Weighted-average exercise price (indollars) $ 48.03 46.10 46.53 60.97

~43~

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

re as follows:
Grant date 12.3.2013 11.6.2015 10.14.2016	Expiry date	December 31, 2018	December 31, 2017
		No. of stocks Exercise price (unitinthousands) (indollars) 572 75.90 $ 1,037 37.90 1,116 38.40	No. of stocks Exercise price (unitinthousands) (indollars) 624 77.10 $ 1,147 38.50 1,304 39.00
	12.2.2023 11.5.2025 10.13.2026

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

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

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

(17) 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 exceeds 25% of the Company’s paid-in capital.

• B. Since the Company is in a changeable industry environment and the life cycle of the Company is in a stable growth, the appropriation of earnings should consider fund requirements and capital budget to decide how much earnings will be kept or distributed and how much cash dividends will be distributed. According to the Company’s Articles of Incorporation, 10% of the annual net income, after offsetting any loss of prior years and paying all taxes and dues, shall be set aside as legal reserve. The remaining net income and the unappropriated retained earnings from prior years can be distributed in accordance with a resolution passed during a meeting of the Board of Directors and approved at the stockholders' meeting. Of the amount to be distributed by the

~44~

Company, stockholders’ dividends shall comprise 50% to 100% of the unappropriated retained earnings, and the percentage of cash dividends shall not be less than 30% of dividends distributed.

• C. In accordance with the regulations, the Company shall set aside special reserve for the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings. The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently.

• D. The Company recognised cash dividends distributed to owners amounting to $379,555 ($0.48 (in dollars) per share) for the year ended December 31, 2018. 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. On March 25, 2019, the Board of Directors proposed for the distribution of cash dividends of $387,462 ($0.49 (in dollars) per share) for the year 2018.

(18) OTHER EQUITY ITEMS

For the year ended December 31, 2018

				Unrealised gain (loss)	Unrealised gain (loss)	Unrealised gain (loss)
		Currency	translation			onvaluation			Total
At January 1	($		19,765)		$	-	($		19,765)
Effect on retrospective application
and restatement			-			148,475			148,475
Balance after restatement
on January 1	(		19,765)			148,475			128,710
Revaluation			-	(		67,722)	(		67,722)
Revaluation transferred to retained			-			115			115
earnings
Currency translation differences
- group	(		21,487)			-	(		21,487)
At December 31	($		41,252)		$	80,868		$	39,616
			Forthe yearendedDecember31,2017
				Unrealised gain (loss)
		Currency	translation			onvaluation			Total
At January 1	($		3,454)		$	-	($		3,454)
Currency translation differences
- group	(		16,311)			-	(		16,311)
At December 31	($		19,765)		$	-	($		19,765)

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(19) OPERATING REVENUE

• A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines:

For the year ended December31,2018 Timing of revenue recognition: At a point in time Over time	API Revenue 3,332,373 $ - 3,332,373 $	Technical Service Revenue - $ 152,220 152,220 $	Other Operating Revenue - $ 39,670 39,670 $		Total
					3,332,373 $ 191,890 3,524,263 $

• B. The Group has recognised contract liabilities related to the contract revenue from advance customer payment of $30,617 on December 31, 2018.

• C. The revenue recognised that was included in the contract liability balance (listed as “Advance receipts”) at the beginning of the year amounted to $9,657 for the year ended December 31, 2018.

• D. Related disclosures on operating revenue for the year ended December 31, 2017 are provided in Note 12(5).

(20) OTHER INCOME

Note 12(5). OTHER INCOME
Interest income Gain on reversal of allowance Compensation revenue Others	Forthe years ended	December31,
	2018 33,234 $ - 9,051 6,312 48,597 $	2017
		25,083 $ 516 6,003 7,920
		39,522 $

(21) OTHER GAINS AND LOSSES

OTHER GAINS AND LOSSES
		Forthe years endedDecemer31,
		2018		2017
Net (loss) gain on financial assets/liabilities
at fair value through profit or loss	($	18,000)		$	10,917
Loss on disposal of property, plant and
equipment	(	75)	(		300)
Gain on reversal of impairment loss		2,273			3,741
Net currency exchange gain (loss)		8,029	(		45,595)
Miscellaneous	(	28,526)	(		15,314)
	($	36,299)	($		46,551)

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(22) FINANCE COSTS

FINANCE COSTS
		Forthe years endedDecember31,
			2018			2017
Interest expense:
Bank loans		$	80,169	$		87,595
Less: Capitalisation of qualifying	assets		-	(		10,964)
		$	80,169	$		76,631
EXPENSES BY NATURE
		Forthe yearendedDecember			31,	2018
	Operating costs		Operating expenses			Total
Employee benefit expenses	$	414,290	$	348,215	$	762,505
Depreciation		278,559		116,820		395,379
Amortisation		3,932		6,510		10,442
	$	696,781	$	471,545	$	1,168,326

(23) EXPENSES BY NATURE

Employee benefit expenses Depreciation Amortisation	Operating costs Operating expenses Total 443,259 $ 377,655 $ 820,914 $ 292,640 130,682 423,322 3,380 5,837 9,217 739,279 $ 514,174 $ 1,253,453 $ Forthe yearendedDecember31,2017	Operating costs Operating expenses Total 443,259 $ 377,655 $ 820,914 $ 292,640 130,682 423,322 3,380 5,837 9,217 739,279 $ 514,174 $ 1,253,453 $ Forthe yearendedDecember31,2017	Operating costs Operating expenses Total 443,259 $ 377,655 $ 820,914 $ 292,640 130,682 423,322 3,380 5,837 9,217 739,279 $ 514,174 $ 1,253,453 $ Forthe yearendedDecember31,2017
		Operating expenses 377,655 $ 130,682 5,837 514,174 $	Total 820,914 $ 423,322 9,217 1,253,453 $

(24) EMPLOYEE BENEFIT EXPENSES

EMPLOYEE BENEFIT EXPENSES
Salaries and wages Labor and health insurance expenses Pension costs Other personnel expenses Salaries and wages Labor and health insurance expenses Pension costs Other personnel expenses	Forthe yearendedDecember31,2018
	Operating costs Operating expenses Total 349,562 $ 295,511 $ 645,073 $ 29,327 20,796 50,123 19,979 13,235 33,214 15,422 18,673 34,095 414,290 $ 348,215 $ 762,505 $ Forthe yearendedDecember31,2017		Total
			645,073 $ 50,123 33,214 34,095
			762,505 $
	Operating costs 370,547 $ 31,219 21,905 19,588 443,259 $	Operating expenses 322,875 $ 21,162 13,892 19,726 377,655 $	Total
			693,422 $ 52,381 35,797 39,314
			820,914 $

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• A. According to the Articles of Incorporation of the Company, a ratio of distributable profit of the current year, 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.

• B. For the years ended December 31, 2018 and 2017, the employees’ compensation was accrued at $46,765 and $48,877, respectively, while the directors’ remuneration was accrued at $7,840 and $7,608, 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 25, 2019, the Board of Directors resolved to distribute employees’ compensation and directors’ remuneration of $46,765 and $7,840, respectively, and the employees’ compensation will be distributed in the form of cash.

The actual amounts approved at the Board of Directors’ meeting for employees’ compensation and directors’ remuneration for 2017 was the same as the estimated amounts recognised in the 2017 financial statements. Information about the appropriation of employees’ compensation and directors’ remuneration by the Company as resolved by the Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.

(25) INCOME TAX

A. Income tax expense

(a) Components of income tax expense:

ME TAX me tax expense Components of income tax expense:
			For theyears ended		December31,
			2018		2017
Current income tax:
Income tax in current year		$	135,808	$	141,200
Tax on unappropriated retained
earnings			84		5,446
Over provision of prior year's
income tax	(		640)	(	3,624)
Total current tax			135,252		143,022
Deferred income tax:
Origination and reversal of temporary
differences	(		25,072)	(	90,087)
Impact of change in tax rate	(		62,617)		-
Total deferred tax	(		87,689)	(	90,087)
Income tax expense		$	47,563	$	52,935

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

		For theyears ended December31,	For theyears ended December31,
		2018	2017
Remeasurement of defined benefit
obligations plan	($	1,667)	$	54
Impact of change in tax rate	(	96)		-
	($	1,763)	$	54

B. Reconciliation between income tax expense and accounting profit:

			Forthe years ended	Forthe years ended	December31,
			2018		2017
Income tax at statutory tax rate		$	89,887	$	80,801
Effect of items disallowed by tax
regulation			49,474	(	9,946)
Impact of change in tax rate	(		62,617)		-
Effect of net operating loss carryforward	(		25,413)	(	19,309)
Effect of investment tax credits	(		3,212)	(	433)
Tax on unappropriated retained earnings			84		5,446
Over provision of prior year's income tax	(		640)	(	3,624)
Income tax expense		$	47,563	$	52,935

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

For the year ended December 31, 2018

Deferred tax assets: Temporary differences: Unrealised loss on inventory market value decline Investment loss Technology know-how Pensions Employee benefits - unused compensated absences Impairment of assets Unrealised exchange loss Unrealised equipment loss Loss carryforward Deferred tax liabilities: Temporary differences: Unrealised loss on financial liabilities	January1 73,417 $ 249,018 14,174 11,783 3,996 1,853 1,135 - 148,194 503,570 $ - $ 503,570 $	Recognised in profit or loss	Recognised in other comprehensive income December31 - $ 78,206 $ - 354,208 - 12,326 1,763 15,373 - 4,812 - 1,716 - 811 - 2,870 - 122,781 1,763 $ 593,103 $ - $ 81) ($ 1,763 $ 593,022 $
		4,789 $ 105,190 1,848) ( 1,827 816 137) ( 324) ( 2,870 25,413) ( 87,770 $ 81) ($ 87,689 $

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For the year ended December 31, 2017

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

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

December 31, 2018: None. Qualifyingitems Research and development expenditures	December31,2017
	Unused taxcredits 7,677 $	Unrecognised deferred taxassets 7,677 $	Expiry year
			2018

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

		December31,2018	December31,2018
Year incurred 2014～2018	Amount filed /assessed 1,250,193 $	Unrecognised Unused tax credits deferred tax assets 1,245,459 $ 754,334 $ December31,2017		Expiry year
				2019～2023
Year incurred 2013～2017	Amount filed /assessed 1,267,104 $	Unused tax credits 1,267,104 $	Unrecognised deferred tax assets 674,327 $	Expiry year
				2018～2022

• F. The Company’s income tax returns through 2017 have been assessed and approved by the Tax Authority, and there were no disputes existing between the Company and the Authority as of March 25, 2019.

• G. The amendments to the Income Tax Act were promulgated and became effective on February 7, 2018. Under the amendments, the corporate income tax rate will be raised from 17% to 20% retroactively effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate and recognised in profit or loss or other comprehensive income based on the nature of temporary differences.

(26) EARNINGS PER SHARE (“EPS”)

nature of temporary differences. EARNINGS PER SHARE (“EPS”)
Basic earnings per share Profit attributable to ordinary stockholders of the parent Diluted earnings per share Profit attributable to ordinary stockholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees' stock options Employees' compensation Profit attributable to ordinary stockholders of the parent plus assumed conversion of all dilutive potential ordinary shares	For theyear ended December31,2018
	Weighted average number of shares outstanding Amount aftertax (sharesinthousands) 442,978 $ 790,739 442,978 $ 790,739 - - - 2,343 442,978 $ 793,082	EPS (indollars)
		0.56 $
		0.56 $

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Basic earnings per share Profit attributable to ordinary stockholders of the parent Diluted earnings per share Profit attributable to ordinary stockholders of the parent Assumed conversion of all dilutive potential ordinary shares Employees' stock options Employees' compensation Profit attributable to ordinary stockholders of the parent plus assumed conversion of all dilutive potential ordinary shares	For theyear ended December31,2017	For theyear ended December31,2017
	Weighted average number of shares outstanding Amount aftertax (sharesinthousands) 422,367 $ 790,739 422,367 $ 790,739 - - - 1,839 422,367 $ 792,578	EPS (indollars)
		0.53 $
		0.53 $

For the years ended December 31, 2018 and 2017, some abovementioned stock options issued are anti-dilutive, therefore they were not included in the EPS calculation.

(27) SUPPLEMENTAL CASH FLOW INFORMATION

• A. Investing activities with partial cash payments:

Investing activities with partial cash payments:
			Forthe years ended		December31,
			2018		2017
Purchase of property, plant and equipment		$	38,381	$	265,760
Add: Beginning balance of payable on
equipment (listed as “Other payables”)			54,326		89,009
Less: Ending balance of payable on
equipment (listed as “Other payables”)	(		41,417)	(	54,326)
Capitalisation of interest			-	(	10,964)
Cash paid for acquisition of property, plant
and equipment		$	51,290	$	289,479

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B. Investing activities with no cash flow effects:

Investing activities with no cash flow effects:
Prepayments for equipment reclassified to property, plant and equipment	Forthe years endedDecember31,
	2018 72,851 $	2017
		56,122 $

(28) CHANGES IN LIABILITIES FROM FINANCING ACTIVITIES

At January 1, 2018 Changes in cash flow from financing activities Impact of changes in foreign exchange rate At December 31, 2018	Short-term borrowings	Long-term borrowings	Guarantee deposits received	Liabilities from financing activities-gross
	374,713 $ 137,723) ( 3,700) ( 233,290 $	1,317,218 $ 109,757) ( 28,958) ( 1,178,503 $	1,712 $ 2) ( 2) ( 1,708 $	1,693,643 $ 247,482) ( 32,660) ( 1,413,501 $

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

• (3) Significant transactions and balances with related parties

Other expenses

Other expenses
Management service fees: －Ultimate parent company －Associate of ultimate parent company	Forthe years endedDecember31,
	2018 5,138 $ 2,115 7,253 $	2017
		5,439 $ 2,051
		7,490 $

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(4) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Share-based payments Post-employment benefits Termination benefits	Forthe years endedDecember31,
	2018 48,946 $ 2,794 581 1,746 54,067 $	2017
		54,722 $ 4,156 621 1,450
		60,949 $

8. PLEDGED ASSETS

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

Assets		December31,2018 29,270 $	December31,2017 Purpose of collateral 28,831 $ Customs duty and performance guarantee
Time deposits (Note)

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

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT

COMMITMENTS

• (1) As of December 31, 2018 and 2017, the Group’s unused letters of credit amounted to $3,571 and $4,952, respectively.

• (2) As of December 31, 2018 and 2017, the Group’s remaining balance due for construction in progress and prepayments for equipment was $102,016 and $132,783, 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 covering the 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. In addition, the Group entered into operating lease agreement for the office equipment and personal computer in 1~4 years. 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 39,871 and $22,276 (listed as “operating costs” and “operating expenses”) was recognised in profit or loss for the years ended December 31, 2018 and 2017, respectively. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

~55~

Within one year Later than five years Later than one year but not exceeding five years	December31,2018 27,704 $ 95,325 334,028 457,057 $	December31,2017
		23,577 $ 94,308 357,586
		475,471 $

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

SciAnda (Changshu) Pharmaceuticals, Ltd.	Nature Guarantee for financing amount	December31,2018 2,499,643 $	December31,2017
			2,543,275 $

As of December 31, 2018 and 2017, the actual amount drawn down for endorsements and guarantees to subsidiaries was $1,178,504 and $1,317,219, respectively.

10. SIGNIFICANT DISASTER LOSS: None.

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

12. OTHERS

(1) Capital management

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

• (2) Financial instruments

• A. Financial instruments

For details of the Group’s financial instruments by category, please refer to Notes 6 and 12(4) .

• B. Risk management policies

• (a)The Group’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.

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

• (c)Information about derivative financial instruments that are used to hedge financial risk are provided in Note 6(2).

• C. Significant financial risks and degrees of financial risks

• (a) Market risk

• I. Foreign exchange rate risk

  • (i) The Group operates internationally and is exposed to foreign exchange risk arising from

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the transations of the Company and its subsidiaries used in various functional currency, primarily with respect to USD. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities.

• (ii) To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Group are required to hedge their foreign exchange risk exposure using forward foreign exchange contracts. However, the Group does not adopt hedging accounting. Details of financial assets or liabilities at fair value through profit or loss are provided in Note 6(2).

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

fluctuations is as follows:
(Foreign currency functional currency) Financial assets Monetary items USD:NTD EUR:NTD CNY:NTD Financial liabilities Monetary items USD:NTD EUR:NTD CNY:NTD		December31,2018		Book value (NTD)
		Foreign currency amount (inthousands) 28,219 $ 50 102 3,764 84 505	Exchangerate 30.715 35.20 4.465 30.715 35.20 4.465
				866,747 $ 1,760 455 115,611 2,957 2,255

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(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 (inthousands) 24,138 $ 65 60 685 506	Exchangerate 29.76 35.57 4.574 29.76 4.574
				718,347 $ 2,312 274 20,386 2,314

• (iv)As of December 31, 2018 and 2017, if the NTD:USD exchange rate appreciates/depreciates by 5% with all other factors remaining constant, the Group’s net profit after tax for the years ended December 31, 2018 and 2017 would increase/decrease by $30,045 and $28,965, respectively. If the NTD:EUR and NTD:CNY exchange rate appreciates/depreciates by 5% with all other factors remaining constant, the Group’s net profit after tax for the years ended December 31, 2018 and 2017 is immaterial.

• (v)Total exchange gain (loss) including realised and unrealised arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2018 and 2017 amounted to $8,029 and ($45,595), respectively.

• II. Price risk

The Group’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss, financial assets at fair value through other comprehensive income and available-for-sale financial assets (listed as “ financial assets carried at cost - non-current” ). To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio and set stop-loss amounts for these instruments. The Group expects no significant market risk.

III. Cash flow and fair value interest rate risk

• (i) The Group’s main interest rate risk arises from short-term and long-term borrowings with variable rates and exposes the Group to cash flow interest rate risk. During the years ended December 31, 2018 and 2017, the Group’s borrowings at variable rate were denominated in USD and CNY.

• (ii) The Group’s borrowings are measured at amortised cost. The borrowings are periodically contractually repriced and to that extent are also exposed to the risk of future changes in market interest rates.

• (iii) If the borrowing interest rates had increased/decreased by 10% with all other variables

~58~

held constant, post-tax profit for the years ended December 31, 2018 and 2017 would have increased/decreased by $643 and $362, respectively. The main factor is that changes in interest expense result from floating rate borrowings.

(b) Credit risk

• I. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.

• II. The Group manages their credit risk taking into consideration the entire group’s concern. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored.

• III. The Group adopts the following assumption under IFRS 9: If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.

• IV. The Group manages its credit risk, whereby if the contract payments are past due over 180 days based on the terms, there has been impairment.

• V. The Group classifies customers’ accounts receivable in accordance with credit rating of customer and credit risk on trade. The Group applies the simplified approach using provision matrix to estimate expected credit loss, and use the forecastability to adjust historical and timely information to assess the default possibility of accounts receivable. Movements in relation to the group applying the simplified approach to provide loss allowance for accounts receivable are as follows:

receivable are as follows:
			For the year ended
			December31,2018
At January 1		$	130
Gain on reveral of expected credit losses	(		84)
Impact of foreign exchange rate	(		1)
At December 31		$	45

VI. Credit risk information for 2017 is provided in Note 12(4).

(c) Liquidity risk

• I. Cash flow forecasting is performed by the Group’s treasury department which monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet

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operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities.

• II. The Group has undrawn borrowing facilities amounting to $5,519,200 and $5,836,733 as of December 31, 2018 and 2017, respectively.

• III. The following table comprises the Group’s non-derivative financial liabilities and derivative financial liabilities with gross-amount settlement that are grouped by their maturity. Nonderivative financial liabilities are analysed from the balance sheet date to the contract maturity date, and derivative financial liabilities are analysed 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.
December31,2018 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings Guarantee deposits received Non-derivative financial liabilities: December31,2017 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings Guarantee deposits received Non-derivative financial liabilities:	Less than 1year 235,348 $ 1,148 89,393 347,319 1,204,844 - Less than 1year 384,670 $ 1,161 90,784 350,117 281,712 -	Between 1 and2years - $ - - - - 1,708 Between 1 and2years - $ - - - 1,122,058 1,712	Between 2 and 5 years - $ - - - - - Between 2 and 5 years - $ - - - - -	More than 5 years
				- $ - - - - - More than 5 years
				- $ - - - - -

(3) Fair value information

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

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

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset

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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. The fair value of the Group’s investment in equity investment without active market is included in Level 3.

• B. Financial instruments not measured at fair value

• The carrying amounts of cash and cash equivalents, financial assets at amortised cost - current, accounts receivable, other receivables, guarantee deposits paid, other financial assets - noncurrent, short-term borrowings, notes payable, accounts payable, other payable, long-term borrowings (including current portion) and guarantee deposits received are approximate to their fair values.

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

December 31, 2017: None. December31,2018 Assets: Recurring fair value measurements Financial assets at fair value through profit or loss Derivative instruments Financial assets at fair value through other comprehensive income Equity securities	Level 1 - $ 268,071 $	Level 2 409 $ - $	Level3 - $ 200,046 $	Total
				409 $
				468,117 $

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

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

Listed shares Market quoted price Closing price

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

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

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

• E. Foresee Pharmaceuticals Co., Ltd. has been listed on the Taipei Exchange from June, 2018, therefore, the Group transferred the fair value from Level 2 to Level 1 at the end of the month when the event occurred. For the year ended December 31, 2017, there was no transfer between Level 1 and Level 2.

• F. The following chart is the movement of Level 3 for the years ended December 31, 2018 and 2017:

			Forthe years endedDecember31,	Forthe years endedDecember31,
			2018	2017
			Equityinstrument	Equityinstrument
At January 1		$	-	$	-
Effect on retrospective application and
restatement			242,355		-
Balance after restatement on January 1			242,355		-
Loss recognised in other comprehensive
income	(		42,309)		-
At December 31		$	200,046	$	-

• G. The Group’s valuation procedures for fair value measurements is categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently assess to make any other necessary adjustments to the fair value.

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

Significant Range Relationship Fair value at Valuation unobservable (weighted of inputs to December 31, 2018 technique input average) fair value

Non-derivative equity instrument: － Unlisted� shares $ 200,046 Net asset Not applicable The higher the value net asset value, the higher the fair value

• I. The Group has carefully assessed the valuation models and assumptions used to measure fair value. However, use of different valuation models or assumptions may result in different measurement. If the net assets value increased or decreased by 1% for Level 3, however, other comprehensive income for the year ended December 31, 2018 is immaterial.

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(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

• A. Summary of significant accounting policies adopted in 2017:

• (a) 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. They are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

• (b) Available for sale financial assets

  • i. They are non-derivatives that are either designated in this category or not classified in any of the other categories.

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

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

• (c) Impairment of financial assets

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

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

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

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

  • (iii) 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;

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• (iv) 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;

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

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

• (i) Financial assets carried at cost

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

• (ii) Financial assets at amortised cost

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

• (d) Financial liabilities at fair value through profit or loss

• i. 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 selling in the short-term. Derivatives are also categorised as financial assets 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:

  • (i) Hybrid (combined) contracts; or

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

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

  - ii. 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.

• B. The reconciliations of carrying amount of financial assets transferred from December 31, 2017, IAS 39, to January 1, 2018, IFRS 9, were as follows:

• Under IFRS 9, financial assets carried at cost amounting to $391,097 were not held for the purpose of trading, and the Group has made an irrevocable election to reclassify as “Financial assets at fair value though other comprehensive income’’ amounting to $539,572, and increased other equity interest in the amount of $148,475.

• C. The significant accounts as of and for the year ended December 31, 2017 are as follows:

• (a) Financial assets carried at cost - non-current

Financial assets carried at cost - non-current
	December31,2017
Unlisted shares
Tanvex Biologics, Inc.	$ 167,673
SYNGEN INC.	4,620
Foresee Pharmaceuticals Co., Ltd.	223,424
	395,717
Less: Accumulated impairment	( 4,620)
	$ 391,097

• i. The Group classified some of its equity investments as available-for-sale financial assets, based on its intention. However, as these stocks are not traded in an active market, and there is no sufficient information of similar companies in the industry, fair value of the investments cannot be measured reliably. Accordingly, the Group classified those stocks as “financial assets carried at cost”.

• ii. As of December 31, 2017, no financial assets carried at cost held by the Group were pledged to others.

• (b) Financial liabilities at fair value through profit or loss

pledged to others. Financial liabilities at fair value through profit or loss
Items Current items: Financial assets held for trading Non-hedging derivatives	December31,2017
	- $

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

• ii. The Group entered into forward foreign contracts to hedge exchange rate risk of operating

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activities. However, these forward foreign exchange contracts are not accounted for under hedge accounting.

  - iii. As of December 31, 2017 no financial assets at fair value through profit or loss held by the Group were pledged to others.

• D. Credit risk information as of December 31, 2017 is as follows:

• (a) As of December 31, 2017, the Group had no accounts receivable classified as “past due but not impaired”.

• (b) Movements on the provision for impairment of accounts receivable are as follows:

not impaired”. Movements on the provision for impairment of accounts	receivable are as follow
At January 1 Reversal for impairment (Note) Effects of exchange rate At December 31 Note: Listed as "Other income".	For the year ended December31,2017
	Group provision
	647 $ 516) ( 1) ( 130 $

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

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

• (e) For the year ended December 31, 2017, no credit limits were exceeded during the reporting periods.

(5) Effects of initial application of IFRS 15 and information on application of IAS 11 and IAS 18 in 2017

• A. The significant accounting policies applied on revenue recognition for 2017 are set out below.

• (a) Sales of goods

The Group manufactures and sells API and intermediates, etc. Revenue is measured at the fair value of the consideration received or receivable taking into account value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods is recognised when

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the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

• (b) Sales of services

  • The Group provides technology development and research and development consulting. 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.

• B. The revenue recognised by using above accounting policies for the year ended December 31, 2017 are as follows:

2017 are as follows:
Sales revenue Less: Sales returns Net sales revenue Technical services Other operating revenue	For the year ended December31,2017
	3,436,755 $ 224,923) ( 3,211,832 164,596 140,053 3,516,481 $

• C. If the Group continues adopting above accounting policies for the year ended December 31, 2018, the effect and description on current balance sheet are as follows. The effect on the statement of comprehensive income is immaterial.

Under IFRS 15, liabilities in relation to customer contracts are recognised as contract liabilities, but were previously presented as advance sales receipts in the balance sheet. As of December 31, 2018, the balance amounted to $30,617.

13. SUPPLEMENTARY DISCLOSURES

According to the current regulatory requirements, the Group is only required to disclose the information for the year ended December 31, 2018.

(1) Significant transactions information

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

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

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

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• D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital: Please refer to table 4.

• 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 5.

• H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please refer to table 6.

• I. Trading in derivative instruments undertaken during the reporting periods: Please refer to Note 6(2).

• J. Significant inter-company transactions during the reporting periods: Please refer to table 7.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 8.

• (3) Information on investments in Mainland China

• A. Basic information: Please refer to table 9.

• B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area: Please refer to table 2 and 5.

14. SEGMENT INFORMATION

(1) General information

The management of the Group has identified the operating segments based on how the Company’s Chief Operating Decision-Maker regularly reviews information in order to make decisions. The Chief Operating Decision-Maker manages the Group’s business from geographical and functional perspectives. Geographically, the Group focuses on its sales business in the U.S., Europe and Asia. In addition, the Group categorized its business units into manufacture, sales, research and development and investment management functions, and combines its segments that meet the disclosure threshold as “Others”.

(2) Measurement of segment information

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

(3) Segment information

The segment information provided to the Chief Operating Decision-Maker for the reportable segments is as follows:

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For the year ended December 31, 2018

Forthe yearendedDecember31,2018	Forthe yearendedDecember31,2018	Forthe yearendedDecember31,2018	8
ScinoPharm SciAnda (Changshu) Taiwan,Ltd. PharmaceuticalsLtd. Others Total Segment revenue 3,470,109 $ 259,005 $ 34,714 $ 3,763,828 $ Revenue from internal customers 10,737 201,469 27,359 239,565 Revenue from external customers 3,459,372 57,536 7,355 3,524,263 Interest income 20,677 5,675 6,882 33,234 Depreciation and amortisation 289,601 116,217 3 405,821 Interest expense 4,456 75,713 - 80,169 Income (loss) from segment before income tax 773,883 276,395) ( 12,928 510,416 Segment assets 10,429,274 1,976,417 445,674 12,851,365 Other acquisition of non-current assets 104,389 9,749 - 114,138 Segment liabilities 635,790 1,612,949 2,084 2,250,823 ScinoPharm SciAnda (Changshu) Taiwan,Ltd. PharmaceuticalsLtd. Others Total Segment revenue 3,449,175 $ 309,288 $ 13,425 $ 3,771,888 $ Revenue from internal customers 2,878 241,727 10,802 255,407 Revenue from external customers 3,446,297 67,561 2,623 3,516,481 Interest income 18,612 235 6,236 25,083 Depreciation and amortisation 334,045 98,241 253 432,539 Interest expense 22 76,609 - 76,631 Income (loss) from segment before income tax 805,257 331,464) ( 4,298) ( 469,495 Segment assets 10,320,695 2,267,126 216,681 12,804,502 Other acquisition of non-current assets 261,160 115,084 - 376,244 Segment liabilities 567,588 2,006,197 722 2,574,507 Forthe yearendedDecember31,2017		ScinoPharm SciAnda (Changshu) Taiwan,Ltd. PharmaceuticalsLtd. Others Total 3,470,109 $ 259,005 $ 34,714 $ 3,763,828 $ 10,737 201,469 27,359 239,565 3,459,372 57,536 7,355 3,524,263 20,677 5,675 6,882 33,234 289,601 116,217 3 405,821 4,456 75,713 - 80,169 773,883 276,395) ( 12,928 510,416 10,429,274 1,976,417 445,674 12,851,365 104,389 9,749 - 114,138 635,790 1,612,949 2,084 2,250,823 Forthe yearendedDecember31,2017	Total
			Total 3,771,888 $ 255,407 3,516,481 25,083 432,539 76,631 469,495 12,804,502 376,244 2,574,507

(4) Reconciliation for segment

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

For the years ended December 31,

			2018				2017
Reportable segments profit before
income tax		$		497,488		$		473,793
Other segments income (loss) before
income tax				12,928	(			4,298)
Internal segments transaction elimination	(			19,875)				5,807
Profit before income tax		$		490,541		$		475,302

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• B. The amount of total assets provided to the Chief Operating Decision-Maker adopts the same measurement for assets in the Group's financial statements. A reconciliation of assets of reportable segments and total assets is as follows:

			December31,2018			December31,2017
Assets of reportable segments		$	12,405,691		$	12,587,821
Assets of other operating segments			445,674			216,681
Internal segment transaction elimination	(		288,037)	(		103,113)
Total assets		$	12,563,328		$	12,701,389

• C. The amount of total liabilities provided to the Chief Operating Decision-Maker adopts the same measurement for liabilities in the Group's financial statements. A reconciliation of liabilities of reportable segments and total liabilities is as follows:

			December31,2018			December31,2017
Liabilities of reportable segments		$	2,248,739		$	2,573,785
Liabilities of other operating segments			2,084			722
Internal segment transaction elimination	(		226,527)	(		290,343)
Total liabilities		$	2,024,296		$	2,284,164

(5) Information on product and service

The Group is engaged in the research and development and manufacture of API, as well as the provision of related consulting and technical services. The reconciliations of total segment and operating revenue were as follows:

operating revenue were as follows:
Revenue from sales of products Revenue from technical services Others	Forthe years endedDecember31,
	2018 3,332,373 $ 152,220 39,670 3,524,263 $	2017
		3,211,832 $ 164,596 140,053
		3,516,481 $

(6) Geographical information

Geographical information for the years ended December 31, 2018 and 2017 is as follows:

Taiwan USA India Asia Europe Others	Non-current Revenue assets 78,775 $ 3,488,914 $ 1,488,676 - 348,813 - 367,880 1,470,872 1,201,155 - 38,964 - 3,524,263 $ 4,959,786 $ Forthe yearendedDecember31,2018	Non-current Revenue assets 78,775 $ 3,488,914 $ 1,488,676 - 348,813 - 367,880 1,470,872 1,201,155 - 38,964 - 3,524,263 $ 4,959,786 $ Forthe yearendedDecember31,2018	Forthe yearendedDecember31,2017	Forthe yearendedDecember31,2017
	Revenue 78,775 $ 1,488,676 348,813 367,880 1,201,155 38,964 3,524,263 $		Revenue 102,032 $ 1,343,964 388,386 521,445 1,126,095 34,559 3,516,481 $	Non-current assets
				3,686,153 $ - - 1,615,432 - -
				5,301,585 $

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(7) Major customer information

Major customer information of the Group for the years ended December 31, 2018 and 2017 is as follows:

follows:
A B C	Revenue Segment 761,592 $ ScinoPharm Tawian, Ltd. 482,593 ScinoPharm Tawian, Ltd. 381,600 ScinoPharm Tawian, Ltd. 1,625,785 $ Forthe yearendedDecember31,2018	Forthe yearendedDecember31,2017
	Revenue 761,592 $ 482,593 381,600 1,625,785 $	Revenue 1,008,847 $ 143,772 143,454 1,296,073 $	Segment
			ScinoPharm Tawian, Ltd. ScinoPharm Tawian, Ltd. ScinoPharm Tawian, Ltd.

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Table 1

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

Loans to others

For the year ended December 31, 2018

Number	Name	Name of counterparty	Account	Related parties	Maximum balance	Ending balance	Actual amount drawndown	Interest rate	Nature of financial activity (Note1)	Total transaction amount	Reason for financing	Allowance for doubtful accounts	Assets pledged	Assets pledged	Loan limit per entity (Note2)	Maximum amount available for loan (Note2)	Footnote
													Item	Value
1	SciAnda (Kunshan) Biochemical Technology, Ltd.	SciAnda (Changshu) Pharmaceuticals, Ltd.	Other receivables	Y	327,272 $	178,615 $	178,615 $	2.2%~3.0%	2	- $	Additional operating capital and loan repayment	- $	－	- $	422,425 $	422,425 $	－

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 1:4.465).

Table 1, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Expressed in thousands of NTD

Provision of endorsements and guarantees to others

For the year ended December 31, 2018

Table 2

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, 2018	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	10,539,032 $	2,593,428 $	2,499,643 $	1,178,504 $	- $	23.72%	10,539,032 $	Y	N	Y	－

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

• 1.A company in which the Company directly and indirectly holds 100% of the voting shares.

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

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

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

Note 3: The numbers in the table that involves foreign currencies are expressed in New Taiwan Dollars according to the exchange rate posted on the date of the consolidated financial statements (CNY:NTD 1:4.465 ；USD:NTD 1:30.715).

Table 2, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) December 31, 2018

			December 31,	2018
Table 3 Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account		As of December31,2018		Fairvalue Footnote Expressed in thousands of NTD
				Number of shares	Bookvalue	Ownership (%)	Fairvalue
ScinoPharm Taiwan, Ltd. SciAnda (Kunshan) Biochemical Technology, Ltd.	Stocks: Tanvex Biologics, Inc. Foresee Pharmaceuticals Co., Ltd. SYNGEN, INC. Structured Products: Fubon Bank (China) Co., Ltd. Structured Products	The Company is a director of Tanvex Biologics, Inc. － － －	Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through other comprehensive income - non-current Financial assets at fair value through profit or loss - non-current Financial assets at amortised cost - current	28,800,000 4,711,269 245,000 -	200,046 $ 268,071 - 178,615	16.84% 5.34% 7.40% -	200,046 $ 268,071 - -	－ － － －

Table 3, Page 1

Table 4

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company's paid-in-capital For the year ended December 31, 2018

Investor	Type of securities	General ledger account	Name of the counterparty	Relationship	Beginnin	gbalance	A	ddition		Dispos	al		Other increa	se(decrease)	Endingb	alance
					Number of shares (in thousands)	Amount	Number of shares (in thousands)	Amount	Number of shares (in thousands)	Saleprice	Bookvalue	Gain on disposal	Number of shares (in thousands)	Amount	Number of shares (in thousands)	Amount
ScinoPharm Taiwan, Ltd. SPT International, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda (Kunshan) Biochemical Technology, Ltd.	Stocks: SPT International, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. Structured Products: Industrial and Commercial Bank of China, E- Principal- Guaranteed Products Fubon Bank(China) Co.,Ltd. Structured Products	Investment accounted for under the equity method Investment accounted for under the equity method Financial assets at amortised cost - current Financial assets at amortised cost - current	Cash capital increase Cash capital increase － －	－ － － －	66,525 - - -	$ 664,038 260,930 - -	14,000 - - -	$ 430,010 430,010 411,717 578,845	- - - -	$ - - 416,116 403,974	$ - - 411,717) ( 400,230) (	$ - - 4,399 3,744	- - - -	348,596) ($ 327,472) ( - -	80,525 - - -	$ 745,452 363,468 - 178,615

Table 4, Page 1

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more For the year ended December 31, 2018

Table 5

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)	193,686 $ 193,686) (	22% (75%)	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	$ - -	－ －	28,821) ($ 28,821	(25%) 77%	－ －

Table 5, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Table 6

Expressed in thousands of NTD

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

December 31, 2018

Purchaser/seller	Counterparty	Relationship with the counterparty	Balance as at December31,2018	Balance as at December31,2018	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date	Allowance for doubtful accounts
			Items	Amount		Amount	Action taken
SciAnda (Kunshan) Biochemical Technology, Ltd.	SciAnda (Changshu) Pharmaceuticals, Ltd.	An investee company of SPT International, Ltd. accounted for under the equity method	Other receivables	178,756 $	－	$ -	－	$ -	$ -

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, 2018 (CNY:NTD 1:4.465).

Table 6, Page 1

Table 7

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

- Significant inter company transactions during the reporting period

For the year ended December 31, 2018

Number (Note 2)	Companyname	Counterparty	Relationship (Note3)		Transactions	Transactions
				General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets(Note 4)
0 0 0 1	ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. ScinoPharm Taiwan, Ltd. SciAnda (Kunshan) Biochemical Technology, Ltd.	SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd. SciAnda (Changshu) Pharmaceuticals, Ltd.	1 1 1 3	Purchases Accounts payable Endorsements and guarantees Other receivables	193,686 $ 28,821 2,499,643 178,756	Closes its accounts 90 days from the end of each month after acceptance － － －	5% － 20% 1%

• 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 1:4.465 ； USD:NTD 1:30.715).

Table 7, Page 1

ScinoPharm Taiwan, Ltd. and Subsidiaries

Table 8

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, 2018

Investor	Investee	Location	Main business activities	Initial investment amount	Initial investment amount	Shares held	as at December 31,2018	as at December 31,2018	Net profit (loss) of the investee for the year ended December 31,2018	Investment income (loss) recognised by the Company for the year ended December 31,2018	Footnote
				Balance as at December 31,2018	Balance as at December 31,2017	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	2,473,314 $ -	2,043,304 $ -	80,524,644 2	100.00 100.00	745,452 $ 96	286,374) ($ 16	306,248) ($ 16	Subsidiary Subsidiary

Note :Initial investment amount in the table that involves foreign currencies are expressed in New Taiwan Dollars according to exchange rate posted on the date of consolidated financial statements (USD: NTD 1:30.715).

Table 8, Page 1

Information on investments in Mainland China － Basic information

Expressed in thousands of NTD

ScinoPharm Taiwan, Ltd. and Subsidiaries

For the year ended December 31, 2018

Table 9

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, 2018	Amount remitt Mainla Amount r to Taiwan fo Decemb	ed from Taiwan to nd China/ emitted back r the year ended er 31,2018	Accumulated amount of remittance from Taiwan to Mainland China as of December 31,2018	Net income of investee for the year ended December 31, 2018	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31, 2018 （Note 2）	Book value of investments in Mainland China as of December 31, 2018	Accumulated amount of investment income remitted back to Taiwan as of December 31, 2018	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 31,2018	122,860 $ （Note 1） 2,288,268 （Note 1） 36,858 （Note 1） Investment amount approved by the Investment Commission of the Ministry of Economic Affairs(MOEA)		114,396 $ - $ 1,858,258 430,010 36,858 - Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA(Note 3)		- $ - -	114,396 $ 2,288,268 36,858	10,677 $ 295,758) ( 1,093) (	100% 100% 100%	10,677 $ 295,758) ( 1,093) (	422,425 $ 363,468 17,301	- $ - -	Subsidary Subsidary Subsidary
ScinoPharm Taiwan, Ltd.	$ 2,477,119	2,477,119 $		6,323,419 $

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, 2018 was based on audited financial statements of investee companies as of and for the year ended December 31, 2018. 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 1:30.715).

Table 9, Page 1