0s3.hicloud.net.tw/aei/官網更新_aaa/20200109... · COMPANY PROFILE II. COMPANY PROFIL 1. Established on: 7 th May 1992 2. Company History: Year Milestones 1990 Dec. MedFirst Medical

- 0 -

Spokesperson

Name/Wei, Tzu-Wen

Title/Deputy General Manager

Tel/(03)397-0761

Email/[email protected]

Deputy Spokesperson

Name/Wang, Ting-Jui

Title/Assistant Vice President, Shopping Mall Operations Division

Tel/(03)397-0761

Email/[email protected]

Headquarters, branch office, factory, addresses and telephone numbers

Headquarters of the Group

Address/1F & 2F, No. 94, Fuxing 1st Rd., Guishan Dist., Taoyuan City 33375,

Taiwan

Tel/(03)397-0761

Branch office：None

Stock Transfer Agency

Name / Service Agency, Fubon Securities Co., Ltd

Address/2F, No. 17, Xuchang St., Zhongzheng Dist., Taipei City 10047, Taiwan

Website /www.fubon.com

Tel/ (02)2361-1300

CPA and CPA Firm for recent financial statement

CPA/Hsieh, Ming-Chung, Kuo, Nai-Hua

CPA Firm/Deloitte Touche Tohmatsu CPA Firm

Address/20F., No.100, Songren Rd., Sinyi Dist., Taipei City 11073, Taiwan

Websit/www.deloitte.com.tw

Tel/ (02) 2725-9988

Name of the overseas trading office of listed valuable securities and

the way to inquire into information of valuable overseas securities:

None

Website

www.medfirst.com.tw

mailto:[email protected]

Table of Contents I. A LETTER TO THE SHAREHOLDERS .............................................................................. 1

II. COMPANY PROFILE ......................................................................................................... 4

I. Established on ....................................................................................................... 4

II. Company History: ................................................................................................. 4

III. CORPORATE GOVERNANCE .......................................................................................... 6

I. Organization ......................................................................................................... 6

II. Details of Directors, Supervisors, General Manager, Deputy General Managers,

Assistant Vice Presidents, and Heads of Departments and Branches ....................... 9

III. Remuneration of Directors, Supervisors, General Manager, and Deputy General Manager 17

IV. Implementation of Corporate Governance ......................................................... 22

Ⅴ. Information on CPA Professional Fees ................................................................ 62

Ⅵ. Information on the Replacement of the CPA ....................................................... 64

Ⅶ. The Company’s Chairman, General Manager, or Any Managerial Office r in

Charge of Finance or Accounting Matters Who Has Held a Position in the

Accounting Firm of the CPA or an Affiliated Enterprise in the Most Recent

Fiscal Year, Where His or Her Name, Title, and Duration of His or Her Service

at the Accounting Firm of the CPA or at the Affiliated Enterprise Should Be

Disclosed ......................................................................................................... 65

Ⅷ. Transfer of Equity Interests and/or Pledge of or Change to Equity Interests by a

Director, Supervisor, Managerial Officer, or Shareholder with a Stake of More

Than 10 Percent during the Previous Fiscal Year or during the Current Fiscal

Year up to the Date of Printing of the Annual Report ....................................... 65

Ⅸ. Information Regarding the Spouse or Relatives within Two Degrees of Kinship

and Relationship between Any of the Top Ten Shareholders ............................. 67

Ⅹ. The Total Number of Shares and Total Equity Stake Held in Any Single Enterprise

by the Company, Its Directors, Supervisors, and Managers, and Any Other

Companies Controlled Either Directly or Indirectly by the Company ................... 69

Ⅳ. INFORMATION ON ACTIVITIES TO RAISE CAPITAL ...................................................... 70

Ⅰ. Issuance of Capital Stock and Stock Shares .................................................................. 70

(1) Sources of Share Capital.............................................................................................. 70

(2) Composition of Shareholders ...................................................................................... 71

(3) Distribution Profile of Share Ownership .................................................................. 71

(4) List of Key Shareholders ............................................................................................. 72

(5) Net Worth, Earnings, Dividends, and Market Price per Share for the Previous

Two Years ................................................................................................ ………72

(6) Dividend Policy and Execution of the

Company ………………………………………………………. ................................ 73

(7) Effects of the Stock Grants Proposed by the Shareholders at This Time on the

Company’s Business Performance and Surplus of Each Share .................................... 74

(8) Remuneration to Employees, Directors, and Supervisors ...................................... 74

(9) Situations of Repurchasing the Company’s Shares ................................................. 75

Ⅱ. Circumstances for Handling Corporate Bonds .............................................................. 76

Ⅲ. Issuance of Preference Shares ......................................................................................... 77

Ⅳ. Issuance of Global Depositary Receipts (GDR) ........................................................... 77

Ⅴ.Employee Subscription Right Vouchers .......................................................................... 77

Ⅵ. Management of Restricted Stock Awards ....................................................................... 77

Ⅶ.Circumstances of Handling New Issue of Shares due to Merger or Assignee of

Other Corporate Stocks ...................................................................................................... 77

Ⅷ. Circumstances of the Execution of the Funds Application Plan ................................ 77

Ⅴ. OVERVIEW OF OPERATIONS ..................................................................................................... 78

Ⅰ. Business Content ................................................................................................................ 78

Ⅱ. Market and Sales Overview ............................................................................................. 94

Ⅲ. The Number of Employees Employed for the Two (2) Previous Fiscal Years and during the

Current Fiscal Year as of Publication of the Annual Report, Their Average Years of Service,

Average Age, and Education Level (Including the Percentage of Employees at Each Level)

Ⅳ. Information of Environment-oriented Expenditures .................................................. 105

Ⅴ. Labor/Management Relations ........................................................................................ 105

Ⅵ. Important Agreements ..................................................................................................... 107

Ⅵ. FINANCIAL STATUS ..................................................................................................................... 108

I. Condensed Balance Sheet and Statement of Comprehensive Income Information

for the Five (5) Most Recent Fiscal Years and the Names and Audit Opinions of

the Attesting CPA……. ................................................................................................. 108

II. Financial Summary of the Past Five Years ................................................................... 112

III. Supervisors' or Audit Committee's Report on Financial Statements for the Previous Fiscal

Year ...................................................................................................................................... 115

IV. The Financial Statement for the Most Recent Fiscal Year, Including the Auditor's

Report Prepared by an Accountant and the Two-year Comparative Balance Sheet,

the Statement of Comprehensive Income, the Statement of Changes in Equity, the

Cash Flow Chart, and Any Related Footnotes or Attachments ................................ 115

V. Recent Financial Statements and Reports of Independent Accountants of the Parent

Company ............................................................................................................................ 115

VI. If the Company or Its Affiliated Companies Have Experienced Financial

Difficulties in the Previous Fiscal Year or during the Current Fiscal Year as of

the Publication of the Annual Report, the Annual Report Shall Explain How Any

Difficulties Will Affect the Company's Financial Situation .................................... 115

Ⅶ. A REVIEW AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND

OPERATIONAL RESULTS, AND A LIST OF RISKS .................................................................. 116

I. Analysis of Financial Status ........................................................................................... 116

Ⅱ. Financial Performance .................................................................................................... 118

Ⅲ. Cash Flow ......................................................................................................................... 120

Ⅳ. Effect upon Financial Operations of Any Major Capital Expenditures during the

Previous Fiscal Year ........................................................................................................ 120

Ⅴ. Investment Policies, Main Reasons for Investment Gains or Losses, and Related

Counter-Measures and Investment Plan for Next Year……………. .................... 121

Ⅵ. Risk Management Assessment during the Previous Fiscal Year or during the

Current Fiscal Year as of the Publication of the Annual Report ............................... 123

Ⅶ. Other Important Matters ................................................................................................. 126

Ⅷ. SPECIAL EVENTS .......................................................................................................................... 127

Ⅰ.Relevant Information on Affiliate Enterprises ............................................................. 127

Ⅱ. The Handling Situation of Private Securities as of the Publication of the Latest

Annual Report ................................................................................................................... 132

Ⅲ. The Company’s Stock Held or Disposed of by Subsidiaries as of the Publication of

the Latest Annual Report ................................................................................................. 132

Ⅳ. Necessary Additional Information ................................................................................ 132

Ⅴ. As of the Publication of the Latest Annual Report, the Matters Prescribed in

Article 36, Paragraph 3, Item 2 of the Securities Exchange Act That Have a

Significant Impact on Shareholder’s Equity or Value of Securities ....................... 133

I

Letter to

Shareholders

I. Letter to Shareholders

In retrospect of developments in Taiwan over the past year, economic growth remained stable,

with the annual growth rate being maintained at more than 3.0% during the first half of 2018.

However, the economic growth in the second half of 2018 slowed down and experienced a sharp

downward turn to around 2%. Therefore, the growth rate of GDP in 2018 reached 1.69%, as

announced by the Directorate General of Budget, Accounting, and Statistics of the Executive Yuan.

However, the economic growth rate (GDP) of 2019 is estimated to drop by 2.85%, while consumer

spending will reveal positive growth, benefited from the impact of tax reform and the salary policy.

As of the end of 2018, MedFirst had established as many as 255 stores in Taiwan and mainland

China. Overall, the annual combined revenue should reach NT$ 4.6 billion, a new historical high.

Of that, the net profit after tax is NT$ 112 million, , and the gross profit remained stable at 31%.

In view of the prospects for 2019, since the aging population has increased significantly across

the Strait, MedFirst will not only make efforts toward the continuous growth of the silver-haired

market, but also actively work with the government to promote long-term care for aging individuals

at their residences. MedFirst will use the community as its core, expanding its service scope to

homes and communities in order to strengthen the quality of life for both caregivers and

care-demanders. By the end of 2018, as many as 4,073 customer cases have received assistance for

their subsidy applications to purchase assistive devices, with the amount reaching NT$21,389,966.

In recent years, MedFirst has actively developed new retail sales and LINE Lohas activities,

adjusted the structure of products through big data analysis, and strengthened the sales of

professional products. Furthermore, it incorporates market demands to jointly develop high

value-added products with suppliers or foundries. MedFirst has also joined a community platform to

connect O2O membership services and activities, accumulate consumer activity data to grasp

customer consumption dynamics, increase product sales channels, and optimize customer services.

In view of the development of a long-term retail layout, MedFirst has invested about NT$1.2

billion to plan new smart logistics and warehousing, which is expected to be launched in the first

quarter of 2020. In addition to improving the efficiency and effectiveness of company logistics, the

plant will introduce energy-saving, environmental protection, automated applications, intelligent

1

I

Letter to

Shareholders

equipment, and operational capability of third-party logistics, in order to help launch growth

momentum for future operations.

This year, MedFirst will continue to optimize the physical and commodity structure of each

store, improve professional service quality, and adjust its store expansion strategy. Therefore, it

anticipates being able to establish long-term and stable links with community residents, rendering

Taiwan’s medical access with better service quality.

I. Operating results in 2018

1. Implementation achievement of operating plan: Unit: NT$ thousands;%

Item(s)/Year 2018 2017 Differences Percentage

Differences %

Operating revenue 4,632,643 4,324,407 308,236 7.13%

Gross profit 1,438,914 1,306,766 132,148 10.11%

Operating income 152,202 113,656 38,546 33.91%

Non-operating revenue

and expenses -3,993 -1,572 -2,421 -154.01%

Income before tax 148,209 112,084 36,125 32.23%

Net income 112,385 88,795 23,590 26.57%

Earnings per share 4.00 3.29 0.71 21.58%

2. Operating performance and profitability analysis

Item(s)/Year 2018 2017

Operatin

g p

erform

ance

Accounts receivable turnover (times) 38.77 40.44

Average collection days (days) 9.41 9.02

Inventory turnover (times) 4.29 4.39

Average payables turnover (times) 3.23 3.37

Average inventory turnover days (days) 85.08 83.14

Real estate property, plant and equipment turnover (times) 3.58 4.42

Total assets turnover (times) 1.54 1.66

Pro

fitability

Return on total assets (%) 3.96 3.77

Return on shareholders’ equity (%) 12.57 11.59

Pre-tax income-to-capital ratio (%) 52.48 39.69

Net income-to-sales ratio (%) 2.43 2.05

Earnings per share (NT$) 4.00 3.29

1. Financial receipts and expenditures

The inflow of net cash in 2018 with annual operation activities was NT$330,221,000; the

outflow of net cash with investment activities was NT$ 139,912,000; and the net outflow

of cash with fund-raising activities was NT$ 87,359,000, totaling an inflow of net cash

2

I

Letter to

Shareholders

incurred as NT$101,487,000 in 2018. Looking toward the future, new stores to be

established through expansion are expected to generate significant revenue growth.

2. Budget Implementation Status

Since the company did not disclose its financial forecast for 2018, the status of budget

implementation does not need to be revealed.

II. Business plan outline for 2019

1. Launch Big Data analytics in healthcare and integrate new retail services

2. Two self-shopping methods and the cooperation of mergers and acquisitions to speed

up the expansion path.

3. The construction of an intelligent logistics center is the logistical foundation for

developing channels.

Finally, thank you for attending and offering your advice, and we hope that everyone can continue

supporting and encouraging our company.

Best wishes to all our shareholders!

MedFirst Healthcare Services, Inc.

Chairman: Chen, Li-Ju

General Manager: Tsai, Te-Chung

3

II COMPANY

PROFILE

II. COMPANY PROFIL

1. Established on: 7th

May 1992

2. Company History: Year Milestones

1990 Dec. MedFirst Medical Devices Enterprise was founded, and the first medical devices retail

store was established

1992 May Founded MedFirst Co., Ltd with NT$5,000,000 capital

1998 Jan. The company name was changed to MedFirst Healthcare Services, Inc.

Jan. The 10th MedFirst retail store was opened

Jan. The commercial automation system and 24-hour customer service hotline were

established

Jul. Capital increased by NT$20,000,000, with total capital reaching NT$25,000,000

1999 Oct. The 20th MedFirst retail store was opened

2000 Dec. Capital increased by NT$30,000,000, with total capital reaching NT$55,000,000

2002 Aug. Obtained ISO9001 certification

Oct. The 50th MedFirst retail store was opened

Nov. MedFirst developed the shopping mall turnkey business model

2003 Jan. The customer relationship management (CRM) system was established

Nov. Capital increased by NT$25,000,000, with total capital reaching NT$80,000,000

2005 Apr. The 100th MedFirst retail store was opened

Dec. The Company was awarded the “Franchise Headquarter Survey Excellence Award”

from the Department of Commerce under the Ministry of Economic Affairs

2006 Jul. Obtained Good Service Practice (GSP) certification

Dec. Awarded the Top GSP Benchmark Enterprise in Taiwan

Dec. Pioneered the industry’s 7-day goods return service

Dec. Developed into the mainland China market and expanded the extensive service

network throughout the Chinese world

Dec. Capital increased by NT$20,000,000, with total capital reaching NT$100,000,000

2008 Nov. Awarded the Outstanding Enterprise Award for the Three-Year Program on the

Adoption of Digital Learning by Franchises

2009 Jan. Capital increased by NT$28,297,000 with a NT$21,703 capital surplus by earnings,

and total capital reaching NT$150,000,000

Dec. Launched and sold products under the MedFirst brand for the first time

2010 Feb. Capital increased by NT$7,016,000, creating a capital surplus by earnings, with total

capital reaching NT$157,016,000

Jun. The 150th MedFirst retail store was opened

Aug. Awarded the Taiwan Superior Brand Award by the Department of Commerce under

the Ministry of Economic Affairs

Sep. Capital increased by NT$3,984,000, creating a capital surplus by earnings, with total


2011 Jan. Capital increased by NT$34,000,000, with total capital reaching NT$195,000,000

Aug. Capital increased by NT$11,700,000, creating a capital surplus by earnings, with total


Dec. Awarded the Taiwan Superior Commercial Service Brand Award by the Department

of Commerce under the Ministry of Economic Affairs

The 160th MedFirst retail store was opened

4

II COMPANY

PROFILE

Year Milestones

2012 Jan. Invested in and constructed the MedFirst Logistics Centre

May Applied for public offering

Jun. Awarded the Silver Award of the Taiwan Service Industry Survey

Aug. Capital increased by NT$16,000,000, creating a capital surplus by earnings, with total


Nov. Awarded the Good Service Practice (GSP) Certified Outstanding Enterprise Award

Dec. MedFirst Air Bed obtained the 2012 Symbol of National Quality (SNQ) certification,

and was awarded the Bronze Medal in the health care equipment/medical equipment

category of the 2012 National Biotechnology Medical Quality Awards

Dec. Officially listed on the emerging stock board on December 21, 2012

2013 Jan. Launched the MedFirst online shopping website

Mar. Officially opened the MedFirst Logistics Center

Jun. Awarded the Gold Award in the Taiwan Service Industry Survey

Sep. The 170th MedFirst retail store was opened

2014 Jan. Passed the Regulations Governing the Implementation of Good Service Practice

(GSP) Certification by the Ministry of Economic Affairs

Apr. Officially listed in the Over-the-Counter market on April 23, 2014

May Capital increased by NT$29,700,000, with total capital reaching NT$252,400,000

2015 Jan. Passed the Regulations Governing the Implementation of Good Service Practice

(GSP) Certification by the Ministry of Economic Affairs

Nov. Officially launched the MedFirst mobile application on November 12, 2015, thus

initiating its mobile commerce and online-to-offline (O2O) integrated services

Dec. LEAD Blood Pressure Monitor was awarded the 2015 Symbol of National Quality

(SNQ) certification

Dec. The 200th retail store opening milestone was reached in both Taiwan and mainland

China

2016 Jul. Awarded the Bronze Award in the Taiwan Service Industry Survey

2017 Feb. The 1st domestic unsecured corporate bond was issued at NT$300 million

Mar. Honor Yahoo! 2017 Golden Store Award and Good Shop

Mar. The 224th

retail store opening milestone was reached in both Taiwan and

mainland China

Mar. Capital increased by NT$30,000,000, with total capital reaching

NT$282,400,000

Apr. The Company’s governance appraisal had good results, ranking in the top 5%

Jun. Acquired ISO9001:2015 certificate

Dec. Best Store Manager of the Year 2017

Dec. Number of stores across the Taiwan Strait reached 243

2018 Jan. Recognized as a “Fine Company” by the Taiwan Federation

Mar. Honor Yahoo! 2018 Golden Store Award and Good Shop

Mar. TCFA 5th "2018 Service Angel Award"

Apr.

Aug.

The Company’s governance appraisal ranks in the top 5%

New Smart Logistics Center starts construction

Dec. Won the Best Store Manager of the Year 2018

Dec. Number of stores across the Taiwan Strait reached 255

2019 Apr.

Apr.

The Company’s governance appraisal ranks in the top 5%

The Intellectual Property Office of the Ministry of Economic Affairs officially

5

II COMPANY

PROFILE

Year Milestones

May

listed the MedFirst trademark as a famous trademark.

Beam raising of the New Smart Logistics Center

6

III CORPORATE

GOVERNANCE

III. CORPORATE GOVERNANCE

I.Organization：

(1) Organizational Chart

1. Organizational Chart

(2) Major Corporate Functions

Department Duties and functions

The Auditing

Office

Responsible for inspecting and evaluating the effectiveness of the Company’s

internal control, as well as drawing up and executing the annual audit plan and

converting it into an audit report, tracking anomalies, and providing

recommendations for improvement.

General Manager

Office

Manages the Company’s overall strategic goals, executes entire business operations and

supervises and coordinates every division and department.

Retail Operations

Division

Formulates and manages retail development strategies.

Responsible for guiding retail stores and coordinating retail operations, ensuring annual

business goals and target profit margins are met.

Shopping Mall

Operations

Division

Handles all shopping mall turnkey-related businesses and implements the co-development

and management of shopping malls.

Mainland China

Operations

Division

Develops, manages and executes business operations in mainland China.

The Shareholders’

Committee

The Board of

Directors

Chairman of

the Board

The Auditing Office

Retail O

peratio

ns

Div

ision

Sh

op

pin

g M

all

Op

eration

s

Div

ision

Main

land

Ch

ina

Op

eration

s

Div

ision

Main

land

Ch

ina

Op

eration

s

Div

ision

Fin

ancial

Man

agem

ent

Div

ision

General

Manager Office

Info

rmatio

n

Man

agem

ent

Div

ision

General

Manager

Op

eation

s

Man

agem

ent

Div

ision

En

gin

eering

Dep

armen

t

Hu

man

Reso

urce

Div

iosn

Audit Committee

Remuneration Committee

7

III CORPORATE

GOVERNANCE

Product Marketing

Division

Plans and executes product development, procurement and brand management

strategies.

Financial

Management

Division

Manages the Company’s overall financing, bank transactions, stock affairs, and short-term,

medium-term and long term financial planning

Handles various accounting and tax affairs and executes budget preparation

Information

Management

Division

Builds, maintains and promotes the planning of information systems and network,

front-stage and back-stage hardware equipment.

Analyzes data on business process reengineering and operations

Uses cloud computing service applications and information innovations and technology.

Operations

Management

Division

Coordinates the operations of the logistic center and monitors service quality

Human Resource

Division

Recruits personnel and manages termination of employees, education and developmental

training, relocation of employees, absenteeism, payroll and other administrative aspects of

human resources

Manages and maintains general affairs and assets

Engineering

Department

Coordinates the investigation and measurement of engineering projects and designs and

monitors construction quality.

Maintains and manages engineering equipment.

8

III CORPORATE

GOVERNANCE

II.Details of Directors, Supervisors, General Manager, Deputy General Manager, Assistant Vice

Presidents, Heads of Departments and Branches (1) Directors and Supervisors:

1.Details of Directors and Supervisors

Stock

(shares)%

Stock

(shares)%

Stock

(shares)%

Stock

(shares)% Title Name Relation

Chairman Taiwan Chen, Li-Ju Female106/

6/143

100/

6/291,832,274 6.49% 1,792,274 6.35% 1,617,884 5.73% - -

Master of Business

Administration,

Yuan Ze University

Master of

Entrepreneurship

Management,

National Cheng Chi

University

<Note 1>

Director

and

General

Manager

Tsai,

Te-

Chung

Spouse

Director

Corporate shareholder Taiwan

Lucktech

Investment

Limited

-106/

6/143

100/

6/299,252,238 32.76% 9,252,238 32.76% - - - - - - - - -

Director

Corporate

representativeTaiwan Tsai, Te-Chung Male

106/

6/143

100/

6/291,657,884 5.87% 1,617,884 5.73% 1,792,274 6.35% - -

Graduate School of

Marketing and

Distribution

Management,

National Kaohsiung

First University of

Science and

Technology; EMBA,

Fudan University

<Note 1> ChairmanChen,

Li-JuSpouse

Director

Corporate

representativeTaiwan Wei, Tzu-Wen Male

106/

6/143

103/

6/2556,228 0.20% 56,228 0.20% 17,426 0.06% - -

Graduate School of

Information Science,

Chung Cheng

Institute of

Technology,

National Defense

University

<Note 1> - - -

Director Taiwan Li, Hung-Hui Male106/

6/143

103/

6/25- - - - - - - -

Ph.D. of Public

Management, Ohio

State University

<Note 1> - - -

Independent Director TaiwanTseng, Sheng-

ChengMale

106/

6/143

101/

7/11- - - - - - - -

Department of

Industrial Design,

Ming Chi Institute of

Technology

<Note 1> - - -

Independent Director Taiwan Yeh, Ching-En Male106/

6/143

101/

7/11- - - - - - - -

Accounting

Department,

National Taipei

College of Business

<Note 1> - - -

Independent Director Taiwan Yang, Shu-Ching Female106/

6/143

101/

7/11- - - - - - - -

Master, Accounting

Department,

National Taiwan

University

Master, Law

Department,

Soochow University

<Note 1> - - -

April 20th 2019;shares

Title

Nationality

or Country

of Origin

Name Sex

Elec

ted

Dat

e

Term

(Years)

Date

of

the

initial

Shareholding Present

【Note 1】Major experiences, other position in the company and other companies

Present Shares held in Major

Educational/Experie

nce

Background

Current

position in

this company

and in

With spouse or 2nd degree

9

III CORPORATE

GOVERNANCE

Name Major Experience

Current position in

this company and in

other company

Chen, Li-Ju Deputy head nurse, internal medicine,

Linco Chang Gung Hospital

Chairman of MedFirst Healthcare Services, Inc.

Chairman of Exactitude Biotech Co., Ltd. (Corporate

Representative)

Director of Taiwan Trim Co., Ltd. (Corporate Representative)

Supervisor of Nanjing MedFirst Healthcare Services, Inc.

(Corporate Representative)

Supervisor of Shanghai MedFirst Healthcare Services, Inc.


Supervisor of Fujian MedFirst Healthcare Services, Inc.


Supervisor of Shanghai An gu Medical Equipment Ltd.


Supervisor of Hangzhou An gu Medical Equipment Ltd.


Supervisor of Nanjing Beijing First Healthcare Services, Inc.


Chairman of Exactitude Biotech Co., Ltd(Corporate

Representative)

Chairman of Xingzhou Pharmaceutical Co., Ltd.


Director of Taiwan TRIM CO.,LTD (Corporate Representative)

Tsai,

Te-Chung Section head of Chang Gung Hospital

General manager & Director of MedFirst Healthcare Services,

Inc.

Chairman of Taiwan Trim Co., Ltd. (Corporate Representative)

Director of Exactitude Biotech Co., Ltd. (Corporate

Representative)

Director of Xingzhou Pharmaceutical Co., Ltd. (Corporate

Representative)

Director of Lead Investment Limited

Executive Director and general manager of Nanjing MedFirst

Healthcare Services, Inc. (Corporate Representative)

Executive Director and general manager of Shanghai MedFirst


Executive Director and general manager of Fujian MedFirst


Executive Director and general manager of Shanghai An gu

Medical Equipment Ltd. (Corporate Representative)

Executive Director and general manager of Hangzhou Angu

Medical Equipment Ltd. (Corporate Representative)

Executive Director and general manager of Beijing MedFirst


Wei,

Tzu-Wen

MedFirst Healthcare Services Company

LimitedStore Associate General Manager

Associate Manager & Director of MedFirst Healthcare

Services, Inc.(Corporate Representative)

Division of MedFirst Healthcare Services,

Inc.

Supervisor of Exactitude Biotech Co., Ltd. (Corporate

Representative)

Assistant Vice President of the Information

Management

Director of Xingzhou Medicine Co., Ltd. (Corporate

Representative)

Division of MedFirst Healthcare Services,

Inc.

Section head of Software Development

Center, MND

10

III CORPORATE

GOVERNANCE

Li, Hung-Hui

Associate dean of College of Management,

Yuan Ze University Director of MedFirst Healthcare Services,Inc.

Dean of Undergraduate School of

Management, Yuan Ze University Supervisor of Richgroup International Media Co., Ltd.

Chief of Management Competency

Development and Research Center, Yuan

Ze University

Chair of MBA in Leadership/Graduate

School of Management, Yuan Ze

University

Chief of Personnel Office, Yuan Ze

University

Member of remuneration committee, Far

Eastern Department Stores Co. Ltd.

Tseng,

Sheng-Cheng

Vice president of Formosa Automobile Co. Independent Director of MedFirst Healthcare Services,Inc.

Engineering Div. Nan Ya Plastics Deputy

Manager

Genral Manager of Battery Technology Depart.

United Renewable Energy Co., Ltd

Director of Ming Chi University of

Technology

Director of Zhaoyang Photoelectric Technology Co., Ltd.


Director of Xinneng Optoelectronics

Technology Co., Ltd. (Corporate

Representative)

Director of Shengyang Materials Co., Ltd.


Director of Jiangxi Shengyang Technology

Co., Ltd. (Corporate Representative)

Chairman of Zhongmei Materials Co., Ltd.


Director and Deputy General Manager of

Solartech Energy Corp

Director of TS Solartech SDN BHD.


Director of Keguan Energy Technology

Co., Ltd. (Corporate Representative)

Director of Zhongyang Photoelectric Co.,

Ltd. (Corporate Representative)

Director of Huiyang Photoelectric Co., Ltd.


Director of Solartech Japan Corp.


Yeh,

Ching-En

General director/general manager of

Practical Taxation Publisher Independent Director of MedFirst Healthcare Services,Inc.

Vice president of KPMG CPA Chairman of Taiwan Thinktank

Consultant of Zonghe United Accounting

Firm Consultant of Pan Harvest CPAs

Director of Zhongzhi Management

Consulting Co., Ltd. Supervisor of Xinhong International Development Co., Ltd.

Yang,

Shu-Ching

7th grade tax auditor, Taipei National

Taxation Administration Independent Director of MedFirst Healthcare Services,Inc.

Auditor of Taxation Agency, MOF Accountant of Crowe Horwath (TW) CPAs

Commissioner of CPA Associations

R.O.C.

Director of Aurlia Corporation

Lecturer in Accounting of

FU JEN CATHOLIC UNIVERSITY

Committee of Ministry of Finance Taxpayer Rights Protection

Advisory

Supervisor of Chinese Tax Research Association

Supervisor of Chinese Tax Agent Association

Supervisor of Taipei Tax Agent Association

11

12

III CORPORATE

GOVERNANCE

2. Major institutional shareholders:

April 20h 2019

Name of Institutional Shareholders

Major Shareholders

Lucktech Investment Limited Chen, Li-Ju (60.09%)

Tsai, Te-Chung (39.91%)

3. Major institutional shareholders of the Company who are legal representatives: not applicable

4. Whether the directors and supervisors have more than five years of work experience and

professional qualifications, and meet the following circumstances: April 20

th 2019

Criteria

Name

Meet One of the Following Professional

Qualification Requirements, with at

Least Five (5) Years Work Experience

Consistent with the situation (Note)

Number of

Other Public

Companies in

Which the

Individual is

also Serving as

an Independent Director

An Instructor

or Higher Position in a

Department of

Commerce, Law, Finance,

Accounting, or

Other

Academic

Department Related to the

Business

Needs of the Company in a

Public or

Private Junior College,

College or University

A Judge, Public

Prosecutor, Attorney, Certified

Public Accountant,

or Other Professional or

Technical Specialist

Who has Passed a

National

Examination and been Awarded a

Certificate in a

Profession that Meets the Needs of

the Business

Has Work

Experience in the Areas

of

Commerce, Law,

Finance, or

Accounting,

or Otherwise

to Meet the Needs of the

Business

1

2

3

4

5

6

7

8

9

10

Chen, Li-Ju - - - - - - - - -

Tsai, Te-Chung

- - - - - - - - - - -

Wei, Tzu-Wen

-

- - - - -

Li, Hung-Hui - - -

Tseng,

Sheng-Cheng - - - Yeh,

Ching-En - - -

Yang, Shu-Ching

- -

Note: Please check“” the corresponding boxes that apply to the directors or supervisors during the two (2) years prior to being

elected or during the term of office.

(1) Not an employee of the Company or any of its affiliates. (2) Not a director or supervisor of the Company or any of its affiliates (does not apply if the person is an independent director of

the Company or its parent company, or any subsidiary established in accordance with the Act and local laws and regulations).

(3) Not a director or supervisor of the Company or any of its affiliated companies (but not applicable in cases where the person is

an independent director of the Company, its parent company, or any subsidiary in which the Company holds, directly or

indirectly, more than fifty (50) percent of the voting share).

III CORPORATE

GOVERNANCE

(4) Not a spouse or relative within the second degree of kinship, or a lineal relative within the third degree of kinship, of any

persons in the preceding three points.

(5) Not a director, supervisor, or employee of a corporate shareholder who directly holds five (5) percent or more of the total

number of outstanding shares of the Company or who holds shares ranking in the top five holdings.

(6) Not a director, supervisor, managerial officer, or shareholder holding five (5) percent or more of the shares of a specific

company or institution that has a financial or business relationship with the Company.

(7) Not a professional individual who is an owner, partner, director, supervisor, or managerial officer of a sole proprietorship,

partnership, company, or institution that provides commercial, legal, financial, accounting or consultation services to the

Company or any affiliate of the Company, or a spouse thereof. These restrictions do not apply to any member of the

Remuneration Committee who exercises powers pursuant to Article 7 of the Regulations Governing the Establishment and

Exercise of Powers of Remuneration Committees of Companies Whose Stock Is Listed on the Taiwan Stock Exchange

(TWSE) or Traded in the Taipei Exchange Market (TPEx)

(8) Not in a marital relationship with, or a relative within the second degree of kinship to any other director of the Company.

(9) Not a person who falls under the specifications defined in Article 30 of the Company Law.

(10) Not a governmental, juridical person or a representative of such person defined in Article 27 of the Company Law.

13

14

III CORPORATE

GOVERNANCE

(1) Details of the General Manager, Deputy General Manager, Assistant Vice Presidents, Heads of

Departments and Branches April 20th 2019

Title Nationality Name Sex Elected

Date

Shareholding

Present

shareholding of

spouse & minor children

Shares held in another’s

name

Major

Educational/

Experience Background

<Note 1>

Current

position

in this

company

and in other

company

With spouse or 2nd

degree relative who are a

superior of the

company

Stock (shares)

% Stock (shares)

% Stock (shares)

% Title

Name

Relation

General Manager

Taiwan Tsai, Te-Chung

Male 85/5/1 1,617,884 5.73%

1,792,274 6.35% - -

Marketing

and

Circulation Managemen

t Institute of

National Kaohsiung

First

University of Science

and Technology,

Master of

Business Administrati

on of Senior

Management, Fudan

University

<Note 1> No No No

Associate General

Manager

Taiwan Wei, Tzu-Wen Male 100/7/18 56,228 0.20

% 17,426 0.06% - -

Graduate

School of Information

Science,

Chung Cheng

Institute of

Technology, National

Defense

University

<Note 1> No No No

Assistant

General

Manager

Taiwan Wang, Ting-

Jui Male 88/7/2 81,649

0.29%

- - - -

Department

of

Information Managemen

t, Yuan Ze

University

<Note 1> No No No

Financial

and

Accounting

Supervisor

Taiwan Kao, Shih-

Lung Male 107/5/4 - - - - - -

National

Taipei University

(NTPU)

Master of Accounting

<Note 1> No No No

<Note 1>Major experiences, other position in the company and other companies

III CORPORATE

GOVERNANCE

April 20th 2019

Name Major Experience Current position in this company and in

other company

Tsai,

Te-Chung

Section head of Linkou Chang Gung

Memorial Hospital

General manager & Director of MedFirst Healthcare Services,

Inc.

Chairman of Taiwan Trim Co., Ltd. (Corporate Representative)


Representative)


Executive Director and general manager of Nanjing

MedFirst Healthcare Services, Inc. (Corporate

Representative)

Executive Director and general manager of Shanghai


Representative)

Executive Director and general manager of Fujian


Representative)

Executive Director and general manager of Shanghai An

gu Medical Equipment Ltd. (Corporate Representative)

Executive Director and general manager of Hangzhou

Angu Medical Equipment Ltd. (Corporate Representative)

Executive Director and general manager of Beijing


Representative)

Wei,

Tzu-Wen

Section head of Software Development

Center, MND

Director (Corporate Representative) and Deputy General

Manager of MedFirst Healthcare Services, Inc.

Assistant Vice President of the Store

Business Division of MedFirst

Healthcare Services, Inc.

Supervisor of Jingzan Bio-tech Co., Ltd. (Corporate

Representative)

Assistant Vice President of the

Commodity Marketing Division of


Director of Xingzhou Medicine Co., Ltd. (Corporate

Representative)


Operation Management Division of



Information Management Division of


Wang,

Ting-Jui

Program designer of TeamMax

Technology


Representative)

Assistant Vice President of MedFirst Healthcare Services,

Inc.

Chairman of Haojie Industrial Co., Ltd. (Corporate

Representative)

Kao,

Shih-Lung

Deloitte & Touche Assistant manager

of Deloitte & Touche

MedFirst Healthcare Services,Inc. Manager of MedFirst

Healthcare Services, Inc.

Assistant manager of Jinwei Industrial

(Shanghai) Co., Ltd. Supervisor of Taiwan TRIM CO.,LTD

15

III CORPORATE

GOVERNANCE

MedFirst Healthcare Services,Inc.

Section chief of MedFirst Healthcare

Services, Inc. Supervisor of Xingzhou Medical Co., Ltd.

16

III CORPORATE

GOVERNANCE

Cash

bon

us a

mo

unt

Sto

ck

bon

us a

mo

unt

Cash

bon

us a

mo

unt

Sto

ck

bon

us a

mo

unt

Chairman Chen, Li-Ju

Director

Corporate

shareholder

Lucktech Investment

Limited

Director

Corporate

shareholder

Tsai, Te-Chung

Director

Corporate

shareholder

Wei, Tzu-Wen

Director Li, Hung-Hui

Independent

DirectorTseng, Sheng-Cheng

Independent

DirectorYeh, Ching-En

Independent

DirectorYang, Shu-Ching

11.99 11.99 -1499 -- - - - 3541 3541 79 79 1499 -335 335 3.43 3.43

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

*Besides disclosure by above chart, the rewards claimed by corporate directors for services at all companies listed on financial statements (such as acting as non-employee counselor):None

Note: The distribution of profits and allocation of remuneration to the employees and directors in 2018 have been duly passed by the Company’s Board of Directors on February 26th 2019.

8087 8087

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

This company All companies

in the financial

reports

Th

is co

mp

an

y

Th

is co

mp

an

y

Director's

remuneration

(C)

professional

fees

(D)

Salary,

bonus,

extraneous

charges, etc.

(E)

Resignation

retirement

pay

(F)

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

Unit: NT$ thousand

Title Name

Remuneration of directors

Proportion of

total amount of

A, B, C and D

in profit after

tax

Relevant Remuneration Received by Employees

Proportion of total

amount of the first

seven items (A, B,

C, D, E, F and G)

in profit after tax

Co

mp

en

satio

n P

aid

to D

irecto

rs from

an

Inv

este

d C

om

pan

y O

ther

than

the C

om

pan

y’s S

ub

sidia

ry

Remuneration

(A)

Resignation

retirement

pay(B)

Employee rewards

(G)

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l

rep

orts

Th

is co

mp

an

y

III.Remuneration of Directors, Supervisors, General Manager and Deputy General Manager

1. Remuneration of Directors (including Independent Directors)

The companyAll companies in the

financial reports(I)The company

All companies in the

financial reports(J)

Under NT$2,000,000

Chen, Li-Ju, Tsai, Te-Chung,

Wei, Tzu-Wen, Li, Hung-

Hui, Yang, Shu-Ching, Tseng,

Sheng-Cheng, Yeh, Ching-En

Chen, Li-Ju、Tsai, Te-

Chung, Wei, Tzu-Wen, Li,

Hung-Hui, Yang, Shu-Ching,

Tseng, Sheng-Cheng, Yeh,

Ching-En

Li, Hung-Hui, Tseng, Sheng-

Cheng, Yeh, Ching-En,

Yang, Shu-Ching

Li, Hung-Hui, Tseng, Sheng-

Cheng, Yeh, Ching-En、

Yang, Shu-Ching

NT$2,000,000(included)~NT$5,000,00

0(excluding)- -


Chung, Wei, Tzu-Wen


Chung, Wei, Tzu-Wen

NT$5,000,000(included)~NT$10,000,0

00(excluding)- - - -

NT$10,000,000(included)~NT$15,000,


NT$15,000,000(included)~NT$30,000,


NT$30,000,000(included)~NT$50,000,


NT$50,000,000(included)~NT$100,000

,000(excluding)- - - -

NT$100,000,000 or above - - - -

Total 7 7 7 7

Interval of remuneration paid to each

board director of the company

Names of directors

Total amount of remuneration of the first four

items(A+B+C+D)

Total amount of remuneration of the first seven items

(A+B+C+D+E+F+G)

17

III CORPORATE

GOVERNANCE

2. Remuneration of Supervisors

The Company passed the resolution to establish an Audit Committee during the Shareholders’ Meeting of

the 25th June 2014. Remuneration of Supervisors: None.

3. Remuneration of the General Manager, Deputy General Manager

Cash

bon

us a

mo

unt

Sto

ck

bon

us a

mo

unt

Cash

bon

us a

mo

unt

Sto

ck

bon

us a

mo

unt

General

ManagerTsai, Te-Chung

Associate

General

Manager

Wei, Tzu-Wen

Note 1: The distribution of profits and allocation of remuneration to the employees and directors in 2018 have been duly passed by the Company’s Board

of Directors on February 26th 2019.

1,499 0 5.37 5.37 03,143 3,143 79 79 1,344 1,344 1,499 0

All c

om

pan

ies in

the fin

an

cia

l rep

orts(N

ote

5)

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l rep

orts(N

ote

5)

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l rep

orts(N

ote

5)

Th

is co

mp

an

y

All c

om

pan

ies in

the fin

an

cia

l rep

orts(N

ote

5)

This company All companies in

the financial

reports(Note 5)

Unit: NT$ thousand

Title Name

Salary

(A)

(Note 2)

Resignation

retirement pay

(B)

Salary, bonus,

extraneous

charges, etc.(C)

(Note 3)

Employee rewards

(D)

(Note 4)

Proportion of

total amount of

A, B, C and D in

profit after

tax(%)

(Note 8)

Co

mp

en

satio

n P

aid

to D

irecto

rs from

an

Inv

este

d C

om

pan

y O

ther th

an

the

Co

mp

an

y’s S

ub

sidia

ry

(No

te 9

)

Th

is co

mp

an

y

18

III CORPORATE

GOVERNANCE

This company(Note 6)All companies in the

financial reports(Note 7)

Under NT$2,000,000

Tsai, Te-Chung, Tsai, Te-Chung,

Wei, Tzu-Wen Wei, Tzu-Wen

NT$5,000,000(included)~NT$10,000

,000(excluding)- -

NT$10,000,000(included)~NT$15,00

0,000(excluding)- -

NT$15,000,000(included)~NT$30,00

0,000(excluding)- -

NT$30,000,000(included)~NT$50,00

0,000(excluding)- -

NT$50,000,000(included)~NT$100,0

00,000(excluding)- -

NT$100,000,000 or above - -

Total 2 2

Remuneration Interval Table

Interval of remuneration paid to

each Manager of the company

Names of General Manager and Vice President

NT$2,000,000(included)~NT$5,000,

000(excluding)

19

III CORPORATE

GOVERNANCE

4. Name of the Managerial Officers who are Awarded an Employee Bonus and the Allocation of Such

Employee Bonuses: 31st December 2017; Unit: NT$ thousand

Ma

na

ge

ri

al

O

ff

ic

er

Title Name Bonus in Stock Bonus in Cash Total

Ratio of Total

Amount to Net

Income (%)

General Manager Tsai,

Te-Chung

- 1,388 1,388 1.56%

Deputy General

Manager

Wei,

Tzu-Wen

Assistant Vice

President

Wang,

Ting-Jui

Assistant Vice

President

Chen,

Meng-Hung

Assistant Vice

President

Cheng,

Chih-Yuan

Assistant Vice

President

Kao,

Shih-Lung

Note: Assistant Manager Chen, Meng-Hung resigned on May 4, 2018, and did not receive employee remuneration.

(4) Analysis of the Ratio of the Total Remuneration Paid by the Company and by All Companies Included in

the Consolidated Financial Statements for the Two (2) Most Recent Fiscal Years to the Directors,

Supervisors, General Manager and Deputy Manager of the Company to the Net Income after Tax and the

Description of the Policies, Standards, and Structure for the Payment of Remuneration, the Procedures for

Determining Remuneration, and Their Correlation with Business Performance and Exposure to Future

Risks.

1. Analysis of the ratio of the total remuneration paid for the two (2) most recent fiscal years to the

directors, supervisors, general manager and deputy manager of the Company, to the net income after tax:

Unit: NT$ thousand;%

Title

2018 2017

This company All companies in the

financial reports This company

All companies in the

financial reports

Total

remuner

ation

Proportio

n in profit

after tax

Total

remune

ration

Proportion

in profit

after tax

Total

remuner

ation

Proportio

n in profit

after tax

Total

remuner

ation

Proportion

in profit

after tax

Directors 3,876 3.43% 3,876 3.45% 3,006 3.31% 3,006 3.39%

General Manager

and

Deputy General

Manager

6,065 5.37% 6,065 5.40% 5,316 5.86% 5,316 5.99%

Total 9,941 8.80% 9,941 8.85% 8,322 9.17% 8,322 9.37%

2. The compensation policy, standards and procedures for determining compensation and the

connection with operational performance and future risks:

20

III CORPORATE

GOVERNANCE

(1) According to Article 33 of the Articles of Incorporation, when the Company enjoys an

annual profit, it shall appropriate 1%-15% as compensation to employees to be

distributed by stock or cash. The Company may appropriate profits of up to 7% as

compensation to directors upon resolution of the Board of Directors.

(2) According to the regulations of the Company, directors who attend the Board of

Directors’ meeting shall be eligible to claim travel expenses. The salary paid to the

Chairman of the Board, as well as the remuneration and other benefits awarded to the

Board of Directors shall be determined based on their degree of participation in the

Company’s business operations, the value of their contributions and the general

compensation ranges in the industry.

(3) Remuneration paid to the directors and managerial officers of the Company shall be

determined in accordance with the regulations of the Company, and are subject to the level of

contribution made to the Company, the general compensation levels in the industry, and their

positive correlation with business performance. The amount of remuneration is required to be

disclosed in the Company’s annual report by lawto minimize exposure to future risks. (4) The Company established the Remuneration Committee on 23

rd August 2012. The

remuneration of the directors and managerial officers shall be first submitted to the

Remuneration Committee for discussion prior to submission to the Shareholders’

Meeting for resolution.

21

III CORPORATE

GOVERNANCE

IV. Implementation of Corporate Governance

(1) Operations of the Board of directors

Directors and supervisors appeared as observers during the Board of Directors meeting on seven

occasions during 2018(A). The attendance of directors were as follows:

Title

Name

(Note)

Attendance in

Person (B) By Proxy

Attendance Rate (%)

(B/A)(Note)

Remark

Chairman Chen, Li-Ju 7 0 100.00% -

Director

Lucktech Investment

Limited

Representative:

Tsai, Te-Chung

7 0 100.00%

-

Director Lucktech Investment

Limited

Representative:

Wei, Tzu-Wen

7 0 100.00%

-

Director Li, Hung-Hui 7 0 100.00% -

Independent

Director Tseng, Sheng-Cheng 6 1 85.71%

(Note)

Independent

Director Yeh, Ching-En 7 0 100.00%

(Note)

Independent

Director Yang, Shu-Ching 6 1 85.71%

(Note)

Note: In total, sevem Board meetings were hold in 2018, Tseng, Cheng-Cheng, as independent

director, attended by proxy once, and Yang, Shu-Ching, as independent director, attended by proxy

once.

Other notable items:

1. If any of the following situations occurs during a meeting of the Board of Directors, the date,

period, proposal contents, all opinions of the Independent Directors, and the Company's handling

of the such opinions should be explained:

1.1 Matters listed in Item 3 of Article 14 of the Security Exchange Act.

1.2 In addition to the previous matters, other board meeting decisions objected to or reserved by

an Independent Director with a recorded or written statement.

22

III CORPORATE

GOVERNANCE

Meeting date Meeting

stage Contents of agenda

Opposite or

reserved

opinions from

independent

directors

2018/3/23

6th

Meeting of

10th

Board

1.Passed proposal of salaries and rewards for directors and

managers on the 2017 financial statemen

None

2.Passed proposal of the 2017 distribution of rewards for

staff and directors

3. Proposal for the Company's 2017 financial report and

business report.

4.Passed proposal of the 2017 distribution of corporate

surplus

5.Passed the 2017 corporate statement of internal control

system

6. Intended to pass the case of the Company's new logistics

warehouse to purchase automation system equipment.

7. Extension of line of credit for E.Sun Commercial Bank,

Ltd

8. Hua Nan Bank Credit Line Renewal and Endorsement

Guarantee provided by E.Sun Bank to the subsidiary

EXACTITUDE BIOTECH CO., LTD.

9. Extension of line of credit for HUA NAN Commercial

Bank, Ltd

10. The relevant matters of the 2018 Annual General

Meeting of Shareholders convened by the Board of

Directors.

◎Opinions from independent directors:None

◎Corporate dealings with opinions from independent

directors:None

◎Resolution result : Except for the absence of the

following personnel associated with a conflict of interest.

1. Directors with employee status (Tsai, Te-Chung, Wei,

Tzu-Wen) and attending supervisors (Chen,

Meng-Hung, Cheng, Chih-Yuan) should avoid

discussing and resolution on the distribution of

managers' remuneration.

2. President (Chen,Li-Ju) should avoid discussing and

resolution regarding his own salary and rewards.

2018/5/4

7th

Meeting of

10th

Board

1. Finance and Accounting Supervisor Transaction

None



directors:None

◎Resolution result: Approved by all directors in

attendance.

2018/6/14 8th 1. The base date for the distribution of cash dividends. None

23

III CORPORATE

GOVERNANCE

Meeting of

10th

Board

2. Conversion price adjustment of the unsecured conversion

of the Company’s corporate bond for the first time in

Taiwan

◎Opinions from independent directors: None


directors: None


attendance.

24

III CORPORATE

GOVERNANCE



Opposite or

reserved

opinions from

independent

directors

2018/8/8

9th

Meeting of

10th

Board

1. Replacement of the Company’s Certified Public

Accountant.

None

2. Consolidated financial statement proposal of the

Company in the second quarter of 2018

3. Endorsement Guarantee provided by E.Sun Bank to the

subsidiary Baodean Co., Ltd.

◎ Opinions from independent directors: None


directors:None


attendance.

2018/8/27

10th

Meeting of

10th

Board

1. Selection of the manufacturer of the Company's new

logistics warehouse construction project.

None


◎ Corporate dealings with opinions from independent

directors: None


attendance.

2018/11/7

11th

Meeting of

10th

Board

1. 2019 Internal Audit Plan.

None

2. Assessment of Certified Public Accountant's competence

and independence.

3. Replacement of the Company’s Certified Public

Accountant.


Company in the third quarter of 2018


◎ Corporate dealing with opinions from independent

directors:None


attendance.

2018/12/28

12th

Meeting of

10th

Board

1.Director remuneration proposal of the Company for 2019

None

2. Chairman remuneration proposal of the Company for

2019

3.Manager remuneration proposal of the Company for 2019

4. Annual operational plan of the Company 2019

5. Chang Hwa Bank loan limit proposal

6. Far Eastern International -Bank credit line contract

renewal proposal



directors:None

25

III CORPORATE

GOVERNANCE

◎ Resolution result:Except for the absence of the following

personnel associated with a conflict of interest

1. Directors with employee status (Tsai, Te-Chung, Wei,

Tzu-Wen) and attending supervisors (Cheng, Chih-Yuan,

Kao, Shih-Lung) should avoid discussing and resolution

on the distribution of directors and managers'

remuneration.

2. President (Chen,Li-Ju) should avoid discussing and

resolutions regarding his own salary and rewards.

2. To ensure that Directors' refrain from interest-related proposals, a list of the directors' names, the

contents of the proposals, the reasons for refraining, and participation in the voting shall all be

stated; if the directors involved in a proposal related to their own interests have already refrained

from the vote, refer to Item 1 above.

3. Evaluation of objectives for strengthening the Board of Directors’ functions during this year and

in recent years (such as setting up the audit committee and improving information transparency)

and their implementation conditions:

3.1 The Company established the Audit Committee on June 25, 2014 to strengthen governance

and improve the operation of the Board of Directors.

3.2 The Company formulated the “Board of Directors' Performance Self-Assessment” in 2015

to promote the function and operation efficiency of the Board of Directors

3.3 To ensure that board members effectively assume their responsibilities, a consensus shall be

reached by convening the Board of Directors. In 2018, seven board meetings were held, and

the important resolutions were disclosed on the investor area of the Company’s website to

improve the transparency of Board information.

3.4 In response to the e-voting policy, the Company’s election of directors shall generally adopt

the candidate nomination system and passed a relevant amendment to the “Rules and

Procedures of Shareholders’ Meetings” in the shareholders’ meeting on June 14, 2017

26

III CORPORATE

GOVERNANCE

(2) The Audit Committee and the Board of Directors’ Meetings

1. The state of operations of the Audit Committee:

In total, five (A) Audit Committee meetings were held in 2018. The attendance of the

independent directors was as follows:

Title Name Attendance in

Person (B) By

Proxy

Attendance Rate (%)

(B/A) Remark

Independent

Director

Tseng,

Sheng-Cheng

5 0 100.00% -

Independent

Director

Yeh, Ching-En 5 0 100.00% -

Independent

Director

Yang, Shu-Ching 4 1 80.00% -

Note: Five audit committee meetings were held in 2018, and the independent director Yang

Shuqing was entrusted to attend the Audit Committee meetings.


1. If any of the following situations occurs during a meeting of the Board of Directors, the

date, period, proposal contents, all opinions of the Independent Directors, and the

Company's handling of such opinions should be explained:

1.1 Matters listed in Item 5 of Article 14 of the Security Exchange Act.

1.2 In addition to the previous matters, other board meeting decisions that were not

passed by the Audit Committee but agreed on by more than two-thirds of all

Directors.



Opposite or

reserved

opinions from

independent

directors

2018/3/23

5th

Meeting

of 2th

Board

1. passed proposal of 2017 distribution of rewards for staff

and directiors

None

2. passed corporate financial statement and business report

of 2017

3. passed proposal of 2017 sirtribution of corporate surplus

4. passed 2017 corporate statement of internal control

system

5. Intend to pass the case of the company's new logistics

warehouse to purchase automation system equipment.


27

III CORPORATE

GOVERNANCE


directors:None

◎Resolution result: Except for the avoidance of the

following relevant personnel due to interest

conflict, it was approved by other attending

members.

1.Directors with employee status (Tsai, Te-Chung, Wei,

Tzu-Wen) and attending supervisors (Chen,

Meng-Hung, Cheng, Chih-Yuan) should avoid

discussion and resolution on the distribution of

managers' remuneration.

2018/5/4

6th

Meeting

of 2th

Board

◎Consolidated financial statement proposal of the

Company in the first quarter of 2018

None

2. Finance and Accounting Supervisor transaction

◎ Opinions from independent directors:None

◎Corporate dealing with opinions from independent

directors:None

◎Resolution result: Approved by all attending members.

2018/8/8

7th

Meeting

of 2th

Board


Company in the second quarter of 2018

None

2. Replacement of the company Certified Public

Accountant.



directors:None


2018/8/27

8th

Meeting

of 2th

Board

1. The selection of the manufacturer of the company's new

logistics warehouse construction project.

None ◎Opinions from independent directors:None


directors:None


2018/11/7

9th

Meeting

of 2th

Board


Company in the third quarter of 2018

None

2. Evaluation of lawfulness and independence of Certified

Public Accountant

3. Replacement of the company Certified Public

Accountant.

◎opinions from independent directors:None

◎Corporate dealing with opinions from independent

directors:None


2. To implement Directors' refraining from interest-related proposals, a list of the directors'

28

III CORPORATE

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names, the contents of the proposals, the reasons for refraining, and participation in the

voting shall all be stated: if the directors involved in a proposal related to their own interests

have already refrained from the vote, refer to Item 1 above.

3. Communication condition of Independent Directors with the internal auditing supervisor

and accountant (including the major communication events of the Company’s financial and

business status, as well as the results):

3.1 The Company's internal auditing supervisors shall regularly report internal audit matters

at the Audit Committee meeting, as well as periodically discuss the internal audit

results with Independent Directors by e-mail or telephone. Each committee member

shall properly communicate with the internal audit supervisor.

3.2 The Company’s Visa Accountant attended one Audit Committee meetings in 2018 to

report the results of the audit or review of the financial statements, as well as to

communicate the matters required by the relevant laws and regulations. All committee

members shall properly communicate with the visa accountant.

(3) The operational situation of the company governance and the difference and causes of Governance

Practice Rules on listed companies and OTC companies

Descriptions

Implementation Status(Note1) Difference and

Causes of

Governance Practice

Rules on Listed

Companies Yes No Summary

1. Has the company established

and disclosed governance

practice rules in accordance

with the “Governance Practice

Rules on Listed Companies”?

The company added the “Governance

Practice Rules” on the 15th

June 2016

and disclosed these rules on the

Market Observation Post System and

company website.

Nil.

Ⅱ.The Company’s shareholding composition and shareholders’ equity

29

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


1. Has the Company established

an internal operating procedure

to deal with shareholders’

suggestions, doubts, disputes

and litigations, and

implemented them based on

procedure?

The internal control system / financing

cycle / service operations of the

Company clearly outlined that the

Company shall establish the duties of a

spokesperson and an acting

spokesperson, and the internal stock

affairs unit shall handle shareholders’

suggestions, disputes, etc.

Nil.

2. The Company’s command of

key shareholders and overall

control of substantial

shareholding

Using the services offered by stock

agents, the Company possesses the list

of the major shareholders who control

the Company and the ultimate

controllers from among major

shareholders.

Nil.

3. The Company’s efforts to

establish a control mechanism

and firewall with affiliates:

The Company has formulated and

accordingly implemented the

Regulations Governing the Financial

and Business Operations of

Conglomerates, Specific Companies

and Related Parties, the Rules

Governing the Supervision of

Subsidiaries and Regulations

Governing the Management of Trading

with Related Parties.

Nil.


internal rules against insider

trading of undisclosed

information?

The company has prohibited insiders

from trading securities by way of

using unpublished information as

specified in the “Rules of Prevention

of Insider Trading”.

Article 5 of the “Rules of Prevention of

Insider Trading”: directors, managers

and employees who acknowledge

material information of the company

shall not disclose any such material

information to others. In addition,

insiders are prohibited from trading

securities by way of using unpublished

information.

Nil.

Ⅲ. The composition, responsibilities and powers of the Board of Directors:

1. Has the Board developed and implemented a diversified policy for the composition of its members?

The Board of Directors of the company passed the amendment of the “Procedures for Election of Directors”, adding content specifying that the Board of Directors be more diversified. The amendment was

Nil.

30

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


discussed and approved during the Shareholders’ Meeting of the 29

th

June 2015. The execution status of the provision

to diversify the Board of Directors of the 10

th Board Meeting in 2017

Name Sex Professional

background

Chen, Li-Ju Female

Industry

knowledge,

Management

Tsai,

Te-Chung Male

Leadership

Decision,

Management

Wei, Tzu-Wen Male Electronic

Resources

Li, Hung-Hui Male

Leadership

Decision,

Management

Tseng,

Sheng-Cheng Male

Industry

knowledge,

Leadership

Decision,

Management

Yeh,

Ching-En Male

Finance,

Accounting

Yang,

Shu-Ching Female

Finance

Accounting, Legal

2. Has the company voluntarily established other functional committees in addition to the Remuneration Committee and the Audit Committee?

The Company has established a

Remuneration Committee as required

by law, and has also voluntarily

established an Audit Committee. Each

department shall be responsible for the

rest of the Company’s corporate

governance according to their scope of

duty. However, committees for other

purposes have yet to be established,

whereby the need to establish such

committees shall be evaluated in

future.

Nil.

31

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


3. Has the company established a standard to measure the performance of the Board of Directors, and implemented it on a yearly basis?

The company passed the establishment

of the “Procedures for Evaluation of

the Board of Directors” on the 14th

May 2015. Each director shall fill in

the “Self-Evaluation Questionnaire for

the Evaluation of the Board of

Directors”, and the “Peer-Evaluation

Questionnaire of Board Members” at

the beginning of each year, and the

department responsible for the Board

Meeting shall evaluate the performance

of Board in first half of the year in

accordance with relevant laws with the

participation of business operations.

The performance evaluation of the

Board, the board member evaluation

and the evaluation results of the

responsible department were all

satisfactory without any abnormalities

or issues for concern in 2018. The

evaluation results were reported to the

Board of Directors on the 26th

February 2019.

Nil.

4. Has the Company regularly evaluated the independence of the CPAs?

The Company shall regularly evaluate

the legality and independence of the

visa accountant every year, and the

shareholding unit shall carry out

evaluation pursuant to the "Visa

Accountant Competency Evaluation

Form". The evaluation includes the

following items:

1. Legality: Accountant qualification,

practice registration, legality of

accountant association, visa

qualifications, etc.

2. Independence: Whether he/she

carries out the business of interest,

receive compensation outside the

rules, accept improper business,

disclose business secrets, or has an

interest-sharing relationship

between himself/herself or spouse

and the client.

Nil.

32

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


The evaluation results confirmed that

the accountants appointed by the

Company met the legality and

independence requirements, and the

Board of Directors passed the “Visa

Accountant Competency and

Independence Evaluation Case” on

November 7, 2018.

Ⅳ. Has the listed company

established a full-time or

part-time department or

personnel responsible for

matters related to corporate

governance (including but

not limited to providing

information required by the

directors and supervisors to

execute business operations

and manage matters related

to the Board and

Shareholders’ Meeting in

accordance with relevant

laws, company registration

and recognition of changes,

and preparing the meeting

minutes of Board and

Shareholders’ Meetings)?

Manager Kao, Shih-Lung is

responsible for the Company’s matters

related to corporate governance,

planning the Board of Directors and

Shareholders’ Meetings, and having

relevant qualifications as an

accountant, whose business content

includes to the following:

1. Planning Board of Directors, Audit

Committee, and Shareholders’

Meetings.

2. Provide documents related to

proposals of Board of Directors,

Audit Committee, and Shareholders’

Meetings.

3. For the contents of the various

proposals of the Board of Directors

in 2018, refer to the “Operation

Status of the Board of Directors” in

this annual report.

4. For the contents of the proposals of

the Audit Committee in 2018, refer

to the “Operation Status of the Audit

Committee” in this annual report.

5. For the contents of the various

proposals of the Remuneration

Committee in 2018, refer to the

“Operation Status of the

Remuneration Committee” in this

annual report.

Nil.

33

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


Ⅴ. Has the company established

a communication channel with

interested parties (including,

but not limited to

shareholders, employees,

customers and suppliers, etc.)

and built areas on the

company website for

interested parties and properly

responded to issues regarding

important corporate social

responsibilities concerning

interested parties?

The company has established areas

on our official website

www.medfirst.com.tw for interested

parties to fully disclose issues

concerning interested parties as

communication channels.

The company has an employee

complaint box and hotline providing

employees with a communication

channel for responses.

There are personnel dedicated to

handling all above-mentioned

channels and responding to issues that

are considered important corporate

social responsibilities.

Nil.

Ⅵ. Is there professional stock

affairs agency appointed by

the company for handling

affairs in relation to

Shareholders’ Meetings?

The company has appointed the Stock

Affairs Agency of Fubon Securities Co.

to handle affairs in relation to

Shareholders’ Meetings and other stock

affair services.

Nil.

Ⅶ.Full disclosure of information:

1. The Company uses its website

to fully disclose information

regarding the Company’s

financial and business

standing as well as for

information management.

The investors’ area of our website

www.medfirst.com.tw has financial,

business and corporate

governance-related information.

Nil.

2. Other methods adopted by the

Company to disclose

information (e.g., translation

of websites into English,

appointment of designated

personnel to collect and

disclose information regarding

the Company, processing

commercial presentations, and

appointment of a

spokesperson system, etc.)

The company has established its

official website in both Chinese and

English. Meanwhile, there are

personnel dedicated to handling

information collection and disclosure

as well as regularly updating the

investors’ areas of the website.

The company has appointment

director Chen, Meng-Hung to serve

as spokesperson, director Wang,

Ting-Jui as deputy spokesperson to

speak on behalf of the company and

ensure that information is disclosed

in a timely and correct manner.

The company will have a presentation

and video with information regarding

Nil.

34

http://www.medfirst.com.tw/

http://www.medfirst.com.tw/

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


the Corporate Conference and will

post it on the investors’ zone of the

official website.

Ⅷ. Is there any other important

information for providing a

better understanding of the

Company’s corporate

governance practices

(including, but not limited

to, employees’ rights,

employees’ welfare, investor

relations, supplier relations,

stakeholders’ rights,

directors’ and supervisors’

training records, the

implementation of risk

management policies and

risk evaluation measures,

the implementation of

customer-relations policies,

and purchasing insurance for

directors and supervisors)?

ˇ (1) Employees’ rights:

The Company pays serious attention

to employees’ rights and has

established a working environment

that emphasizes gender equality. The

Company’s Employee Welfare

Committee organizes and coordinates

various welfare matters, and allocates

pension funds in accordance with

relevant laws.

(2) Employees’ welfare:

The Company regularly provides

medical examinations, and

encourages self-development of its

employees through its education and

training system. The Company’s

Labor Management Committee

enables employees to directly express

their opinions and ensures substantial

communication, and has also

established the employee hotline:

[email protected] to provide

employees with the assistance they

require.

(3) Investor relations:

The Company carries out annual

Shareholders’ Meetings in

accordance with the Company Act

and relevant laws, and provides

shareholders with the opportunity to

raise questions and make motions. To

ensure adequate understanding,

participation and decision-making of

the shareholders regarding the

Company’s major agendas, the

Company has disclosed sufficient and

relevant information on the MOPS

and the Company’s official website,

and has established spokesperson and

acting spokesperson positions as well

as hired designated personnel to

manage shareholders’ suggestions,

Nil.

35

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


doubts and disputes.

(4) Supplier relations:

The Company follows its internal

control system and code of ethical

conduct, emphasizes the

reasonableness of purchasing prices

and aims to establish good working

relationships with suppliers.

(5) Stakeholders’ rights:

The Company maintains good

communications with banks,

employees, consumers and suppliers,

and has established the spokesperson

system and customer hotline to

respect and protect the legal rights of

all stakeholders.

(6) Training of directors and

Servisors: The company had arranged for

directors to attend training courses in

accordance with the “Direction for

the Implementation of Continuing

Education for Directors and

Supervisors of TWSE Listed and

TPEx Listed Companies”. The time

requirement of the training courses

were met in 2018. Shareholders Course Name Hours

Chen, Li-Ju 1.Important

agreements before

M&A and keys to

success after M&A,

M&A practice, and

case analysis

2. Discussion on the

Strategy of

Rewarding

Employees and the

Application of Tools

6

Tsai,

Te-Chung

1.Eastern Leader

Lecture - How to

Realize Values

2. Oriental

Leadership Lecture -

The Role and

Function of

Company

Governance in the

Capital Market

3. Oriental

14

36

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed



Corporate

Everlasting

4. Oriental


Xinnanshan's

Successful

Transformation

Experience


Issues of Human

Resources and M&A

Integration in the

Process of Enterprise

M&A


Strategy of

Rewarding

Employees and the


Wei,

Tzu-Wen


Issues of Human

Resources and M&A

Integration in the


M&A


Strategy of

Rewarding

Employees and the


6

Li, Hung-Hui 1. Discussion on the

legal issues of instant

messaging

2. The way for

directors to lead the

Corporate in the

rapid change of

technology

6

Tseng,

Cheng-Cheng

1 Discussion on the

Issues of Human

Resources and M&A

Integration in the


M&A


Strategy of

Rewarding

Employees and the


6

Yeh, Ching-En 1. Discussion on the

Issues of Human

Resources and M&A

Integration in the


M&A


Strategy of

Rewarding

Employees and the

6

37

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed



Yang,

Shu-Ching


Issues of Human

Resources and M&A

Integration in the


M&A


Strategy of

Rewarding

Employees and the


6

Implementation of risk management

policies and risk evaluation measures

Major proposals related to the

Company’s major business policies,

investments, endorsements and

guarantees, fund loans and bank

financing are evaluated and analyzed

by the responsible departments, and are

implemented in accordance with the

resolutions by the Board of Directors.

The Company’s Audit Office

formulates and executes the audit plan

for a given fiscal year in accordance

with risk outcomes to implement the

required monitoring mechanisms and

control the execution of various risk

management efforts.

(8)Implementation of customer

relationship policies The Company provides 0800

customer service hotline and

mailboxes where the Company

directly communicates with

customers and handles complaints,

problems and feedback, as well as

reviews and improves on such

matters in the Company’s internal

meetings.

(9) Purchase of insurance for directors

and supervisors The Company has been purchasing

insurance for directors and

supervisors from 2015 onwards.

Ⅸ. Please explain the improvement of conditions, and matters and measures to be reinforced as a priority

according to the corporate governance evaluation results published by the Corporate Governance Center of the

38

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Governance Practice

Rules on Listed


Taiwan Stock Exchange Corporation. (a company not subject to evaluation is exempt)

(I) The improved situation of the fifth corporate governance evaluation:

1. On November 7, 2018, the Board of Directors assessed the independence of Certified Public

Accountant and disclosed the assessment procedures in detail in the annual report.

2. The resolution results of the audit committee on major resolutions and the company's handling

of the opinions of the audit committee are disclosed in the annual report.

3. The opinions of the Company’s independent directors on the major resolutions of the Board of

Directors and the Company's handling of such opinions shall be disclosed in the Annual

Report.※

(II) Priority improvement items and measures for 2019:

1. Internal auditors shall obtain such professional certificates as those for international internal

auditors, international computer auditors, or certified public accountants.

2. Plan ahead for the relevant matters for next year’s shareholders' meeting The shareholders'

meeting is expected to be held before the end of May next year.

3. Set up a functional committee other than statutory.

39

III CORPORATE

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(4) Composition, Responsibilities and Operations of the Company’s Remuneration Committee

1. Information on the Remuneration Committee Members

Note1: Please fill in director, independent director or other in status.

Note 2: Put a tick in the appropriate box following the descriptions below of any members who met

the following conditions two years prior to their appointment and during their terms of office:

(1) Not an employee of the company or an employee of an associated party of the company.

(2) Are not directors or supervisors of the company or its affiliated companies. However, an

exception will be made if they are independent directors established in accordance with

the Act or laws of local countries of the company, its parent company and subsidiaries.

(3) Not a natural person shareholder of a company where the person, their spouse or children

hold more than 1% of the outstanding shares, or among the top 10 shareholders or holding

such shares under the title of a third party.

(4) Not a spouse of a relative at the 2nd degree of kinship as stated in the Civil Code, or the

next of kin within the 5th degree of kinship as stated in the Civil Code to any of the

parties mentioned in the previous 3 points.

(5) Not a director, supervisor, employee of a judicial person shareholder holding directly up

to 5% of the total shares connected with Les Enphants or a shareholder holding up to 5%

of the total issued shares.

(6) Not a director, supervisor or manager of a specific corporation or organization in the field

of finance or in a business connected with Les Enphants or a shareholder holding up to

5% of the total issued shares.

(7) Not a professional, sole proprietor, partner, corporation or organization rendering financial,

business or legal services, as a consultant to Les Enphants, or as a proprietor, partner,

director (trustee), manager or spouse thereof.

Title

(Note1)

Condition

Name

Hands-on experience for a minimum of five

years?

Compliance with

independence

（Note2） Number of

companies

where the

person also

acts as an

independent

director

Remarks

文

完

At least a lecturer

from a private or

public college or

university in the

discipline of business,

law, finance,

accounting

or another subject

required by the

Company

Passed the public

examination and

licensed in a special

profession such as a

judge, public

prosecutor, attorney,

accountant or

otherwise as required

by the Company

Required

experience

In business,

law, finance,

accounting

or otherwise

as required

by the

Company

1 2 3 4 5 6 7 8

Independent

director

Tseng,

Sheng-Chen

g

- - 0 -

Independent

director

Yeh,

Ching-En - - 0 -

Independent

director

Yang,

Shu-Ching 0 -

40

III CORPORATE

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(8) Do not fall under any circumstance stipulated in Article 30 of the Company Law.

Note 3: Please explain if the director or supervisor is satisfactory pursuant to Paragraph 5 of Article 6

of the “Regulations Governing the Appointment and Exercise of Powers by the Remuneration

Committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the

Counter”.

2. Status of the Remuneration Committee

(1) There are 3 members in the Remuneration Committee.

(2) The tenure of office of the members is from the 14th June 2017 to the 13th June 2020. The

Remuneration Committee convened 2 meetings (A) in the previous year (2018). The

qualification and attendance of members are as follows:

Title Name Attendance in

Person (B) By Proxy

Attendance Rate (%)

(B/A) Remark

Convener Tseng, Sheng-Cheng 2 0 100% - Committee

Member Yeh, Ching-En 2 0 100% -

Committee

Member Yang, Shu-Ching 2 0 100% -


1.If the Board of Directors declines to adopt or modifies a recommendation of the Remuneration

Committee, it should specify the date of the meeting, the session, the content of the motion, the

resolution adopted by the Board of Directors, and the Company’s response to the Remuneration

Committee’s opinion

Meeting date Meeting stage Contents of agenda

Opposite or

reserved

opinions

from

independent

directors

2018/3/23 3th Meeting of

3th Board

1. Salary and remuneration of directors and

managers in the 2017 annual financial

statements

NA

opinions from independent directors:None

◎Corporate dealing with opinions from

independent directors:None

◎Resolution result: Except for the avoidance of

the following relevant personnel due to interest

conflict, it was approved by other attending

members.

1. The Director (Tsai, Te-Chung, Cheng,

Chih-Yuan) should avoid discussion and

resolution on distribution of remuneration for

managing emplovees

2018/12/28 4th Meeting of

3th Board

1. The company's 2019 annual director

remuneration proposal. NA

2. The company's 2019 annual chairman's

41

III CORPORATE

GOVERNANCE

remuneration proposal.

3. The company's 2019 annual manager

remuneration proposal.

◎ Opinions from independent directors:None

◎Corporate dealing with opinions from

independent directors:None

◎Resolution result: Except for the avoidance of

the following relevant personnel

due to interest conflict, it was

approved by other attending

members.

1. The Director (Chen, Li-Ju, Tsai, Te-Chung,

Cheng, Chih-Yuan)should avoid discussion and

resolution on distribution of remuneration for

managing emplovees

2. To implement Directors' refraining from interest-related proposals, a list of the directors' names,

the contents of the proposals, the reasons for refraining, and participation in the voting shall all be

stated: if the directors involved in a proposal related to their own interests have already refrained

from the vote, refer to Item 1 above.

3. Responsibilities of the Remuneration Committee

(1) The Remuneration Committee shall exercise good duty of care as an administrator in

faithfully executing its official powers as listed below, and shall submit recommendations for

deliberation to and by the Board of Directors:

(A) Formulate and regularly review the performance review and remuneration policy, and

the system, standards and structure for directors, supervisors and managerial officers.

(B) Periodically evaluate and create details of the individual remuneration of directors,

supervisors and managerial officers.

(2) When executing the official powers stated in the preceding paragraph, the Remuneration

Committee shall follow the principles listed below:

(A) The Remuneration Committee shall ensure that the Company’s remuneration

arrangements comply with relevant laws to allow the Company to attract talented

personnel.

(B) With regards to the performance assessment and remuneration of directors, supervisors

and managerial officers of the Company, the Remuneration Committee shall refer to

the general salary ranges and levels in the industry and take into consideration the

reasonableness of the correlation between remuneration and individual performance, as

well as the Company’s business performance and exposure to future risks.

(C) The Remuneration Committee shall not produce an incentive for the directors or

managerial officers to engage in activities to increase their remuneration that it exceeds

the risk threshold of the Company.

(D) The Remuneration Committee shall take into consideration the characteristics of the

industry and the nature of the Company’s operations when determining the ratio of

bonus payout based on short-term performance of directors and senior management as

well as the time of payout and changes to remuneration.

42

III CORPORATE

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(E) The Remuneration Committee members shall not participate in the discussion of and

voting for individual employee’s remuneration.

(3) “Remuneration” as used in the preceding two paragraphs refers to cash compensation, stock

options, stock bonus, retirement benefits or severance pay, allowances or stipends of any

description, and other substantive incentive measures. Its scope shall be consistent with that

of the remuneration paid to directors, supervisors and managerial officers in accordance with

the Regulations Governing Information to be published in Annual Reports of Public

Companies.

(4) When deliberating the recommendations from the Remuneration Committee, the Board of

Directors shall give comprehensive consideration to matters including the amount of

remuneration, the payment method and the Company’s exposure to future risk.

(5) Should the Board of Directors decline to adopt, or modify, a recommendation of the

Remuneration Committee , the Remuneration Committee shall require the consent of a

majority of the directors in attendance at a meeting attended by two-thirds or more of the

entire board, during which the resolution shall include comprehensive consideration under

the preceding paragraph and shall specifically explain if the remuneration in question

exceeds the recommendation of the Remuneration Committee in any way.

(6) If the remuneration passed by the Board of Directors exceeds the recommendation of the

Remuneration Committee , the circumstances and cause for the declination or modification

shall be specified in the Board of Directors’ meeting minutes, and shall be publicly

announced and reported on the website designated by the competent authority within two (2)

days of the date of passing the resolution by the Board of Directors.

(7) If decision-making and handling of any matter relating to the remuneration of directors and

managerial officers of the Company’s subsidiary is delegated to the Company’s subsidiary

but requires ratification by the Board of Directors of the Company, the Company's

Remuneration Committee shall be asked to make recommendations before the matter is

submitted to the Board of Directors for deliberation.

(5) Corporate Social Responsibility:

Descriptions

Implementation Status(Note) Difference and

Causes of

Corporate Social

Responsibility Yes No Summary(Note)

Ⅰ.Implementation of Corporate Governance

1. Has the Company declared its

corporate social responsibility

policy and examined the results

following implementation?

ˇ The Company has established the

Corporate Social Responsibility Best

Practice Principles. The Company

shall fulfill its corporate social

responsibility in the course of

business operations to meet the

international trend of balancing

business development with

environmental concerns, social

Nil.

43

III CORPORATE

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Descriptions


Causes of

Corporate Social


responsibility and corporate

governance.

2. Does the Company provide

educational training on


on a regular basis?

The Company regularly and

sporadically explains the activities

and direction of corporate social

responsibility practices in various

meetings (e.g. operations meetings,

store manager monthly meetings,

and labor management meetings).

Nil.


exclusively (or concurrently)

dedicated first-line managers

authorized by the Board of

Directors to be in charge of

proposing corporate social

responsibility policies and

reporting such policies to the

Board of Directors?

The general manager office of the

company is overall department

responsible for proposing these

policies. The general manager leads

officers from all departments to

propose the annual plan for

corporate social responsibility. The

annual plan includes:

1. Expanding upon the use of green

building materials (engineer

dept.)

2. Improving the quality of indoor

air (engineer dept.)

3. Introducing energy saving

equipment and electronic

countersign system (MIS)

4. Continuous charity donation

(general manager office)

5. Organizing 10 charity activities

(business division)

The report on the implementation

of corporate social

responsibilities (carrying out

corporate governance,

sustainable environmental

development, public welfare

maintenance, information

Nil.

44

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


disclosure reinforcement) was

submitted to the Board of

Directors on the 14th August

2017.

The implementation status is as

follows:

1. Carrying out corporate

governance:

- The company actively complies

with the corporate governance

evaluation promoted by the

Financial Supervisory

Commission. The ranking of

company in the 3rd

evaluation

result was in the top 5%.

2. Sustainable environmental

development:

- The Company uses energy saving

lightbulbs

- The Company recycles racks and

counters

- The Company has introduced an

electronic countersign system

- The Company accepts goods

delivered using a tablet and takes

inventories using machines

- The Company uses low-pollution

electronic pallet trucks and lifts

- The Company places needles,

and waste batteries in appropriate

recycling bins.

3. Maintain public welfare:

- The Company provides a good

working environment

- The Company keeps employees

in a good physical and

psychological health and safety

work environment

- The Company provides rich

45

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


employee welfares and clear

promotion channels

- The Company provides complete

and professional customer

services

- The Company regularly

organizes charity activities, and

provides low-income scholarship

4. Reinforce information

disclosure:

- The Company discloses company

information in the annual report,

MOPS and investors’ zone of the

Company website

The Company simultaneously posts

material information in English and

established the investors’ zone in

English on the website in 2016

4. Has the Company declared a

reasonable salary remuneration

policy, and integrates the

employee performance appraisal

system into the corporate social

responsibility policy, as well as

established an effective reward

and disciplinary system?

The Company has stipulated staff

rules and remuneration policies,

performance incentives, and reward

& penalty standards in order to share

the Company’s profits and allow our

colleagues' salary to grow together

with company operations. In the

second case of the discussion item

of the 13th meeting of the 10th

Board of Directors, Article 33 of

these Articles of Incorporation

stipulates that “If the Company

makes a profit in a year, it should

draw 1% to 15% for the

remuneration of employees”; the

resolution was passed to grant 4% of

the pre-tax net profit, for a total of

NT$6,223,476 for employee

remuneration, in accordance with

the performance assessment system

and corporate social responsibility

Nil.

46

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


policy.

II. Developing a sustainable environment

1. Does the Company endeavor to

more efficiently use all resources

and renewable materials that

have lower impact on the

environment?

To go paperless and enhance

operational efficiency, the Company

has continuously promoted the use

of electronic platforms among

suppliers to make orders and

payments, stock check machines and

tablets for incoming stock

inspections and acceptance,

electronic forms for document

exchange between departments,

electronic receipts at retail stores

nationwide, and reuses recycled

counter shelves in the event retail

stores close down.

Nil.


proper environmental

management systems based on

the characteristics of the industry

in which it is involved?

The Company serves as a medical

devices and supplies distributor and

does not have its own manufacturing

process, hence it does not produce

waste such as waste water or gas

emissions from a production plant,

etc. The Company’s retail stores

have recycling bins to make

recycling more convenient and so

the Company’s environmental

protection efforts have been

positive.

Nil.

3. Does the Company monitor the

impact of climate change on its

operations and conduct

greenhouse gas inspections, as

well as establish company

strategies for energy

conservation and carbon

reduction?

Retail Stores:

1. Timer devices are used in retail

stores to save energy and

automatically adjust the

temperature of air conditioners

and electric fans are also used to

save energy.

2. Products with environmental

protection and energy saving

labels, such as T5 and LED

lightbulbs and light fixtures,

inverter air-conditioners and air

doors are used in new retail

Nil.

47

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


stores.

Warehouse:

1. A thermostatic storage area is

installed with an automatic

rotating door. Roof and walls of

normal temperature areas are

installed with ventilation

equipment where drum fans and

exhausts fans are installed to

allow convection flow to create a

naturally-ventilated environment

to help reduce the power

consumption of air-conditioners

and electric fans.

2. The dormitory shower water

heater uses solar energy

technology to save more energy

and reduce the carbon footprint.

3. Electric forklifts and pallet trucks

are used to prevent pollution

from gas-powered machines.

Maintenance is regularly carried

out on batteries to maintain

charging efficiency and prevent

power loss.

4. Statistics on the total carbon

emissions of the whole store in

the past two years:

Year

Total

carbon

emission

Total

store

quantity

Total store

evaluation

quantity

Average

carbon

emissio

n (tons/

pyeong)

2017 5,017 230 5,991 0.84

2018 4,446 240 5,611 0.79

The Company belongs to the

channel retail industry, and uses

only electricity and tap water, with

no emissions of greenhouse gases

48

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


or waste. The Company's energy

saving and carbon reduction target

is to reduce carbon emissions per

ping of the store by 5% per year.

In 2018, the total carbon emissions

of the Whole Retail Store was

4,446 metric tons. The carbon

emissions calculated by the

average number of pings were

0.79 (metric tons per ping), which

was 5.9% lower than that of 0.84

(metric tons per ping) in 2017.

Therefore, the Company’s energy

saving and carbon reduction target

was reached in 2018.

Ⅲ. Maintaining Social Public Welfare

1. Has the Company created

appropriate management policies

and procedures in accordance

with relevant regulations and the

International Bill of Human

Rights?

The Company abides by relevant

labor laws and international human

rights conventions and has

formulated the “Corporate Social

Responsibility Best Practice

Principles”. These principles are

disclosed on the Company's website

and public information observation

stations, and the Company thus

fulfills its responsibilities for

protecting human rights, such as no

restrictions on gender, race, marital

status, age, height, or weight of the

recruitment target, but instead pays

attention to employment

opportunities for the physically and

mentally handicapped and other

disadvantaged groups, while also

developing complete systems for

appointments, compensation,

training, assessment, promotion, and

welfare in order to protect the

Nil.

49

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


legitimate rights and interests of

employees. Every quarter, a labor

meeting is held to maintain the

two-way communication with

employees.

2. Has the Company established an

employee hotline or grievance

procedure to handle complaints

to help reach an appropriate

solutions?

The Company has established the

Regulations Governing the

Management of Grievances and

Whistleblowing. The Company has

also provided a hotline number,

e-mail address and other channels

for reporting grievances and

whistleblowing, and uses these

procedures to handle matters

accordingly.

Nil.

3. Has the Company provided a

healthy and safe work

environment and does it organize

training on health and safety for

its employees on a regular basis?

1. As the distribution warehouse

uses lifts, pallet trucks, and air

pressure the area can become a

hazardous place so the

distribution warehouse has a fire

inspection and checks equipment

on a weekly basis to ensure the

work environment is safe for all

employees.

2. The business scope of the

company covers retail sale and

mall stores. To ensure safety in

the workplace and implement

disease control, procedures are

followed on a monthly basis to

improve fire prevention

knowledge and the emergency

response of employees.

Meanwhile, pest control

operations are conducted

regularly to provide a good work

environment.

3. Fire equipment checks and fire

drills are carried out on a

Nil.

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III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


semi-annual basis.

4. Health checks for employees are

organized on an annual basis.

5. Fire insurance and public

liability insurance are purchases

for all retail stores and shopping

malls in accordance with the

relevant laws.

6. Door access control, and fire and

carbon dioxide alarms are

installed to provide employees

with a safe and secure work

environment.

4. Has the Company set up a

communication channel with

employees, as well as reasonably

inform employees of any

significant changes in operations

that may have an impact on

them?

The Company regularly or

sporadically discloses information

during store manager monthly

meetings, meetings held within each

department, operations meetings,

labor management meetings,

employee welfare committee

meetings, elite meetings and others

using the Company’s daily real-time

information system as an effective

communication channel to distribute

the Company’s operations policies.

Nil.

5. Has the Company provided its

employees with a plan for their

career development and training

sessions?

The Company provides complete

education and training courses, such

as induction education and training

for new hires, store management

associate training, and store

manager/team leader training and so

on, and conducts on-the-job training

at the Company’s head office/retail

stores, trains employees so they can

develop their professional skills and

provides a high-quality service so

employees are able to acquire new

knowledge, thus ensuring they can

Nil.

51

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


provide high-quality service while

ensuring their own

self-development.


any consumer protection

mechanisms and appeal

procedures regarding research

development, purchasing,

production, operations and

service provision?


membership management system.

Policies regarding consumer rights

and adherence to guidelines on

personal data protection have been

clearly stated in the membership

application form, and by giving

consent on this form it complies

with the requirements of relevant

laws. Information regarding

promotional activities and customer

service (e.g. rental from location A

but return to location B, purchase

from location A but return to

location B) is also published in

stores, on the official website and

DM, etc. For any customer disputes,

customers may a file complaint

through the customer service hotline

(0800-028-328) or our website.

The relevant internal control system

and regulations for reward and

punishment concerning customer

service have also been established.

Nil.

7. Does the Company advertise and

label its goods and services

according to relevant regulations

and international standards?

The Company carries out product

and service marketing and labeling

in accordance with relevant laws,

and has established a related internal

control system to carry out

necessary controls.

Nil.

8. Has the Company evaluated

records of suppliers’ impact on

the environment and society

before entering into business

partnerships?

The Company pays serious attention

to environmental and social

protection and selects companies

that comply with the ethical

standards of the Company. As of

Nil.

52

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


2016, the Company evaluates the

effect of original equipment

manufacturers (OEMs), with which

the Company has recently

established a new cooperation, on

environmental and social protection,

and shall organize sporadic visits to

these companies to assess their

competence.

9. Do the contracts between the

Company and its major suppliers

include termination clauses

which enter into legal force

should the suppliers breach the


policy and cause significant

impact on the environment and

society?

The company has been requesting

associate suppliers to sign

provisions of corporate social

responsibilities as of 2016. The

company has notified the associate

suppliers via email and reinforced

these controls as well as requested

improvement from those suppliers

whose standards have been lacking.

In the event a supplier violates the

corporate social responsibilities

policies the result of which was a

material impact to the environment

and society, correction of the

violation must be made according to

the contract. Business cooperation is

terminated in severe cases.

Nil.

Ⅳ. Enhancing the Disclosure of Information

1. Does the company disclose

relevant and reliable information

regarding its corporate social

responsibility on its website and

the Market Observation Post

System (MOPS)?

An investor’s area has been

established on the Company’s

official website, and information is

disclosed there regarding the

Company’s corporate social

responsibility as required by law,

such as the Company’s Corporate

Social Responsibility Best Practice

Principles and the status of its

implementation.

Nil.

53

III CORPORATE

GOVERNANCE

Descriptions


Causes of

Corporate Social


Ⅴ. If the company has established “practice rules of corporate social responsibilities of listed

companies”, please describe the differences between operations and established rules practiced:

the necessary details have been provided in the table above.

Ⅵ. Other important information to facilitate a better understanding of the Company’s corporate social

responsibility practices:

(1)Environmental Protection:

1. The Company serves as a distributor of medical and healthcare products and does not have

its own manufacturing process, therefore it does not produce waste from a manufacturing

plant. Although the Company has yet to participate in the ISO14001 environmental

management system certification, the Company has obtained the ISO9001 product quality

management system certification.

2. Since 2016, the Company has organized field visits and evaluation on newly-added OEMs

with regards to their implementation of corporate social responsibility so that the Company

can verify the effect of these manufacturers on the environment and society.

(2) Social Participation, Social Contributions, Social Services and Social Welfare:

1. Health Lecture:

The Company holds one or two lectures per month in each store. A total of 18 lectures were

held in 2018. The topics of the lectures are as follows:

(1) Selection of suitable assistive devices

(2) Mom classroom

(3) Professional protective gear lecture

(4) Diabetes diet lecture

(5) Long-term care subsidy lecture

2. Health checks:

The Company and its suppliers collaborated to organize health check activities (e.g. bone

assessments) at various retail stores. A total of 57 events of this nature were held.

3. Care in a hundred communities:

The company has been organizing [neighborhood care, FirstMed around you] activities since

2015, with a total of 146 events held in 2018. The company has taken roots in communities

of all counties and cities, providing care to patients in communities, supporting tools, tests

and health education services.

4. Public welfare:

Positively participate in a variety of activities sponsored by public benefit groups and assist

in exposing the public benefits of DM.

5. Poverty Scholarship:

Poverty Scholarship is established perennially, to help the poverty student receiving the

equal education.

(3) Consumer rights: The company has a 24-hour customer service hotline and special message on our

website. The general manager office is responsible for handling customer complaints.

Ⅶ. A clear statement shall be made below if the corporate social responsibility reports were verified

by external certification institutions: None

54

III CORPORATE

GOVERNANCE

(6) Ethical Corporate Management and Its Implementation

Descriptions

Implementation Status (Note) Difference and

Causes of Ethical

Corporate

Management Yes No Summary

Ⅰ. Establishing Ethical Corporate Management Policies and Solutions

1. Has the Company declared its

ethical corporate management

policies and procedures in its

guidelines and external documents,

as well as received support from the

Board to implement such policies?


Ethical Corporate Management

Best Practice Principles, which

clearly describe the Company’s


policies, practice and

commitment, and can be found on

the Company’s official website

and MOPS.

Nil.


policies to prevent unethical

conduct with clear statements

regarding relevant procedures,

guidelines of conduct, punishment

for violation, process of appeal, and

the commitment to implement these

policies?

The Company’s Ethical Corporate

Management Best Practice

Principles clearly state various

prohibited unethical behavior, the

procedure for whistle-blowing

and the disciplinary system,

which are implemented in the

operations of each department.

Nil.


appropriate precautions against

highly-potential unethical conduct

or listed activities stated in Article

2, Paragraph 7 of the Ethical

Corporate Management

Best-Practice Principles for

TWSE/TPEx Listed Companies?

To carry out business operations

in good faith, the Company has

established an effective

accounting system and internal

control system. Internal auditing

personnel periodically review

compliance of the preceding

systems. No violation was found

in 2018.

Nil.

Ⅱ. Implementing Ethical Corporate Management

1. Has the Company assessed the

ethical record of its business

partners and included ethics-related

clauses in business contracts?

Supply contracts signed by the

Company and its suppliers clearly

state that both parties shall

comply with the principles of

ethical corporate management.

Should these principles be

violated, the violating party shall

be liable for such actions.

Nil.

55

III CORPORATE

GOVERNANCE

Descriptions


Causes of Ethical

Corporate


2. Has the company organized a

ull-time (or part-time) department

delegates by the Board to promote

ethical management and to

regularly report the status of its

implementation to the Board?

The general manager office is the

department responsible for

promoting ethical management.

It reports the status of its

implementation to the Board on a

yearly basis. The content of the

report to the Board on the 14th

August 2017 was as follows:

1. The Board passed the “rules of

ethical management” on the

20th March 2015.

2. Moral promotion:

a. Promote ethical

management and moral

standards with associate

suppliers and enter into an

agreement of the principles

of good faith with suppliers.

b. Promote the principles and

policies of good faith in

regular or spontaneous

meetings of the company

(operations meetings,

regional manager meetings,

monthly store meetings,

etc.)

3. Reporting system:

a. Establish the “regulations

governing complaints or

reporting”.

b. Set up the reporting hotline

(0800-028-328) and

reporting mailbox

([email protected]).

c. Conceal the identity of the

informant so people may

report content in

confidence.

d. Conduct an investigation

Nil.

56

mailto:[email protected]

III CORPORATE

GOVERNANCE

Descriptions


Causes of Ethical

Corporate


based on standard

procedures.

4. Fraud management:

No cases of fraud, bribery, or

insider trading were found in

2018.

5. Information disclosure:

a. Disclose the business

culture and ethical

management on the website

– investors’ zone.

b. Disclose the company's

"Code of Integrity" to the

public information

observatory.

The company conducted an

one-hour training program of

integrity management at the

business meeting on August 10,

2018. The theme is "Integrity

Management Principles and

Policies". The total number of

participants in the training is 21;

the company conducted an

one-hour training program of

integrity management at the

monthly meeting of the store on

August 25, 2018. The theme is

"Integrity Management Principles

and Policies". The total number of

participants in the training is 311

(93 in North 1st District, 71 in

North 2nd District, 47 in Central

District, 47 in South 1st District

and 53 in South 2nd District).


policies to prevent conflicts of

interest and provided appropriate

communication channels to




Whistle-Blowing. The Company

Nil.

57

III CORPORATE

GOVERNANCE

Descriptions


Causes of Ethical

Corporate


implement such policies? has also provided a hotline

number, an e-mail address and

other communication channels for

reporting grievances and

whistle-blowing, and uses these

procedures to handle matters

accordingly.


effective systems for both

accounting and internal control to

facilitate ethical corporate

management, and are they audited

by either internal auditors or CPAs

on a regular basis?

The Company has established a

comprehensive accounting system

and internal control system in

accordance with relevant laws. In

addition to the internal auditors

regularly carrying out audit

activities in accordance with the

audit plan, CPAs regularly carry

out auditing of the Company’s

internal control system on an

annual basis. No violation of laws

or policies were discovered in

2018.

Nil.

5. Does the Company regularly hold

internal and external educational

training on ethical corporate

management?

The Company regularly or

spontaneously explains the

activities and direction of the


principles and policies during

meetings (e.g. operations

meetings, store manager monthly

meetings, and labor management

meetings).

Nil.

Ⅲ. Operating Status of the Whistle-Blowing System of the Company

1. Has company established a

practical reporting and reward

system, a convenient reporting

channel and appointed dedicated

personnel to whom to report?




Whistleblowing. The Company

has also provided a hotline

number, an e-mail address and

other channels for reporting

grievances and whistle-blowing,

Nil.

58

III CORPORATE

GOVERNANCE

Descriptions


Causes of Ethical

Corporate


and uses these procedures to

handle matters accordingly. There

were no whistle-blowing cases

discovered in 2018.


standard operating procedures for

confidential reporting and

investigating cases of accusation?




Whistleblowing, which clearly

states the Company’s standard

operating procedure for

investigations and confidentiality

procedure.

Nil.

3. Has the company taken action to

protect the informant from being

unduly punished due to reports?

The company has established the

“regulations governing

complaints and reports” as well as

the confidentiality procedure

protecting the informant from

being unduly punished.

Nil.

Ⅳ. Enhancing the Disclosure of Information

1. Has the Company disclosed its


policies and the results of its

implementation on the Company’s

official website and MOPS?

The Company has set up its own

official website to disclose

information such as the

Company’s corporate culture and

business philosophy, and has also

disclosed the Company’s ethical

corporate management best

practice principles on MOPS.

Nil.

Ⅴ. If the company has established “practice rules of corporate social responsibilities of listed

companies”, please describe the differences between operations and established rules practiced:

necessary details have been provided in the table above.

Ⅵ.Other important information to facilitate a better understanding of the Company’s ethical

corporate management policies (e.g., the review and amendment of the Company’s ethical corporate

management policies): TPEx circulated the letters of JGJZ Document No. 1030029951 dated the

10th

November 2014, JGJZ Document No. 10300361062 dated the 31st December 2014, and

JGJZ Document No. 10400020852 dated the 4th

February 2015, and submitted sections of

Articles of the “Corporate Governance Best Practice Principles for TWSE/TPEx Listed

Companies” and the amendment to the “Sample Template for OO Procedures for Ethical

Management and Guidelines for Conduct”. The company passed the amendment to the

“Principles of Ethical Management” by the Board of Directors on the 20th

March 2015 to meet

regulations and current operations conditions.

59

III CORPORATE

GOVERNANCE

(7) Method of disclosure and inquiries of Corporate Governance Best-Practice Principles:

The Board of Directors passed the “Practice Rules of Corporate Governance” on the 15th June

2016 to implement business practices related to corporate governance.

(8) Other important information that can enhance the understanding of the status of the

implementation in relation to the cooperate governance of the Company:

The ranking of company in the 5rd evaluation result of corporate governance was in the top 5%

( 34 companies made the top 5%) from among 686 TPEx listed companies.

(9) Implementation status of the Company’s internal control system:

1. Internal control declaration: please refer to page 134.

2. Where a CPA has been hired to carry out a special audit of the internal control system, this

must be included in the CPA audit report: none.

(10) For the most recent fiscal year and during the current fiscal year up to the date of printing of

the Annual Report, any sanctions disclosed imposed in accordance with the Company Law or

its internal personnel for violations of the provisions of the internal control system, significant

deficiencies or the status of any efforts made to make improvements: none.

(11) The important resolutions of shareholders and board meeting in recent years and as of the

date of publication:

1. Major resolutions adopted during a Shareholders’ Meeting:

Date of

Meeting Major Resolution Implementation Status

2018/06/14

Approve of proposal concerning

2017 Business Report and

Financial Statements and

profit distribution.

After passing the resolution, the cash dividend

of NT$ 2.6 per share was issued on August 3,

2018, a total of NT$73,424,000.

2. Major Resolutions adopted during a Board of Directors’ Meeting:

Date of

Meeting Major Resolution

2018/3/23

1. Passed the proposal of salary and remuneration of directors and managers

related to the 2017 annual financial.

2. Proposal for the company's 2017 employee remuneration and directors'

remuneration distribution.

3. Proposal for the company's 2017 financial report and business report

4. Proposal for the company's 2017 annual surplus allocation

5. Statement of the company's 2017 internal control system

6. New logistics warehouse automation system equipment purchase

7. E.Sun Bank Credit Line Renewal

8. Endorsement Guarantee provided by E.Sun Bank to the subsidiary

EXACTITUDE BIOTECH CO., LTD.

9. Hua Nan Bank Credit Line Renewal

10.The relevant matters of the 2018 Annual General Meeting of Shareholders

convened by the Board of Directors.

60

III CORPORATE

GOVERNANCE

2018/5/4 1. Finance and Accounting Supervisor transaction

2018/6/14

1. Cash dividend distribution date proposal.

2. Conversion price adjustment of unsecured conversion of the Company’s

corporate bond for the first time in Taiwan

2018/8/8

1. Replacement of the company Certified Public Accountant.

2. Consolidated financial statement of the Company in the second quarter of 2018

3. Endorsement Guarantee provided by E.Sun Bank to the subsidiary Baodean Co.,

Ltd.

2018/8/27 1. The selection of the manufacturer of the company's new logistics warehouse

construction project.

2018/11/7

1. Internal audit plan for 2019

2. Assessment of Certified Public Accountant's competence and independence.

3. Replacement of the company Certified Public Accountant.

4. Consolidated financial statement of the Company in the third quarter of 2018

2018/12/28

1. Director remuneration proposal of the Company for 2018.

2. Chairman remuneration proposal of the Company for 2019.

3. Manager remuneration proposal of the Company for 2019.

4. Annual operational plan of the Company for 2019.

5. The company's 2018 annual internal control system statement

6. Far Eastern Int’l Bank loan amount.

2019/2/26

1. Proposal for the salary and remuneration of directors and managers of the

company in 2018.

2. Proposal for the company's 2018 employee remuneration and directors'

remuneration distribution.

3. The company's 2018 financial report and business report

4. Proposal for the company's 2018 annual surplus allocation

5. The company's 2018 annual internal control system statement

6. Cathay United Bank medium term loan.

7. Cathay United Bank loan amount.

8. Yuanta Bank loan amount.

9. DBS Bank loan amount.

10.Amendment of the Company’s “Articles of Incorporation”.

2019/2/26

11.Amendment of the “Operational Procedures for Acquisition and Disposal of

Assets” of the Company and its subsidiaries.

12.Annual General Meeting of Shareholders convened by the Board of Directors.

61

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III CORPORATE

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(12) In the most recent year and as of the printing date of the Annual Report, if the director or

supervisor has different opinions on the important resolutions passed by the board of directors

and has a record or written statement, the main content: none.

(13) The summary of the resignation of the company's chairman, general manager, accounting

supervisor, financial supervisor, internal audit supervisor and R&D supervisor in the most

recent year and as of the printing date of the Annual Report:

Title

Name

Arrival Date

Leaving Date Reasons for

Resignation or Dismissal

Accounting

and

Finance

Supervisor

Chen,

Meng-Hung

2010/9/27

2018/5/4

Transfer job

Ⅴ.Information on CPA professional fees

Class interval table of information of accountant’s public expenses

Accounting CPA Firm

CPA Period Covered Audit Remark

Deloitte & Touche Chen, Hui-

Ming

Weng,

Po-Jen 2018.01.01-2018.03.31 Due to internal

restructuring of the CPA

Deloitte & Touche Chen, Hui-

Ming

Kuo,

Nai-Hua 2018.04.01-2018.09.30 Due to internal

restructuring of the CPA

Deloitte & Touche Hsieh,

Ming-Chung Kuo,

Nai-Hua 2018.10.01-2018.12.31 -

Unit: NT$ thousand

Item of public expense

Amount class interval

Audit

public

expense

Non-audit

public

expense (Note)

Total

1 Under NTD$ 2,000,000 - - -

2 NTD$ 2,000,000 (included)-NTD$ 4,000,000

-

-

-

3 NTD$ 4,000,000 (included)-NTD$ 6,000,000

4,100 - -

4 NTD$ 6,000,000 (included)-NTD$ 8,000,000

- - -

5 NTD$ 8,000,000 (included)-NTD$ 10,000,000

- - -

6 Above NTD$ 10,000,000 (included) - - -

Note：None

63

III CORPORATE

GOVERNANCE

(1) When the non-audit fees paid to the CPA, to the CPA of the CPA, and to any affiliated

enterprise of the CPA are equivalent to one quarter or more of the audit fees paid to them,

the amounts of both audit and non-audit fees and the details of the non-audit services shall

be disclosed:

CPA Accountants Audit public

expense

Non-audit public expense Period Covered

Audit Remark

System

Design

Business

registration

Human

Resources

Other

(Note) Total

Deloitte &

Touche

Chen,

Hui-Ming

Weng, Po-Jen

4,100 - - - - -

2018.01.01

-2018.03.31 -

Chen,

Hui-Ming

Kuo, Nai-Hua

2018.04.01

-2018.09.30

Hsieh,

Ming-Chung

Kuo, Nai-Hua

2018.10.01

-2018.12.31

Note：None

(2) Changes to the CPA, and the audit fees paid for the fiscal year to which such a change

applies are lower than those for the previous year, the reduction in the amount of audit

fees is calculated: none

(3) Audit fees paid for the current year are lower than those for the previous fiscal year by 15

percent or more: none

64

III CORPORATE

GOVERNANCE

Ⅵ.Information on the replacement of the CPA (1) Regarding the previous CPA

Replacement Date 8th

Aug. 2018/7th

Nov. 2018

Replacement reasons and

explanations Due to internal restructuring of the CPA

State whether the Company

terminated the CPA or the CPA did

not accept the appointment

Party situation

Accountants The Company

Termination of

appointment

Not applicable No longer accepted

(continued)

appointment

Comments and reasons (except for

unqualified issues) in the audit

reports during the previous two (2)

fiscal years

No

Differing opinion from the issuer Yes Accounting principles or

practices

Disclosure of financial

statements

Audit scope or steps

Other

No V

Description

Other Matters Disclosed

(Item 1-4 to 1-7 of Paragraph 6 of

Article 10 of these Rules to be

disclosed)

No

(2) Regarding the successive CPA:

CPA Firm Deloitte & Touche

CPA Chen, Hui-Ming Kuo, Nai-Hua

Date of appointment 2018.08.08(Board resolution date)

CPA Hsieh, Ming-Chung Kuo, Nai-Hua

Date of appointment 2018.11.7 (Board resolution date)

Consultation results and opinions on accounting

treatments or principles with respect to the specified

transactions and the company's financial reports that the

CPA might issue prior to the engagement

None

The successive CPA’s written opinion of disagreement

of the CPA None

III CORPORATE

GOVERNANCE

(3)The preceding CPA’s reply letter to Item 1 and Item 2-3, Paragraph 6, Article 10 of these

Guidelines: none

Ⅶ.The Company’s chairman, general manager, or any managerial officer in charge of finance

or accounting matters who has held a position in the CPA of the CPA or an affiliated

enterprise in the most recent fiscal year, where his or her name, title, and duration of his or

her service at the CPA of the CPA or at the affiliated enterprise should be disclosed: None

Ⅷ. Transfer of equity interests and/or pledge of or change to equity interests by a director,

supervisor, managerial officer, or shareholder with a stake of more than 10 percent during

the previous fiscal year or during the current fiscal year up to the date of printing of the

Annual Report:

(1) Circumstance of changes to the equity of directors, supervisors, managers and substantial

shareholders

Unit:Share

Title Name

2018 Up to now April 20th,

2019

Shares

holding

Increased

(decreased)

shares

Shares

pledging

Increased

(decreased)

shares

Shares

holding

Increased

(decreased)

shares

Shares

pledging

Increased

(decreased)

shares

Chairman Chen, Li-Ju -40,000 - - -

Director Corporate

shareholder, Major

shareholder

Lead

Investment

Limited - - - -

Director Corporate

representative,

General Manager

Tsai,

Te-Chung -40,000 - - -

Director Corporate

representative,

Deputy General

Manager

Wei,

Tzu-Wen - - - -

Directors Li,

Hung-Hui - - - -

Independent

Director Tseng,

Sheng-Che

ng - - - -

Independent

Director Yeh,

Ching-En - - - -

Independent

Director Yang,

Shu-Ching - - - -

Assistant

Vice President

Chen,

Meng-Hung - - -

Assistant

Vice President

Wang,

Ting-Jui - - - -

65

III CORPORATE

GOVERNANCE

Title Name

2018 Up to now April 20th,

2019

Shares

holding

Increased

(decreased)

shares

Shares

pledging

Increased

(decreased)

shares

Shares

holding

Increased

(decreased)

shares

Shares

pledging

Increased

(decreased)

shares

Assistant

Vice President

Cheng,

Chih-Yuan - - - -

Financial and

accounting

supervisor

Kao,

Shih-Lung

Note: Assistant Vice President Cheng, Chih-Yuan resigned the office on 2019/2/1.

(2)Equity transfer information: the counterparty to which the directors, supervisors, managerial

officers and shareholders holding ten (10) percent or more of shares transfer their shares is

a related party: none

(3) Equity pledge information: none

66

III CORPORATE

GOVERNANCE

Ⅸ.Information regarding the spouse or relatives within the second degree of kinship and

relationship between any of the top ten shareholders

April 14th 2019; Unit : Share

Name

Present shareholding

Present shareholding

of spouse & minor

children

Shares held in

another’s

name

Name and Relationship Between the Company’s

Top Ten Shareholders, or Spouses or Relatives

Within the Second Degree of Kinship Remark

Stock

(shares) %

Stock

(shares) %

Stock

(shares) % Title or(Name) Relation

Lead Investment Limited 9,252,238 32.76% - - - - Tsai, Te-Chung Director of Lead Investment

Limited -

Lead Investment Limited

Legal Representative：Tsai,

Te-Chung

1,617,884 5.73% 1,792,274 6.35% - -



- Chen, Li-Ju

Spouse of the Director of


Tsai, Chi-Hsuan Father and son

Tsai, Chi-En Father and son


Legal Representative：Wei,

Tzu-Wen

56,228 0.20% 17,426 0.06% - - - - -

Tsai, Chi-En 1,828,258 6.47% - - - -

Lead Investment

Limited

Son of the Director of Lead

Investment Limited

- Tsai, Te-Chung Father and son

Chen, Li-Ju Mother and son

Tsai, Chi-Hsuan Brother

Chen, Li-Ju 1,792,274 6.35% 1,617,884 5.73% - -

Lead Investment

Limited

Spouse of the Director of


- Tsai, Te-Chung Spouse

Tsai, Chi-Hsuan Mother and son

Tsai, Chi-En Mother and son

Tsai, Chi-Hsuan 1,750,489 6.20% - - - -

Lead Investment

Limited


Investment Limited

-

Hua Yi Investment Limited

Director of Hua Yi Investment Limited

Tsai, Te-Chung Father and son


Tsai, Chi-En Brother

Tsai, Te-Chung 1,617,884 5.73% 1,792,274 6.35% - -

Lead Investment

Limited

Director of Lead Investment

Limited

- Chen, Li-Ju

Spouse of the Director of Lead Investment Limited

Tsai, Chi-Hsuan Father and son

Tsai, Chi-En Father and son

Liu, Chih-Kang 966,293 3.42% - - - - - - -

Chen, Yu-Lien 376,328 1.33% - - - -

New County and

Community

Construction and

Investment

Director of New County

and Community

Construction and

Investment

-

Hsueh, Hung-Chun 310,000 1.10% - - - - - -

New County and Community Construction

and Investment

255,000 0.90% - - - - Chen, Yu-Lien


and Community

Construction and Investment

-

67

III CORPORATE

GOVERNANCE

New County and

Community Construction and Investment

Legal Representative：

Chen, Yu-Lien

376,328 1.33% - - - -

New County and

Community



and Community


-

Hua Yi Investment Limited 199,000 0.70% - - - - Tsai, Chi-Hsuan Director of Hua Yi Investment Limited

-


Legal Representative：

Tsai, Chi-Hsuan

1,750,489 6.20% - - - -

Lead Investment

Limited


Investment Limited

-

Tsai, Te-Chung Father and son


Tsai, Chi-En Brother


Director of Hua Yi Investment Limited

68

III CORPORATE

GOVERNANCE

Ⅹ. The total number of shares and total equity stake held in any single enterprise by the

company, its directors and supervisors, managers, and any other companies controlled

either directly or indirectly by the company.

20th

April 2018; Unit: Share; %

Reinvestment business

Investment of this

company

Investment of the

director, supervisor,

manager and directly or

indirectly controlled

business (Note)

Comprehensive investment

Stock(shares) % Stock(shares) % Stock(shares) %

ABOVE ADVANCE

LIMITED 10,898,000 100% - - 10,898,000 100%

CAYMAN MEDFIRST

GROUP LIMITED 10,898,000 100% - - 10,898,000 100%

Nanjing MedFirst Healthcare

Services, Inc. (Note) 100% - - (Note) 100%

Apricot first medical products

Limited by Share Ltd. (Note) 100% - - (Note) 100%

Fujian Medfirst Healthcare

Services, Inc. (Note) 100% - -

(Note) 100%

Shanghai An Gu Medical

Equipment Ltd

(Note) 100% - -

(Note) 100%

Hangzhou Angu Medical

Equipment Ltd.

(Note) 100% - -

(Note) 100%

Beijing MedFirst Healthcare

Services, Inc.

(Note) 100% - -

(Note) 100%

Shandong En Gu Medical

Devices Company Limited

(Note) 100% - -

(Note) 100%

Nanjing Baitang Trading Co.,

Ltd.

(Note) 100% - -

(Note) 100%

Taiwan TRIM CO.,LTD 1,000,000 50% - - 1,000,000 50%

Hsing Chou Healthcare Co.,

Ltd. 8,610,000 90.63% - - 8,610,000 90.63%

Exactitude Biotech Co., Ltd 1,000,000 100% - - 1,000,000 100%

Singleton Pharma Logistics Co.

Ltd 833,000 12% - - 833,000 12%

Baodean Co., Ltd. 926,000 92.60% 926,000 92.60%

Note:These joint ventures are either one hundred (100) percent owned directly by the Company or one hundred (100)

percent owned indirectly by the joint venture company. These companies are private limited companies that have not

issued shares, therefore there are no share percentages.

69

Ⅳ Information

on capital

raising

activities

IV. Information on activities to raise capital

Ⅰ. Issuance of capital stock and stock shares

(1) Sources of share capital

1. capita

Unit: Share; NT$ thousands

Year/Month

Issuing

Price

(NTD)

Authorized

Capital Stock

Issued Capital

Stock Remark

Stock

(shares) Amount

Stock

(shares) Amount

Sources of share

capital

Written-of

f with

property

other than

cash

Other

1992.05 10 500,000 5,000 500,000 5,000 Original capital

NT$5,000,000 NO

1992.5.7

CHIEN-SAN-TZU

No. 228485

1998.07 10 2,500,000 25,000 2,500,000 25,000 Capital increase of

NT$20,000,000 NO

1998.7.27

CHIEN-SAN-TZU

No. 202097


NT$30,000,000 NO

2000.12.13

JIH-CHING (89)

CHUNG-TZU No.

89541037


NT$25,000,000 NO

2003.11.13

CHING-SHOU-CHU

NG-TZU No.

09232955540

2006.12 10 10,000,000 100,000 10,000,000 100,000 Capital increase

NT$20,000,000 NO

2006.12.20

CHING-SHOU-CHU

NG-TZU No.

09533328690

2009.01 10 20,000,000 200,000 15,000,000 150,000

Capital increase of

NT$28,297,000

NO

2009.1.9

CHING-SHOU-CHU

NG-TZU No.

09831533600

Capital increase by

earnings of

NT$21,703,000

2010.02 10 20,000,000 200,000 15,701,576 157,016

Capital increase by

earnings of

NT$7,016,000

NO

2010.2.1

CHING-SHOU-CHU

NG-TZU No.

09931625730

2010.09 10 20,000,000 200,000 16,100,000 161,000

Capital increase by

earnings of

NT$3,984,000

NO

2010.9.21

CHING-SHOU-CHU

NG-TZU No.

09932593820


NT$34,000,000 NO

2011.1.18

CHING-SHOU-CHU

NG-TZU No.

10031565100

2011.08 10 50,000,000 500,000 20,670,000 206,700

Capital increase by

earnings of

NT$11,700,000 NO

2011.8.4

CHING-SHOU-CHU

NG-TZU No.

10032344130

70

Ⅳ Information

on capital

raising

activities

2012.08 10 50,000,000 500,000 22,270,000 222,700

Capital increase by

earnings of

NT$16,000,000

NO

2012.8.28

CHING-SHOU-CHU

NG-TZU No.

10132427530


NT$29,700,000 NO

2014.5.13

CHING-SHOU-CHU

NG-TZU No.

10333330810


NT$30,000,000 NO

2017.05.02

FU-CHING-TENG-T

ZU No. 10690831230

2. Type of Shares

Type of

Shares

Authorized Capital Stock Remark

Issued Stock Shares Unlisted Stock Shares Total

Registered

common stock 28,240,000 21,760,000 50,000,000 Listed Stock

3. Information regarding Shelf-Registration and Issuance of Shares: N/A

(2) Composition of shareholders

April 20th

2019; Unit: Share Composition of

shareholders

Number

Governmen

t Agencies

Financial

institutions

Other legal

person Individuals

Foreign

institutions

and

foreigners

Total

Shareholders - - 25 2,491 1 2,517

No. of shares

held -

- 10,458,316 17,771,684 10,000 28,240,000

Shareholding

% -

- 37.03% 62.93% 0.04% 100.00%

(3) Distribution Profile of Share Ownership

1. Common stock

Share value: NT$10 as per the 20th

April 2019; Unit: share

Grouping of shares held No. of

shareholders

No. of shares

held

Shareholding

%

1 ~ 999 355 52,944 0.19%

1,000 ~ 5,000 1,804 3,218,120 11.40%

5,001 ~ 10,000 196 1,448,375 5.13%

10,001 ~ 15,000 62 751,281 2.66%

15,001 ~ 20,000 22 389,585 1.38%

20,001 ~ 30,000 21 481,831 1.71%

30,001 ~ 50,000 16 627,179 2.22%

50,001 ~ 100,000 21 1,481,177 5.25%

100,001 ~ 200,000 11 1,640,744 5.81%

71

Ⅳ Information

on capital

raising

activities

200,001 ~ 400,000 3 941,328 3.33%

400,001 ~ 600,000 0 0 0.00%

600,001 ~ 800,000 0 0 0.00%

800,001 ~ 1,000,000 1 966,293 3.42%

Above 1,000,001 5 16,241,143 57.51%

Total 2,517 28,240,000 100.00%

2. Preferred stocks: none

(4) List of key shareholders

Name, number of shares held and shareholding ratio of the shareholders whose equity proportion

total more than 5% of shares or whose equity proportion is ranked in the top ten:

April 20th

2019; Unit: Share(s)

Shares

Name of key shareholders No. of shares held Shareholding %

Lead Investment Limited 9,252,238 32.76%

Tsai, Chi-En 1,828,258 6.47%

Chen, Li-Ju 1,792,274 6.35%

Tsai, Chi-Hsuan 1,750,489 6.20%

Tsai, Te-Chung 1,617,884 5.73%

Liu, Chih-Kang 966,293 3.42%

Chen, Yu-Lien 376,328 1.33%

Hsueh, Hung-Chun 310,000 1.10%

Lianshou Investment Industrial

Co., Ltd. 255,000 0.90%

Hua Yi Investment Limited 199,000 0.70%

(5) Net Worth, Earnings, Dividends, and market price per share for the previous two years

Unit: NT$

Year

Item 2018 2019

Current year to

March 31st 2018

Market

price per

shares

Maximum 81.5 67.8 65.7

Minimum 61 52.5 53.1

Average 71.20 60.15 59.4

Net worth

per shares

Before distribution 31.06 32.24 -

After distribution 28.46 29.94 -

Surplus of

each share

Weighted average stock

shares

28,240 thousand

shares

28,240 thousand

shares

-

Earnings per Share (EPS) 3.29 4 -

72

Ⅳ Information

on capital

raising

activities

Dividend

of each

share

Cash dividend 2.6(Note1) 2.3(Note1) -

Stock

dividend

- - 0.63 -

- - - -

Cumulative unpaid

dividend - - -

Analysis

of

investment

reward

Price-earnings ratio 21.64 15.04 -

Price-dividend ratio 27.38 26.15 -

Cash dividend yield rate % 3.65 3.82 -

Note: Distribution of earnings by the Company in 2018 has already been passed by the

Board of Directors on the 26rd February 2019, and shall be raised in the 2019 Shareholders’ Meeting for resolution.

(6) Dividend policy and execution of the company

1. Dividend policy adopted in the Company’s Articles of Incorporation

Article 33-1: Where there is profit at the end of the year, the Corporation shall first offset

its losses from previous years and set aside 10% as the legal capital reserve. However, the

Company may not be required to set aside a legal reserve if it has reached the invested

capital of the Company. Remaining profits shall be set aside or reversed for special

reserve. The Board of Directors shall prepare the proposal concerning the appropriation

of net profits for remaining profits incorporated with the accumulative earnings from

previous years, and submit the same to the Shareholders’ Meeting for resolution of the

allocation of dividends and bonuses to shareholders.

Article 35: the dividend policy of the company must align with current and future

development plan. In comprehensive consideration of the investment environment, the

capital plan and domestic and foreign competition, the earnings available for distribution

shall appropriate at least 30% as bonus to shareholders in general. The bonus to

shareholders may be distributed via cash or in the form of stocks, however, the cash

dividend must be at least 10% of the total dividend.

2. Performance situation

The Company’s 2018 surplus distribution scheme was passed by the resolution of the Board

of Directors on the 26rd February 2019 as follows:

Undistributed surplus balance at the beginning of the period 42,708,136

Actual gains and losses included in retained earnings (1,352,720)

Undistributed earnings after adjustment 41,355,416

Net Income 112,950,220

Drawing of 10% statutory surplus reserve (11,295,022)

Current surplus available for distribution (4,988,043)

Distributable surplus of this year 138,022,571

73

74

Ⅳ Information

on capital

raising

activities

Distributable items

Shareholders’ dividend–Cash (NT$ 2.3/ share) (64,952,000)

Shareholders stock dividend (NT$0.63/ Share) (17,791,200)

Distributable surplus of this year 55,279,371

(7) Effects of the stock grants proposed by the shareholders at this time on the company’s

business performance and surplus of each share: none

(8) Remuneration to employees, directors and supervisors

1. Percentage or range of remuneration of employees, directors and supervisors specified in

the Articles of Incorporation:

Article 33: Where there is an annual profit, the company shall appropriate 1%-15% as

compensation to employees to be distributed via stocks or cash upon resolution of the

Board of Directors. The subjects of the distribution may cover the employees of

subsidiaries subject to satisfaction of certain conditions. The company may appropriate

compensation to directors up to 7% of preceding amount of profit upon resolution of the

Board of Directors. The proposal concerning the distribution of compensation to

employees and directors shall be reported during the Shareholders’ Meeting. However,

should the Company make a loss, losses shall be first covered and then compensation to

employees and directors shall be appropriated proportionally over preceding percentages.

2. Accounting treatment on the difference between the estimation basis for the estimation of

remuneration of employees, directors and supervisors, shares calculation basis for

employee remuneration distributed as stocks, the actual distributed amount, and the

estimated amount of the current period:

The estimation of remuneration of employees, directors and supervisors of the Company

in 2018 was calculated as 4% and 2.28% of its tax benefit before deducting the

remuneration of employees, directors and supervisors for the current fiscal year. Should

there be a discrepancy between the estimated figures and the actual amount of distribution,

the discrepancy shall be regarded as a change to the accounting estimates and recorded in

the adjusted accounts of the year of distribution

3. Circumstances of passing the remuneration distribution by the Board of Directors:

The proposal for the distribution of remuneration approved during the Board of Directors’

meeting on the 26rd February 2019 is as follows:

(1) Bonuses distributed in cash or stocks to employees and bonuses distributed to

directors and supervisors as approved by the Board of Directors: the amount of bonus

distributed to employees totaled NT$6,223,000, and NT$3,541,000 to directors and

Ⅳ Information

on capital

raising

activities

supervisor for this period.

(2) Where the Board of Directors has approved the distribution of the Company’s shares

to employees, the ratio of the number of shares distributed to employees to the

increase of capital by earnings: the Board of Directors has yet to decide and approve

the distribution of the Company’s shares to employees.

4. Circumstances of actual distribution of remuneration to employees, directors and

supervisors of the previous year (including the number of shares distributed, the amount,

and share price), any difference between the remuneration of employees, directors and

supervisors acknowledged, and detailed description of changes to the amount, the reason

for changes and handling of the situation:

Information regarding the 2018 actual compensation paid to

employees and directors is as follows: Unit: NT$ Thousands

Distribution

Actual amount of

distribution

approved in the

Shareholders’

Meeting

Original

amount of

distribution

approved by

the Board of

Directors

Difference Reason for

difference

Handling

condition

1. Employee Cash

Bonus 4,828 4,828 0 NO N/A

2. Remuneration

to directors 2,656 2,656 0 NO N/A

(9) Situations of repurchasing of the Company’s shares: none

75

Ⅳ Information

on capital

raising

activities

Ⅱ. Circumstances for handling corporate bonds:

(1) Circumstances for handling corporate bonds:

Type of corporate bond 1st domestic unsecured convertible corporate bond

Issue (management) date 23rd February 2017

Par value NT$100,000

Issue and trading place Domestic

Issuing price 100％ Issued in face value

Total NT$300,000 thousand

Interest rate Coupon rate 0%

Deadline 3 years, due on the 23rd March 2020

Guarantee agency N/A

Agent Trust Department, Cathay Commercial Bank

Underwriting agency Cathay Securities Corporation Co., Ltd

Solicitor Handsome Attorneys-at-law

Accountant N/A

Repayment method

Except for conversion or redemption in accordance

with the procedures for conversion, repayment will

be made once in full by cash.

Outstanding principal NT$108,400,000(Note)

Repayment or earlier liquidation provisions

Please refer to Article 19 of the Procedures for

Corporate Bond Issuance and Conversion of the

Company

Restriction provisions None

The name of the credit ranking institution, the

evaluation date, and results of corporate bond

evaluation

N/A

Other rights affiliated-

The amount of common stocks transferred

(exchanged or subscribed) as on the printing

date of the Annual Report

As of the 20th April 2018, no creditor exercised the

right to convert corporate bonds

Other rights affiliated-

Procedures for the Issuance and Conversion

(Exchange or Subscription)

N/A

The effect of procedures for the issuance and

conversion, exchange or subscription, the

issuance conditions of the possible dilution of

equity and current shareholders’ equity

N/A

The name of the escrow agent for the

exchange target N/A

76

77

Ⅳ Information

on capital

raising

activities

Note: The total number of executed sales of these convertible corporate bonds from January 25, 2019 to February 23,

2019 was 1,916. These convertible corporate bonds were not converted by shareholders between February 23, 2017

and April 20, 2019.

(2) Convertible corporate bonds information

Type of corporate bond 1st domestic unsecured convertible corporate bond

Year Item

2017 2018 Current year to 20th April 2019

Market price of convertible

corporate bond

Highest 107.00 106.50 104.00

Lowest 100.75 100.05 100.55

Average 103.47 103.79 101.48

Conversion price (Note 2) (Note 2) (Note 2)

Conversion price as of the

issuance (management) date

and issuance

Issue date: 23rd

February 2017

Conversion price as of issuance: NT$80.2

Obligation to execute conversion

New shares issuance

Note 1 : This convertible corporate bond was not traded between 23rd February 2017 and 20th April 2019

Note 2: The conversion price from 23rd February to 26th March 2017 was NT$ 80.20, and the conversion price

from 27th March to 4th August 2017 was NT$ 78.90. The conversion price from 5th August 2017 to 20th July 2018

was NT$ 75.40, and the conversion price from 21st July 2018 to 20th April 2019 was NT$ 72.40.

(3) Exchange of corporate bonds information: none (4) Common corporate bonds raised and issued through generalized declaration: none

(5) Corporate bonds with warranty information: none

Ⅲ. Issuance of preferred shares : None

Ⅳ. Issuance of Global Depositary Receipts (GDR) : None

Ⅴ.Employee subscription right vouchers : None

Ⅵ. Management of restricted stock awards : None Ⅶ. Circumstances of handling the new issue of shares due to a merger or assignee of other

corporate stocks : None

Ⅷ. Circumstances of the execution of the funds application plan : None

Ⅴ Overview

of

Operations

Ⅴ.Overview of Operations

Ⅰ. Business Content

(1) Business Scope

1. Main Areas of the Company’s Business Operations

The Company is a leading medical supplies chain distribution channel led by a

professional healthcare team in Taiwan. The Company primarily engages in the sale of

medical care, healthcare and biotechnology healthcare products and the provision of related

services and uses “MedFirst” as the brand name for its healthcare chain stores. Furthermore,

the Company is the contractor of retail stores of medical supplies located at various major

hospitals and engages in the management and planning of hospital shopping malls. The

Company has registered the following business areas with the Ministry of Economic Affairs:

1. F102040 Wholesale of Nonalcoholic Beverages 20. F208011 Retail Sale of Chinese Medicine

2. F102170 Wholesale of Food and Grocery 21. F208021 Retail Sale of Drugs and Medicines

3. F104110 Wholesale of Fabric, Clothes, Shoes,

Hats, Umbrellas and Apparel, Clothing

Accessories and Other Textile Products

22. F208031 Retail sale of Medical Equipment

4. F105050 Wholesale of Furniture, Bedclothes

Kitchen Equipment and Fixtures 23. F208040 Retail Sale of Cosmetics

5. F106020 Wholesale of Items for Daily Use 24. F208050 Retail Sale of the Second Type

Patent Medicine

6. F106040 Wholesale of Water Containers

25. F209060 Retail Sales of Stationery, Musical

Instruments and Educational Entertainment

Articles

7. F107030 Wholesale of Cleaning Preparations 26. F301010 Department Stores

8. F108011 Wholesale of Chinese Medicines 27. F399010 Supermarkets

9. F108021 Wholesale of Drugs and Medicines 28. F399040 Retail Business Without Stores

10. F108031 Wholesale of Drugs, Medical Goods 29. F401010 International Trade

11. F108040 Wholesale of Cosmetics 30. F501030 Coffee/Tea Shops and Bars

12. F109070 Wholesale of Stationery, Musical

Instruments and Educational Entertainment

Articles

31. F501060 Restaurants

13. F199990 Other Wholesale Trade 32. F501990 Other Eating and Drinking Places

Not Elsewhere Classified

14. F203010 Retail Sale of Food and Grocery 33. G202010 Parking Garage Business

15. F204110 Retail Sale of Cloths, Clothes, Shoes,

Hat, Umbrella and Apparel, Clothing Accessories

and Other Textile Products

34. H703100 Real Estate Rental and Leasing

16. F205040 Retail Sale of Furniture, Bedclothes,

Kitchen Equipment and Fixtures 35. I103060 Management Consulting Services

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2. Proportion of Main Business Areas Unit: NT$ thousand

3. Products and services of the Company

The Company's business model is mainly for the mass sales of medical care, health-care, and

biotechnology health care products. To achieve the company's corporate mission "Health

Manager of Your Family", it is also about to launch more health-related products to provide a

friendly and convenient shopping environment and services.

17. F206020 Retail Sale of Articles for Daily Use 36. I199990 Other Consultancy

18. F206040 Retail Sale of Water Containers 37. JA03010 Laundry Services

19. F207030 Retail Sale of Cleaning Preparations

38. ZZ99999 All business items that are not

prohibited or restricted by law, except those that

are subject to special approval.

Business Area

2017 2018

Amount Proportion Amount Proportion

Medical Care 3,218,137 74.42% 3,466,585 74.83%

Health Care 351,040 8.12% 370,867 8.01%

Biotechnology Health Care 703,281 16.26% 734,730 15.86%

Other 51,949 1.20% 60,461 1.31%

Total 4,324,407 100.00% 4,632,643 100.00%

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At present, the Company Primarily offers the following goods and services:

The Company currently offers the following main goods and services:

4. Plan for the development of new products (services)

1. Medical Care

(A) Continue to introduce new technologically developed products based on market

demand and developments including the Xingfu gift (free gift APP) service.

(B) Continue to develop the Company’s own products to meet customer demands based

on MedFirst’s many years of experience.

(C) Service differentiation: Enhance customer satisfaction through value-added services,

such as increasing warranty periods, reducing waiting time for receiving maintenance

support and providing free regular repair services at specific locations.

(D) To enhance the constomer service experience, MedFirst interacts with consumers

through Line and combines member certification to enhance consumer shopping

convenience and multi-digit digital services. (member inquiry, transaction details,

digital coupons, event offers, etc.)

Product

category Product Types

Medical Care

Diabetes care products, respiratory care products, incontinence care

products, wound dressing products, medical equipment and supplies, stoma

care products, special nutrition products, general nutrition products,

rehabilitation care products, pain management products, protective gear,

home healthcare, maternal and child care products

Health care Beauty care products, oral care products, daily supplies, medical books,

cosmetics, food and beverages

Biotechnology

Health care Health food and medical drugs

Others Fresh pre-ordered goods, pre-ordered goods for home appliances,

and packaging operations

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2. Healthcare

(A) Increase the development of daily necessities to satisfy consumers’ daily needs with

the goal of establishing a one-stop shopping location.

(B) Increase the development of cosmetics and beauty products based on market trends

(C) Strengthen the development of organic and health foods by making consumers’ health

the primary goal.

3. Biotechnological Healthcare

(A) Expand the health food product line to replenish consumers’ inadequate intake by

responding to market changes and the increase in the number of people who eat out.

(B) Continue to develop various functional health products that target busy working

adults in the metropolitan area in response to customs’ ever-changing daily habits.

4. Laundry washing

(A) Put hospital shopping malls into operation to offer a complete daily life service in

hospitals.

(B) Engage in the management and planning of other types of shopping venues (e.g. in

schools).

(2) Market Overview

(1) Current state and development of the market

A. Macro-environmental factors

As the Company’s industry is deeply connected with national health expenditure

(hereinafter referred to as “NHE”), national income, the national average life

expectancy and other macro-environmental factors, the following graph shows

the changes in NHE trends per capita and the ratio of NHE to GDP in Taiwan, as

well as changes in demographic trends factors in Taiwan:

(A) Changes to NHE per capita and ratio of NHE per capita to GDP per capita in

Taiwan

National Health Expenditure Growth

Source: Ministry of Health and Welfare

7,824

8,732

10,385 10,869

11,274

6.26.7

6.2 6.3 6.3

4.5

-1.4

4.1

2.31.9

-4

-2

0

2

4

6

8

10

-

2,000

4,000

6,000

8,000

10,000

12,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

％

10

0 m

illion

NHE NHE/GDP Annual Growth Rate (%)

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National Health Expenditure

Source: Ministry of Health and Welfare

According to Statistics of General Health and Welfare, the average

NHE per capita in 2017 was NT$ 46,606, a 1.0% increase from NT$

46,219 in 2016. As for the proportion of average NHE per capita to GDP

per capita, both have been maintained at 6% or more since 2006,

indicating that the amount that the Taiwanese spend on health care

generally indicates a steadily increasing trend.

(B) Changes to the trend of the national average age in Taiwan

According to the Report on the Population Projection from 2014 to 2061 for the

Republic of China prepared by the National Development Council under Executive Yuan,

the ratio of the population aged 65 and above to the overall population in Taiwan will

increase from 7.1 percent as of 1993 to 14.6 percent in 2018, thus turning Taiwan into a

more-ageing society. The ratio of the population aged 65 and above to the overall

population in Taiwan is estimated to later increase to 20% percent, thus turning Taiwan

into a rapidly-ageing society in 2025. This ratio is estimated to increase further to 41%

percent in 2061. Due to the gradual increase in the proportion of the aging population in

Taiwan, the demand for medical care, and the control and prevention of diseases and

Year

National Health

Expenditure (NHE) NHE per Capita GDP per Capita

NHE/GDP

(%)

GDP

Annual

Growth

Rate (%)

NT$

hundred

millions

Annual

Growth

Rate (%)

NT$

hundred

millions

Annual

Growth

Rate (%)

NT$

hundred

millions

Annual

Growth

Rate (%)

2006 7,824 4.7 34,282 4.3 553,851 4.1 6.2 4.5

2007 8,146 4.1 35,545 3.7 585,016 5.6 6.1 6.1

2008 8,347 2.5 36,294 2.1 571,838 -2.3 6.3 -1.9

2009 8,732 4.6 37,837 4.3 561,636 -1.8 6.7 -1.4

2010 8,893 1.8 38,432 1.6 610,140 8.6 6.3 8.9

2011 9,170 3.1 39,539 2.9 617,078 1.1 6.4 1.4

2012 9,280 1.2 39,877 0.9 631,142 2.3 6.3 2.6

2013 9,679 4.3 41,460 4 652,429 3.4 6.4 3.7

2014 10,079 4.1 43,067 3.9 688,434 5.5 6.3 5.8

2015 10,385 3.0 44,261 2.8 714,774 3.8 6.2 4.1

2016 10,869 4.7 46,219 4.4 729,381 2.0 6.3 1.9

2017 11,274 3.6 46,606 1 742,296 1.7 6.3 1.9

Note: data for each year was compiled and adjusted based on the latest GDP figures.

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other healthcare needs is bound to increase. Therefore, expenditure on medical supplies

is simultaneously expected to increase.

The proportion of the population over 65 years old to the total population (%)

Source: The Council for Economic Planning and Development “Taiwan 2014 to 2061

Population Estimates and Projections”

B. Domestic Medical Supply and Pharmaceutical Retail Market

Data given in the “Monthly Report of Commercial Turnover Statistics” prepared

by the Department of Statistics of the Ministry of Economic Affairs shows that

the domestic medical supply and pharmaceutical retail market capitalization in

Taiwan has grown from NT$1,650 hundred million in 2010 to NT$2,107

hundred million in 2018. As of 2016, the amount had increased accounting for

4% of annual growth. However, the financial and European debt crises of 2012

respectively have affected the local economy and domestic market, thus causing

market growth to slow. Overall, the domestic medical supply and pharmaceutical

retail market is growing. As the market includes medical equipment and related

products, this growth trend is expected to drive the growth and development of

the medical equipment industry.

Projection

Ageing Aged Super-aged

65 years old and over

80 years old

and over

85 years old

and over

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Domestic Medical Drugs, Cosmetics and Medical Supplies Retail Market Revenue

Source: the “Monthly Report of Commercial Turnover Statistics” issued by the Department of Statistics,

the Ministry of Economic Affairs

C. Medical devices market in mainland China.

The overall medical devices market in mainland China reached US$ 17 billion in

2013, and the average medical devices cost per capita is US$ 12.6. However, the

medical devices market in mainland China is facing a huge demand for devices

due to the country’s large population, as well as the continuous increase per

capita in mainland China and efforts made by the Chinese government to

promote various health policies. Therefore, the overall demand for medical

devices is expected to be increased drastically in the coming years. As the

Chinese government actively promotes policies related to the 12th

Five-year Plan

such as the “12th

Five-Year Medical Device Technology Industry Plan” and the

“12th

Five-Year Health Development Plan”, and has recently implemented New

Medical Reform policies, it will continue to strengthen efforts to improve the

environment and facilities of medical institutions within the country to help

increase health awareness among consumers in mainland China, enhance

consumers’ understanding of and demand for healthcare at home, and drive the

continuous increase in the demand for medical devices and supplies. This market

is estimated to experience steady growth during the next five years.

1,650 1,732 1,732 1,759

1,829 1,883

1,962 2,020

2,107

4.65%4.98%

0.04%

1.50%

4.04%

2.95%

4.16%

2.97%

4.31%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2010 2011 2012 2013 2014 2015 2016 2017 2018

Turnover (100 million) Annual Growth Rate

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Bandages and

dressing Thread

Syringe and

tubes Others Overall M

ark

et C

apit

aliz

atio

n (

NT

$ h

und

red

mil

lio

ns)

Source: BMI Espicom (2014/01); IEK (2014/06)

Pic 1. Medical Supplies and Consumables Market Capitalization in mainland China - 2012

and 2016

Market size of medical consumable products in mainland China in2012~2016

In recent years, more and more medical equipment manufacturers in mainland

China have turned to producing of high-end medical equipment, including

computerized tomography (CT), nuclear magnetic resonance scanners and

digital X-ray equipment.

D. Global medical devices market

According to the IEK research report of the ITRI, the global medical equipment

market in 2017 was US$359.8 billion and will reach US$425.3 billion in 2020,

reflecting a compound growth rate of 5.70% from 2017 to 2020. The annual

compound growth rate of the Asia-Pacific market is 5.74%, which is higher than

the annual compound growth rate of the global medical market, as well as higher

than the 5.71% in Western Europe and 5.73% in the Americas. This situation

suggests that the growth of the Asia-Pacific medical market, which includes

Taiwan and mainland China, can be expected to become the focus of the global

medical equipment industry.

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Source: ITRI IEK

E. Biotechnology health food industry

As the global living environment improves and medical technology rapidly

advances, the quality of human life has generally improved, and the average life

expectancy has also increased. However, for many developed or developing

countries, the resulting aging population is accompanied by an increase in the

number of chronically ill patients, which has become a major concern regarding

national medical expenditures and social welfare burden. By promoting and

implementing preventive medicine, people choose adjuvant and alternative

therapies to prevent the occurrence of diseases, especially health care and

functional foods that can increase nutrition, promote health, and delay aging;

such therapies have gradually become favored by health-conscious consumers.

The term ‘functional food’ was created in 1984 and swept across Japan.

Basically, this concept is known as “health food” in Taiwan, “nutritional

supplements” in the U.S., and “health care food” in China. Japan’s Ministry of

Welfare defines food as “food that has a relationship between the physiological

functions of food with specific health care effects proven by using various

analytical methods”.

Currently, Taiwan’s biotechnology and health food primarily focus on products

90 155

741860

1,752

3,598

106 183

8761016

2,071

4,253

5.50%

5.55%

5.60%

5.65%

5.70%

5.75%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

The Middle

East/Africa

Rest of Europe Asia-Pacific Western Europe America Global

2017~2020 Variation tendency of global medical

devices market distribution

2017 2020 CAGR

Unit:％Unit:100 million US dollars

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that promote blood lipid regulation, gastro-intestinal improvement, immune

regulation, and liver protection.

(2) Correlation between upstream, midstream and downstream sectors

The Company belongs to the medical supply chain distribution industry. The

upstream sector of the industry involves suppliers of various medical care provisions

and healthcare and biotechnological health food materials and components, including

plastic materials, electronic components, metal manufacturing, biotechnological

health food ingredients, raw materials, and other various materials. Meanwhile, the

downstream sector of the industry consists of manufacturers of medical care and

healthcare products, biotechnological health foods, medical tests and monitoring

equipment (such as electronic sphygmomanometers, clinical thermometers, ear

thermometers, air-testing products and thermostat products), optical medical devices

(such as optical lenses and contact lenses), medical disposables (such as catheters and

consumables used for conducting tests), and all kinds of capsules, tablets and health

drinks. As the Company serves as a distributor in the downstream channel of the

industry, the Company sells and distributes the aforementioned medical supplies and

provides consumers with professional consultation services, thus serving as “the last

stepping stone” in the medical supply industry supply chain. The following diagram

shows the upstream, midstream and downstream channels of the industry in which

the Company function.

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Ⅴ Overview

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(3) Various Product Trends and Competition

Since Taiwan's demographic structure has entered an aging society, long-term

care needs have gradually increased the overall burden on society. Therefore,

MedFirst promotes the concept of self-care, self-paying care, and elderly-elderly care.

Self-paying care and elderly-elderly care refer to:

A. Guiding the elderly to develop self-care ability and prepare themselves now and

for the future

B. Giving the elderly a new life with work value gained

C. Enabling the elderly to not only live long but also live well

D. Encouraging the elderly to socialize with others

E. Have 60-year-olds take care of 70-year-olds so that they can better understand

each other's needs and feelings

Upstream, Midstream and Downstream of the Medical Supplies Industry

Plastic Materials

(e.g. colloidal particles, PP, ABS)

Electronic Components

(e.g. IC, sensors, PCB, resistors,

capacitors, LCD)

Metal Manufacturing

(Various metal components)

Other Materials and

Components

(For example, packing

materials)

Medical Care and Healthcare

Products Manufacturer

Upstream

Various types of medical testing

and medical care devices, optical

medical devices and medical

consumables

Biotechnological Health Food

Ingredients and Raw Materials

(e.g. clam extract, dietary fibre,

Lactobacillus powder and food

processing materials)

Biotechnological Health Food

Manufacturer

Various types of capsules, tablets

and health drinks

Medical Care and Healthcare

Products Manufacturer

Various types of medical testing

and medical care devices, optical

medical devices and medical

consumables

Consumers

Midstream Upstream Downstream

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Furthermore, MedFirst will expand its service items to create a big health

platform and provide B2B to B2C services in all aspects as follows:

(4) Competition situation

A. Government Policies

The “Six Key Emerging Industries”, including healthcare, biotechnological

tourism, green energy, quality agriculture, culture and creative arts, and the

“Emerging Smart Industries”, which include cloud computing, smart electric

vehicles, smart green buildings, and invention and patent industrialization are the

key industries to be developed under the Executive Yuan’s industrial policies.

In the field of medical care, the Government's industrial development policy is to

promote the 10-year plan 2.0 for long-term care in response to the population's

"aging", "less children", "health promotion" and "disease management" trends to

establish a comprehensive care model for our community and build a network of

care. In order to foster local aging, Long-Term Care 2.0 provides a wide range of

services from support for families, homes, and communities to residential care,

by providing a universal care service system and centered, care-based

communities, and is expected to enhance the quality of life of those with

long-term care needs and their caregivers.

In the Sixth Chen-Chiang Summit organized by the Taiwan Straits Exchange

Foundation (SEF) and the Association for Relations across the Taiwan Straits

(ARATS) of mainland China, both parties signed of the “Cross-Strait

Cooperation Agreement on Medicine and Public Health Affairs” on 21st

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Ⅴ Overview

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December 2010. In the future, cooperation to develop new drugs and medical

devices will be entered into in accordance with the standards of the International

Council on Harmonization (ICH) and the Global Harmonization Task Force

(GHTF) in order to carry out testing, inspection and registration as well as

develop manufacturing practices by establishing of a common framework as the

goal in accordance with the international standards of Good Laboratory Practice

(GLP), Good Clinical Practice (GCP) and Good Manufacturing Practice (GMP).

The overall goal of this partnership is to allow mutual certification between both

sides and to shorten the market penetration process for of the other enterprise.

For Taiwan’s biotechnological encouraging, this means combining the strengths

of each enterprise and driving mutual cooperation to reach new heights.

B. Growing maturity of consumer needs for healthcare

Research has shown that women are more concerned with their health than men,

with many of them being the main shopper in for their families. Furthermore,

society’s low birth rate trend has led to children’s health being taken more

seriously than ever before. At the same time, baby boomers, who are set to

control most of the global economic power in the future, have a more mature

understanding of preventive medicine than previous generations. The healthcare

needs of these key consumer groups will increase the demand and business

opportunities for healthcare-related products.

C. The upcoming generation that stresses prevention over cure

Unbalanced dietary habits due to fast-paced lifestyles have led to the onset of

many diseases at a younger age. Therefore, consumers have placed greater

emphasis on the concept of prevention over cure. Demand for medical supplies

is no longer exclusive to middle-aged and elderly populations. The consumption

of medical supplies among young adults has continuously increased in recent

years. The customer base of a medical supplies store does not only consist of the

ill or injured. With this preventive medical spending behavior, consumers choose

their own purchase medium based on such considerations as brand,

word-of-mouth advice, convenience and aftersales service. The pre-purchase

expectations of the quality of product and service are greater in this new

generation of consumers than ever before. Therefore, to satisfy the new

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generation of consumers, more efforts and consideration must be invested in

every details of services than ever before.

D. Effect of information symmetry on price elasticity

In a highly-competitive industry along with the advancement of information

technology, product information has become more transparent than ever. The

Internet now allows many users to share different types of information in real

time. As a result, consumers have a better understanding of product attributes

and whether certain products are suitable when they buy medical supplies. The

channel that consumers use to purchase the products they need is now also

included in the necessary information that must be collected. In such an

environment, the price of a product is not the only factor that influence the

purchasing decision of the customer. The customer relationship management

(CRM) of the channel distributor and its understanding of consumer behavior

and psychology have become more vital than ever before.

3. Research and development overview AA General Manager Office OK

The Company is a professional medical supply chain distributor but has not yet

established a R&D department; therefore, the Company has no R&D-related expenses.

However, to serve the needs of most consumers, the Company’s Product Marketing

Division is actively involved in the development and implementation of new products,

and planning the Company’s own packaging strategies, marketing strategies and

promotion of distribution channels.

4. Long and short-term business development plans

The Company shall adopt a “Total Solutions” concept as its business strategy, to deliver

value from physical to virtual platforms and from products to services. In addition to

consumer goods, the Company shall further strengthen its professional health

education and consultation services and develop platforms related to health

consultations, including health testing, consultations on grant applications,

door-to-door repair services and other health education related consultation services.

Not only will the Company focus on providing high-quality and professional services,

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the Company also aims to create and satisfy needs the customer may not even know

he/she has, rather than simply satisfy the existing ones.

1. Short-term business development plan

A. Online-to-Offline (O2O) integration (virtual and physical integration):

An Economic Daily News article from 30th

August 2015 reported that despite the

rapid development of e-commerce in Taiwan, the ratio of e-commerce sales revenue

to the overall retail sales revenue was estimated to increase from only 5.13% in 2014

to 6.5% by 2020. By investigating the causes of this situation, we determined that

physical channels possess three characteristics that e-commerce cannot replace:

immediacy, service and professionalism. However, with the Internet and mobile

devices becoming increasingly common, the liquidity and openness of information

lowers the imporce of the aforementioned characteristics, resulting in the need to

move toward the development of omni-channel retail services. In addition to

e-commerce platforms that can provide consumers with a more diversified purchase

channel and enhance the immediacy of purchases, the Online-to-Offline (O2O) or

physical and virtual integration model can further extend the service and

professionalism of the sales of medical devices. Furthermore, if the wearability of

products becomes even more popular, the acquisition of information will become

even more real and convenient over time, so that big data analytics can be used to

achieve precise marketing objectives.

Due to technological advances, the number of channels through which customers

purchase products has increased. To ensure the safe use of medical devices and

improve the accessibility of medical devices, the Food and Drug Administration

established a mail-order purchasing channel of low-risk Class I medical devices as of

1st November 2012 and a mail-order purchasing channel of body fat meters and

non-invasive, non-implanted, Class II medical devices that are suitable for use at

home and require no professional instructions or assistance on 2nd

January 2014. The

relevant government department shall assess the potential establishment of such

channels in the future, including purchasing channels for other Class II medical

devices subject to assessment of product features and consumer demands, with the

goal of intensifying market competition.

The online sales of medical devices are moving towards the integration and

connection between consumers in physical and virtual channels, thus solving

immediate home care needs, and will eventually become a future trend. Virtual

channels not only provide online consumers with a greater variety of medical

supplies from which to choose, but also provide remote consumers with

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real-time services. The role of these channels will become even more

comprehensive as they evolve from hospital services to community-based

services, to the point to which they are now heading customized home care

services, thus providing a more comprehensive, immediate and convenient

business model.

B. Value delivery:

Consumers have evolved from being “price-oriented” to “value-oriented”, which

is also referred to as smart consumerism. By either emphasizing low

price-performance ratio or using consumer emotions or customization as the

foundation, the product or service specifications that are expected to be delivered

are professionalism and trust. Based on the current model of purchasing medical

supplies, consumer involvement is still relatively low. However, price is not

consumers’ only consideration when making a purchase, and consumers are

currently searching for platforms that can offer professional health education

services as well as a wider variety of products from which to choose.

Furthermore, developing a comprehensive shopping environment that includes

product display, dedicated checkout, and management of customer traffic flow,

can provide consumers with an excellent shopping experience through

experimental marketing channels.

(2) Long-term business development plan

A. Health management cloud platform:

With various major hospitals promoting remote care and health awareness increasing

among the population, medical devices have gradually evolved from medicinal cures

to preventative medicine, where the foundation of preventive medicine is the

establishment of an integrated health management platform. Data measurement,

integration, and computations are carried out using information to understand and

predict future consumer demands, increase repeat customers, and develop long-term

customer loyalty. The process of a health management service is constructed using

technology, and incorporates data collection, computation, estimation and predictions,

to develop an innovative service business model that actively promotes the health

industry.

Information technology has transformed the traditional medical care model by

incorporating information technology intergration, service model establishment, and

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remote care provision. One example of such a transformation is the introduction of

the health promotion industry. Taking diabetes patients as an example, data

measurement, integration, and computations, are carried out using information about

diabetes to understand and predict future consumer demands, increase repeat

customers, and develop long-term customer loyalty.

B. Customized home care:

With the implementation of remote care, medical supply channelsbear an even

greater responsibility. In addition to providing related products for consumers to

purchase, these channels will also lease medical devices and provide consultation

services in the future. Respond to these changing trends not only requires the spatial

segregation, personnel retraining, and efficient traffic flow of products, but also the

facilities to clean and manage leased products and cover the additional costs

associated with leasing business operations.

More importantly, door-to-door service will become more prominent as the

aging population trend continues. House call maintenance, interior decoration,

product repair and daily food deliveries shall test the ability of businesses to integrate

logistics, as well as cash and information flow. When daily living assistance becomes

a daily necessity, customized home care services shall also become mainstream.

Standardized products will no longer satisfy the needs of such customers. The only

way to fulfill these service needs is to provide professional training to the Company’s

sales team so that they have the tools necessary to provide customized products and

services. As for products, the Company shall construct a highly-flexible and

diversified product system that will include a search function for product

specifications, as well as warehouse storage to quickly respond to consumer demand.

In terms of services, the Company shall express due care and concern to understand

customers’ needs, and acquire suitable medical knowledge and professional health

education to fulfill such needs. The Company will only able to maintain its

competitive advantage by offering customized products and services as well as a wide

spectrum of customized home care services.

Ⅱ.Market and Sales Overview (1) Market analysis

(1) Sales areas of main products

The Company’s proportion of domestic sales during previous two (2) fiscal years

exceeded 95% as the medical supplies chain distribution business of the Company focuses

mainly on product sales and provision of services to domestic consumers. Therefore, the

Company’s main sales area is the domestic market.

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Unit: NT$ thousands

(2) Market share

The Company is engaged in the trading of health care products in the chain distribution

channel. According to data from the Taiwan Chain Store Almanac in 2019, the total number of

domestic medical supply chain stores at the end of 2018 was 5,056, whereas the Company had

240 retail stores in 2018, accounting for 4.75% of the total number of domestic medical supply

chain stores within the country. Furthermore, data from the “Monthly Report on Commercial

Revenues” by the Ministry of Economic Affairs showed that the total sales in medical drugs,

medical supplies and cosmetics businesses was NT$210.6 billion in 2018, with the Company’s

sales revenue reported in the 2018 Annual Report totaling NT$4.4398 billion and accounting

for 2.1% of the market share.

(3) Supply and Demand Status and Growth of the Future Market

A. Supply

Since the Company is a downstream channel chain industry in the medical

supplies industry, the output value of its upstream medical equipment

manufacturing industry is used for supply side analysis. According to the

TrendForce report, the global medical equipment market was estimated to be

US$444.2 billion in 2018, and US$577.6 billion in 2023, with an annual

compound growth rate of 5.4%. In response to aging, chronic disease prevention

and disability assisted technology, the global demand for medical equipment

continues to grow. According to the BMI report, the market size of the global

medical equipment industry in 2018 was US$389.9 billion, with an estimated

US$490.2 billion in 2022, reflecting a compound growth rate of 5.9% in

2018-2022. Looking forward to 2019, according to the survey data of the

Industrial Technology International Strategy Development Institute of ITRI on

Taiwan's medical equipment industry, Taiwan's medical equipment output value

in 2019 is estimated to reach NT$120.66 billion, with an increase of 8.2% over

the previous year. Overall, the output value of Taiwan's medical equipment

industry will continue to grow in the future.

Year 2017 2018

Region Amount Proportion Amount Proportion

Domestic 4,194,186 96.99% 4,460,250 96.28%

Export 130,221 3.01% 172,393 3.72%

Total 4,324,407 100.00% 4,632,643 100.00%

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With regard to government policy, due to the improvement of the health

awareness of the Chinese people and the aging and declining population

structure, the demand for care is increasing every day. In order to meet the

sizeable long-term care needs in the future and alleviate significant family care

responsibilities, the Executive Yuan began implementing the Long-Term Care

2.0 program in 2017, in which long-term care services are the focus of

government regulation and assessment. All county and city governments have

actively promoted the Long-Term Care 2.0 policy. Many surrounding industries

have also begun to lay out long-term care related markets, including care

services, home care and community and home rehabilitation.

Online sales of medical equipment have been phased open, and the competition

for channels has also become more open. Currently, online stores can sell

first-class medical equipment, and market competition is becoming increasingly

clear.

B. Demand

(A) Domestic medical supplies market

According to the Ministry of Health and Welfare and the Ministry of the Interior,

Taiwan officially became an "ageing society" in 2018, which means that one out

of seven people is elderly. Faced with a heavy 1:7 burden, MedFirst has been

focusing on the elderly and home care for nearly 30 years. In addition to

providing niche market products, such features as professional care consulting

services, medical knowledge and training for assistive device use have also laid a

gap between companies in the same industry. As the proportion of the elderly

population climbs, the business opportunities for the elderly continue to grow.

According to the “Estimated report on the population of the Republic of China

from 2014 to 2061” prepared by the Economic Development Committee of the

Executive Yuan, the number of elderly people aged 65 and over will increase

from 3,268,000 in 2017 to 7,152,000 in 2061. In the structure of the elderly

population, the proportion of the structural layer of the elderly aged 65 to 74

years old shows a downward trend, while the proportion of the structural layer of

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Ⅴ Overview

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the elderly aged 75 to 85 years old shows an upward trend. The above data

shows that in addition to the long-term increase trend of the population over 65

years old, the increase in the proportion of the population over the age of 75 also

reflects the trend of longevity in the country. The increase in the elderly

population and the increase in the average life expectancy of the national

population will make consumers pay more attention to the health care concept of

“live long, live well and live healthy”, and the demand for medical care, health

care products and bio-tech care products is expected to increase. According to

the statistics of MedFirst's members, members over 60 years old accounted for

26.31%, and 40-60 years old accounted for 49.21%. This shows that the elderly

are a long-term stable customer base of MedFirst, and will help to promote the

growth of the market for the company's industry.

Year

Elderly population aged over 65 (thousand persons)

Total

65-74 years old

young elderly

population

75-84 years old

older elderly

population

Over 85 years old

super elderly

population

2016 3,108 1,782 969 358

2021 3,974 2,513 1,038 423

2031 5,731 3,217 1,957 557

2041 6,815 3,173 2,532 1,110

2051 7,391 3,299 2,539 1,553

2061 7,152 2,829 2,660 1,663

Year Proportion of age distribution (%)

2016 100.0 57.3 31.2 11.5

2021 100.0 63.2 26.1 10.6

2031 100.0 56.1 34.1 9.7

2041 100.0 46.6 37.2 16.3

2051 100.0 44.6 34.4 21.0

2061 100.0 39.6 37.2 23.3

(B) Medical supplies market in mainland China

With the improvement of the living standards of mainland residents and

their awareness of medical care, the demand for medical device products

continues to grow, and the medical device industry has entered a period of

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Ⅴ Overview

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Operations

rapid growth. In 2017, compared with the market size of the medical device

industry in mainland China, the per capita medical device expenditure in

mainland China was much lower than that in developed countries. In

developed countries, the per capita medical device costs sere all greater than

$100, and as much as $513 in Switzerland, while the per capita medical

device cost in the mainland was only $6. With the aging population, the

increase in per capita disposable income and the strong support of

government policy, room for growth wil still be ample in the mainland’s

future medical device industry.

(C) Biotechnological health food market

Based on past estimates from Global Industry Analysts and Taiwan

Science and Technology Center, the global market for biotech and health food

products has grown from US$155.9 billion in 2007 to US$243.4 billion in

2015, indicating a compound annual growth rate of 5.7%. The top three

regional markets in the world, which are the United States, Europe, and Japan,

accounted for 86% of the global market for biotech-health food products due

to their high levels of disposable income. Nevertheless, the Asia-Pacific

region is experiencing rapid growth thanks to increasing income, and its

compound growth rate from 2010 to 2015 was about 7-10%, exceeding that of

the global market. The Asian market has continued to show positive growth.

In a recent unofficial market survey, the market size of Taiwan's health

products exceeded NT$100 billion. In 2017, the value of the health food

market reached NT$114.9 billion. Therefore, the future market outlook is very

promising.

(4) Competition Niche

A. Stable customer relations earn customers’ trust

The Company upholds the basic belief of becoming “the health manager for

your family”. The professionalism among the Company’s emplyees is top-quality,

and they use their professionalism and expertise to provide customers with

recommendations and advice, offer more in-depth and detailed services to satisfy

customer’s needs, advance the professional reputation of the “MedFirst” brand,

and enable customers to have a great deal of confidence in the Company

B. Product diversity meets customer demand

The Company has many retail stores throughout Taiwan. The Company’s

medical team provides professional explanations and services related to the wide

variety of products available, thus providing customers with a one-stop shopping

experience. The Company also pioneered the 7-day goods return policy in the

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Ⅴ Overview

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industry, and offers a variety of products and comprehensive services to customers

to give them peace of mind.

C. Bulk-buying reduces purchasing costs

The Company uses its large market share to control the quality of imported

products and strives to reduce costs associated with delivery to ensure that

customers are well-protected and rewarded with lower-cost goods.

D. Focus on providing medical supplies services and getting the brand to shopping malls

The Company also participates in shopping turnkey projects to provide more

diverse and extensive services that cover various aspects of our daily lives. The

Company plays the role of a family health manager to penetrate deep into every

aspect of daily life with the aim of enhancing the quality of people’s lives

E. Strengthening the position of Taiwan on a global scale

The Company has used its experience developing the market in Taiwan as a

foundation for integrating healthcare professionals into the market in mainland

China to drive the Company’s market share there.

(5) Favorable and unfavorable factors and countermeasures in the long-term development

vision

A. Favorable factors

(A) Our government actively promotes the development of the medical devices

and supplies industry

In May 2013, our government changed the name of the “Diamond Action

Plan for the Takeoff of Biotechnology in Taiwan” to the “Action Plan for

the Takeoff of Taiwan’s Biotechnology Industry” to better meet the needs

of the industry. The adjusted action plan divided the biotechnology

industry into three areas, each with different characteristics, namely

medical drugs, medical devices and supplies, and healthcare management,

and developed measures to promote each area. The aim of the action plan

is to continuously strengthen established systems and the technological

base of each of the three areas in the hopes of driving success in the areas

of medical drugs, and medical devices and supplies, as well as driving

innovation in the healthcare management sector. The action plan solidifies

efforts to train personnel in the biotechnology industry and encourage great

talent in the country to enter the field of biotechnology to serve the

industry and bridge the gap between theory and applications in the field.

Government initiatives for actively promoting the development of the

biotechnology industry, as mentioned above, and listing the medical

devices and supplies as one of the key areas for development shall

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Ⅴ Overview

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Operations

effectively drive this industry’s development, increase market opportunities,

and encourage personnel in the industry to develop more innovative

products.

(B) Increase of national income, the ageing population, and rising

healthcare awareness

As the national income, the proportion of the elderly population and

national average life expectancy continue to increase, people’s awareness of

healthcare has moved toward the concept of “Live Longer, Live Better and

Live Healthier”. Therefore, expenditures on healthcare and preservation,

medical care for patients with chronic and long-term diseases, and other

medical care and prevention services are expected to continuously grow, thus

driving the future growth momentum of the medical supplies market.

(C) The Company is a leading enterprise in the medical supplies chain

distribution industry and shall continue to expand its retail stores and develop

distribution channels

The Company is a leading enterprise in the medical supplies chain

distribution industry in terms of number of retail stores it has, and boasta an

excellent brand image and reputation. The Company owns many retail stores

and shopping malls, with stores being established at strategic locations inside

and around various major hospitals. The shopping malls are operated with the

Company appointed the contractor of the medical supplies sales department of

various major hospitals. The Company shall continue to expand its retail

stores and further developing its distribution channels,as well as its product

portfolio by developing its services in the Taiwanese market. Furthermore, the

Company shall continue to drive efforts to develop its medical supplies

business in mainland China to reap the benefits of economies of scale and

bulk distribution.

(D) Understanding the needs and preferences of customers, developing its own

diverse branded services, and improving customer satisfaction

The Company is a professional medical supplies chain distributor. Due to

the specifications of the industry in which the Company operates, the

Company must first makes contact with consumers to understand their needs

and preferences and then use this information to develop its own products that

can satisfy customer needs. By selling products that better suit for consumers’

needs, the Company will be able to increase customer satisfaction and gain

repeat sales.

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(E) Great loyalty and repeat customers of the brand effectively contribute to

increased sales revenue

The Company’s store personnel employ such methods as inviting

member customers to visit their stores to take advantage of sales promotions

to increase the number of visits to the stores and customers’ loyalty and

repeat-purchases. Currently, more than1.3 million people have joined the

Company’s membership. The Company’s members can use their membership

cards to enjoy various rewards including discounts, cashback from redeeming

bonus points and member’s birthday gifts, which all help encourage

customers to return to the stores. Sales revenue from purchases by members

currently contributes to half of the Company’s total monthly sales revenue.

This figure is constantly increasing, demonstrating the great loyalty and

repeat-visits of member customers of the brand. Sales revenue from our loyal

customers is expected to continue to increase in future and be a driving force

of market growth and the Company’s expansion.

B. Unfavorable factors and countermeasures

(A) Increasingly vague industry boundaries and increasing market competition

Due to the aging population trend in developed countries, business

opportunities to serve the elderly population have a greater potential for future

growth. Furthermore, increasingly vague industry boundaries have led to a

situation where medical supplies are being sold in drug stores and cosmetic

retail stores, as well as on online shopping platforms that sell a wide variety

of other products. Therefore, both the product and price competition shall

become increasingly tough in the future.

Countermeasures:

The Company has been committed to training and developing store personnel

to be equipped with professional expertise, skills and passion for delivering great

service so that they will be able to take the initiative to provide customers with

healthcare services and respond to their medical supply problems with an excellent

service attitude. By offering comprehensive professional services, the Company

can to provide customers with the most comprehensive medical supplies solutions

that will enhance the customer’s recognition, trust and loyalty towards the brand

and the Company.

Furthermore, the Company has established strategic partnerships with

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Ⅴ Overview

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Operations

agents in different regions to understand changing market trends and provide

differentiated services amd price competition strategies, and has applied brand

marketing abilities and all-in-one service solutions to maintain a long-term

stable, and cooperative relationship.

(B) Wide variety of products, wide management span, and difficulty in managing

quality control

The Company upholds the spirit of serving customers while offering a

highly diverse range of products. However, the Company has experienced

difficulties in managing quality across such a wide range of products that

come from a variety of suppliers.

Before importing products to be sold on store shelves, the Company

must strengthen its quality control for products, evaluate and rate suppliers,

and actively carry out preventive measures to control product quality on

behalf of the customers. Should the products suffer defects, the Company

must actively implement trace and recall procedures to prevent customers

from purchasing defective products, thus further enhancing the confidence

customers habe in our brand.

(C) Brand image and reputation in mainland China has not yet won the people

over

The Company has had a presence in mainland China for years due to its

confidence in the country’s market potential. However, consumption habits and

purchasing methods among consumers in mainland China differ from those in

Taiwan. Furthermore, the mainland China market is vast and geographically

scattered. Local competitors in mainland China have a geographical advantages

and a great abundance of capital, so the Company has experienced difficulties in

establishing a brand reputation there. Although business performance has grown

significantly, it has not yet met the Company’s expectations or desired goals.

Countermeasures:

The Company shall use Taiwan’s excellent brand image as a

competitive niche to gradually enter locations with a high purchasing power,

like Shanghai, Nanjing, Xiamen, Hangzhou and Beijing, to serve as the

market entry points and promote the brand. Furthermore, the Company shall

strengthen its product portfolio and retail sales technique, as well as uphold

the Company’s service concept of using “love, care and patience” as well as

“sincerity” to acquire customers’ “satisfaction”, enhance customers’

recognition of the Company’s brand, and further expand into the mainland

China market to help enhance overall business performance.

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(2) Important Applications and the Manufacturing Process of Major Products

1. Applications of Major Products

(2) Product Review and Launch Process

(3) Supply Status of Major Raw Materials

The Company’s major product categories, their respective suppliers and supply status are shown

below. The Company receives a regular supply of products.

(4) List of Major Suppliers and Clients

(1) A list of any suppliers accounting for ten (10) percent or more of the Company's total purchase

amount in either of the two (2) previous fiscal years, the amount bought from each supplier, the

percentage of the total amount of purchases accounted for by each supplier, and an explanation of

the reason for the increase or decreases of the figures:

In 2018, the proportion of purchases of the major suppliers of the Company declined. The main

reason is that the Abbott food safety incident caused a decline in consumers' willingness to

purchase. Therefore, the Company changed to other brand substitute products, but the main

suppliers with more than 10% of the total purchases remained unchanged, and only the proportion

of purchases decreased.

Unit: NT$ thousand

Item

2017 2018 End of the previous season in 2019

(Note 2)

Name

(Note 1) Amount

Occupat

ion of

yearly

net

purchase

(%)

Relat

ionsh

ip

with

issuer

Name

(Note 1) Amount

Occupati

on of

yearly net

purchase(

%)

Relations

hip with

issuer

Name

(Note 1) Amount

Occup

ation

of

yearly

net

purcha

se(%)

Relations

hip with

issuer

1 Abbott 556,229 18.11 No Abbott 429,604 13.05 No Abbott 107,561 12.55 No

2 Other

2,515,630 81.89

Other 2,861,703 86.95

Other 749,455 87.45

purchases

income 3,071,859 100.00

purchase

s income 3,291,307 100.00

purchases

income 857,015 100.00

Note 1: The name of the supplier, the purchase amount, and the proportion of the purchase amount

Product Category Application

1. Medical care

2. Healthcare

3. Biotechnological

health care supplies

4. Others

Products sold at medical supplies chain stores to

provide consumers with medical care, home care and

preventive health options.

Major Product

Category Suppliers Supply Status

Medical Care Abbott, Yuli,Kunyang Normal supply

Healthcare Jingzan, Dachang Normal supply

Biotechnology

Health Care Minshi , Yuli, Tianyi Normal supply

Publish

investment

information on

the official

website

New commodity and market demand survey

Invite

manufacturers to

participate in

investment

conferences

Product

screening

Contract

negotiation

Sell on the shelf

of the store

103

Ⅴ Overview

of

Operations

of more than 10% of the total purchase amount in the last two years are listed. However,the

contract stipulates that the supplier name cannot be disclosed or that the transaction object is an

individual and not a related person, so it can be presented by code.

(2) A list of clients accounting for ten (10) percent or more of the Company's total amount of

sales in either of the two (2) previous fiscal years, the amounts sold to each client, the

percentage of the total amount of sales accounted for by each client, and an explanation of the

reason for increase or decrease of the figures:

The Company is a professional medical supplies chain distributor that targets regular consumers as

its main customers. Therefore, the Company has not faced a situation in which clients account for

ten (10) percent of the Company’s total amount of sales.

(5) Output volume & value over two (2) years:

The Company is a medical supply chain distributor that focuses on chain development, product

sales, care consultation and drug-use consultation, but does not engage in production or

manufacturing, therefore, the analysis of changes in production volume does not apply.

(6) Sales unit & amount over two (2) years: Unit: NT$ thousand

Note 1: The Company is a composite dealer of medical appliances with numerous products for sale and

inconsistent quantity units. Therefore, quantities are not available

Note2: Other rental income or other operation revenue.

III. The number of employees employed for the two (2) previous fiscal years, and during the

current fiscal year as of the publication of the Annual Report, their average years of service,

average age, and education level (including the percentage of employees at each level)

Unit: person; years of age; year; %

Year 2017 2018

sales unit &

amount Domestic Export Domestic Export

Main Product Unit Amount Unit Amount Unit Amount Unit Amount

Medical care

(Note 1)

3,119,952

( Note 1)

96,868

( Note 1)

3,337,584

( Note 1)

129,001

Healthcare 341,997 10,618 357,066 13,801

Biotechnological

health care

supplies

681,853 21,170 707,389 27,341

Others(Note 2) 50,384 1,565 58,211 2,250

Total 4,194,186 130,221 4,460,250 172,393

Year 2017 2018 Current year to the

20th April 2019

No. of

staff

Internal Staff 169 183 183

Retail Salesperson 950 1053 1,087

Total 1,119 1,236 1,270

Average age 27.68 27.77 27.83

Average Seniority 3.13 3.36 3.36

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IV. Information of environment-oriented expenditures

Describe the loss (including damages or compensation paid) suffered by the Company due

to environmental pollution incidents that occurred during the previous two (2) fiscal years and

during the current fiscal year as of the publication of the Annual Report, the total penalty/fine

amount, and the Company’s future counter-policies (including measures for improvement) and

possible expenses to be incurred (including possible losses if no preventive measures are taken,

and the penalties and estimated damage compensation amount (if reasonable estimation cannot

be made, explain why): none

Ⅴ. Labor/Management Relations

(1) The status of employee welfare, on-the-job training, employee development training,

retirement procedures and implementation, labor-management coordination and the protection

of employee rights and benefits:

1- Employee welfare measures

The Company not only helps employees apply for labor insurance and national health

insurance (NHI), and provides them employee group insurance, but also organizes trips to

foreign countries and provides employees with health checks. In addition to paying empolyees’

salaries, the Company also provides individual performance bonuses, bonuses for outstanding

store managers, recruitment bonuses, birthday gifts, holiday gifts, employee wedding and

funeral subsidies, hospitalization subsidies, disaster aid and emergency relief, group

recreational activity subsidies, childcare subsidies, education scholarships, subsidies for

obtaining professional certifications and employee shopping discounts, totaling up to

NT$1,927,000. Furthermore, the Company distributes quarterly bonuses and year-end bonuses

based on the Company’s earnings.

2- Employees engaging in professional development and training

In terms of employees engaging in professional development and training, an employee is

permitted to submit proposals to undergo external training based on his/her job requirements

or business needs. Subsidies for professional development are distributed after evaluating such

needs. Employees are required to prepare end-of-training reports in order for the Company to

understand the learning process and progress that the employee has made and evaluate how

the training outcomes can be applied to drive the business forward In terms of education and

training, each employee shall involve themselves in personal career development and

promotion plans from the first day on which he or she starts in their position, and shall be

assigned a series of education and training courses, including induction training for new hires,

Year 2017 2018 Current year to the 20th April

2019

Educational

Background

(%)

Ph.D. 0.09% 0.00% 0.00%

Master Degree 5.00% 4.53% 4.96%

Bachelor

Degree

91.51% 93.53% 93.07%

Senior High

School

3.22% 1.78% 1.89%

Below Senior

High School

0.18% 0.16% 0.08%

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future store manager/executive officer training, and store manager/team leader training

amongst others. Furthermore, the Company shall organize on-the-job training at the

Company’s head office or in retail stores with the purpose of coaching professional skills and

enhancing service excellence among employees so that they are equipped with new knowledge

and skills, thus ensuring that employees not only offer the best-quality service to customers,

but also expand their individual career path.

3- Employee retirement system

The Company has set aside retirement funds in accordance with the relevant labor

pension system. Retired employees can enjoy various social security benefits and apply for

pension payments in accordance with the Labor Standards Act. As of 1st July 2005, the

Company has been contributing six (6) percent of the monthly salaries of employees who opt

to participate in the labor pension fund of the Labor Pension Act into their personal pension

accounts at the Bureau of Labor Insurance.

4- Agreement on labor and capital as well as the rights of employees, and maintaining and

measuring their interests:

The Company has established its own work rules, and any problems between employer

and employees shall be handled pursuant to them. Furthermore, the Company has established

an employee complaint hotline, for which the Human Resources department is responsible for

answering calls and immediately handling any employee complaints. The Company organizes

labor management meetings on a quarterly basis. Both employer and employees shall provide

a number of proposals to enhance employee rights in the spirit of cooperation, where mutually

beneficial labor relations take priority.

(2) Any loss suffered by the Company due to labor disputes during the previous two (2) fiscal

years and during the current fiscal year as of the publication of the Annual Report, an estimate

of the losses incurred to date and that may be incurred in the future, and the countermeasures

taken or to be taken. If a reasonable estimation cannot be made, explain why it cannot be made:

the Company has not faced any labor disputes during the fiscal year as of the publication of

the Annual Report.

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Operations

Ⅵ. Important Agreements

AGREEMENT COUNTERPARTY CONTRACTE

D PERIOD

MAJOR

CONTENTS RESTRICTIONS

Short-term Loan E.SUN BANK 2018.1~2019.1 Short-term

Loan None

Short-term Loan Hua Nan Bank 2018.3~2019.3 Short-term

Loan None

Short-term Loan Chang Hwa Bank 2019.1~2010.1 Short-term

Loan None

Short-term Loan Far Eastern Int’l Bank 2019.1~2010.1 Short-term

Loan None

Short-term Loan DBS Bank 2019.3~2010.2 Short-term

Loan None

Long-term Secured Loan Cathay United Bank 106.1~2010.1 Long-term

Secured Loan None

Long-term Secured Loan Chang Hwa Bank 2019.1~2022.1 Long-term

Secured Loan None

Long-term Loan Far Eastern Int’l Bank 2019.1~2021.1 Long-term

Loan

None (shared with

short-term)

Long-term Loan Yuanta Bank 2019.1~2021.1 Long-term

Loan None

Long-term Loan DBS Bank 2019.3~2021.2 Long-term

Loan

None (shared with

short-term)

107

Ⅵ FINANCIAL

STATUS

Ⅵ.Financial Status

I. Condensed Balance Sheet and Statement of Comprehensive Income Information for the five

(5) most recent fiscal years and the names and audit opinions of the attesting CPA

(1) Condensed Balance Sheet and Statement of Comprehensive Income

1. Condensed Balance Sheet – International Financial Reporting Standards (IFRS)

(Consolidated)

Unit: NT$ thousands

Year

Item Financial Summary for The Past Five Years

2014 2015 2016 2017 2018

Current assets 1,166,539 1,226,312 1,294,321 1,409,872 1,678,802

Real Estate, Plant and

Equipment 456,933 460,080 653,952 1,304,802 1,281,503

Intangible assets 8,518 17,913 14,680 38,202 27,092

Other assets 78,793 70,633 348,252 131,078 138,982

Total assets 1,710,783 1,774,938 2,311,205 2,903,536 3,130,399

Current

liabilities

Before

distribution 802,177 827,439 1,396,910 1,181,007 1,675,657

After

distribution 882,945 928,399 1,487,278 1,254,431 (Note)

Non-current liabilities 276,447 275,811 258,490 845,511 544,186

Total

liabilities

Before

distribution 1,078,624 1,103,250 1,655,400 2,026,518 2,219,843

After

distribution 1,159,392 1,204,210 1,745,768 2,099,942 (Note)

Equity attributable to

shareholders of the

parent company

626,855 667,039 652,063 862,770 895,955

Capital stock 252,400 252,400 252,400 282,400 282,400

Capital surplus 204,900 204,900 204,900 390,115 390,115

Earnings

retained

Before

distribution 163,771 205,046 205,371 205,215 243,388

After

distribution 83,003 104,086 115,003 131,791 (Note)

Other equity interest 5,784 4,693 -10,608 -14,960 -19,948

Treasury stock - - - - -

Non-controlling interest 5,304 4,649 3,742 14,248 14,601

Total equity

Before

distribution 632,159 671,688 655,805 877,018 910,556

After


Note: As of the print date of this annual report, the Company has not yet held the General Shareholders’ Meeting.

Therefore, the figures after dividend distribution are not disclosed.

108

Ⅵ FINANCIAL

STATUS

(2) Condensed Statement of Comprehensive Income -IFRS (Consolidated)

Unit: NT$ thousands

Year Financial Summary for The Past Five Years

Item 2014 2015 2016 2017 2018

Operating Revenue 3,606,527 3,880,229 4,109,619 4,324,407 4,632,643

Gross Profit 1,117,964 1,184,450 1,250,944 1,306,766 1,438,914

Operating income (loss) 104,746 138,136 106,894 113,656 152,202

Non - operating Revenue

and Expenses 16,116 12,100 18,056 -1,572 -3,993

Income Before Tax 120,862 150,236 124,950 112,084 148,209

Profit from Continuing

Operations 120,862 150,236 124,950 112,084 148,209

Loss from Discontinued

Operations - - - - -

Net income(loss) 96,927 121,193 101,091 88,795 112,385

Other Comprehensive

Income (Income After

Tax)

1,470 -896 -16,014 -4,868 -6,321

Total Comprehensive

Income 98,397 120,297 85,077 83,927 106,064

Net Income Attributable

to Shareholders of the

Parent Company

98,403 121,848 101,998 90,728 112,950

Net Income attributable to

Non-controlling Interest -1,476 -655 -907 -1,933 -565

Comprehensive Income

attributable to

Shareholders of the Parent

Company

99,873 120,952 85,984 85,860 106,969


attributable to

Non-controlling Interest

-1,476 -655 -907 -1,933 -905

Earnings per Share (EPS) 4.04 4.83 4.04 3.29 4.00

109

Ⅵ FINANCIAL

STATUS

(3) Condensed Balance Sheet –IFRS(Individual)

Unit: NT$ thousands

Year

Item

Financial Summary for The Past Five Years

2014 2015 2016 2017 2018

Current assets 1,069,886 1,143,108 1,189,988 1,209,054 1,447,100

Funds & Investment 85,709 72,572 343,408 412,669 392,460

Plant Assets 436,417 442,946 443,900 1,092,565 1,091,801

Intangible assets 8,492 17,899 14,678 8,233 4,376

Other assets 73,944 61,843 275,374 109,864 113,768

Total assets 1,674,448 1,738,368 2,267,348 2,835,084 3,047,736

Current

liabilities

Before distribution 774,021 799,087 1,360,094 1,130,993 1,611,676

After

distribution 854,789 900,047 1,450,462 1,204,417 (Note)

Long-term liabilities 186,346 172,949 158,333 741,251 437,000

Other liabilities 87,226 99,293 96,858 100,070 103,105

Total

liabilities

Before distribution 1,047,593 1,071,329 1,615,285 1,972,314 2,151,781

After

distribution 1,128,361 1,172,289 1,705,653 2,045,738 (Note)

Capital stock 222,700 252,400 252,400 282,400 282,400

Capital surplus 204,900 204,900 204,900 390,115 390,115

Retaining

earnings

Before distribution 163,771 205,046 205,371 205,215 243,388

After


Unrealized Gain or Loss on

Financial Instruments - - - - -

Other equity interest 5,784 4,693 (10,608) (14,960) (19,948)

Net Loss Unrecognized as Pension

Cost - - - - -

Total

amount of

shareholders

’ equity

Before distribution 626,855 667,039 652,063 862,770 895,955

After

distribution 546,087 566,079 561,695 (Note) (Note)

Note: As of the printing date of the annual report, the company has not held a general meeting of

shareholders, so the post-distribution figures have not been disclosed.

110

Ⅵ FINANCIAL

STATUS

(7) Condensed Statement of Comprehensive Income –IFRS(Individual) Unit: NT$ thousands

Year Item


2014 2015 2016 2017 2018

Operating Revenue 3,516,317 3,760,414 3,975,722 4,184,969 4,439,866

Gross Profit 1,088,987 1,148,914 1,166,648 1,258,930 1,363,200

Operating Income (loss) 117,406 150,782 120,619 134,291 162,026

Non - operating Revenue

and Expenses 3,858 (920) 4,250 (21,069) (16,204)

Income Before Tax 121,264 149,862 124,869 113,222 145,822

Profit from Continuing

Operations 121,264 149,862 124,869 113,222 145,822

Loss from Discontinued

Operations - - - - -

Net income(loss) 98,403 121,848 101,998 90,728 112,950

Other Comprehensive

Income (Income After Tax) 1,470 (896) (16,014) (4,686) (5,981)

Total Comprehensive

Income 99,873 120,952 85,984 85,860 106,969

Net Income Attributable to

Shareholders of the Parent

Company - - - -

Net Income attributable to

Non-controlling Interest - - - -


attributable to Shareholders

of the Parent Company - - - -


attributable to

Non-controlling Interest - - - -

Earnings per Share (EPS) 4.04 4.83 4.04 3.29 4.00

(2) Name of the CPAs and their audit opinion over the five (5) most recent fiscal years

Year Accounting CPA Firm Certified CPA Audit Opinion

2014 Deloitte & Touche Chen, Hui-Ming,Weng, Po-Jen Unqualified opinion




2018 Deloitte & Touche Hsieh, Ming-Chung,

Kuo, Nai-Hua Unqualified opinion

111

Ⅵ FINANCIAL

STATUS

II. Financial Summary of The Past Five Years

(1) Financial Analysis-Based on the IFRS (Consolidated):

Unit: Thousand NTD Year

Item


2014 2015 2016 2017 2018

Financial

structure

(% )

Debt Ratio 63.05 62.16 71.62 69.79 70.91

Ratio of long-term capital to

real estate, plant and

equipment 198.85 205.94 139.81 132.01 113.52

Solvency %

Current ratio 145.42 148.20 92.66 119.38 100.19

Quick ratio 75.39 75.23 42.49 57.58 51.09

Interest earned ratio (times) 38.25 47.99 40.27 10.92 18.19

Operating

performance

Accounts receivable turnover

(times) 93.38 85.29 54.43 40.44 38.77

Average collection days 4 4 7 9.02 9.41

Inventory turnover (times) 5.16 4.82 4.66 4.39 4.29

Accounts payable turnover

(times) 4.23 4.44 3.84 3.37 3.15

Average days of sales 71 76 78 83.14 85.08

Real estate, plant and

equipment turnover (times) 7.73 8.46 7.38 4.42 3.58

Total assets turnover (times) 2.33 2.23 2.01 1.66 1.54

Profitability

Return on total assets (%) 6.44 7.11 5.08 3.77 3.96

Return on stockholders' equity

(%) 19.06 18.59 15.23 11.59 12.57

Pre-tax income to paid-in

capital (%) 47.89 59.52 49.50 39.69 52.48

Net profit ratio (%) 2.69 3.12 2.46 2.05 2.43

Earnings per share (NT$ in

dollars) 4.04 4.83 4.04 3.29 4.00

Cash flow

Cash flow ratio (%) 10.50 17.36 24.04 16.11 19.71

Cash flow adequacy ratio (%) 60.31 66.30 45.68 32.97 73.68

Cash reinvestment ratio (%) -0.35 5.13 18.79 4.9 13.88

Leverage Operating leverage 8.93 6.9 9.33 8.57 7.03

Financial leverage 1.03 1.02 1.03 1.11 1.06

During this period, the turnover rate of accounts receivable was low, mainly due to the increased revenue of the

e-commerce business, and the payment request period was longer.

The proportion of long-term funds in real estate, plant, and equipment decreased, mainly because the real estate

amount increased due to the purchase of logistics warehouses, resulting in a decline in the proportion of long-term

funds for real estate.

The increase in the current ratio was the result of the repayment of short-term borrowings in 2017.

The decreased cash flow ratio and current investment ratio were caused by increased capital expenditures due to land

acquisition in 2017.

112

Ⅵ FINANCIAL

STATUS

(2) Financial Analysis -Based on IFRS (Individual):

Unit: Thousand NTD

Year Financial Summary for The Past Five Years

Item 2014 2015 2016 2017 2018

Financial

structure

(% )

Debt Ratio 62.56 61.63 71.24 69.57 70.60

Ratio of long-term capital to

real estate, plant and

equipment

206.32 212.05 204.38 155.97 122.09

Solvency %

Current ratio 138.22 143.05 87.49 106.9 89.79

Quick ratio 68.19 69.97 37.76 44.5 40.99

Interest earned ratio (times) 38.38 47.96 40.24 11.05 17.91

Operating

performance

Accounts receivable turnover

(times) 90.19 84.5 54.63 40.71 39.99

Average collection days 4 4 7 9 9

Inventory turnover (times) 5.37 4.86 4.68 4.46 4.23

Accounts payable turnover

(times) 4.40 4.43 3.89 3.41 3.49

Average days in sales 68 75 78 82 86

Real estate, plant and

equipment turnover (times) 7.88 8.55 8.97 5.45 4.07

Total assets turnover (times) 2.32 2.2 1.99 1.64 1.51

Profitability

Return on total assets (%) 6.68 7.3 5.22 3.92 4.08

Return on stockholders' equity

(%) 19.53 18.83 15.46 11.98 12.87

Pre-tax income to paid-in

capital (%) 48.04 59.37 49.47 40.09 51.64

Net profit ratio (%) 2.80 3.24 2.57 2.17 2.54

Earnings per share (NT$ in

dollars) 4.04 4.83 4.04 3.29 4.00

Cash flow

Cash flow ratio (%) 11.93 18.26 23.82 14.08 18.62

Cash flow adequacy ratio (%) 55.46 61.95 41.73 27.05 66.68

Cash reinvestment ratio (%) 0.36 5.49 15.35 3.88 12.09

Leverage Operating leverage 7.65 6.21 7.84 6.97 6.30

Financial leverage 1.03 1.02 1.03 1.09 1.06

113

Ⅵ FINANCIAL

STATUS

＊＊The calculation formulae used for financial analysis are as follows:

1. Financial structure

(1) Ratio of liability to asset = total liability / total asset.

(2) Ratio of long-term capital to real estate, plant and equipment = (total equity + non-current liability) / real estate,

plant and equipment net amount.

2. Solvency

(1) Current ratio = current asset / current liability.

(2) Quick ratio = (current asset – inventory – prepaid expenses) / current liability.

(3) Interest earned ratio = net profit before income tax and interest expenses / current interest expenses.

3. Operating ability

(1) Accounts payable (including accounts receivable and notes receivable caused by business) turnover ratio = net

sales / average accounts receivable (including accounts receivable and notes receivable caused by business)

balance.

(2) Average collection days = 365 / accounts payable turnover ratio.

(3) Inventory turnover ratio = sales cost / average inventory.

(4) Accounts payable (including accounts payable and notes payable caused by business) turnover ratio = sales cost /

average accounts payable (including accounts payable and notes payable caused by business) balance.

(5) Average days in sale = 365 / inventory turnover ratio.

(6) Real estate, plant and equipment turnover ratio = net sales / average real estate, plant and equipment net amount.

(7) Total assets turnover ratio = net sales / average total assets.

4. Profitability

(1) Return on assets = (after-tax profit and loss + interest expense × (1 – tax rate)) / average total assets.

(2) Return on equity = after-tax profit and loss / average total equity.

(3) Net profit ratio = after-tax profit and loss / net sales.

(4) Earnings per Share (EPS) ＝ (equity attributable to shareholders of parent company – preference dividend) /

weighted average issued share number. (Note 4)

5. Cash flow

(1) Cash flow ratio = net cash flow of operations activity / current liability.

(2) Net cash flow adequacy ratio = net cash flow of operating activity in recent five years / recent five years (capital

expenditure + inventory increase + cash dividend).

(3) Cash reinvestment ratio = (net cash flow of operating activity - cash dividend) / (real estate, plant and equipment

gross + long-term investment + other non-current asset + working capital). (Note 5)

6. Leverage:

(1) Operating leverage = (net operating revenue – changed Operating costs and expense) / operating profit. (Note 6).

(2) Financial leverage = operating profit / (operating profit – interest expense).

114

Ⅵ FINANCIAL

STATUS

III. Supervisors' or Audit Committee's Report on Financial Statements for the previous fiscal

year: refer to page 135-136

IV. The Financial Statement for the most recent fiscal year, including the Auditor's Report

prepared by an accountant and the Two-year Comparative Balance Sheet, the Statement of

Comprehensive Income, the Statement of Changes in Equity, the Cash Flow Chart, and any

related footnotes or attachments:

refer to pages 137-216

V. Recent Financial Statements and Reports of Independent Accountants of the parent

company:

None

VI. If the Company or any of its affiliats have experienced financial difficulties in the previous

fiscal year or during the current fiscal year up to the publication of the Annual Report, the

Annual Report shall explain how any such difficulties will affect the Company's financial

situation:

None

115

Ⅶ A review and analysis of the

company's financial condition and

operational results, and a list of risks

Ⅶ. Review and Analysis of the Company's Financial Condition

and Operational Results, and a List of Risks

I. Analysis of Financial Status

The Annual Report shall list the main reasons for any material change to the Company's assets,

liabilities, or equity during the previous 2 fiscal years, and describe the effect thereof as shown

below:

(1) Financial Status – IFRS (Consolidated)

Unit: NT$ thousands ;%

Year

Item 2017 2018

Difference

Amount Amount

Total current assets 1,409,872 1,678,802 268,930 19.07%

Investment under equity 17,870 7,518 (10,352) (57.93%)

Real Estate, Plant and Equipment 1,304,802 1,281,503 (23,299) (1.79%)

Computer software costs 38,202 27,092 (11,110) (29.08%)

Other assets 131,078 138,982 7,904 6.03%

Total assets 2,903,536 3,130,399 226,863 7.81%

Total current liabilities 1,181,007 1,675,657 494,650 41.88%

Long-term liabilities 741,251 437,000 (304,251) (41.05%)

Other liabilities 104,260 107,186 2,926 2.81%

Total liabilities 2,026,518 2,219,843 193,325 9.54%

Capital 282,400 282,400 0.00%

Additional invested capital 390,115 390,115 0.00%

Retained earnings 205,215 243,388 38,173 18.60%

Other Equities (14,960) (19,948) (4,988) 33.34%

Non-controlling interests 14,248 14,601 353 2.48%

Total Equity 877,018 910,556 33,538 3.82%

Reasons for such changes (if the change before and after the period is greater than 20%, and the

amount exceeds NT$10 million):

1. Reduction in investment by the equity method: mainly due to the loss of an investment

company.

2. Reduction in computer software: mainly due to the lack of large purchases in 2018.

3. Increase in current liabilities: mainly due to the reclassification of corporate bonds to current

liabilities.

4. Reduction in long-term liabilities: mainly due to the reclassification of corporate bonds to

current liabilities.

5. Other equity reductions: mainly due to the unrealized profit and loss arising from the

application of IAS39 in 2018.

116




(2) Financial Status – IFRS (Individual)

Unit: NT$ thousands

Year

Item 2017 2018

Difference

Increase (decrease)

Amount

%

Total current assets 1,209,054 1,447,100 238,046 19.69%

Investment under equity

method 412,669 392,460 (20,209) (4.90%)

Real Estate, Plant and

Equipment 1,092,565 1,091,801 (764) (0.07%)

Computer software costs 8,233 4,376 (3,857) (46.85%)

Other assets 109,864 113,768 1,205 1.07%

Total assets 2,835,084 3,047,736 212,652 7.50%

Total current liabilities 1,130,993 1,611,676 480,683 42.50%

Long-term liabilities 741,251 437,000 (304,251) (41.05%)

Other liabilities 100,070 103,105 3,035 3.03%

Total liabilities 1,972,314 2,151,781 179,467 9.10%

Capital 282,400 282,400 0 0.00%

Additional invested capital 390,115 390,115 0 0.00%

Retained earnings 205,215 243388 38,173 18.60%

Other Equities -14,960 -19,948 (4,988) 33.34%

Total Equity 862,770 895,955 33,185 3.85%

Reasons behind the changes over the previous two (2) fiscal years (where the difference percentage

exceeds twenty (20) percent and the difference amount exceeds NT$10 million):

1. Reduction in computer software: mainly due to the lack of large purchases in 2018.

2. Increase in current liabilities: mainly due to the reclassification of corporate bonds to current

liabilities.

3. Reduction in long-term liabilities: mainly due to the reclassification of corporate bonds to current

liabilities.

4. Other equity reductions: mainly due to the unrealized profit and loss arising from the application

of IAS39 in 2018.

(3) Effect of major changes to the Company’s financial position in the previous two (2) fiscal years

and related countermeasures:

The changes to the Company’s financial position in the previous two (2) fiscal years have no

significant impact on the Company. Future working capital arising from operational activities and

part of the funds obtained from financial institutions shall sufficiently cover the Company’s

operational needs.

117




Ⅱ.Financial Performance

(1) Main reasons behind major changes in operation revenues, operations income, or income

before tax during the previous two (2) fiscal years

1. Comparative Analysis of Operational Performance in the Previous Two (2) Fiscal Years –

IFRS (Consolidated)

Unit: NT$ thousands; %

Year

Item

2017 2018

Increase

(decrease)

Amount

Difference

%

Operations Revenue 4,324,407 4,632,643 308,236 7.13%

Operations costs 3,017,641 3,193,729 176,088 5.84%

Gross Profit 1,306,766 1,438,914 132,148 10.11%

Operations expenses 1,193,110 1,286,712 93,602 7.85%

Net Operations Profit (Loss) 113,656 152,202 38,546 33.91%

Non-Operations Revenue and Expenses (1,572) (3,993) (2,421) 154.01%

Net Profit (Loss) Before Tax 112,084 148,209 36,125 32.23%

Income Tax Benefits (Expenses) (23,289) (35,824) (12,535) 53.82%

Net Profit (Loss) 88,795 112,385 23,590 26.57%

Total Comprehensive Income 83,927 106,064 22,137 26.38%

Reasons behind the changes over the previous two (2) fiscal years (where the difference percentage

exceeds twenty (20) percent and the difference amount exceeds NT$10 million):

1. Increase of net operating income (loss): primarily due to increasing operation revenue and rising profits.

2. Reduction in non-operating income and expenses: mainly due to the loss of related companies that

adopted the equity method to invest.

3. Increase of net income (loss) before tax: primarily due to increasing operation revenue; however, both

the operating and non-operating expenses increased, which caused profits to decline.

4. Increase of net income (loss) after tax: primarily due to increasing operation revenue, while both the

operating expense and non-operating expenses increased, which caused profits to decline.

5. Total comprehensive income: primarily due to increasing operation revenue; however, both the

operating expense and non-operating increased, which caused profits to decline.

118




(2) Comparative Analysis of Operations Performance in the Previous Two (2) Fiscal Years – IFRS

(Individual)

Unit: NT$ thousands

Year

Item

2017 2018

Increase

(decrease)

Amount

Difference

%

Operations Revenue 4,184,969 4,439,866 254,897 6.09%

Operations costs 2,926,039 3,076,666 150,627 5.15%

Gross Profit 1,258,930 1,363,200 104,270 8.28%

Operations expenses 1,124,639 1,201,174 76,535 6.81%

Net Operations Profit (Loss) 134,291 162,026 27,735 20.65%

Non- Operations Revenue and Expenses (21,069) (16,204) 4,865 (23.09%)

Net Profit (Loss) Before Tax 113,222 145,822 32,600 28.79%

Income Tax Benefits (Expenses) (22,494) (32,872) (10,378) 46.14%

Net Profit (Loss) 90,728 112,950 22,222 24.49%

Total Comprehensive Income 85,860 106,969 21,109 24.59%

Reasons behind the changes over the previous two (2) fiscal years (where the percentage difference

exceeds twenty (20) percent and the amount difference exceeds NT$10 million):

1.Increase of net operating income (loss): mainly due to the increase in operating income and rising

profits.

2 Increase of non-operating income and expenses: mainly due to the increase in the deposit period.

3. Increase of net income (loss) before tax: mainly because although the operating income has grown, the

operating and non-operating expenses have risen, resulting in a decrease in profit decline.

4. Net (loss) profit increased during the period: mainly because although the operating income has

grown, the operating expenses and non-operating expenses have risen, resulting in a profit decline.

5. Total consolidated profit and loss for the period: mainly because although the operating income has

grown, the operating and non-operating expenses have risen, resulting in a decrease in profit decline.

(2) Sales volume forecast and the basis thereof, and a description of the effect on the

Company's financial operations and the countermeasures to be taken:

The Company’s industry is still in the growth stage, and the Company shall pay attention

said industry’s environment and market trends of the industry, expand the Company’s market

share and enhance profitability. The Company is expected to manage to maintain growth of sales

volume in the years to come.

119




Ⅲ.Cash Flow

(1) Cash Flow Analysis for the Previous Fiscal Year

Estimated

Cash and

Cash

Equivalents,

Beginning

of Year

Estimated

Net Cash

Flow from

Operation

Activities

Estimated

Cash

Outflow

(Inflow)

Effect of

Exchange

Rate

Cash

Surplus

(Deficit)

Leverage of Cash

Surplus (Deficit)

Investmen

t Plans

Financing

Plans

528,892 330,221 101,487 (1,463) 630,379 - -

Analysis of change in cash flow in 2018:

(1) Operations activities: net cash inflow 330,221 mainly due to cash income derived from continuous

profit earnings.

(2) Investment activities: net cash outflow of NT$139,912 is mainly due to the increase in

fixed time deposits.

(3)Financing activities: net cash outflow of NT$87,359 is mainly due to repayment of

long-term loans and cash dividends.

(2) Improvement plan for illiquidity: no illiquidity

(3) Cash flow analysis for the coming year:

Estimated

Cash and Cash

Equivalents,

Beginning of

Year

(1)

Estimated Net Cash

Flow from

Operating

Activities (2)

Estimated

Cash

Outflow

(Inflow) (3)

Cash Surplus

(Deficit)

(1)+(2)-(3)

Leverage of Cash Surplus

(Deficit)

Investment

Plans

Financing

Plans

Investment

plan

Financing

plan

630,379 363,243 249,998 743,624 - -

Cash flow analysis for the coming year:

Operations activities: Expected to experience revenue growth, resulting in net cash inflow from

operations activities in 2019

Investment activities: Expected to continuously expand retail stores, purchase fixed assets and acquire

a second logistics center, thus resulting in a net cash outflow in 2019

Financial activities: Expected to increase cash capital due to the acquisition of a second logistics

center, issue corporate bonds and take on long-term loans, thus resulting in a net cash outflow in 2019

Ⅳ. Effect on the financial operations of any major capital expenditures during the previous

fiscal year:None

120




Ⅴ. Investment Policies, Main Reasons for Investment Gains or Losses and Related

Counter-Measures, Investment Plan for Next Year

Unit: thousands

Description

Original

investment

amount.

Policy

Main reasons for profits or

losses

Description Improvement scheme

Company

Income

summary(NT$

thousands)

Listed as

investment loss

of current

period(NT$

thousands)

ABOVE

ADVANCE

LIMITED

USD10,898

Is a holding

company of

re-invested

business of

the company

(5,726) (5,726)

Mainly because

scale economy was

not achieved by

number of channels

within re-invested

business in

mainland China

thus operating

performance was

not elevated which

caused the operating

scale of re-invested

business in

mainland China to

be unable to afford

daily operating

expenditures and

losses.

1.A logistics

warehouse was set up

in Shanghai in order

to seek suppliers of

good commodities at

fair prices and reduce

purchase costs.

2.Cooperated and

negotiated with large

national or central

enterprises in the hope

that quality business

locations can be

obtained to expand

channels of new

shops.

CAYMAN

MEDFIRST

GROUP

LIMIED

USD10,898

Is a holding

company of

re-invested

business of

the company

(5,726) (5,726)

Nanjing

MedFirst

Healthcare

Services,

Inc.

USD2,115

RMB1,000

Develop

market of

domestic

demands in

mainland

(100) (100)

Shanghai

MedFirst

Healthcare

Services,

Inc.

USD1,550

RMB50,700

Develop

market of

domestic

demands in

mainland

(5,757) (5,757)

Fujian

MedFirst

Healthcare

Services,

Inc.

USD800

Develop

market of

domestic

demands in

mainland

367 367

Shanghai An

gu Medical

Devices

Company

Limited

RMB2,700

Develop

market of

domestic

demands in

mainland

(2,916) (2,916)

Hangzhou

An gu

Healthcare

Services,

Inc.

RMB1,500

Develop

market of

domestic

demands in

mainland

(2,603) (2,603)

Beijing

MedFirst

Healthcare

Services,

Inc.

RMB2,000

Develop

market of

domestic

demands in

mainland

21 21

121




Shandong

En Gu

Medical

Devices

Company

Limited

RMB3,000

Develop

market of

domestic

demands in

mainland

(972) (972)

Nanjing

Baitang

Trading Co.,

Ltd.

RMB450

Develop

market of

domestic

demands in

mainland

(1,163) (640)

Taiwan

Trim Co.,

Ltd.

NTD10,000

Water

Ionizer

Seller

(165) (82)

Mainly because the

business scale at

beginning stage of

corporate operation

was too small to

afford daily

operating

expenditures.

1.Proactively develop

business to bring up

sales numbers and

growth of revenue.

2.Proactively contract

dealers so as to

expand sales

channels.

3.Proactively hold

seminars at companies

and hospitals.

Exactitude

Biotech Co.,

Ltd.

NTD10,000

Medical

Supply

Retailer

391 567

Mainly due to the

logistics service

income.

Continue the

development of new

product.

Xinglitong

Logistics

Co., Ltd.

NTD27,756

Centralized

drug delivery

service for

prescriptions

(25,501) (10,352)

Mainly because it is

still in the business

development stage.

Propose the method of

raising income and

reducing expenditure

to reduce high

expenses

Hsing Chou

Healthcare

Co., Ltd.

NTD86,100

Management

consultancy

services

2,372 686


still in the business

development stage.

Stabilize expenditures

of pharmacies and

elevate revenues.

Baodean

Co., Ltd. NTD9,260

Foreign

medical

supplies

brand

distribution

6,638 (374)


still in the market

development stage.

Actively expand

business to promote

performance growth

and turnover growth

One-year investment plan:

1.Mainly associated with the expansion of shops in mainland China, which shall be carried out to develop business and

achieve scale merit. Shops in hospitals shall also be done proactively developed.

2.Other re-invested companies shall propose capital increase to the company depending on operating requirements. The

Company shall evaluate such related investment and approval procedures.

122

123




Ⅵ. Risk management assessment during the previous fiscal year or during the current fiscal

year as of the publication of the Annual Report

(1) Effects of changes to interest rates, foreign exchange rates and inflation of corporate finance,

and future response measures:

Unit: NT$ thousands

Item

2017 2018

Amount Ratio over

revenue %

Amount Ratio over

revenue %

Interest revenue 1,041 0.02% 1,724 0.04%

Interest expense 11,299 0.26% 11,106 0.24%

Net Exchange Loss

(386) (0.01%) 424 0.01%

(1) Changes to interest rates

The interest incomes of the company and subsidiaries were 1,724,000 and

1,041,000 in 2018 and 2017, accounting for 0.04% and 0.02% of revenue for each

year, respectively. Interest expenses were 11,106,000 and 11,299,000 in 2018 and

2017, accounting for 0.24% and 0.26% of revenue respectively. The percentages of

the annual interest expenses and income over revenue were very small and therefore

were insignificant to the Company’s operations.

The Company has ised funds stably and conservatively, whereby cash is

deposited in banks to acquire a fixed deposit yield. The Company’s finance

department has established and maintained good relationships with banks, and

continuously acquires information regarding changes to interest rates to analyze and

interpret future interest rate trends, thus adjusting interest rates of loans

appropriately. The Company shall accordingly adjust how it uses funds based on

interest rate changes in the future.

(2) Changes to foreign exchange rates

The Company’s recognized losses were NT$424,000 in 2018 and NT$386,000

in 2017, which accounted for 0.28% and 0.34% of the Company’s operational

profits respectively, as well as 0.29% and 0.34% of the Company’s net income

before tax respectively, thus indicating that these percentage values had very impact.

The Company’s sales and purchases of products were mostly quoted in New Taiwan

dollars (NT$), therefore international exchange rate fluctuations have a limited

effect on the Company’s profit and losses.

(3) Inflation

Due to the increase of in material costs in recent years, the overall economic

environment has shown an inflation trend. However, such inflation has not yeat had

an immediate significant impact. Furthermore, the Company will continue to watch

124




fluctuations in material market prices, maintain good relationships with suppliers,

and be flexible with regard to adjusting prices in accordance with the cost of its

various suppliers. By doing so, it can prevent any significant impact caused by

inflation.

(2) Policies, primary reasons for gains or losses and future response measures with respect to

high-risk, high-leveraged investments, lending or endorsement guarantees, and derivatives

transactions:

The Company and its subsidiaries carefully evaluate all of its investments and manage

such matters in accordance with the “Procedures for the Acquisition or Disposal of Assets”.

The Company does not engage in any high risk or high leverage investments. The company

has also established the “Procedures for Lending Funds to Others” and the “Procedures for

Endorsements and Guarantees” in accordance with all the stipulations of relevant regulations.

The Company is endorsed as of the publication of this annual report in 2017 and absolutely

holds the subsidiary of Shanghai MedFirst Healthcare Services, Inc. with guarantee provided

in December 2017.

(3) Research and development work to be carried out in the future and further

expenditures expected for research and development work:

The Company is a professional medical supply chain distributor, but has yet to

establish a R&D department. Therefore, the Company has no expenses related to R&D.

If the Company needs to carry out R&D activities due to the developing needs of the

Company, it shall do so only following careful deliberation and consideration as to

whether R&D would fit within the Company as it stands to protect the interests of its

original shareholders.

(4) Effects on financial operations by keys domestic or overseas policies and articles of law

and related counter-measures.

No important policy or changes to laws have affected the finances or businesses of the

Company and its subsidiaries. In addition to collecting and evaluating the effects of

important domestic policies and changes to laws on our finances and businesses in the future,

we will consult relevant professionals in the field to fully comprehend external information

and adopt corresponding measures as appropriate.

(5) Effects on financial operations by new technology and related counter-measures:

The Company continues to understand the changes in the industry and market trends,

pays attention to relevant technology developments and changes, and recognizes consumer

preferences to launch products that meet mass market trends. No major technological

125




changes or industrial changes occurred in the 2018 and as of the publication of the Annual

Report and yjus did not significantly affect the Company's financial business.

Respond to influences caused by system exception, the company has established

Regulations of Information Security, and has completed Information Protecting and

controling measures to ensure usefulness, completeness, and confidence of data.

(6) The impact of changes to the corporate image or corporate risk management, and the

Company’s response measures:

The Company has been committed to maintaining corporate image for many years,

developing unique innovative services, such as return and exchange services within 7 days,

product leasing and recycling services, home delivery services, 24-hour customer service

voice line and “Xing Line LOHAS”, and implementing the brand positioning of the “Health

Manager of your family”. It often receives good reviews from customers and positive media

reports, which also has a positive impact on the Company's image. No corporate crisis

management situation has arisen due to changes in the corporate image in 2018 and as of the

publication of the Annual Report.

(7) Expected benefits from, risks related to and responses to merger and acquisition plans:

The Company and its subsidiaries have no plan to acquire another company. However, if

an acquisition plan is created in the future, the Company will consider the impact that such a

merger or acquisition would have on the Company and would strive to take every effort

possible to protect the rights of the original shareholders.

(8) Expected benefits from, risks related to and response to factory expansion plans:

The Company is a professional medical supply chain distributor, the main business of

which consists of selling products through its retail stores. Therefore, the Companyhas no

manufacturing plan or production facilities. The Company shall open new retail stores in

accordance with the Company’s retail store expansion plan, and carry out careful

deliberation with regard to its retail store expansion plan to consider whether the expansion

would work in favor of the Company to protect the interests of its original shareholders.

(9) Risks related to and responses to centralized purchases or sales:

The Company is a professional medical supply chain distributor, the stock of which is

purchased by the Company from local and foreign sources and does not come from one

centralized source. Furthermore, most of the Company’s suppliers have established long-

term partnerships with the Company, where both the suppliers and the Company have signed

sales and purchase agreements. Therefore, no risk arises from purchasing stock from one

centralized source.Furthermore, the Company’s sales target is the general consumer, from

which no further issue arises in terms of purchasing stock from a single centralized supplier.

(10) Effects of, risks related to, and response to large share transfers or changes to shares held

126




by directors, supervisors, or shareholders with shareholdings of over 10%: none

(11) Effects of, risks related to, and responses to changes in management rights:

As of 14th April 2019, all directors hold between them 39.11% of thetotal shares of

the Company. The Company’s directors and employees have a strong mission to the

Company as they work together to run the Company for the long term. Moreover, the

employees identify with the development direction of the Company, which has thus

maintained good operating performance over the past few years. The Company shall

uphold its firm and steady business philosophy and execute good management decisions

so that operations and profits can continue to increase and grow and to win the

shareholders’ recognition of the work done by the management team. In conclusion, the

Company’s ownership has been relatively stable and the Company has yet to experience a

large quantity of shares being transferred to another party or changing hand that

subsequently upsets Company ownership, bringing with it risks and potentially-damaging

changes (as of the date of publication of the Annual Report).

(12) Matters of litigation or non-litigation:

1. Any final judgments or lawsuits in progress, non-litigious or administrative litigation of

the Company in the previous two years, as of the publication of the Annual Report, the

results of which may have a significant effects on shareholders’ equity or securities price,

facts under dispute, the start date of lawsuits, the main parties involved and current

management status are thus disclosed: none.

2. Major ongoing lawsuits, cases of non-litigation or administrative lawsuits caused by the

Company’s director, supervisor, general manager, actual head, major shareholder who

holds more than 10% of the shares or a subsidiary company of the publication of the

Annual Report, and matters that may have a major effect on shareholder’s equity or

values of securities: none.

3. Occurrence of any event set forth under Article 157 of the Securities and Exchange Act

that involves a company director, supervisor, its general manager, or any major

shareholder with a stake of more than 10% that occurred in the previous two fiscal years

or during the current fiscal year as of the publication of the Annual Report with details of

how the Company is currently handling the matter: none.

(13) Other significant risks and response measures: none

Ⅶ. Other important matters : None.

Ⅷ Special

Events

Ⅷ.Special Events

Ⅰ.Relevant information on affiliate enterprises

(1) Affiliate enterprises consolidated operations report

1. Organizational chart of affiliates

2. Basic Information of Affiliated Companies

December 31th

2018；Unit: thousands

Company Date of

Establishment Address

Invested

Capital

Major Business or

Products

ABOVE ADVANCE

LIMITED 2005/07/28

Vistra Corporate Services

Centre, Ground Floor

NPF Building, Beach

Road, Apia, Samoa

USD 10,898 Investment Holdings

Company

CAYMAN MEDFIRST

GROUP LIMITED 2005/09/27

Floor 4,Willow House, Cricket Square, P O Box 2804, Grand Cayman KY1-1112, Cayman Islands.

USD 10,898 Investment Holdings

Company

Nanjing MedFirst Healthcare Services, Inc.

2006/02/28

No. 5, Room 1506, Block 2, Junlin International Building, Guangzhou Rd, Gulou District, Nanjing City

USD 2,440 Medical Supply

Retailer

Shanghai Angu Medical

Equipment Ltd. (Note 3)

Shanghai MedFirst Healthcare

Services, lnc. (Note 1)

82.81% 81.72% 18.28%

CAYMAN MEDFIRST GROUP

LIMITED

Beijing MedFirst Healthcare




Exactitude

Biotech

Co., Ltd.

Fujian

MedFirst

Healthcare

Services, lnc.

100% 100%

New

Zuelling

Co., Ltd.

Taiwan

Trim Co.,

Ltd. (Note

2)

Hsing

Chou

Healthcare

Co., Ltd.

MedFirst Healthcare Services,

lnc.

45.32% 40% 50%

ABOVE ADVANCE LIMITED

100%

100% 5.73% 11.46%

100%

100%

Hangzhou An gu Medical

Equipment Ltd. (Note 4)

100%

127

Ⅷ Special

Events

Company Date of

Establishment Address

Invested

Capital

Major Business or

Products

Shanghai MedFirst Healthcare Services, Inc.

2009/09/11

Room 301, 3rd Floor, Building 9, No. 99, Tianzhou Road, Xuhui District, Shanghai

USD 9,264 Medical Supply

Retailer

Fujian MedFirst Healthcare Services, Inc.

2010/08/19 B1F, No. 123 Xiafei Road, Xinyang Industrial Zone, Haicang District, Xiamen

USD 800 Medical Supply

Retailer

Shanghai An gu Medical Devices Company Limited

2014/10/29 South-5, 10, No. 9506, Humin Road, Xuhui District, Shanghai

RMB 2,700 Medical Supply

Retailer

Hangzhou An gu Healthcare Services, Inc.

2014/11/07

Room 1508, No. 607, Zhongshan North Road, Xiacheng District, Hangzhou


Retailer

Beijing MedFirst Healthcare Services, Inc.

2015/04/13

Room A, Building 2, No. 168, Litang Road, Tianbei Street, Changping District, Beijing


Retailer

Shandong En Gu Medical Devices Company Limited

2018/06/04 1019, Building 2, Digital Technology Center, No. 63 Haier Road, Laoshan District, Qingdao, Shandong

RMB 3,000

Medical Supply Retailer

Nanjing Baitang Trading Co., Ltd.

2018/01/05 Room 1505, Building 2, No. 5, Guangzhou Road, Gulou District, Nanjing

RMB 450 Medical Supply

Retailer

Taiwan TRIM CO.,LTD 2012/04/20 4F, No. 1, Ln. 108, Fuxing 1st Rd., Guishan Dist., Taoyuan City

NTD 20,000

Water Ionizer Seller

EXACTITUDE BIOTECH CO., LTD

2012/05/03 4F, No. 1, Ln. 108, Fuxing 1st Rd., Guishan Dist., Taoyuan City

NTD 10,000

Medical Supply Retailer

Singleton Pharma Logistics Co. Ltd

2013/12/17

12 F, No. 2, Sec. 3, Minquan E. Rd., Zhongshan Dist., Taipei City

NTD 69,390

Centralized Dispensing Service


Ltd. 2016/05/25

3 F-1, No. 1, Ln. 108, Fuxing 1st Rd., Wenhua Vil., Guishan Dist., Taoyuan City

NTD 95,000

Management consultancy services

Baodean Co., Ltd. 2017/05/12 3F., No.94, Fusing 1st Rd., Gueishan Dist., Taoyuan City

NTD 10,000

Foreign medical supplies brand distribution

3. Description of the area of business and dealings of the industries covered by the business

operations of all affiliates with a business connection exists with the Company: medical supplies,

healthcare, and biotechnological healthcare retail products

128

Ⅷ Special

Events

4. Directors, Supervisors and Managerial Officers of Affiliated Companies December 31

th 2018；Unit: Shares

Company Title Name or Representative Shareholdings

Share %

ABOVE ADVANCE

LIMITED Director Chen, Li-Ju 10,898,000 100%

CAYMAN MEDFIRST

GROUP LIMITED Director Chen, Li-Ju, Tsai, Te-Chung 10,898,000 100%


Services, Inc.

Executive Director

Tsai, Te-Chung - 100%

Apricot first medical products

Limited by Share Ltd.

Executive Director


Fujian MedFirst Healthcare

Services Company Limited

Executive Director


Shangha En Gu Medical


Executive Director


Hangzhou En Gu Medical


Executive Director


Beijing En Gu Medical


Executive Director


Shandong En Gu Medical

Devices Company Limited Executive Director


Nanjing Baitang Trading

Co., Ltd. Executive Director


Taiwan TRIM CO.,LTD

Chairman

Director

Director

Director

Supervisor Supervisor

Representative of MedFirst Healthcare Services, Inc.: Tsai, Te-Chung Representative of MedFirst Healthcare Services, Inc.: Chen, Li-Ju

Representative of Nihon Trim Co., Ltd.: TAHARA NORIO

Representative of Nihon Trim Co., Ltd.: Oda Hiroshiro

Kao, Shih-Lung

Shinkatsu Morisawa

1,000,000 50%

EXACTITUDE BIOTECH

CO., LTD

Chairman

Director

Director

Supervisor

Representative of MedFirst Healthcare Services, Inc.: Chen, Li-Ju

Representative of MedFirst Healthcare Services, Inc.: Tsai, Te-Chung

Representative of MedFirst Healthcare Services, Inc.: Wang, Ting-Jui

Representative of MedFirst Healthcare Services, Inc.: Wei, Tzu-Wen

1,000,000 100%

Singleton Pharma Logistics

Co. Ltd

Chairman

Director

Director

Representative of Durban Development Co.Ltd.: Huang, Yung-Lun Representative of Durban Development Co.Ltd.: Huang, Chun-Fa

2,775,600 40%

129

130

Ⅷ Special

Events

Supervisor Representative of MedFirst Healthcare Services, Inc.:Wei,

Tzu-Wen

Li, Li-Ching


Ltd.

Chairman

Director

Director

Supervisor

Representative of MedFirst Healthcare Services, Inc.: Chen, Li-Ju Representative of MedFirst Healthcare Services, Inc.: Tsai, Te-Chung Representative of MedFirst Healthcare Services, Inc.: Wei, Tzu-Wen Kao, Shih-Lung

8,610,000

90.63%

Baodean Co., Ltd.

Chairman

Director

Director

Supervisor

Tsao, Chia-hung

Tu, Ching-Kuo

Wang, Wen-Ping

Lin, Yen-Ling

195,455

19.55%

Ⅷ Special

Events

5. Situations of business operations of each affiliate enterprise

31st December

2018；Unit: NT$ thousands

Company Capital Total Assets Total

Liabilities Net Value

Operating

Income Gross

Profit

Net

Income

Earnings per

Share

(EPS)(NT$)

Net Value (after tax) (after tax)

ABOVE ADVANCE

LIMITED USD 10,898 215,709 207 215,502 0 0 (5,726) -

CAYMAN

MEDFIRST GROUP

LIMITED

USD 10,898 215,709 0 215,709 0 (162) (5,726) -

Nanjing MedFirst

Healthcare Services,

Inc.

USD 2,440 18,990 6,985 12,005 7,283 (1,903) (100) -

Shanghai MedFirst


Inc.

USD 9,294 239,761 23,875 215,886 80,876 (14,769) (5,757) -

Fujian MedFirst


Inc.

USD 800 29,111 6,939 22,172 31,206 248 367 -

Shanghai An gu

Medical Devices

Company Limited

RMB 2,700 9,140 3,276 5,864 18,226 (321) (2,916) -

Hangzhou An gu


Inc.

RMB 1,500 23,026 17,337 5,689 36,304 (1326) (2,603) -

Beijing En Gu

Medical Devices

Company Limited

RMB 2,000 13,328 4,418 8,910 17,543 (164) 21 -

Shandong En Gu

Medical Devices

Company Limited

RMB 3,000 16,420 3,946 12,474 2,889 (979) (972) -

Nanjing Baitang

Trading Co., Ltd. RMB 450 876 1 875 0 (1,278) (1,163) -

Taiwan TRIM

CO.,LTD NTD 20,000 6,008 655 5,353 4,031 (292) (165) (0.08)

EXACTITUDE

BIOTECH CO., LTD NTD 10,000 39,738 29,079 10,659 108,224 616 391 0.39

Singleton Pharma

Logistics Co. Ltd NTD 69,390 100,871 91,209 9,662 164,427 (26,264) (25,501) (3.68)

New Zuelling Co.,

Ltd. NTD 95,000 94,988 111 94,877 4,476 (19) 2,372 0.25

Baodean Co., Ltd. NTD 10,000 55,990 36,016 19,974 116,601 10,037 6,638 6.64

(2) Statement of consolidated financial reports of related enterprises

According to the “Preparation Guidelines for Related Enterprises’ Consolidated

Business Report, Consolidated Financial Statements, and Relationship Report”, the

Company shall be included amoung the companies preparing the consolidated corporate

financial report of the Company in 2018 (from January 1 to December 31, 2018), which is

the same as a company being included in its parent company's consolidated financial report

according to International Financial Reporting Standard No. 10; if relevant information that

a related enterprise’s consolidated financial report is required to reveal has already been

131

Ⅷ Special

Events

disclosed in a previous consolidated financial report of the parent company, then said related

enterprise’s consolidated financial report shall not be prepared separately.

(3) Affiliation Report: None

Ⅱ. The handling situation of private securities as of the publication of the latest Annual

Report: None.

Ⅲ. The Company’s stock held or disposed by subsidiaries as of the publication of the latest

Annual Report:Yes

Ⅳ. Necessary additional information

In accordance with the guidance of the official document issued by TPEx Zheng Gui Shen

Zi # 10301001251 dated 28th

January 2014, the Company proceeded with the following

matters.

(1) “The Company shall not give up on increasing its annual capital in Above Advanced

Limited (hereinafter ‘Above’), Shanghai MedFirst Healthcare Services Limited

(hereinafter ‘Shanghai MedFirst’), Nanjing MedFirst Healthcare Services Limited

(hereinafter ‘Nanjing MedFirst’), Fujian MedFirst Healthcare Services Limited

(hereinafter “Fujian MedFirst”), the Taiwan Trim Company Limited and Exactitude

Biotechnology Company Limited, nor in the Cayman MedFirst Group Limited (hereinafter

‘MedFirst’) in the future. MedFirst shall also not give up on increasing annual capital in

Shanghai MedFirst and Nanjing MedFirst in the future, and Fujian MedFirst shall not give

up on increasing annual capital in Nanjing MedFirst. If any of these companies is required

to either give up on increasing their annual capital investments in the aforementioned

companies or dispose of the aforementioned companies due to strategic alliance

considerations or investors who have obtained approval from the stock exchange, such

matter must be approved during a special Board of Directors meeting.” If these regulations

are amended in the future, the Company shall input and disclose such information on

MOPS, and file a formal notice to TPEx.

(2) TPEx shall request the Company to delegate CPAs or an CPA authorized by TPEx as

necessary. The Company shall carry out professional external inspections in accordance

with the audit scope authorized by TPEx and submit the inspection outcome to TPEx, and

the Company shall bear the related costs.

(3) Retail stores that do not comply with the relevant law related to buildings for business use

shall either complete the relevant procedure for the legal use of buildings or shut down

prior to expiration of the lease.

132

Ⅷ Special

Events

Ⅴ. As of the publication of the latest Annual Report, the matters prescribed in Article 36,

Paragraph 3, Item 2 of the Securities Exchange Act that have a significant impact on

shareholder’s equity or value of securities: None.

133


Internal Control Declaration Date: 26

rd February 2019

I. The Company’s Board of Directors and managerial officers are responsible for the

establishment, implementation, and maintenance of a proper internal control system. Our

internal control system is designed to provide reasonable assurance over the effectiveness and

efficiency of our operations (including profitability, performance, and protection of assets), as

well as the reliability of our financial reporting in accordance with applicable laws and

regulations.

II. An internal control system has certain inherent limitations; no matter how perfectly designed,

an effective internal control system can only provide reasonable assurance of accomplishing its

stated objectives. Furthermore, the effectiveness of an internal control system may be subject

to change due to extenuating circumstances beyond the Company’s control. Nevertheless, our

internal control system consists of self-monitoring mechanisms, and the Company takes

immediate corrective action upon identifying any deficiencies.

III. The Company evaluates its internal control system’s design and operational effectiveness

according to the criteria provided in the Regulations Governing the Establishment of Internal

Control Systems by Public Companies (hereinafter referred to as the “Regulations”). The

criteria adopted by the Regulations identify five key components of managerial internal control:

(1) environment control, (2) risk assessment, (3) activity control, (4) information and

communication, and (5) monitoring.

IV. The Company has evaluated the design and operational effectiveness of its internal control

system according to the aforementioned Regulations.

V. Based on said evaluation’s results, the Company believes that on 31st December 2018, it

maintained an effective internal control system in all material aspects (including the

supervision and management of our subsidiaries) in order to provide reasonable assurance over

our operational effectiveness and efficiency, as well as the reliability of our financial reporting

in accordance with applicable laws and regulations.

VI. This Declaration is an integral part of the Company’s Annual Report and relevant

documentation and shall be made public. Any falsehood, concealment, or other illegality in the

content made public will entail legal liability under Articles 20, 32, 171, and 174 of the

Securities and Exchange Law.

VII. This Declaration was passed by the Board of Directors during the meeting held on 26rd

February 2019, with none (0) of the seven (7) attending directors expressing a dissenting

opinion, and all seven affirming the content of this Declaration.



General Manager: Tsai, Te-Chung

134

Audit Committee's Review Report

The Audit Committee agrees and the Board of Directors decides the 2018

Financial Statements, Business Report and Profit Distribution Proposal of the

company; the 2018 Financial Statements has been audited by Deloitte & Touche

which was entrusted by the Board of Directors with clean opinion audit report

issued.

The Audit Committee is responsible for supervising the financial reporting

process of the company.

The Certified Public Accountants certificate the 2018 Financial Statements of

the company and communicate the following matters with the Audit Committee:

1. There have been no material audit findings in the audit scope and period

planned by the Certified Public Accountants.

2. The Certified Public Accountants provide the statement that the personnel

regulated by independence in the firm which the Certified Public

Accountants working in have abided by the stipulations about independence

in CPAs professional ethics and there have been no relationships or other

matters which can affect the independence of Certified Public Accountants.

3. After communicating with the Audit Committee, the Certified Public

Accountants decide to disclose the key audit matters communicated about

inventory reduction in the audit report.

The company’s 2018 financial statements, business report, and proposal for the

distribution of earnings, all of which have been approved by the audit committee and

the Board of Directors, have been found to conform with the provisions of the

relevant decrees in accordance with the report of the fourth sub-paragraph of Article

14 of the Securities Exchange Act and the aforementioned reports.

Please Verify

Yours sincerely

2018 Shareholders’ Meeting of MedFirst Healthcare Services, Inc.

Convener of the Audit Committee: Tseng, Sheng-Cheng

February 26, 2019

135

Agreement Report of Audit Committee The Audit Committee agrees and the Board of Directors decides the 2018

Consolidated Financial Statement of the Group and it has been audited by

Deloitte & Touche with clean opinion audit report issued.

The Audit Committee is responsible for supervising the financial reporting

process of the Group.

The Certified Public Accountants certificate the 2018 Consolidated Financial

Statement of the Group and communicate the following matters with the Audit

Committee:

1. There have been no material audit findings in the audit scope and period

planned by the Certified Public Accountants.

2. The Certified Public Accountants provide the statement that the personnel

regulated by independence in the firm which the Certified Public

Accountants working in have abided by the stipulations about independence

in CPAs professional ethics and there have been no relationships or other

matters which can affect the independence of Certified Public Accountants.

3. After communicating with the Audit Committee, the Certified Public

Accountants decide to disclose the key audit matters communicated about

inventory reduction in the audit report.

The Audit Committee agrees and the Board of Directors decides the 2018

Consolidated Financial Statement of the Group conforms to the relevant laws and

reports as above in line with the sub-paragraph of Article 14 of Securities Exchange

Act.

Please Verify

Yours sincerely

2018 Shareholders’ Meeting of MedFirst Healthcare Services, Inc.

Convener of the Audit Committee: Tseng, Sheng-Cheng

February 26, 2019

136

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The companies that are required to be included in the consolidated financial statements of affiliates of

MedFirst Healthcare Services, Inc. for the year ended December 31, 2018, under the Criteria Governing

the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial

Statements of Affiliated Enterprises are the same as the companies required to be included in the

consolidated financial statements of parent and subsidiary companies prepared in conformity with

International Financial Reporting Standards No. 10, “Consolidated Financial Statements.” In addition, the

information required to be disclosed in the consolidated financial statements of affiliates has all been

disclosed in the consolidated financial statements of affiliates has all been disclosed in the consolidated

financial statements of parent and subsidiary companies. Consequently, MedFirst Healthcare Services,

Inc. and subsidiaries did not prepare a separate set of consolidated financial statements of affiliates.

Very truly yours,

MEDFIRST HEALTHCARE SERVICES, INC.

By

LI-JU CHEN

Chairman

February 26, 2019

137

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders


Opinion

We have audited the accompanying consolidated financial statements of MedFirst Healthcare

Services, Inc. and its subsidiaries (collectively referred to as the “Group”), which comprise the

consolidated balance sheets as of December 31, 2018 and 2017, the consolidated statements of

comprehensive income, changes in equity and cash flows for the years then ended, and the notes to

the consolidated financial statements, including a summary of significant accounting policies

(collectively referred to as the “consolidated financial statements”).

In our opinion, the accompanying consolidated financial statements present fairly, in all material

respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and

its consolidated financial performance and its consolidated cash flows for the years then ended in

accordance with the Regulations Governing the Preparation of Financial Reports by Securities

Issuers, and International Financial Reporting Standards (IFRS), International Accounting

Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued

into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation

of Financial Statements by Certified Public Accountants and auditing standards generally accepted

in the Republic of China. Our responsibilities under those standards are further described in the

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our

report. We are independent of the Group in accordance with The Norm of Professional Ethics for

Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical

responsibilities in accordance with these requirements. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in

our audit of the consolidated financial statements for the year ended December 31, 2018. These

matters were addressed in the context of our audit of the consolidated financial statements as a

whole, and in forming our opinion thereon, and we do not provide a separate opinion on these

matters.

138

Evaluation of Inventory

As of December 31, 2018, the inventory of the Group amounted to $772,684 thousand (net of the

allowance for inventory losses of $12,028 thousand) and represented 25% of the Group’s total

assets, and was deemed material. Refer to Notes 4(g), 5 and 13 to the accompanying consolidated

financial statements for the Group’s accounting policies, sources of estimation uncertainty, and

detailed disclosures for inventory.

The estimation of the allowance for inventory losses includes evaluating the net realizable value of

inventory and its aging condition, which is subject to management’s judgment. In addition, the

balance of inventory held by the Group is material to the consolidated financial statements as a

whole, and since management’s judgment of inventory impairment has a significant degree of

uncertainty, the estimation of the allowance for inventory losses has been identified as a key audit

matter.

Our main audit procedures performed in respect of the above matter included the following:

1. We understood the accounting policy for the assessment of inventory write-downs recognized

by the Group, and evaluated whether the inventory aging and conditions of obsolete

inventories were reviewed in a timely manner by the management and whether the related

write-downs were recognized upon management’s approval.

2. We tested the accuracy of the net realizable value of sampled inventory through tracking its

source documents and recalculating the net realizable value, and sampled and inspected

whether the inventory value was held on a lower of cost or net realizable value basis by

comparing the carrying value to the net realizable value.

3. We obtained the inventory aging report and verified that management’s estimation of the

allowance for inventory losses was in compliance with the Group’s accounting policies.

4. We performed retrospective testing on inventory to verify the reasonableness of the inventory

losses recognized.

Other Matter

We have also audited the parent company only financial statements of MedFirst Healthcare

Services, Inc. as of and for the years ended December 31, 2018 and 2017 on which we have issued

an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated

Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial

statements in accordance with the Regulations Governing the Preparation of Financial Reports by

Securities Issuers, and International Financial Reporting Standards (IFRS), International

Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC)

endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China,

and for such internal control as management determines is necessary to enable the preparation of

consolidated financial statements that are free from material misstatement, whether due to fraud or

error.

In preparing the consolidated financial statements, management is responsible for assessing the

Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going

concern and using the going concern basis of accounting unless management either intends to

liquidate the Group or to cease operations, or has no realistic alternative but to do so.

139

Those charged with governance, including the audit committee, are responsible for overseeing the

Group’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to

issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of

assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards

generally accepted in the Republic of China will always detect a material misstatement when it

exists. Misstatements can arise from fraud or error and are considered material if, individually or in

the aggregate, they could reasonably be expected to influence the economic decisions of users

taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of

China, we exercise professional judgment and maintain professional skepticism throughout the

audit. We also:

1. Identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks,

and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

The risk of not detecting a material misstatement resulting from fraud is higher than for one

resulting from error, as fraud may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal control.

2. Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Group’s internal control.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

4. Conclude on the appropriateness of management’s use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists

related to events or conditions that may cast significant doubt on the Group’s ability to

continue as a going concern. If we conclude that a material uncertainty exists, we are required

to draw attention in our auditors’ report to the related disclosures in the consolidated financial

statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are

based on the audit evidence obtained up to the date of our auditors’ report. However, future

events or conditions may cause the Group to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities

or business activities within the Group to express an opinion on the consolidated financial

statements. We are responsible for the direction, supervision, and performance of the Group

audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies

in internal control that we identify during our audit.

140

We also provide those charged with governance with a statement that we have complied with

relevant ethical requirements regarding independence, and to communicate with them all

relationships and other matters that may reasonably be thought to bear on our independence, and

where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters

that were of most significance in the audit of the consolidated financial statements for the year

ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our

auditors’ report unless law or regulation precludes public disclosure about the matter or when, in

extremely rare circumstances, we determine that a matter should not be communicated in our report

because the adverse consequences of doing so would reasonably be expected to outweigh the

public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are

Ming-Chung Hsieh and Nai-Hua Kuo.

Deloitte & Touche

Taipei, Taiwan

Republic of China

February 26, 2019

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated

financial position, financial performance and cash flows in accordance with accounting principles

and practices generally accepted in the Republic of China and not those of any other jurisdictions.

The standards, procedures and practices to audit such consolidated financial statements are those

generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying

consolidated financial statements have been translated into English from the original Chinese

version prepared and used in the Republic of China. If there is any conflict between the English

version and the original Chinese version or any difference in the interpretation of the two versions,

the Chinese-language independent auditors’ report and consolidated financial statements shall

prevail.

141

MEDFIRST HEALTHCARE SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars)

2018 2017

ASSETS Amount % Amount %

CURRENT ASSETS

Cash and cash equivalents (Note 6) $ 630,379 20 $ 528,892 18

Financial assets at amortized cost - current (Note 9) 82,000 3 - -

Debt investments with no active market - current (Note 11) - - 7,000 -

Notes receivable 1,353 - 2,989 -

Trade receivables (Note 12) 128,899 4 105,757 4

Trade receivables from related parties (Notes 12 and 36) - - 1,024 -

Other receivables 9,349 - 24,339 1

Current tax assets (Note 28) - - 215 -

Inventories (Note 13) 772,684 25 678,396 24

Prepayments (Note 19) 49,972 2 51,475 2

Other current assets (Note 19) 4,166 - 9,785 -

Total current assets 1,678,802 54 1,409,872 49

NON-CURRENT ASSETS

Financial assets at fair value through profit or loss - non-current (Note 7) 761 - 6,271 -

Financial assets at fair value through other comprehensive income - non-current (Note 8) 13,065 - - -

Available-for-sale financial assets - non-current (Note 10) - - 15,000 1

Financial assets at amortized cost - non-current (Notes 9 and 37) 10,100 - - -

Debt investments with no active market - non-current (Notes 11 and 37) - - 20,730 1

Investments accounted for using the equity method (Note 15) 7,518 - 17,870 1

Property, plant and equipment (Notes 16, 37 and 38) 1,281,503 41 1,304,802 45

Goodwill (Note 17) 12,692 - 12,692 -

Other intangible assets (Note 18) 27,092 1 38,202 1

Deferred tax assets (Note 28) 14,022 1 8,279 -

Prepaid equipment (Notes 19 and 38) 16,535 1 4,227 -

Refundable deposits (Notes 19, 33, 36 and 37) 68,309 2 65,591 2

Total non-current assets 1,451,597 46 1,493,664 51

TOTAL $ 3,130,399 100 $ 2,903,536 100

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Financial liabilities at fair value through profit or loss - current (Note 7) $ 4,770 - $ 4,530 -

Contract liabilities - current (Note 23) 34,935 1 - -

Notes payable (Note 22) 1,017 - 2,716 -

Trade payables (Note 22) 1,059,521 34 900,215 31

Trade payables to related parties (Notes 22 and 36) 10,107 - 1,611 -

Other payables (Note 23) 238,202 8 220,174 8

Current tax liabilities (Note 28) 27,123 1 11,830 1

Deferred revenue - current (Note 23) - - 7,954 -

Receipts in advance (Note 23) - - 26,636 1

Current portion of long-term borrowings and bonds payable (Notes 20, 21 and 37) 294,173 10 1,532 -

Other current liabilities (Note 23) 5,809 - 3,809 -

Total current liabilities 1,675,657 54 1,181,007 41

NON-CURRENT LIABILITIES

Bonds payable (Note 21) - - 289,190 10

Long-term borrowings (Notes 20 and 37) 437,000 14 452,061 16

Deferred tax liabilities (Note 28) 959 - 821 -

Net defined benefit liabilities - non-current (Note 24) 2,070 - 682 -

Guarantee deposits (Note 23) 104,157 3 102,757 3

Total non-current liabilities 544,186 17 845,511 29

Total liabilities 2,219,843 71 2,026,518 70

EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 25)

Share capital - ordinary shares 282,400 9 282,400 10

Capital surplus 390,115 13 390,115 13

Retained earnings

Legal reserve 74,123 2 65,050 2

Special reserve 14,960 1 10,609 -

Unappropriated earnings 154,305 5 129,556 5

Total retained earnings 243,388 8 205,215 7

Other equity (19,948) (1) (14,960) -

Total equity attributable to owners of the Company 895,955 29 862,770 30

NON-CONTROLLING INTERESTS (Note 25) 14,601 - 14,248 -

Total equity 910,556 29 877,018 30

TOTAL $ 3,130,399 100 $ 2,903,536 100

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

142


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2018 2017

Amount % Amount %

OPERATING REVENUE (Notes 26 and 40) $ 4,632,643 100 $ 4,324,407 100

OPERATING COSTS (Notes 13, 18, 27 and 36) (3,193,729) (69) (3,017,641) (70)

GROSS PROFIT 1,438,914 31 1,306,766 30

OPERATING EXPENSES (Notes 18, 24, 27, 30

and 36)

Selling and marketing expenses (1,007,143) (22) (905,881) (21)

General and administrative expenses (279,569) (6) (287,229) (6)

Total operating expenses (1,286,712) (28) (1,193,110) (27)

PROFIT FROM OPERATIONS 152,202 3 113,656 3

NON-OPERATING INCOME AND EXPENSES

(Notes 27 and 36)

Other income 22,009 - 19,651 -

Other gains and losses (7,027) - (1,742) -

Finance costs (8,623) - (11,299) -

Share of loss of associates and joint ventures (10,352) - (8,182) -

Total non-operating income and expenses (3,993) - (1,572) -

PROFIT BEFORE INCOME TAX 148,209 3 112,084 3

INCOME TAX EXPENSE (Note 28) (35,824) (1) (23,289) (1)

NET PROFIT FOR THE YEAR 112,385 2 88,795 2

OTHER COMPREHENSIVE INCOME (LOSS)

(Note 28)

Items that will not be reclassified subsequently to

profit or loss:

Remeasurement of defined benefit plans (1,804) - (622) -

Unrealized loss on investments in equity

instruments at fair value through other

comprehensive income (1,575) - - -

Income tax relating to items that will not be

reclassified subsequently to profit or loss 451 - 106 -

(2,928) - (516) -

(Continued)

143


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

2018 2017

Amount % Amount %

Items that may be reclassified subsequently to profit

or loss:

Exchange differences on translating the financial

statements of foreign operations $ (4,833) - $ (5,244) -

Income tax relating to items that may be

reclassified subsequently to profit or loss 1,440 - 892 -

(3,393) - (4,352) -

Other comprehensive loss for the year, net of

income tax (6,321) - (4,868) -

TOTAL COMPREHENSIVE INCOME FOR THE

YEAR $ 106,064 2 $ 83,927 2

NET PROFIT (LOSS) ATTRIBUTABLE TO:

Owners of the Company $ 112,950 2 $ 90,728 2

Non-controlling interests (565) - (1,933) -

$ 112,385 2 $ 88,795 2

TOTAL COMPREHENSIVE INCOME (LOSS)

ATTRIBUTABLE TO:

Owners of the Company $ 106,969 2 $ 85,860 2

Non-controlling interests (905) - (1,933) -

$ 106,064 2 $ 83,927 2

EARNINGS PER SHARE (IN NEW TAIWAN

DOLLARS; Note 29)

Basic $ 4.00 $ 3.29

Diluted $ 3.60 $ 3.07

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

144


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



Equity Attributable to Owners of the Company

Other Equity

Retained Earnings

Exchange

Differences on

Translating the

Financial

Statements of

Unrealized Loss on

Financial Assets at

Fair Value

Through Other

Share Capital Capital Surplus Legal Reserve Special Reserve

Unappropriated

Earnings

Foreign

Operations

Comprehensive

Income Total

Non-controlling

Interests Total Equity

BALANCE AT JANUARY 1, 2017 $ 252,400 $ 204,900 $ 54,850 $ - $ 150,521 $ (10,608) $ - $ 652,063 $ 3,742 $ 655,805

Appropriation of 2016 earnings

Legal reserve - - 10,200 - (10,200) - - - - -

Special reserve - - - 10,609 (10,609) - - - - -

Cash dividends distributed by the Company - - - - (90,368) - - (90,368) - (90,368)

Other changes in capital surplus

Equity components of convertible bonds issued by the

Company - 11,032 - - - - - 11,032 - 11,032

Net profit (loss) for the year ended December 31, 2017 - - - - 90,728 - - 90,728 (1,933) 88,795

Other comprehensive loss for the year ended December 31, 2017,

net of income tax - - - - (516) (4,352) - (4,868) - (4,868)

Total comprehensive income (loss) for the year ended

December 31, 2017 - - - - 90,212 (4,352) - 85,860 (1,933) 83,927

Issuance of ordinary shares for cash 30,000 167,510 - - - - - 197,510 - 197,510

Issuance of ordinary shares under employee share options - 6,673 - - - - - 6,673 - 6,673

Non-controlling interests - - - - - - - - 12,439 12,439

BALANCE AT DECEMBER 31, 2017 282,400 390,115 65,050 10,609 129,556 (14,960) - 862,770 14,248 877,018

Effect of retrospective application - - - - - - (360) (360) - (360)

BALANCE AT JANUARY 1, 2018 AS RESTATED 282,400 390,115 65,050 10,609 129,556 (14,960) (360) 862,410 14,248 876,658

Appropriation of 2017 earnings

Legal reserve - - 9,073 - (9,073) - - - - -

Special reserve - - - 4,351 (4,351) - - - - -

Cash dividends distributed by the Company - - - - (73,424) - - (73,424) - (73,424)

Net profit (loss) for the year ended December 31, 2018 - - - - 112,950 - - 112,950 (565) 112,385

Other comprehensive loss for the year ended December 31, 2018,

net of income tax - - - - (1,353) (3,053) (1,575) (5,981) (340) (6,321)

Total comprehensive income (loss) for the year ended

December 31, 2018 - - - - 111,597 (3,053) (1,575) 106,969 (905) 106,064

Non-controlling interests - - - - - - - - 1,258 1,258

BALANCE AT DECEMBER 31, 2018 $ 282,400 $ 390,115 $ 74,123 $ 14,960 $ 154,305 $ (18,013) $ (1,935) $ 895,955 $ 14,601 $ 910,556

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

145


CONSOLIDATED STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax $ 148,209 $ 112,084

Adjustments for:

Depreciation expenses 75,547 67,277

Amortization expenses 12,896 11,142

Expected credit loss reversed on trade receivables (71) -

Impairment loss reversed on trade receivables - (563)

Net loss on fair value changes of financial liabilities designated as at

fair value through profit or loss 5,750 3,210

Finance costs 8,488 11,169

Interest income (1,533) (1,012)

Compensation costs of employee share options - 6,673

Share of loss of associates and joint ventures 10,352 8,182

Loss on disposal of property, plant and equipment 267 1,147

Gain on disposal of associates - (4,783)

Write-downs of inventories 2,222 -

Reversal of write-downs of inventories - (11)

Changes in operating assets and liabilities

Notes receivable 1,636 4,213

Trade receivables (23,071) 9,803

Trade receivables from related parties 1,024 (1,024)

Other receivables 14,991 7,960

Other receivables from related parties - 1,768

Inventories (96,504) (9,858)

Prepayments 1,503 (8,609)

Other current assets 5,619 3,473

Contract liabilities 345 -

Notes payable (1,699) (2,285)

Trade payables 159,306 1,268

Trade payables to related parties 8,496 1,022

Other payables 20,876 1,088

Receipts in advance and deferred revenue - (1,110)

Other current liabilities 2,000 (1,857)

Net defined benefit liabilities - non-current (416) (428)

Cash generated from operations 356,233 219,939

Interest received 1,533 1,012

Interest paid (3,515) (7,004)

Income taxes paid (24,030) (23,693)

Net cash generated from operating activities 330,221 190,254

(Continued)

146


CONSOLIDATED STATEMENTS OF CASH FLOWS



2018 2017

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of financial assets measured at cost $ (64,370) $ -

Purchase of debt investments with no active market - (11,000)

Acquisition of subsidiaries - (37,928)

Payments for property, plant and equipment (32,455) (476,857)

Proceeds from disposal of property, plant and equipment 245 658

Increase in refundable deposits (2,718) (2,989)

Payments for intangible assets (1,785) (910)

Increase in prepaid equipment (38,829) (39,107)

Net cash used in investing activities (139,912) (568,133)

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments of short-term borrowings - (250,000)

Proceeds from issuance of bonds - 297,362

Proceeds from long-term borrowings - 437,000

Repayments of long-term borrowings (16,593) (156,355)

Proceeds from guarantee deposits received 1,400 3,088

Dividends paid to owners of the Company (73,424) (90,368)

Proceeds from issuance of ordinary shares - 197,510

Changes in non-controlling interests 1,258 -

Net cash (used in) generated from financing activities (87,359) 438,237

EFFECT OF EXCHANGE RATE CHANGES ON THE BALANCE OF

CASH HELD IN FOREIGN CURRENCIES (1,463) (543)

NET INCREASE IN CASH AND CASH EQUIVALENTS 101,487 59,815

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE

YEAR 528,892 469,077

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 630,379 $ 528,892

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

147


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

MedFirst Healthcare Services, Inc. (the “Company”) was incorporated in the Republic of China (“ROC”)

on May 7, 1992.

The Company and its subsidiaries (collectively, the “Group”) are mainly engaged in the sale of medical

supplies and the management of malls.

The Company’s shares have been listed on the mainboard of the Taipei Exchange (“TPEx”) since April 23,

2014.

The consolidated financial statements are presented in the Company’s functional currency, the New Taiwan

dollar.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on February 26,

2019.

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

a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports

by Securities Issuers and the International Financial Reporting Standards (IFRS), International

Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC)

(collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission

(FSC)

Except for the following, whenever applied, the initial application of the amendments to the

Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs

endorsed and issued into effect by the FSC would not have any material impact on the Group’s

accounting policies:

1) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with

consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards.

IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets

and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets and financial liabilities

On the basis of the facts and circumstances that existed as of January 1, 2018, the Group has

performed an assessment of the classification of recognized financial assets and has elected not to

restate prior reporting periods.

148

The following table shows the original measurement categories and carrying amount under IAS 39

and the new measurement categories and carrying amounts under IFRS 9 for each class of the

Group’s financial assets and financial liabilities as of January 1, 2018.

Measurement Category Carrying Amount

Financial Assets IAS 39 IFRS 9 IAS 39 IFRS 9 Remark

Cash and cash equivalents Loans and receivables Amortized cost $ 528,892 $ 528,892 - Derivatives Held‑ for‑ trading Mandatorily at fair value

through profit or loss (i.e.

FVTPL)

6,271 6,271

Equity securities Available‑ for‑ sale Fair value through other

comprehensive income

(i.e. FVTOCI) - equity instruments

15,000 14,640 b)

Time deposits with

original maturities of more than 3 months

Loans and receivables Amortized cost 7,000 7,000 c)

Time deposits with

original maturities of more than 3 months -

pledged

Loans and receivables Amortized cost 20,730 20,730 c)

Notes receivable, trade receivables (including

related parties) and other receivables

Loans and receivables Amortized cost 134,109 134,109 a)

Refundable deposits Loans and receivables Amortized cost 65,591 65,591 -

Measurement Category Carrying Amount

Financial Liabilities IAS 39 IFRS 9 IAS 39 IFRS 9 Remark Derivatives Held‑ for‑ trading Held‑ for‑ trading $ 4,530 $ 4,530 -

Notes payable, trade

payables (including related parties), other

payables, bonds

payable, long-term borrowings, and

guarantee deposits

Amortized cost Amortized cost 1,970,256 1,970,256 -

Financial Assets

IAS 9

Carrying

Amount

as of

January 1,

2018

Reclassifi-

cations

Remeasure-

ments

IFRS 9

Carrying

Amount

as of

January 1,

2018

Other Equity

Effect on

January 1,

2018 Remark

FVTOCI

Equity instruments $ -

Add: Reclassification from available-for-sale (IAS 39)

-

$ 15,000

$ (360 )

$ 14,640

$ (360 )

b)

$ - $ 15,000 $ (360 ) $ 14,640 $ (360 )

a) Notes receivable, trade receivables (including related parties) and other receivables that were

previously classified as loans and receivables under IAS 39 were classified as at amortized cost

with an assessment of expected credit losses under IFRS 9.

b) The Group elected to designate all its investments in equity securities previously classified as

available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not

held for trading.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated

as at FVTOCI under IFRS 9 and were remeasured at fair value. Consequently, a decrease of

$360 thousand was recognized in both financial assets at FVTOCI and other equity - unrealized

gain (loss) on financial assets at FVTOCI on January 1, 2018.

149

c) Debt investments previously classified as debt investments with no active market and measured

at amortized cost under IAS 39 were classified as at amortized cost with an assessment of

expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows

were solely payments of principal and interest on the principal outstanding and these

investments were held within a business model whose objective is to collect contractual cash

flows.

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

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers,

and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of

revenue-related interpretations. Refer to Note 4 for the related accounting policies.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is

recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, receivables

were recognized or deferred revenue was reduced when revenue was recognized for the relevant

contract under IAS 18.

The Group elected only to retrospectively apply IFRS 15 to contracts that were not complete as of

January 1, 2018 and recognize the cumulative effect of the change in retained earnings on January 1,

2018.

The impact on assets, liabilities and equity as of January 1, 2018 from the initial application of IFRS

15 is set out below:

As Originally

Stated

Adjustments

Arising from

Initial

Application Restated

Contract liabilities - current $ - $ 34,590 $ 34,590

Deferred revenue - current 7,954 (7,954) -

Receipts in advance 26,636 (26,636) -

Total effect on liabilities $ 34,590 $ - $ 34,590

3) Amendments to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

The amendments clarify that the difference between the carrying amount of the debt instrument

measured at fair value and its tax base gives rise to a temporary difference, even though there are

unrealized losses on that asset, irrespective of whether the Group expects to recover the carrying

amount of the debt instrument by sale or by holding it and collecting contractual cash flows.

In addition, in determining whether to recognize a deferred tax asset, the Group should assess a

deductible temporary difference in combination with all of its other deductible temporary

differences, unless the tax law restricts the utilization of losses as deduction against income of a

specific type, in which case, a deductible temporary difference is assessed in combination only with

other deductible temporary differences of the appropriate type. The amendments also stipulate that,

when determining whether to recognize a deferred tax asset, the estimate of probable future taxable

profit may include some of the Group’s assets for more than their carrying amount if there is

sufficient evidence that it is probable that the Group will achieve the higher amount and that the

estimate for future taxable profit should exclude tax deductions resulting from the reversal of

deductible temporary differences.

Prior to the amendment, in assessing a deferred tax asset, the Group assumed that it will recover the

asset at its carrying amount when estimating probable future taxable profit. The Group applied the

above amendments retrospectively in 2018.

150

b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS),

Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed

by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations

(the “New IFRSs”)

Effective Date

Announced by IASB (Note 1)

Annual Improvements to IFRSs 2015-2017 Cycle January 1, 2019

Amendments to IFRS 9 “Prepayment Features with Negative

Compensation”

January 1, 2019 (Note 2)

IFRS 16 “Leases” January 1, 2019

Amendments to IAS 19 “Plan Amendment, Curtailment or

Settlement”

January 1, 2019 (Note 3)

Amendments to IAS 28 “Long-term Interests in Associates and Joint

Ventures”

January 1, 2019

IFRIC 23 “Uncertainty over Income Tax Treatments” January 1, 2019

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on

or after their respective effective dates.

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

Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements

occurring on or after January 1, 2019.

1) IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of

related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16, in

determining whether contracts are, or contain, a lease, only to contracts entered into (or changed) on

or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will

not be reassessed and will be accounted for in accordance with the transitional provisions under

IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets, and lease

liabilities for all leases on the consolidated balance sheets except for those whose payments under

low-value and short-term leases will be recognized as expenses on a straight-line basis. On the

consolidated statements of comprehensive income, the Group will present the depreciation expense

charged on right-of-use assets separately from the interest expense accrued on lease liabilities;

interest is computed using the effective interest method. On the consolidated statements of cash

flows, cash payments for the principal portion of lease liabilities will be classified within financing

activities; cash payments for the interest portion will be classified within operating activities.

Currently, payments under operating lease contracts are recognized as expenses on a straight-line

basis. Cash flows for operating leases are classified within operating activities on the consolidated

statements of cash flows. Leased assets and finance lease payables are recognized for contracts

classified as finance leases.

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The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial

application of this standard recognized on January 1, 2019. Comparative information will not be

restated.

The Group expects to apply the following practical expedient:

The Group will account for those leases for which the lease term ends on or before December 31,

2019 as short-term leases.

The Group as lessor

Except for sublease transactions, the Group will not make any adjustments for leases in which it is a

lessor and will account for those leases with the application of IFRS 16 starting from January 1,

2019.

The Group subleased its leasehold mall to a third party. Such sublease is classified as an operating

lease under IAS 17. The Group will assess the sublease classification on the basis of the remaining

contractual terms and conditions of the head lease and sublease on January 1, 2019.

Anticipated impact on assets, liabilities and equity

Carrying

Amount as of

December 31,

2018

Adjustments

Arising from

Initial

Application

Adjusted

Carrying

Amount as of

January 1, 2019

Right-of-use assets $ - $ 935,529 $ 935,529

Lease liabilities - current $ - $ 253,407 $ 253,407

Lease liabilities - non-current - 682,122 682,122

Total effect on liabilities $ - $ 935,529 $ 935,529

2) IFRIC 23 “Uncertainty over Income Tax Treatments”

IFRIC 23 clarifies that when there is uncertainty over income tax treatments, the Group should

assume that the taxation authority will have full knowledge of all related information when making

related examinations. If the Group concludes that it is probable that the taxation authority will

accept an uncertain tax treatment, the Group should determine the taxable profit, tax bases, unused

tax losses, unused tax credits or tax rates consistently with the tax treatments used or planned to be

used in its income tax filings. If it is not probable that the taxation authority will accept an uncertain

tax treatment, the Group should make estimates using either the most likely amount or the expected

value of the tax treatment, depending on which method the Group expects to better predict the

resolution of the uncertainty. The Group has to reassess its judgments and estimates if facts and

circumstances change.

Upon initial application of IFRIC 23, the Group will recognize the cumulative effect of

retrospective application on retained earnings on January 1, 2019.

Except for the above impacts, as of the date the consolidated financial statements were authorized for

issue, the Group continues assessing other possible impacts that application of the aforementioned

amendments and the related amendments to the Regulations Governing the Preparation of Financial

Reports by Securities Issuers will have on the Group’s financial position and financial performance and

will disclose these other impacts when the assessment is completed.

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

New IFRSs

Effective Date

Announced by IASB (Note 1)

Amendments to IFRS 3 “Definition of a Business” January 1, 2020 (Note 2)

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets

between an Investor and its Associate or Joint Venture”

To be determined by IASB

IFRS 17 “Insurance Contracts” January 1, 2021

Amendments to IAS 1 and IAS 8 “Definition of Material” January 1, 2020 (Note 3)

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on

or after their respective effective dates.

Note 2: The Group shall apply these amendments to business combinations for which the acquisition

date is on or after the beginning of the first annual reporting period beginning on or after

January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

Note 3: The Group shall apply these amendments prospectively for annual reporting periods

beginning on or after January 1, 2020.

As of the date the consolidated financial statements were authorized for issue, the Group is

continuously assessing the possible impact that the application of other standards and interpretations

will have on the Group’s financial position and financial performance, and will disclose the relevant

impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations

Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued

into effect by the FSC.

b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for

financial instruments which are measured at fair value.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the

fair value measurement inputs are observable and based on the significance of the inputs to the fair

value measurement in its entirety, are described as follows:

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

2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an

asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

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

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

Current assets include:

1) Assets held primarily for the purpose of trading;

2) Assets expected to be realized within 12 months after the reporting period; and

3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a

liability for at least 12 months after the reporting period.

Current liabilities include:

1) Liabilities held primarily for the purpose of trading;

2) Liabilities due to be settled within 12 months after the reporting period; and

3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least

12 months after the reporting period.

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

d. Basis of consolidation

Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and the

entities controlled by the Company (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the

consolidated statement of profit or loss and other comprehensive income from the effective date of

acquisition up to the effective dates of disposals, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their

accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon

consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the

Company and to the non-controlling interests even if this results in the non-controlling interests

having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing

control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the

Group’s interests and the non-controlling interests are adjusted to reflect the changes in their

relative interests in the subsidiaries. Any difference between the amount by which the

non-controlling interests are adjusted and the fair value of the consideration paid or received is

recognized directly in equity and attributed to the owners of the Company.

See Note 14, Tables 6 and 7 for detailed information of subsidiaries (including percentages of

ownership and main business).

e. Business combinations

Acquisitions of businesses are accounted for using the acquisition method. Acquisition-related costs are

generally recognized in profit or loss as they are incurred.

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Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any

non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity

interests in the acquiree over the net of the acquisition-date amounts of the identifiable assets acquired

and the liabilities assumed.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate

share of the entity’s net assets in the event of liquidation may be initially measured at fair value. Other

types of non-controlling interests are measured at fair value.

Where the consideration the Group transfers in a business combination includes assets or liabilities

resulting from a contingent consideration arrangement, the contingent consideration is measured at its

acquisition-date fair value and considered as part of the consideration transferred in a business

combination. Changes in the fair value of the contingent consideration that qualify as measurement

period adjustments are adjusted retrospectively, with the corresponding adjustments being made against

goodwill or gain on bargain purchase. Measurement period adjustments are adjustments that arise from

additional information obtained during the measurement period about facts and circumstances that

existed as of the acquisition date. The measurement period does not exceed 1 year from the acquisition

date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not

qualify as measurement period adjustments depends on how the contingent consideration is classified.

Contingent consideration that is classified as equity and included in capital surplus - options is not

remeasured at the end of the subsequent reporting period and its subsequent settlement is accounted for

within equity and transferred to capital surplus - share premiums. Other contingent consideration is

remeasured at fair value at the end of subsequent reporting period with any gain or loss recognized in

profit or loss.

When a business combination is achieved in stages, the Group’s previously held equity interest in an

acquiree is remeasured to fair value at the acquisition date, and the resulting gain or loss is recognized

in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have

previously been recognized in other comprehensive income are recognized on the same basis as would

be required if those interests were directly disposed of by the Group.

f. Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other

than the entity’s functional currency (i.e. foreign currencies) are recognized at the rates of exchange

prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated

at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or

translation are recognized in profit or loss in the period in which they arise.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated

at the rates prevailing at the date when the fair value was determined. Exchange differences arising

from the retranslation of non-monetary items are included in profit or loss for the period except for

exchange differences arising from the retranslation of non-monetary items in respect of which gains and

losses are recognized directly in other comprehensive income; in which cases, the exchange differences

are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are translated using the

exchange rate at the date of the transaction.

155

For the purpose of presenting the consolidated financial statements, the functional currencies of the

Company and the group entities (including subsidiaries in other countries that use currencies which are

different from the currency of the Company) are translated into the presentation currency, the New

Taiwan dollar as follows: Assets and liabilities are translated at the exchange rates prevailing at the end

of the reporting period; and income and expense items are translated at the average exchange rates for

the period. The resulting currency translation differences are recognized in other comprehensive income

(attributed to the owners of the Company and non-controlling interests as appropriate).

g. Inventories

Inventories consist of finished goods and are stated at the lower of cost or net realizable value.

Inventory write-downs are made by item, except where it may be appropriate to group similar or related

items. The net realizable value is the estimated selling price of inventories less all estimated costs of

completion and costs necessary to make the sale. Inventories are recorded at the weighted-average cost

on the balance sheet date.

h. Investments in associates

An associate is an entity over which the Group has significant influence and which is neither a

subsidiary nor an interest in a joint venture.

The Group uses the equity method to account for its investments in associates.

Under the equity method, investments in an associate are initially recognized at cost and adjusted

thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the

associate. The Group also recognizes the changes in the Group’s share of the equity of associates

attributable to the Group.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable

assets and liabilities of an associate at the date of acquisition is recognized as goodwill, which is

included within the carrying amount of the investment and is not amortized. Any excess of the Group’s

share of the net fair value of the identifiable assets and liabilities over the cost of acquisition, after

reassessment, is recognized immediately in profit or loss.

When the Group subscribes for additional new shares of an associate at a percentage different from its

existing ownership percentage, the resulting carrying amount of the investment differs from the amount

of the Group’s proportionate interest in the associate. The Group records such a difference as an

adjustment to investments with the corresponding amount charged or credited to capital surplus -

changes in capital surplus from investments in associates accounted for using the equity method. If the

Group’s ownership interest is reduced due to its additional subscription of the new shares of the

associate, the proportionate amount of the gains or losses previously recognized in other comprehensive

income in relation to that associate is reclassified to profit or loss on the same basis as would be

required had the investee had directly disposed of the related assets or liabilities. When the adjustment

should be debited to capital surplus, but the capital surplus recognized from investments accounted for

using the equity method is insufficient, the shortage is debited to retained earnings.

When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which

includes any carrying amount of the investment accounted for using the equity method and long-term

interests that, in substance, form part of the Group’s net investment in the associate), the Group

discontinues recognizing its share of further losses. Additional losses and liabilities are recognized only

to the extent that the Group has incurred legal obligations, or constructive obligations, or made

payments on behalf of that associate.

156

The entire carrying amount of the investment (including goodwill) is tested for impairment as a single

asset by comparing its recoverable amount with its carrying amount. Any impairment loss recognized is

not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment.

Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the

investment subsequently increases.

The Group discontinues the use of the equity method from the date on which its investment ceases to be

an associate. Any retained investment is measured at fair value at that date, and the fair value is

regarded as the investment’s fair value on initial recognition as a financial asset. The difference

between the previous carrying amount of the associate attributable to the retained interest and its fair

value is included in the determination of the gain or loss on disposal of the associate. The Group

accounts for all amounts previously recognized in other comprehensive income in relation to that

associate on the same basis as would be required had that associate had directly disposed of the related

assets or liabilities.

When a group entity transacts with its associate, profits and losses resulting from the transactions with

the associate are recognized in the Group’ consolidated financial statements only to the extent that

interests in the associate are not related to the Group.

i. Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation.

Property, plant and equipment in the course of construction are measured at cost less any recognized

impairment loss. Cost includes professional fees and borrowing costs eligible for capitalization. Such

assets are depreciated and classified to the appropriate categories of property, plant and equipment

when completed and ready for their intended use.

Depreciation of property, plant and equipment is recognized using the straight-line method. Each

significant part is depreciated separately. If the lease term of an item of property, plant and equipment is

shorter than its useful life, it is depreciated over the lease term. The estimated useful lives, residual

values and depreciation methods are reviewed at the end of each reporting period, with the effects of

any changes in the estimates accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds

and the carrying amount of the asset is recognized in profit or loss.

j. Goodwill

Goodwill arising from the acquisition of a business is measured at cost as established at the date of

acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating

units or groups of cash-generating units (referred to as “cash-generating units”) that is expected to

benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually or more

frequently when there is an indication that the unit may be impaired, by comparing its carrying amount,

including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a

cash-generating unit was acquired in a business combination during the current annual period, that unit

shall be tested for impairment before the end of the current annual period. If the recoverable amount of

the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce

the carrying amount of any goodwill allocated to the unit and then pro rata to the other assets of the unit

based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in

profit or loss. Any impairment loss recognized for goodwill is not reversed in subsequent periods.

157

If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within

that unit, the goodwill associated with the operation which is disposed of is included in the carrying

amount of the operation when determining the gain or loss on disposal and is measured on the basis of

the relative values of the operation disposed of and the portion of the cash-generating unit retained.

k. Intangible assets

1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost

and subsequently measured at cost less accumulated amortization. Amortization is recognized on a

straight-line basis. The estimated useful life, residual value, and amortization method are reviewed

at the end of each reporting period, with the effect of any changes in estimates accounted for on a

prospective basis. Intangible assets with indefinite useful lives that are acquired separately are

measured at cost less accumulated impairment loss.

2) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are

initially recognized at their fair value at the acquisition date (which is regarded as their cost).

Subsequent to initial recognition, they are measured on the same basis as intangible assets that are

acquired separately.

3) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the

carrying amount of the asset is recognized in profit or loss.

l. Impairment of tangible and intangible assets other than goodwill and assets related to contract cost

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and

intangible assets, excluding goodwill, to determine whether there is any indication that those assets

have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is

estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the

recoverable amount of an individual asset, the Group estimates the recoverable amount of the

cash-generating unit to which the asset belongs.

The recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable

amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying

amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting

impairment loss recognized in profit or loss.

Before the Group recognizes an impairment loss from assets related to contract costs, any impairment

loss on inventories, property, plant and equipment and intangible assets related to the contract

applicable under IFRS 15 shall be recognized in accordance with applicable standards. Then,

impairment loss from the assets related to the contract costs is recognized to the extent that the carrying

amount of the assets exceeds the remaining amount of consideration that the Group expects to receive

in exchange for related goods or services less the costs which relate directly to providing those goods or

services and which have not been recognized as expenses. The assets related to the contract costs are

then included in the carrying amount of the cash-generating unit to which they belong for the purpose of

evaluating impairment of that cash-generating unit.

158

When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset,

cash-generating unit or assets related to contract cost is increased to the revised estimate of its

recoverable amount, but only to the extent of the carrying amount that would have been determined had

no impairment loss been recognized for the asset, cash-generating unit or assets related to contract costs

in prior years. A reversal of an impairment loss is recognized in profit or loss.

m. Financial instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the

contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are

directly attributable to the acquisition or issuance of financial assets and financial liabilities (other than

financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the

financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly

attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized

immediately in profit or loss.

1) Financial assets

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

date basis

a) Measurement category

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial

assets at amortized cost, and investments in equity instruments at FVTOCI.

i. Financial assets at FVTPL

A financial asset is classified as at FVTPL when such a financial asset is mandatorily

classified as at FVTPL. Financial assets mandatorily classified as at FVTPL include

investments in equity instruments which are not designated as at FVTOCI and debt

instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses

arising on remeasurement recognized in profit or loss. The net gain or loss recognized in

profit or loss incorporates any dividend or interest earned on such a financial asset. Fair

value is determined in the manner described in Note 35.

ii. Financial assets at amortized cost

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

cost:

The financial asset is held within a business model whose objective is to hold financial

assets in order to collect contractual cash flows; and

The contractual terms of the financial asset give rise on specified dates to cash flows

that are solely payments of principal and interest on the principal amount outstanding.

159

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash

equivalents, notes receivable at amortized cost, trade receivables, other receivables and

refundable deposits, are measured at amortized cost, which equals the gross carrying amount

determined using the effective interest method less any impairment loss. Exchange

differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying

amount of such a financial asset, except for:

Purchased or originated credit-impaired financial assets, for which interest income is

calculated by applying the credit-adjusted effective interest rate to the amortized cost of

such financial asset; and

Financial assets that are not credit-impaired on purchase or origination but have

subsequently become credit-impaired, for which interest income is calculated by

applying the effective interest rate to the amortized cost of such financial asset in

subsequent reporting periods.

Cash equivalents include time deposits with original maturities within 3 months from the

date of acquisition, which are highly liquid, readily convertible to a known amount of cash

and are subject to an insignificant risk of changes in value. These cash equivalents are held

for the purpose of meeting short-term cash commitments.

iii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments

in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the

equity investment is held for trading or if it is contingent consideration recognized by an

acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with

gains and losses arising from changes in fair value recognized in other comprehensive

income and accumulated in other equity. The cumulative gain or loss will not be reclassified

to profit or loss on disposal of the equity investments; instead, it will be transferred to

retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when

the Group’s right to receive the dividends is established, unless the dividends clearly

represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at FVTPL,

available-for-sale financial assets, and loans and receivables.

i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such financial assets are held for trading.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on

remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss

incorporates any dividends or interest earned on such a financial asset. Fair value is

determined in the manner described in Note 35.

160

ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as

available-for-sale or are not classified as loans and receivables, held-to-maturity investments

or financial assets at FVTPL.

Available-for-sale financial assets are measured at fair value. Changes in the carrying

amounts of available-for-sale monetary financial assets (relating to changes in foreign

currency exchange rates, interest income calculated using the effective interest method and

dividends on available-for-sale equity investments) are recognized in profit or loss. Other

changes in the carrying amount of available-for-sale financial assets are recognized in other

comprehensive income and will be reclassified to profit or loss when such investments are

disposed of or are determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the

Group’s right to receive the dividends is established.

iii. Loans and receivables

Loans and receivables (including cash and cash equivalents, debt investments with no active

market, notes receivable, trade receivables, other receivables and refundable deposits) are

measured using the effective interest method at amortized cost less any impairment, except

for short-term receivables when the effect of discounting is immaterial.

Cash equivalents include time deposits with original maturities within 3 months from the

date of acquisition, which are highly liquid, readily convertible to a known amount of cash

and are subject to an insignificant risk of changes in value. These cash equivalents are held

for the purpose of meeting short-term cash commitments.

b) Impairment of financial assets and contract assets

2018

The Group recognizes a loss allowance for expected credit losses on financial assets at

amortized cost (including trade receivables), investments in debt instruments that are measured

at FVTOCI, lease receivables, as well as contract assets.

The Group always recognizes lifetime expected credit loss (i.e. ECLs) for trade receivables and

lease receivables. For all other financial instruments, the Group recognizes lifetime ECLs when

there has been a significant increase in credit risk since initial recognition. If, on the other hand,

the credit risk on a financial instrument has not increased significantly since initial recognition,

the Group measures the loss allowance for that financial instrument at an amount equal to

12-month ECLs.

Expected credit losses reflect the weighted average of credit losses with the respective risks of

default occurring as the weights. Lifetime ECLs represent the expected credit losses that will

result from all possible default events over the expected life of a financial instrument. In

contrast, 12-month ECLs represent the portion of lifetime ECL that is expected to result from

default events on a financial instrument that are possible within 12 months after the reporting

date.

The Group recognizes an impairment gain or loss in profit or loss for all financial instruments

with a corresponding adjustment to their carrying amount through a loss allowance account,

except for investments in debt instruments that are measured at FVTOCI, for which the loss

allowance is recognized in other comprehensive income and does not reduce the carrying

amount of such a financial asset.

161

2017

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end

of each reporting period. Financial assets are considered to be impaired when there is objective

evidence, as a result of one or more events that occurred after the initial recognition of such

financial assets, that the estimated future cash flows of the investment have been affected.

Financial assets at amortized cost, such as trade receivables and other receivables, are assessed

for impairment on a collective basis even if they were assessed not to be impaired individually.

Objective evidence of impairment for a portfolio of receivables could include the Group’s past

experience with collecting payments, an increase in the number of delayed payments in the

portfolio past the average credit period of 30 days to 45 days, as well as observable changes in

national or local economic conditions that correlate with defaults on receivables.

For a financial asset at amortized cost, the amount of the impairment loss recognized is the

difference between such an asset’s carrying amount and the present value of estimated future

cash flows, discounted at the financial asset’s original effective interest rate.

For a financial assets carried at amortized cost, if, in a subsequent period, the amount of the

impairment loss decreases and the decrease can be related objectively to an event occurring after

the impairment was recognized, the previously recognized impairment loss is reversed through

profit or loss to the extent that the carrying amount of the investment (at the date on which the

impairment is reversed) does not exceed what the amortized cost would have been had the

impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of

the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant

financial difficulty of the issuer or counterparty, breach of contract such as a default or

delinquency in interest or principal payments, it becoming probable that the borrower will enter

bankruptcy or financial re-organization, or the disappearance of an active market for those

financial assets because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or

losses previously recognized in other comprehensive income are reclassified to profit or loss in

the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit

or loss is not reversed through profit or loss. Any increase in fair value subsequent to

impairment is recognized in other comprehensive income. In respect of available-for-sale debt

securities, impairment loss is subsequently reversed through profit or loss if an increase in the

fair value of such an investment can be objectively related to an event occurring after the

recognition of the impairment loss.

The carrying amount of a financial asset is reduced by the impairment loss directly for all

financial assets, with the exception of trade receivables and other receivables, where the

carrying amount is reduced through the use of an allowance account. When trade receivables

and other receivables are considered uncollectible, they are written off against the allowance

account. Subsequent recoveries of amounts previously written off are credited against the

allowance account. Changes in the carrying amount of the allowance account are recognized in

profit or loss except for uncollectible trade receivables and other receivables that are written off

against the allowance account.

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c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows

from the asset expire or when it transfers the financial asset and substantially all the risks and

rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the

asset’s carrying amount and the sum of the consideration received and receivable and the

cumulative gain or loss which had been recognized in other comprehensive income is

recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at

amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of

the consideration received and receivable is recognized in profit or loss. On derecognition of an

investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount

and the sum of the consideration received and receivable and the cumulative gain or loss which

had been recognized in other comprehensive income is recognized in profit or loss. However, on

derecognition of an investment in an equity instrument at FVTOCI, the difference between the

asset’s carrying amount and the sum of the consideration received and receivable is recognized

in profit or loss, and the cumulative gain or loss which had been recognized in other

comprehensive income is transferred directly to retained earnings, without recycling through

profit or loss.

2) Equity instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as

equity in accordance with the substance of the contractual arrangements and the definitions of a

financial liability and an equity instrument.

Equity instruments issued by a group entity are recognized at the proceeds received, net of direct

issue costs.

The repurchase of the Company’s own equity instruments is recognized in and deducted directly

from equity. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or

cancellation of the Company’s own equity instruments.

3) Financial liabilities

a) Subsequent measurement

Except the following situation, all financial liabilities are measured at amortized cost using the

effective interest method:

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when such financial liabilities are held for

trading.

Financial liabilities held for trading are stated at fair value, with any gain or loss arising on

remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss

incorporates any interest or dividend paid on such financial liability.

Fair value is determined in the manner described in Note 35.

163

b) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the

consideration paid, including any non-cash assets transferred or liabilities assumed, is

recognized in profit or loss.

4) Convertible bonds

The component parts of compound instruments (i.e. convertible bonds) issued by the Group are

classified separately as financial liabilities and equity in accordance with the substance of the

contractual arrangements and the definitions of a financial liability and an equity instrument.

On initial recognition, the fair value of the liability component is estimated using the prevailing

market interest rate for similar non-convertible instruments. This amount is recorded as a liability

on an amortized cost basis using the effective interest method until extinguished upon conversion or

upon the instrument’s maturity date. Any embedded derivative liability is measured at fair value.

The conversion option classified as equity is determined by deducting the amount of the liability

component from the fair value of the compound instrument as a whole. This is recognized and

included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the

conversion option classified as equity will remain in equity until the conversion option is exercised;

in which case, the balance recognized in equity will be transferred to capital surplus - share

premium. When the conversion option remains unexercised at maturity, the balance recognized in

equity will be transferred to capital surplus - share premium.

Transaction costs that relate to the issuance of the convertible notes are allocated to the liability and

equity components in proportion to the allocation of the gross proceeds. Transaction costs relating

to the equity component are recognized directly in equity. Transaction costs relating to the liability

component are included in the carrying amount of the liability component.

5) Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest

rate and foreign exchange rate risks, including put option, contingent considerations and convertible

options.

Derivatives are initially recognized at fair value at the date on which the derivative contracts are

entered into and are subsequently remeasured to their fair value at the end of each reporting period.

The resulting gain or loss is recognized in profit or loss immediately unless the derivative is

designated and effective as a hedging instrument; in which event, the timing of the recognition in

profit or loss depends on the nature of the hedge relationship. When the fair value of derivative

financial instruments is positive, the derivative is recognized as a financial asset; when the fair

value of a derivative financial instruments is negative, the derivative is recognized as a financial

liability.

Before 2018, derivatives embedded in non-derivative host contracts were treated as separate

derivatives when they met the definition of a derivative; their risks and characteristics were not

closely related to those of the host contracts; and the contracts were not measured at FVTPL.

Starting from 2018, derivatives embedded in hybrid contracts that contain financial asset hosts that

is within the scope of IFRS 9 are not separated; instead, the classification is determined in

accordance with the entire hybrid contract. Derivatives embedded in non-derivative host contracts

that are not financial assets that is within the scope of IFRS 9 (e.g. financial liabilities) are treated as

separate derivatives when they meet the definition of a derivative; their risks and characteristics are

not closely related to those of the host contracts; and the host contracts are not measured at FVTPL.

164

n. Revenue recognition

2018

The Group identifies contracts with the customers, allocates the transaction price to the performance

obligations and recognizes revenue when performance obligations are satisfied.

Revenue from sale of goods

Revenue from sale of goods comes from sales of medical supplies. Sales of medical supplies are

recognized as revenue because it is the time when the customer has full discretion over the manner of

distribution and bears the risks of loss or damage. Trade receivables are recognized concurrently.

Under the Customer Loyalty Program, the Group offers vouchers which can be used for future

purchases. The voucher provides a material right to the customer. The transaction price allocated to the

voucher is recognized as a contract liability when collected and will be recognized as revenue when the

voucher is redeemed or has expired.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced

for estimated customer returns, rebates and other similar allowances. Allowances for sales returns and

liabilities for returns are recognized at the time of sale based on the seller’s reliable estimate of future

returns and based on past experience and other relevant factors.

1) Revenue from the sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

a) The Group has transferred to the buyer the significant risks and rewards of ownership of the

goods;

b) The Group retains neither continuing managerial involvement to the degree usually associated

with ownership nor effective control over the goods sold;

c) The amount of revenue can be measured reliably;

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

and

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

The sale of goods that results in award credits for customers under the Group’s award scheme is

accounted for as a multiple element revenue transaction, and the fair value of the consideration

received or receivable is allocated between the goods supplied and the award credits granted. The

consideration allocated to the award credits is measured with reference to their fair value, i.e. the

amount for which the award credits could be sold separately. Such consideration is not recognized

as revenue at the time of the initial sales transaction but is deferred and recognized as revenue when

the award credits are redeemed and the Group’s obligations have been fulfilled.

2) Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits

will flow to the Group and the amount of income can be measured reliably. Interest income is

accrued on a time basis with reference to the principal outstanding and at the applicable effective

interest rate.

165

o. Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks

and rewards of ownership to the lessee. All other leases are classified as operating leases.

1) The Group as lessor

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

relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added

to the carrying amount of the leased asset and amortized on a straight-line basis over the lease term.

Contingent rents are recognized as income in the period in which they are incurred.

2) The Group as lessee

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

Contingent rents are recognized as expenses in the period in which they are incurred.

p. Borrowing costs

Borrowing costs directly attributable to an acquisition, construction or production of qualifying assets

are added to the cost of those assets, until such time as the assets are substantially ready for their

intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their

expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

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

they are incurred.

q. Employee benefits

1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted

amount of the benefits expected to be paid in exchange for the related service.

2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when

employees have rendered services entitling them to the contributions.

Defined benefit costs (including service cost, net interest and remeasurement) under defined benefit

retirement benefit plans are determined using the projected unit credit method. Service cost

(including current service cost) and net interest on the net defined benefit liabilities (assets) are

recognized as employee benefits expense in the period in which they occur. Remeasurement,

comprising actuarial gains and losses, and the return on plan assets (excluding interest), is

recognized in other comprehensive income in the period in which it occurs. Remeasurement

recognized in other comprehensive income is reflected immediately in retained earnings and will

not be reclassified to profit or loss.

Net defined benefit liabilities (assets) represent the actual deficit (surplus) in the Group’s defined

benefit plans. Any surplus resulting from this calculation is limited to the present value of any

refunds from the plans or reductions in future contributions to the plans.

166

r. Share-based payment arrangements employee share options

Employee share options granted to employees

The fair value at the grant date of the employee share options is expensed on a straight-line basis over

the vesting period, based on the Group’s best estimates of the number of shares or options that are

expected to ultimately vest, with a corresponding increase in capital surplus - employee share options. It

is recognized as an expense in full at the grant date if vested immediately. The grant date of issued

ordinary shares for cash which are reserved for employees is the date on which the board of directors

approves the transaction.

s. Taxation

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

1) Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided

for as income tax in the year the shareholders approve to retain earnings.

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

provision.

2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and

liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax

assets are generally recognized for all deductible temporary differences to the extent that it is

probable that taxable profits will be available against which those deductible temporary differences

can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments

in subsidiaries and associates, except where the Group is able to control the reversal of the

temporary difference and it is probable that the temporary difference will not reverse in the

foreseeable future. Deferred tax assets arising from deductible temporary differences associated

with such investments and interests are only recognized to the extent that it is probable that there

will be sufficient taxable profits against which to utilize the benefits of the temporary differences

and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and

reduced to the extent that it is no longer probable that sufficient taxable profits will be available to

allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also

reviewed at the end of each reporting period and recognized to the to the extent that it has become

probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the

period in which the liabilities are settled or the assets are realized, based on tax rates (and tax laws)

that have been enacted or substantively enacted by the end of the reporting period. The

measurement of deferred tax liabilities and assets reflects the tax consequences that would follow

from the manner in which the Group expects, at the end of the reporting period, to recover or settle

the carrying amount of its assets and liabilities.

167

3) Current and deferred taxes for the year

Current and deferred taxes are recognized in profit or loss, except when they relate to items that are

recognized in other comprehensive income or directly in equity, in which case, the current and

deferred taxes are also recognized in other comprehensive income or directly in equity, respectively.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION

UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments,

estimates, and assumptions about the carrying amounts of assets and liabilities that are not readily apparent

from other sources. The estimates and associated assumptions are based on historical experience and other

factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognized in the period in which the estimates are revised if the revisions affect only that

period or in the period of the revisions and future periods if the revisions affect both current and future

periods.

Write-down of Inventories

The net realizable value of inventories is the estimated selling price in the ordinary course of business less

the estimated costs of completion and disposal. The estimation of the net realizable value is based on

current market conditions and historical experience with product sales of a similar nature. Changes in

market conditions may have a material impact on the estimation of the net realizable value.

6. CASH AND CASH EQUIVALENTS

December 31

2018 2017

Cash on hand $ 27,656 $ 25,271

Checking accounts and demand deposits 578,120 466,698

Cash equivalents

Time deposits with original maturities of less than 3 months 24,603 36,923

$ 630,379 $ 528,892

The market rate intervals of cash in the bank and time deposits at the end of the reporting period were as

follows:

December 31

2018 2017

Bank balance 0.05%-0.30% 0.08%-0.30%

Time deposits 1.10%-2.10% 1.10%-1.76%

168

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31

2018 2017

Financial assets at FVTPL - non-current

Put options $ 761 $ 6,237

Contingent consideration - 34

$ 761 $ 6,271

Financial liabilities at FVTPL - current

Financial liabilities held for trading

Derivative financial liabilities (not under hedge accounting)

Convertible options (Note 21) $ 4,770 $ 4,530

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

2018

Investments in Equity Instruments at FVTOCI

December 31,

2018

Non-current

Domestic investments

Unlisted shares

Ordinary shares - Hao Jie Industrial Co., Ltd. $ 13,065

These investments in equity instruments are not held for trading. Instead, they are held for medium to

long-term strategic purposes. Accordingly, the management elected to designate these investments in equity

instruments as at FVTOCI as they believe that recognizing short-term fluctuations in these investments’ fair

value in profit or loss would not be consistent with the Group’s strategy of holding these investments for

long-term purposes. These investments in equity instruments were classified as available-for-sale under IAS

39. Refer to Notes 3 and 10 for information relating to their reclassification and comparative information

for 2017.

9. FINANCIAL ASSETS AT AMORTIZED COST - 2018

December 31,

2018

Current

Time deposits with original maturities of more than 3 months $ 82,000

Non-current


169

a. The interest rates for time deposits with original maturities of more than 3 months were from 0.07% to

1.065% as at the end of the reporting period. The time deposits were classified as debt investments with

no active market under IAS 39. Refer to Notes 3 and 11 for information relating to their reclassification

and comparative information for 2017.

b. Refer to Note 37 for information relating to investments in financial assets at amortized cost pledged as

security.

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS - 2017

December 31,

2017

Non-current

Domestic investments

Unlisted shares $ 15,000

11. DEBT INVESTMENTS WITH NO ACTIVE MARKET - 2017

December 31,

2017

Current


Non-current


a. As of December 31, 2017, the market interest rate range of the time deposits with original maturities

more than 3 months was 0.07%-1.05%.

b. Refer to Note 37 for information relating to bond investments with no active market pledged as

security.

12. TRADE RECEIVABLES

December 31

2018 2017

At amortized cost

Gross carrying amount $ 128,971 $ 106,924

Less: Allowance for impairment loss (72) (143)

$ 128,899 $ 106,781

170

In 2018

The average credit period of trade receivables from shopping malls was between 10 days and 45 days. No

interest was charged on trade receivables. In determining the recoverability of a trade receivable, the Group

considered any change in the credit quality of a trade receivable since the date credit was initially granted to

the end of the reporting period.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9,

which permits the use of lifetime expected loss provision for all trade receivables. The expected credit

losses on trade receivables are estimated using a provision matrix by reference to past default experience of

the debtor and an analysis of the debtor’s current financial position, adjusted for general economic

conditions of the industry in which the debtors operate and an assessment of both the current as well as the

forecast direction of economic conditions at the reporting date. As the Group’s historical credit loss

experience does not show significantly different loss patterns for different customer segments, the provision

for loss allowance based on past due status is not further distinguished according to the Group’s different

customer base.

The Group writes off a trade receivable when there is information indicating that the debtor is in severe

financial difficulty and there is no realistic prospect of recovery, e.g. For trade receivables that have been

written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due.

Where recoveries are made, these are recognized in profit or loss.

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

December 31, 2018

Not Past Due 1 to 180 Days Over 180 Days Total

Expected credit loss rate 0% 50% 100% -

Gross carrying amount $ 128,827 $ 144 $ - $ 128,971

Loss allowance (Lifetime ECL) - (72) - (72)

Amortized cost $ 128,827 $ 72 $ - $ 128,899

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

2018

Balance at January 1, 2018 per IAS 39 $ 143

Adjustment on initial application of IFRS 9 -

Balance at January 1, 2018 per IFRS 9 143

Less: Net remeasurement of loss allowance (71)

Balance at December 31, 2018 $ 72

In 2017

The Group applied the same credit policy in 2018 and 2017. If there is no specific situation, the Group

recognized an allowance for impairment loss of 100% against all receivables over 180 days because

historical experience was that receivables that are past due beyond 180 days are not recoverable. Allowance

for impairment loss was recognized against trade receivables between 0 and 180 days based on the

estimated irrecoverable amounts determined by reference to the past default experience of the

counterparties and an analysis of their current financial positions.

171

The aging of receivables was as follows:

December 31,

2017

Up to 180 days $ 106,083

181 days and older 841

$ 106,924

The above aging schedule was based on the number of past due days from the invoice date.

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

Collectively

Assessed for

Impairment

Balance at January 1, 2017 $ 706

Less: Impairment losses reversed (563)

Balance at December 31, 2017 $ 143

13. INVENTORIES

December 31

2018 2017

Finished goods $ 772,684 $ 678,396

The cost of inventories recognized as cost of goods sold for the years ended December 31, 2018 and 2017

was $3,109,407 thousand and $2,937,770 thousand, respectively. The cost of goods sold included reversals

of inventory write-downs of $2,222 thousand and $11 thousand. The reversals of previous write-downs for

the year ended December 31, 2017 resulted from the sale of slow-moving inventory in these periods.

14. SUBSIDIARIES

Subsidiaries Included in the Consolidated Financial Statements

Proportion of

Ownership (%)

December 31

Investor Investee Nature of Activities 2018 2017 Remark

The Company Above Advance Limited Investment holding company 100.00 100.00


Inc. (FJ)

Sale of medical supplies 100.00 100.00


Inc. (NJ)


Taiwan Trim Co., Ltd. Sale of water Ionizer 50.00 50.00 Exactitude Biotech Co., Ltd. Sale of medical supplies 100.00 100.00


Inc. (SH)


Xing Zhou Pharmaceutical Co.,

Ltd.

Management consultancy

service

90.63 90.63 a

Proterann Healthcare Inc. Agent of foreign medical supplies brand

92.60 92.60 b

(Continued)

172

Proportion of

Ownership (%)

December 31

Investor Investee Nature of Activities 2018 2017 Remark

Above Advance Limited Cayman Medfirst Group Limited Investment holding company 100.00 100.00

Cayman Medfirst Group Limited MedFirst Healthcare Services,

Inc. (NJ)



Inc. (SH)


MedFirst Healthcare Services, Inc. (FJ) MedFirst Healthcare Services, Inc. (NJ)



Inc. (BJ)


MedFirst Healthcare Services, Inc. (SH) MedFirst Materials & Supplies,

Inc. (SH)


ShanDong Medfirst Healthcare Services Trade Ltd.

Sale of medical supplies 100.00 - c

MedFirst Materials & Supplies, Inc. (SH) MedFirst Materials & Supplies,

Inc. (HZ)


MedFirst Materials & Supplies, Inc.

(HZ)

Nanjing Baitang Trading Co.,

Ltd.

Sale of medical supplies 55.00 - d

(Concluded)

Remarks:

a. The Group acquired 4,305 thousand shares of Xing Zhou Pharmaceutical Co., Ltd. in the amount of

$44,043 thousand on July 3, 2017; the Group’s percentage of ownership increased from 45.32% to

90.63%, and subsequently obtained control of the company.

b. The Group acquired 623 thousand shares of Proterann Healthcare, Inc. in the amount of $44,659

thousand (of which $8,330 thousand has not yet been paid, and was accounted for as investment

payables) on August 1, 2017; the Group’s percentage of ownership was 92.6%, and subsequently

obtained control of the company.

c. The Group established ShanDong Medfirst Healthcare Services Trade Ltd. in June 2018, in which the

Group invested RMB3,000 thousand to obtain 100% of the equity of the company.

d. The Group established Nanjing Baitang Trading Co., Ltd. in January 2018, in which the Group invested

RMB2,750 thousand to obtain 55% of its equity. In consideration of the overall strategy and capital

allocation, the Group implemented a capital reduction in December 2018, and shares were refunded in

accordance with the shareholding ratio.

15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

Investments in Associates

December 31

2018 2017

Material associates

Singleton Pharma Logistics Co., Ltd. $ 7,518 $ 17,870

Material associates:

Proportion of Ownership and

Voting Rights

December 31

Name of Associate 2018 2017

Singleton Pharma Logistics Co., Ltd. 40% 40%

173

Refer to Table 6 “Information on Investees” for the nature of activities, principal places of business and

countries of incorporation of the associates.

Investments accounted for using the equity method and the share of profit or loss and other comprehensive

income of those investments were calculated based on financial statements which have not been audited.

Management believes there is no material impact on the equity method of accounting or the calculation of

the share of profit or loss and other comprehensive income from the financial statements of Singleton

Pharma Logistics Co., Ltd., of which have not been reviewed.

All the associates are accounted for using the equity method.

Summarized financial information in respect of each of the Group’s material associates is set out below.

The summarized financial information below represents amounts shown in the associates’ financial

statements prepared in accordance with IFRSs adjusted by the Group for equity accounting purposes.

Singleton Pharma Logistics Co., Ltd.

December 31

2018 2017

Current assets $ 84,016 $ 55,392

Non-current assets 16,855 12,942

Current liabilities (86,748) (20,776)

Non-current liabilities (4,461) (12,015)

Equity $ 9,662 $ 35,543

Proportion of the Group’s ownership 40% 40%

Equity attributable to the Group $ 7,518 $ 17,870

Carrying amount $ 7,518 $ 17,870

For the Year Ended December 31

2018 2017

Operating revenue $ 164,427 $ 151,816

Net loss for the year $ (25,501) $ (17,624)

16. PROPERTY, PLANT AND EQUIPMENT

Land Buildings

Storage

Equipment

Leasehold

Improvements

Transportation

Equipment Office Equipment Other Equipment

Property under

Construction Total

Cost

Balance at January 1, 2017 $ 224,259 $ 327,727 $ 20,280 $ 269,133 $ 991 $ 78,394 $ 68,683 $ - $ 989,467

Additions 437,671 962 1 9,942 - 11,222 15,770 - 475,568

Reclassified 187,042 - - 34,432 - 3,924 - - 225,398

Disposals - - - (51,903 ) - (7,095 ) (1,468 ) - (60,466 )

Acquisitions through business combinations - - - 6,343 - 4,772 24,056 -

35,171

Effect of foreign currency

exchange differences - (4,141 ) - (1,001 ) - (396 ) (105 ) -

(5,643 )

Balance at December 31,

2017 $ 848,972 $ 324,548 $ 20,281 $ 266,946 $ 991 $ 90,821 $ 106,936 $ -

$ 1,659,495

Accumulated depreciation

Balance at January 1, 2017 $ - $ 24,137 $ 5,590 $ 213,833 $ 760 $ 52,475 $ 38,720 $ - $ 335,515

Depreciation expenses - 9,154 2,044 28,876 198 12,384 14,621 - 67,277

Disposals - - - (51,210 ) - (6,278 ) (1,173 ) - (58,661 )

Acquisitions through

business combinations - - - 1,907 - 1,744 7,807 -

11,458


exchange differences - 462 - (949 ) - (352 ) (57 ) -

(896 )


2017 $ - $ 33,753 $ 7,634 $ 192,457 $ 958 $ 59,973 $ 59,918 $ -

$ 354,693

(Continued)

174

Land Buildings

Storage

Equipment

Leasehold

Improvements

Transportation

Equipment Office Equipment Other Equipment

Property under

Construction Total

Carrying amounts at

December 31, 2017 $ 848,972 $ 290,795 $ 12,647 $ 74,489 $ 33 $ 30,848 $ 47,018 $ -

$ 1,304,802

Cost

Balance at January 1, 2018 $ 848,972 $ 324,548 $ 20,281 $ 266,946 $ 991 $ 90,821 $ 106,936 $ - $ 1,659,495

Additions - - 144 7,072 - 10,956 6,219 5,226 29,617

Reclassified - - - 23,874 - 2,647 - - 26,521

Disposals - - - (8,590 ) - (947 ) (1,800 ) - (11,337 )


exchange differences - (3,592 ) - (112 ) - (69 ) (47 ) -

(3,820 )


2018 $ 848.972 $ 320,956 $ 20,425 $ 289,190 $ 991 $ 103,408 $ 111,308 $ 5,226 $ 1,700,476

Accumulated depreciation

Balance at January 1, 2018 $ - $ 33,753 $ 7,634 $ 192,457 $ 958 $ 59,973 $ 59,918 $ - $ 354,693

Depreciation expenses - 10,470 2,054 35,278 33 12,536 15,176 - 75,547

Disposals - - - (8,346 ) - (911 ) (1,568 ) - (10,825 )


exchange differences - (327 ) - (40 ) - (42 ) (33 ) -

(442 )


2018 $ - $ 43,896 $ 9,688 $ 219,349 $ 991 $ 71,556 $ 73,493 $ -

$ 418,973

Carrying amounts at

December 31, 2018 $ 848,972 $ 277,060 $ 10,737 $ 69,841 $ - $ 31,852 $ 37,815 $ 5,226

$ 1,281,503

(Concluded)

The above items of property, plant and equipment are depreciated on a straight-line basis over their

estimated useful lives as follows:

Buildings

Main buildings 27-35 years

Others 10-15 years

Storage equipment 2-10 years

Leasehold improvements 1-12 years

Transportation equipment 5 years

Office equipment 1-7 years

Other equipment 1-13 years

Property, plant and equipment pledged as collateral for bank borrowings is set out in Note 37.

17. GOODWILL


2018 2017

Cost

Balance at January 1 $ 12,692 $ -

Additional amounts recognized from business combinations

occurring during the year (Note 31) - 12,692

Balance at December 31 $ 12,692 $ 12,692

The Group acquired Xing Zhou Pharmaceutical Co., Ltd. on July 3, 2017 and recognized goodwill of

$8,964 thousand which consisted of the control premium and the expected benefits from the pharmacy

consulting management business.

The Group acquired Proterann Healthcare, Inc. on August 1, 2017 and recognized goodwill of $3,728

thousand which consisted of the expected benefits from obtaining the agency business in foreign medical

supplies.

175

18. OTHER INTANGIBLE ASSETS

Agency Rights

Computer

Software Total

Cost

Balance at January 1, 2017 $ - $ 34,888 $ 34,888

Additions - 910 910

Acquisitions through business combinations 31,138 5,234 36,372

Effect of foreign currency exchange differences - (1) (1)

Balance at December 31, 2017 $ 31,138 $ 41,031 $ 72,169

Accumulated amortization

Balance at January 1, 2017 $ - $ (20,208) $ (20,208)

Amortization expenses (2,477) (8,665) (11,142)

Acquisitions through business combinations - (2,617) (2,617)

Balance at December 31, 2017 $ (2,477) $ (31,490) $ (33,967)

Carrying amount at December 31, 2017 $ 28,661 $ 9,541 $ 38,202

Cost

Balance at January 1, 2018 $ 31,138 $ 41,031 $ 72,169

Additions - 1,785 1,785

Disposals - (53) (53)

Effect of foreign currency exchange differences - 1 1


Accumulated amortization

Balance at January 1, 2018 $ (2,477) $ (31,490) $ (33,967)

Amortization expenses (5,946) (6,950) (12,896)

Disposals - 53 53

Balance at December 31, 2018 $ (8,423) $ (38,387) $ (46,810)

Carrying amount at December 31, 2018 $ 22,715 $ 4,377 $ 27,092

Other intangible assets were amortized on a straight-line basis over their estimated useful lives as follows:

Agency rights 1-6 years

Computer software 1-5 years

176


2018 2017

An analysis of depreciation by function

Operating costs $ 1,308 $ 1,308

Selling and marketing expenses - 129

General and administrative expenses 11,588 9,705

$ 12,896 $ 11,142

19. OTHER ASSETS

December 31

2018 2017

Current

Prepaid rent $ 10,618 $ 12,220

Prepayments 7,872 10,459

Other prepayments 8,873 7,446

Offset against business tax payable 22,609 21,350

Temporary payments 2,804 2,800

Others 1,362 6,985

$ 54,138 $ 61,260

Non-current

Prepaid equipment $ 16,535 $ 4,227

Refundable deposits (Note 33) 68,309 65,591

$ 84,844 $ 69,818

Refundable deposits are for operating leases (see Note 37 for the details).

20. BORROWINGS

Long-term Borrowings

December 31

2018 2017

Secured borrowings (Note 37)

Bank loans (a) $ - $ 16,593

Bank loans (b) 437,000 437,000

437,000 453,593

Less: Current portions - (1,532)

Long-term borrowings $ 437,000 $ 452,061

177

a. As of December 31, 2017, the weighted average effective interest rate of the bank loans secured by the

Group’s freehold land and buildings (see Note 37) was 1.34% per annum. The maturity date of the

loans is October 15, 2028, the Group has repaid the loan in advance in June 2018.

b. As of December 31, 2018 and 2017, the weighted average effective interest rate of the bank loans

secured by the Group’s freehold land (see Note 37) was all 1.25% per annum. The maturity date of the

loans is January 23, 2020.

21. BONDS PAYABLE

December 31

2018 2017

Unsecured domestic convertible bonds $ 300,000 $ 300,000

Less: Discount on bonds payable (5,827) (10,810)

294,173 289,190

Less: Current portions (294,173) -

$ - $ 289,190

Unsecured Domestic Convertible Bonds

As of February 23, 2017, the Company issued 3 thousand units of 0%, New Taiwan (NT)

dollar-denominated unsecured convertible bonds in Taiwan, with an aggregate principal amount of

$300,000 thousand.

a. Each bond entitles the holder to convert it into ordinary shares of the Company at a conversion price of

$72.4. Conversion may occur at any time between March 24, 2017 and February 23, 2020.

b. If the bonds have not been converted, they will be redeemed on February 23, 2020 at face value.

c. The holder of the bonds can request the Company to repurchase the bonds at face value with the interest

compensation which is 101.0025% of the face value (actual earning rate 0.5%). The agreed repurchase

day is 2 years since the issued date, which is February 23, 2019.

The convertible bonds contain both liability and equity components. The equity component was presented

in equity under the heading of capital surplus - options. The effective interest rate of the liability component

was 1.71% per annum on initial recognition.

Proceeds from issuance (less transaction costs of $2,540 thousand) $ 296,042

Equity component (less transaction costs allocated to the equity component of $98

thousand) (11,032)

Liability component at the date of issuance (less transaction costs allocated to the

liability component of $2,638 thousand) 285,010

Interest charged at an effective interest rate of 1.71% 4,180

Liability component at December 31, 2017 289,190

Interest charged at an effective interest rate of 1.71% 4,983

Liability component at December 31, 2018 $ 294,173

178

22. NOTES PAYABLE AND TRADE PAYABLES

The average credit period on purchases of certain goods was between 60 days and 120 days. The Group has

financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit

terms.

23. OTHER LIABILITIES

December 31

2018 2017

Current

Other payables

Payables for purchase of equipment $ 11,916 $ 14,754

Payables for salaries or bonuses 72,984 71,160

Payables for remuneration to employees and directors 14,716 11,440

Payables for pension 6,511 5,569

Payables for insurance 10,289 8,956

Payables for rent 1,385 597

Payables for investment 8,330 16,670

Others (business tax, shipping expenses, professional service fees

and advertisement expenses, etc.) 112,071 91,028

$ 238,202 $ 220,174

Contract liabilities $ 34,935 $ -

Deferred revenue (a) - 7,954

Receipts in advance - 26,636

Others 5,809 3,809

$ 40,744 $ 38,399

Non-current

Guarantee deposits (b) $ 104,157 $ 102,757

a. Deferred revenue refers to revenue that has been deferred due to bonus points given to customers that

have not been redeemed and which the Group has not yet fulfilled its performance obligations.

b. Guarantee deposits are mainly refundable deposits received from suppliers.

24. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company, Porterann Healthcare Inc., Xing Zhou Pharmaceutical Co., Ltd. and Taiwan Trim Co.,

Ltd. of the Group adopted a pension plan under the Labor Pension Act (the “LPA”), which is a

state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to

employees’ individual pension accounts at 6% of monthly salaries and wages.

179

b. Defined benefit plans

The defined benefit plans adopted by the Company in accordance with the Labor Standards Law is

operated by the government of the ROC. Pension benefits are calculated on the basis of the length of

service and average monthly salaries of the six months before retirement. The Company contributes

amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension

fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the

committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If

the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees

who conform to retirement requirements in the next year, the Group is required to fund the difference in

one appropriation that should be made before the end of March of the next year. The pension fund is

managed by the Bureau of Labor Funds, Ministry of Labor (“the Bureau”); the Group has no right to

influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plan

were as follows:

December 31

2018 2017

Present value of defined benefit obligation $ 16,890 $ 15,393

Fair value of plan assets (14,820) (14,711)

Deficit 2,070 682

Net defined benefit liabilities $ 2,070 $ 682

Movements in net defined benefit liabilities were as follows:

Present Value

of the Defined

Benefit

Obligation

Fair Value of

the Plan Assets

Net Defined

Benefit

Liabilities

Balance at January 1, 2017 $ 14,486 $ (13,998) $ 488

Service cost

Current service cost 145 - 145

Net interest expense (income) 261 (259) 2

Recognized in profit or loss 406 (259) 147

Remeasurement

Return on plan assets (excluding amounts

included in net interest) - 121 121

Actuarial loss

Changes in financial assumptions 417 - 417

Experience adjustments 84 - 84

Recognized in other comprehensive income 501 121 622

Contributions from the employer - (575) (575)

Balance at December 31, 2017 $ 15,393 $ (14,711) $ 682

(Continued)

180

Present Value

of the Defined

Benefit

Obligation

Fair Value of

the Plan Assets

Net Defined

Benefit

Liabilities

Balance at January 1, 2018 $ 15,393 $ (14,711) $ 682

Service cost

Current service cost 149 - 149

Net interest expense (income) 246 (240) 6

Recognized in profit or loss 395 (240) 155

Remeasurement

Return on plan assets (excluding amounts

included in net interest) - (344) (344)

Actuarial loss

Changes in financial assumptions 628 - 628

Experience adjustments 1,520 - 1,520

Recognized in other comprehensive income 2,148 (344) 1,804

Contributions from the employer - (571) (571)

Benefits paid (1,046) 1,046 -

Balance at December 31, 2018 $ 16,890 $ (14,820) $ 2,070

(Concluded)

An analysis by function of the amounts recognized in profit or loss in respect of the defined benefit plan

is as follows:


2018 2017

General and administrative expenses $ 155 $ 147

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the

following risks:

1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities,

bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the

mandated management. However, in accordance with relevant regulations, the return generated by

plan assets should not be below the interest rate for a 2-year time deposit with local banks.

2) Interest risk: A decrease in the government bond interest rate will increase the present value of the

defined benefit obligation; however, this will be partially offset by an increase in the return on the

plans’ debt investments.

3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the

future salaries of plan participants. As such, an increase in the salary of the plan participants will

increase the present value of the defined benefit obligation.

181

The actuarial valuations of the present value of the defined benefit obligation were carried out by

qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as

follows:

December 31

2018 2017

Discount rate(s) 1.35% 1.60%

Expected rate(s) of salary increase 1.50% 1.50%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other

assumptions will remain constant, the present value of the defined benefit obligation would increase

(decrease) as follows:

December 31

2018 2017

Discount rate(s)

0.25% increase $ (628) $ (519)

0.25% decrease $ 659 $ 544

Expected rate(s) of salary increase

1% increase $ 2,811 $ 2,321

1% decrease $ (2,356) $ (1,956)

The sensitivity analysis presented above may not be representative of the actual changes in the present

value of the defined benefit obligation as it is unlikely that changes in assumptions would occur in

isolation of one another as some of the assumptions may be correlated.

December 31

2018 2017

Expected contributions to the plans for the next year $ 571 $ 576

Average duration of the defined benefit obligation 20 years 19 years

25. EQUITY

a. Share capital

Ordinary shares

December 31

2018 2017

Number of shares authorized (in thousands) 50,000 50,000

Shares authorized $ 500,000 $ 500,000

Number of shares issued and fully paid (in thousands) 28,240 28,240

Shares issued $ 282,400 $ 282,400

182

b. Capital surplus

December 31

2018 2017

May be used to offset a deficit, distributed as cash dividends, or

transferred to share capital*

Issuance of ordinary shares $ 377,245 $ 377,245

May be used to offset a deficit only

Others 1,838 1,838

May not be used for any purpose

Equity components of convertible bonds 11,032 11,032

$ 390,115 $ 390,115

* Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit,

such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a

certain percentage of the Company’s capital surplus and once a year).

c. Retained earnings and dividend policy

Under the dividend policy as set forth in the amended Articles, where the Company made a profit in a

fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting

aside as legal reserve 10% of the remaining profit, setting aside or reversing special reserve in

accordance with the laws and regulations, and then any remaining profit together with any undistributed

retained earnings shall be used by the Company’s board of directors as the basis for proposing a

distribution plan, which should be resolved in the shareholders’ meeting for the distribution of

dividends and bonuses to shareholders. For the policies on distribution of employees’ compensation and

remuneration of directors after amendment, refer to employees’ compensation and remuneration of

directors in Note 27-g.

The Company’s Articles also stipulate a dividend policy that is in line with the current and future

development plans; after comprehensive consideration of the investment environment, financial

planning, domestic and foreign competition and other factors, in principle, at least 30% of the retained

earnings can be distributed as dividends to shareholders, which can be made in the form of cash or

shares, and cash dividends should not be less than 10% of total dividends distributed. However, the type

and ratio of distribution of profits are subject to actual annual earnings and financial condition, which

shall be proposed by the Company’s board of directors and resolved in the shareholders’ meeting.

An appropriation of earnings to a legal reserve shall be made until the legal reserve equals the

Company’s paid-in capital. The legal reserve may be used to offset deficit. If the Company has no

deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be

transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865, should be appropriated to a special reserve by the

Company.

183

The appropriations of earnings for 2017 and 2016 which were approved in the shareholders’ meetings

on June 14, 2018 and June 14, 2017, respectively, were as follows:

Appropriation of Earnings

Dividends Per Share

(NT$)

For the Year Ended

December 31

For the Year Ended

December 31

2017 2016 2017 2016

Legal reserve $ 9,073 $ 10,200 $ - $ -

Special reserve 4,351 10,609 - -

Cash dividends 73,424 90,368 2.6 3.2

The appropriation of earnings for 2018 are subject to resolution in the shareholders’ meeting to be held

on June 12, 2019.

Appropriation

of Earnings

Dividends Per

Share (NT$)

Legal reserve $ 11,295 $ -

Special reserve 4,988 -

Cash dividends 64,952 2.3

Share dividends 17,791 0.63

The appropriation of earnings for 2018 are subject to resolution in the shareholders’ meeting to be held

on June 12, 2019.

d. Special reserve


2018 2017

Balance at January 1 $ 10,609 $ -

Appropriations in respect of

Debits to other equity items 4,351 10,609


e. Other equity items

1) Exchange differences on translating the financial statements of foreign operations


2018 2017

Balance at January 1 $ (14,960) $ (10,608)

Effect of change in tax rate 542 -

Recognized for the year

Exchange differences on translating the financial

statements of foreign operations (3,595) (4,352)

Balance at December 31 $ (18,013) $ (14,960)

184

2) Unrealized loss on financial assets at FVTOCI

For the Year

Ended

December 31,

2018

Balance at January 1 per IAS 39 $ -

Adjustment on initial application of IFRS 9 (360)

Balance at January 1 per IFRS 9 (360)

Recognized for the year

Unrealized loss - equity instruments (1,575)

Balance at December 31 $ (1,935)

f. Non-controlling interests


2018 2017

Balance at January 1 $ 14,248 $ 3,742

Share in loss for the year (565) (1,933)

Other comprehensive loss during the year

Exchange difference on translating the financial statements of

foreign entities (340) -

Non-controlling interest arising from acquisition of Xing Zhou

Pharmaceutical Co., Ltd. (see Note 31) - 9,434

Non-controlling interest arising from acquisition of Proterann

Healthcare, Inc. (see Note 31) - 3,005

Non-controlling interest arising from acquisition of Nanjing

Baitang Trading Co., Ltd. 10,414 -

Non-controlling interest reducing from withdrawal of Nanjing

Baitang Trading Co., Ltd. (9,156) -


26. REVENUE


2018 2017

Revenue from contracts with customers

Revenue from sale of goods $ 4,426,595 $ 4,218,386

Revenue from others 206,048 106,021

$ 4,632,643 $ 4,324,407

185

a. Contract balances

December 31,

2018

Trade receivables (Note 12) $ 128,899

Contract liabilities

Sale of goods $ 26,525

Customer loyalty programs 8,410

$ 34,935

b. Disaggregation of revenue

Product

For the Year

Ended

December 31,

2018

Medical care $ 3,348,068

Biotechnology health care 716,916

Health care 358,653

Other products 191

Other revenue 208,815

$ 4,632,643

c. Partially completed contracts

The transaction prices allocated to the performance obligations that are not fully satisfied and the

expected timing for recognition of revenue are as follows.

December 31,

2018

Customer loyalty programs

Before 2020 $ 8,410

27. NET PROFIT

a. Other income


2018 2017

Interest income

Bank deposits $ 1,533 $ 1,012

Imputed interest on deposits 194 29

Others 20,282 18,610

$ 22,009 $ 19,651

186

b. Other gains and losses


2018 2017

Fair value changes of financial assets and financial liabilities

Financial assets designated as at FVTPL $ (5,510) $ -

Financial liabilities designated as at FVTPL (240) (3,210)

Gain on disposal of associates - 4,783

Net foreign exchange gains (losses) 424 (386)

Loss on disposal of property, plant and equipment (267) (1,147)

Others (1,434) (1,782)

$ (7,027) $ (1,742)

c. Finance costs


2018 2017

Interest on bank loans $ 4,873 $ 6,989

Imputed interest on deposits 135 130

Interest on convertible bonds 6,098 4,180

Less: Amounts included in the cost of qualifying assets (2,483) -

$ 8,623 $ 11,299

Information about capitalized interest is as follows:


2018 2017

Capitalized interest $ 2,483 $ -

Capitalization rate 1.25%-1.74% -

d. Impairment losses recognized (reversed)


2018 2017

Trade receivables $ 71 $ 563

Inventories (included in operating costs) $ (2,222) $ 11

e. Depreciation and amortization


2018 2017

An analysis of depreciation by function

Operating costs $ 781 $ 3,464

Operating expenses 74,766 63,813

$ 75,547 $ 67,277

(Continued)

187


2018 2017

An analysis of amortization by function

Operating costs $ 1,308 $ 1,308


$ 12,896 $ 11,142

(Concluded)

f. Employee benefits expense


2018 2017

Post-employment benefits

Defined contribution plan $ 27,184 $ 22,949

Defined benefit plan (Note 24) 155 147

Share-based payments

Equity-settled - 6,673

Other employee benefits 596,417 536,467

Total employee benefits expense $ 623,756 $ 566,236

An analysis of employee benefits expense by function

Operating costs $ 138 $ 67


$ 623,756 $ 566,236

g. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Company, the Company accrued employees’

compensation and remuneration of directors at the rates of 1% to 15% and no higher than 7%,

respectively, of net profit before income tax, employees’ compensation, and remuneration of directors.

The employees’ compensation and the remuneration of directors for the years ended December 31,

2018 and 2017, which were approved by the Company’s board of directors on February 26, 2019 and

March 23, 2018, respectively, are as follows:

Accrual rate


2018 2017

Employees’ compensation 4% 4%

Remuneration of directors 2.28% 2.20%

Amount


2018 2017

Cash Cash

Employees’ compensation $ 6,223 $ 4,828

Remuneration of directors 3,541 2,656

188

If there is a change in the amounts after the annual consolidated financial statements are authorized for

issue, the differences are recorded as a change in the accounting estimate.

There is no difference between the actual amounts of employees’ compensation and remuneration of

directors paid and the amounts recognized in the consolidated financial statements for the years ended

December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors resolved by the Company’s

board of directors in 2019 and 2018 is available at the Market Observation Post System website of the

Taiwan Stock Exchange.

28. INCOME TAXES

a. Income tax recognized in profit or loss

Major components of income tax expense are as follows:


2018 2017

Current tax

In respect of the current year $ 37,229 $ 23,078

Income tax on unappropriated earnings 629 -

Adjustments for prior years 1,680 (33)

39,538 23,045

Deferred tax

In respect of the current year (2,952) 244

Adjustments to deferred tax attributable to changes in tax rates (762) -

(3,714) 244

Income tax expense recognized in profit or loss $ 35,824 $ 23,289

A reconciliation of accounting profit and income tax expenses is as follows:


2018 2017

Profit before tax $ 148,209 $ 112,084

Income tax expense calculated at the statutory rate $ 28,362 $ 20,352

Nondeductible expenses in determining taxable income 2,010 21

Income tax on unappropriated earnings 629 -

Unrecognized loss carryforwards 1,007 802

Unrecognized loss deductible temporary differences 2,898 2,147

Effect to tax rate changes (762) -

Adjustments for prior years’ tax 1,680 (33)

Income tax expense recognized in profit or loss $ 35,824 $ 23,289

In 2017, the applicable corporate income tax rate used by the group entities in the ROC was 17%.

However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was

adjusted from 17% to 20%, effective in 2018. In addition, the rate of the corporate surtax applicable to

the 2018 unappropriated earnings will be reduced from 10% to 5%. The applicable tax rate used by

subsidiaries in China is 25%.

189

As the status of the 2019 appropriations of earnings is uncertain, the potential income tax consequences

of the 2018 unappropriated earnings are not reliably determinable.

b. Income tax recognized in other comprehensive income


2018 2017

Deferred tax

Effect of change in tax rate $ 632 $ -

In respect of the current period:

Translation of foreign operations 898 892

Remeasurement of defined benefit plans 361 106

Total income tax recognized in other comprehensive income $ 1,891 $ 998

c. Current tax assets and liabilities

December 31

2018 2017

Current tax assets

Tax refund receivable $ - $ 215

Current tax liabilities

Income tax payable $ 27,123 $ 11,830

d. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities are as follows:

For the year ended December 31, 2018

Deferred Tax Assets

Opening

Balance

Recognized in

Profit or Loss

Recognized in

Other

Compre-

hensive

Income

Closing

Balance

Temporary differences

Deferred revenue $ 1,352 $ 330 $ - $ 1,682

Defined benefit obligation 404 (102) 451 753

Payables for annual leave 474 318 - 792

Write-downs of inventory 1,686 654 - 2,340

Exchange gains and losses 36 (36) - -

Exchange differences on

translating the financial

statements of foreign

operations 3,069 - 1,440 4,509

Convertible bonds 710 1,123 - 1,833

Financial liabilities at

FVTPL 546 144 - 690

Financial assets at FVTPL - 1,423 - 1,423

Others 2 (2) - -

$ 8,279 $ 3,852 $ 1,891 $ 14,022

190

Deferred Tax Liabilities

Opening

Balance

Recognized in

Profit or Loss

Recognized in

Other

Compre-

hensive

Income

Closing

Balance


Exchange gains and losses $ - $ 2 $ - $ 2

Gain or loss on disposal of

associates 821 136 - 957

$ 821 $ 138 $ - $ 959


Deferred Tax Assets

Opening

Balance

Recognized in

Profit or Loss

Recognized in

Other

Compre-

hensive

Income

Closing

Balance


Deferred revenue $ 2,180 $ (828) $ - $ 1,352

Defined benefit obligation 371 (73) 106 404

Payables for annual leave 339 135 - 474

Write-downs of inventory 1,550 136 - 1,686

Exchange gains and losses 17 19 - 36

Exchange differences on

translating the financial

statements of foreign

operations 2,177 - 892 3,069

Convertible bonds - 710 - 710

Financial liabilities at

FVTPL - 546 - 546

Others 70 (68) - 2

$ 6,704 $ 577 $ 998 $ 8,279

Deferred Tax Liabilities

Opening

Balance

Recognized in

Profit or Loss

Recognized in

Other

Compre-

hensive

Income

Closing

Balance


Gain or loss on disposal of

associates $ - $ 821 $ - $ 821

191

e. Deductible temporary differences and unused loss carryforwards for which no deferred tax assets have

been recognized in the consolidated balance sheets

December 31

2018 2017

Loss carryforwards $ 42,591 $ 51,457

Deductible temporary differences

Share of profit or loss on investments accounted for using the

equity method $ 139,754 $ 156,980

Financial assets at FVTOCI 1,935 -

Write-downs of inventory 327 428

$ 142,016 $ 157,408

f. Income tax assessments

The income tax returns through 2016 of the Company and subsidiaries in Taiwan have been assessed by

Taiwan’s tax authorities. All other companies prepare their tax returns according to local law.

29. EARNINGS PER SHARE

Unit: NT$ Per Share


2018 2017

Basic earnings per share

Basic earnings per share $ 4.00 $ 3.29

Diluted earnings per share

Diluted earnings per share $ 3.60 $ 3.07

The earnings and weighted average number of ordinary shares outstanding used in the computation of

earnings per share are as follows:

Net Profit for the Period


2018 2017

Earnings used in the computation of basic earnings per share $ 112,950 $ 90,728

Effect of potentially dilutive ordinary shares:

Interest on convertible bonds (after tax) 3,987 3,469

Earnings used in the computation of diluted earnings per share $ 116,937 $ 94,197

192

Weighted Average Number of Ordinary Shares Outstanding (In Thousands of Shares)


2018 2017

Weighted average number of ordinary shares used in the

computation of basic earnings per share 28,240 27,541

Effect of potentially dilutive ordinary shares:

Convertible bonds 4,143 3,096

Employees’ compensation 132 79

Weighted average number of ordinary shares used in the

computation of diluted earnings per share 32,515 30,716

If the Group offered to settle compensation paid to employees in cash or shares, the Group assumed that the

entire amount of the compensation will be settled in shares, and the resulting potential shares were included

in the weighted average number of shares outstanding used in the computation of diluted earnings per share,

as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted

earnings per share until the number of shares to be distributed to employees is resolved in the following

year.

30. SHARE-BASED PAYMENT ARRANGEMENTS

The Group issued ordinary shares for cash in March 2017 and reserved 15% of the shares for employee

share options at the grant date of February 20, 2017; related information about the employee share options

is as follows:

For the Year Ended

December 31, 2017

Number of

Options (In

Thousands)

Weighted-

average

Exercise Price

(NT$)

Balance at January 1 - $ -

Options granted 450 66.67

Options forfeited (124)

Options exercised (326)

Balance at December 31 -

Options exercisable, end of period -

Weighted-average fair value of options granted (NT$) $ 14.83

Compensation costs recognized was $6,673 thousand for the year ended December 31, 2017.

193

31. BUSINESS COMBINATIONS

a. Subsidiaries acquired

Principal Activity Date of Acquisition

Proportion of

Voting Equity

Interests

Acquired (%)

Consideration

Transferred

Xing Zhou

Pharmaceutical

Co., Ltd.

Management

consultancy

services

July 3, 2017 90.63 $ 44,043

Proterann

Healthcare, Inc.

Agent of foreign

medical supplies

brand

August 1, 2017 92.60 $ 44,659

Xing Zhou Pharmaceutical Co., Ltd. and Proterann Healthcare, Inc. were acquired in order to continue

the expansion of the Group’s activities in medical supplies.

b. Considerations transferred

Xing Zhou

Pharmaceutical

Co., Ltd.

Proterann

Healthcare, Inc.

Cash $ 44,043 $ 50,930

Adjustment of contingent consideration arrangements and put

options* - (6,271)

$ 44,043 $ 44,659

* According to the contingent consideration arrangement, which is based on the earnings before

income tax of Proterann Healthcare, Inc. during the period from July 1, 2017 to December 31, 2017

(the “First Period”), if the earnings of the First Period before income tax is more than $4,200

thousand, half of the excess earnings will be added to the adjusted payment of the second period (as

defined in the arrangement) of $8,340 thousand; if the earnings during the First Period before

income tax is lower than $3,800 thousand, half of the deficit in earnings will be deducted from the

adjusted payment of the second period of $8,340 thousand. Based on the gross profit ratio of

Proterann Healthcare, Inc. in 2018, if the gross profit ratio for 2018 is more than 43%, the adjusted

payment of the third period (as defined in the arrangement) will be the payment of the third period

of $8,330 thousand, added to the excess over 43%, and then multiplied by the payment of the third

period; if the gross profit ratio is less than 33%, the adjusted payment of the third period will be the

deficit under 33%, multiplied by the payment of the third period of $8,330 thousand, and then

deducted from the payment of the third period. The estimated fair value of this contingent

obligation at the acquisition date was a gain of $34 thousand.

According to the put option arrangement, if the original dealer repurchases the agent and

distribution rights in Taiwan before December 31, 2020, the adjusted transaction price would be as

follows: If 92.6% of the option holders do not complete settlement, the Group will not pay the rest

of the transaction price in the remaining periods, and the transaction will close; if the original dealer

revokes the agent and distribution rights in Taiwan, the whole payment shall be returned to the

Group without interest. If the original dealer repurchases the agent and distribution rights in Taiwan

from Proterann Healthcare, Inc. and the repurchase amount is lower than the Group’s payment of

the transaction price, the difference between the repurchased amount and the payment shall be

returned to the Group; if the original dealer repurchases the agent and distribution rights in Taiwan

from Proterann Healthcare, Inc. and the repurchased amount is more than the Group’s payment of

194

the transaction price, Proterann Healthcare, Inc. shall return the difference between the repurchased

amount and the payment of the transaction price to the Group. The estimated fair value of this right

at the acquisition date was $6,237 thousand.

c. Assets acquired and liabilities assumed at the acquisition dates

Xing Zhou

Pharmaceutical

Co., Ltd.

Proterann

Healthcare, Inc.

Current assets

Cash and cash equivalents $ 30,345 $ 10,030

Trade receivables - 18,097

Other receivables 25,400 -

Inventories - 7,282

Other current assets 9,825 2,118

Non-current assets

Property, plant and equipment 23,122 591

Intangible assets 2,617 31,138

Other non-current assets 3,184 20

Current liabilities

Trade payables - (17,937)

Other payables (3,393) (5,963)

Current tax liabilities - (573)

Other current payables (954) (1,440)

$ 90,146 $ 43,936

d. Non-controlling interests

The non-controlling interest (a 9.37% ownership interest in Xing Zhou Pharmaceutical Co., Ltd.) was

measured by the proportion of the non-controlling interest to the identifiable net assets.

The non-controlling interest (a 7.4% ownership interest in Proterann Healthcare, Inc.) recognized at the

acquisition date was measured by reference to the fair value of the non-controlling interest and

amounted to $3,005 thousand. This fair value was estimated using the income approach. The key

assumptions used in determining the fair value was a discount rate of 16%. Each asset has different

required rate of return due to its different risks and liquidity, which will be used as a discount rate to

assess the value of the asset.

e. Goodwill recognized on acquisitions

Xing Zhou

Pharmaceutical

Co., Ltd.

Proterann

Healthcare, Inc.

Consideration transferred $ 44,043 $ 44,659

Plus: Previously owned equity of the acquired company 45,633 -

Plus: Non-controlling interests (9.37% in Xing Zhou

Pharmaceutical Co., Ltd.)

9,434 -

Plus: Non-controlling interests (7.4% in Proterann Healthcare,

Inc.)

- 3,005

Less: Fair value of identifiable net assets acquired (90,146) (43,936)

Goodwill recognized on acquisitions $ 8,964 $ 3,728

195

The goodwill recognized in the acquisition of Xing Zhou Pharmaceutical Co., Ltd. and Proterann

Healthcare, Inc. mainly represents the control premium included in the cost of the combination. In

addition, the consideration paid for the combinations effectively included amounts attributed to the

benefits of expected synergies, revenue growth and future market development. These benefits are not

recognized separately from goodwill because they do not meet the recognition criteria for identifiable

intangible assets.

f. Net cash outflow on acquisitions of subsidiaries

Xing Zhou

Pharmaceutical

Co., Ltd. Proterann

Healthcare, Inc.

Consideration paid in cash $ 44,043 $ 50,930

Less: Cash and cash equivalent balances acquired (30,345) (10,030)

Investment payable - (16,670)

$ 13,698 $ 24,230

g. Impact of acquisitions on the results of the Group

The results of the acquirees since the acquisition dates included in the consolidated statements of

comprehensive income are as follows:

Xing Zhou

Pharmaceutical

Co., Ltd. Proterann

Healthcare, Inc.

Revenue $ 4,692 $ 12,436

Loss $ (588) $ (13,354)

Had these business combinations been in effect at the beginning of the annual reporting period, the

Group’s revenue would have been $4,334,445 thousand, and the profit would have been $89,694

thousand for the year ended December 31, 2017. This pro-forma information is for illustrative purposes

only and is not necessarily an indication of the revenue and results of operations of the Group that

actually would have been achieved had the acquisitions been completed on January 1, 2017, nor is it

intended to be a projection of future results.

In determining the pro-forma revenue and profit of the Group had Xing Zhou Pharmaceutical Co., Ltd.

and Proterann Healthcare, Inc. been acquired at the beginning of the current reporting period, the

management already considered the written off transactions between the companies.

32. NON-CASH TRANSACTIONS

For the years ended December 31, 2018 and 2017, the Group entered into the following non-cash investing

and financing activities which were not reflected in the consolidated statement of cash flows:

a. The Group acquired property, plant and equipment with an aggregate fair value of $29,617 thousand

and paid $2,838 thousand, resulting in a decrease in other payables in the same amount. Total net cash

used in acquiring property, plant and equipment was $32,455 thousand for the year ended December 31,

2018 (see Note 16).

196

b. The Group acquired property, plant and equipment with an aggregate fair value of $475,568 thousand

and paid $1,289 thousand, resulting in a decrease in other payables in the same amount. Total net cash

used in acquiring property, plant and equipment was $476,857 thousand for the year ended December

31, 2017 (see Note 16).

c. The Group reclassified the amounts of $26,521 thousand and $225,398 thousand from prepaid

equipment to property, plant and equipment for the years ended December 31, 2018 and 2017,

respectively (see Note 16).

d. The Group reclassified the amounts of $1,532 thousand from long-term borrowings to current portion of

long-term borrowings for the year ended December 31, 2017 (see Note 20).

e. The Group reclassified the amounts of $294,173 thousand from bonds payable to current portion of

bonds payable for the year ended December 31, 2018 (see Note 21).

33. OPERATING LEASE ARRANGEMENTS

Operating leases relate to leases of store spaces with lease terms between 1 and 12 years. The Group does

not have a bargain purchase option to acquire the leased property at the expiration of the lease periods.

The Group paid refundable deposits on operating lease contracts for the period ended December 31, 2018

and 2017 in the amounts of $65,692 thousand and $61,924 thousand, respectively.

The future minimum lease payments under non-cancellable operating lease commitments were as follows:

December 31

2018 2017

Not later than 1 year $ 305,215 $ 229,893

Later than 1 year and not later than 5 years 593,045 445,563

Later than 5 years 91,058 60,847

$ 989,318 $ 736,303

34. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going

concerns while maximizing the return to stakeholders through the optimization of the debt and equity

balance. The Group’s overall strategy remains unchanged from 2012.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and

equity attributable to owners of the Company (comprising issued capital, reserves, retained earnings and

other equity).

The Group is not subject to any externally imposed capital requirements.

Key management personnel of the Group review the capital structure on a quarterly basis. As part of this

review, the key management personnel consider the cost of capital and the risks associated with each class

of capital. Based on recommendations of the key management personnel, in order to balance the overall

capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new

shares issued or repurchased, and/or the amount of new debt issued or existing debt redeemed.

197

35. FINANCIAL INSTRUMENTS

a. Fair value of financial instruments that are not measured at fair value

There were no financial assets and financial liabilities where the carrying amounts are significantly

different from the fair values in the consolidated financial statements.

b. Fair value of financial instruments that are measured at fair value on a recurring basis

1) Fair value hierarchy

December 31, 2018

Level 1 Level 2 Level 3 Total

Financial assets at FVTPL

Contingent consideration of

business combinations $ - $ - $ - $ -

Put options - - 761 761

$ - $ - $ 761 $ 761

Financial assets at FVTOCI

Investments in equity

instruments at FVTOCI

Unlisted shares $ - $ - $ 13,065 $ 13,065


Redemption of bonds at

maturity $ - $ - $ 4,770 $ 4,770

December 31, 2017

Level 1 Level 2 Level 3 Total

Financial assets at FVTPL

Contingent consideration of

business combinations $ - $ - $ 34 $ 34

Put options - - 6,237 6,237

$ - $ - $ 6,271 $ 6,271

Available-for-sale financial

assets

Equity securities

Unlisted shares $ - $ - $ 15,000 $ 15,000


Redemption of bonds at

maturity $ - $ - $ 4,530 $ 4,530

There were no transfers between Levels 1 and 2 in the current and prior periods.

198

2) Reconciliation of Level 3 fair value measurements of financial instruments


Financial Assets Financial Assets

at FVTOCI

at FVTPL Equity

Derivatives Instruments Total

Financial assets

Balance at January 1, 2018 $ 6,271 $ 14,640 $ 20,911

Recognized in profit or loss (included in

other gains and losses) (5,510) - (5,510)

Recognized in other comprehensive

income (included in unrealized loss on

financial assets at FVTOCI) - (1,575) (1,575)

Balance at December 31, 2018 $ 761 $ 13,065 $ 13,826

Recognized in other gains and losses -

unrealized $ (7,115) $ -

$ (7,115)

Financial

Liabilities

FVTPL

Derivatives

Financial liabilities

Balance at January 1, 2018 $ 4,530

Recognized in profit or loss (included in other gains and losses) 240

Balance at December 31, 2018 $ 4,770

Recognized in other gains and losses - unrealized $ (240)


Financial Assets

at

Fair Value

Through Profit

or Loss

Available-for-

sale Financial

Assets

Held-for-

trading

Equity

Instruments Total

Financial assets

Balance at January 1, 2017 $ - $ 15,000 $ 15,000

Purchases 6,271 - 6,271


199

Financial

Liabilities at

FVTPL

Held-for-

trading


Balance at January 1, 2017 $ -

Recognized in profit or loss (included in other gains and losses)

Unrealized 3,210

Additions 1,320

Balance at December 31, 2017 $ 4,530

Recognized in other gains and losses - unrealized $ (3,210)

3) Valuation techniques and inputs applied for Level 3 fair value measurement

a) The fair values of unlisted equity securities were determined using the market approach based

on the Company’s recent fundraising activities, technological developments, evaluations of

similar companies, market conditions, and other economic indicators.

b) The values of contingent consideration of business combinations and put options were

determined using the income approach. The values of contingent consideration were determined

using the scenario-based method, and the values of put options were determined using the

option pricing method, taking into consideration the impact of the probability of occurrence.

c) Redemption of bonds payable is based on the assumption that the bonds will be redeemed on

February 23, 2020, and the discount rate used is determined with reference to similar

government bonds on the issue date and the holding period, plus the credit risk premium.

c. Categories of financial instruments

December 31

2018 2017

Financial assets

Financial assets at FVTPL $ 761 $ 6,271

Loans and receivables (Note 1) - 756,322

Available-for-sale financial assets - 15,000

Financial assets at amortized cost (Note 2) 930,389 -

Financial assets at FVTOCI 13,065 -


Financial liabilities at FVTPL 4,770 4,530

Financial liabilities at amortized cost (Note 3) 2,056,477 1,887,656

Note 1: The balances include loans and receivables measured at amortized cost, which comprise cash

and cash equivalents, debt investments with no active market, notes receivable, trade

receivables, other receivables and refundable deposits.

Note 2: The balances include financial assets measured at amortized cost, which comprise cash and

cash equivalents, debt investments, notes receivable, trade receivables, other receivables and

refundable deposits.

200

Note 3: The balances include financial liabilities measured at amortized cost, which comprise, notes

payable, trade payable, other payable (not including accrued payroll and remuneration to

employees and directors), bonds payable, long-term borrowings, and guarantee deposits.

d. Financial risk management objectives and policies

The Group’s major financial instruments included equity and debt investments, trade receivables, trade

payables, bonds payable and borrowings. The Group’s Corporate Treasury function provides services to

the business, coordinates access to domestic and international financial markets, monitors and manages

the financial risks relating to the operations of the Group through internal risk reports which analyze

exposures by degree and magnitude of risks. These risks include market risk (including foreign

currency risk and interest rate risk), credit risk and liquidity risk.

1) Market risk

a) Foreign currency risk

Several subsidiaries of the Company have foreign currency bank deposits, which exposed the

Group to foreign currency risk. However, the amounts are not significant; thus, foreign currency

risk is insignificant.

b) Interest rate risk

The Group is exposed to interest rate risk because the Group has time deposits, borrowings and

bonds payable at both fixed and floating interest rates.

The carrying amount of the Group’s financial assets and financial liabilities with exposure to

interest rates at the end of the reporting period were as follows.

December 31

2018 2017

Fair value interest rate risk

Financial assets $ 38,703 $ 49,453

Financial liabilities 294,173 289,190

Cash flow interest rate risk

Financial assets 78,000 15,200

Financial liabilities 437,000 453,593

Sensitivity analysis

The sensitivity analysis below was determined based on the Group’s exposure to interest rates

for both derivative and non-derivative instruments at the end of the reporting period. For

floating rate liabilities, the analysis was prepared assuming the amount of each liability

outstanding at the end of the reporting period was outstanding for the whole year. A 1% basis

point increase or decrease was is when reporting interest rate risk internally to key management

personnel and represents management’s assessment of the reasonably possible change in interest

rates.

If interest rates had been 1% basis points higher/lower and all other variables were held constant,

the Group’s post-tax profit for the years ended December 31, 2018 and 2017 would

decrease/increase by $2,872 thousand and $3,639 thousand, respectively, which was mainly

attributable to the Group’s exposure to interest rates on its variable-rate bank borrowings.

201

The Group’s sensitivity to interest rates decreased during the current period mainly due to the

decrease in variable rate debt instruments.

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting

in a financial loss to the Group. The Group’s counterparties are mostly mall contractors with many

years of business relationships, and the Group continues supervision of accounts receivable

balances; thus, the risk of bad debts is not significant.

The Group transacts with a large number of unrelated customers and, thus, no concentration of

credit risk was observed.

Because the main counterparties of liquid funds are banks monitored by regulators in the People’s

Republic of China and the Republic of China, the credit risk is limited.

3) Liquidity risk

The Group manages liquidity risk by monitoring and maintaining a level of cash and cash

equivalents deemed adequate to finance the Group’s operations and mitigate the effects of

fluctuations in cash flows. In addition, management monitors the utilization of bank borrowings and

ensures compliance with loan covenants.

The Group relies on bank borrowings as a significant source of liquidity. As of December 31, 2018

and 2017, the Group had available unutilized short-term bank loan facilities set out in (b) below.

a) Liquidity and interest rate risk tables for non-derivative financial liabilities

The following tables detail the Group’s remaining contractual maturities for its non-derivative

financial liabilities with agreed repayment periods. The tables have been drawn up based on the

undiscounted cash flows of financial liabilities from the earliest date on which the Group can be

required to pay. The tables include both interest and principal cash flows. Specifically, bank

loans with a repayment on demand clause were included in the earliest time band regardless of

the probability of the banks choosing to exercise their rights. The maturity dates for other

non-derivative financial liabilities were based on the agreed repayment dates.

To the extent that interest flows are floating rate, the undiscounted amount was derived from the

average interest rate at the end of the reporting period.

December 31, 2018

On Demand

or Less than

1 Month 1-3 Months

3 Months to

1 Year 1-5 Years 5+ Years

Non-interest bearing liabilities $ 559,145 $ 639,206 $ 97,636 $ 11,456 $ 1,061

Variable interest rate liabilities 464 883 4,116 437,464 -

Fixable interest rate liabilities - 300,000 - - -

$ 559,609 $ 940,089 $ 101,752 $ 448,920 $ 1,061

202

December 31, 2017

On Demand

or Less than

1 Month 1-3 Months

3 Months to

1 Year 1-5 Years 5+ Years

Non-interest bearing liabilities $ 447,371 $ 546,020 $ 129,160 $ 7,768 $ 29

Variable interest rate liabilities 610 1,174 5,423 449,261 8,935

Fixable interest rate liabilities - - - 300,000 -

$ 447,981 $ 547,194 $ 134,583 $ 757,029 $ 8,964

b) Financing facilities

December 31

2018 2017

Unsecured bank overdraft facilities:

Amount used $ - $ -

Amount unused 450,000 600,000

$ 450,000 $ 600,000

Secured bank overdraft facilities:

Amount used $ 437,000 $ 627,000

Amount unused - 100,000

$ 437,000 $ 727,000

36. TRANSACTIONS WITH RELATED PARTIES

Balances and transactions between the Company and its subsidiaries, which are related parties of the

Company, have been eliminated on consolidation and are not disclosed in this note. Besides information

disclosed elsewhere in the other notes, details of transactions between the Group and other related parties

are disclosed below.

a. Related party name and category

Related Party Name Related Party Category

Singleton Pharma Logistics Co., Ltd. Associate

LEAD Investment Co. Other related party

Nihon Trim Co., Ltd. Other related party

Tsai, Chi-Hsuan Other related party

Tsai, Chi-En Other related party

b. Purchases of goods


Related Party Category 2018 2017

Associate $ 33,009 $ 5,273

Other related party 1,588 761

$ 34,597 $ 6,034

203

The prices of purchases from related parties are mutually agreed prices, and paid for using operating

funds.

c. Receivables from related parties

December 31

Line Items Related Party Category 2018 2017

Trade receivables Other related party $ - $ 1,024

The outstanding trade receivables from related parties are unsecured. For the year ended December 31,

2017, no impairment loss was recognized for trade receivables from related parties.

d. Payables to related parties

December 31

Line Items Related Party Category 2018 2017

Trade payables Associate $ 9,816 $ 1,016

Trade payables Other related party 291 595

$ 10,107 $ 1,611

The outstanding trade payables from related parties are unsecured.

e. Other transactions with related parties

Rent expense

For the Year Ended December 31, 2018

Lease Object Lease Period

Determinat

ion of Rent

Monthly

Rent

Rent

Expense

Other related party Staff dormitory June 21, 2015-

May 20, 2018

Negotiations $ 20 $ 100

May 21, 2018-

May 20, 2021

Negotiations 20 140

Logistics center July 1, 2018-

April 30, 2020

Negotiations 333 1,998

$ 2,238

For the Year Ended December 31, 2017

Lease Object Lease Period

Determinat

ion of Rent

Monthly

Rent

Rent

Expense

Other related party Staff dormitory June 21, 2015-

May 20, 2018

Negotiations $ 20 $ 240

204

Others


Line Item Related Party Category 2018 2017

Other income Other related party $ 572 $ 584

December 31

Line Item Related Party Category 2018 2017

Refundable deposits Other related party $ 699 $ -

f. Compensation of key management personnel


2018 2017

Short-term employee benefits $ 13,604 $ 14,639

Post-employment benefits 242 314

$ 13,846 $ 14,953

The remuneration of directors and key executives was determined by the remuneration committee based

on the performance of individuals and market trends.

37. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets were provided as collateral for bank borrowings, as deposits for rental agreements and

as security for purchase contracts with suppliers.

December 31

2018 2017

Property, plant and equipment

Land $ 848,972 $ 848,972

Buildings 23,855 25,009

Pledged deposits (classified as financial assets at amortized cost) 10,100 -

Pledged deposits (classified as debt investments with no active

market) - 20,730

Refundable deposits 68,309 65,591

$ 951,236 $ 960,302

38. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group as of

December 31, 2018 and 2017 were as follows:

Unrecognized commitments were as follows:

December 31

2018 2017

Acquisition of property, plant and equipment $ 559,963 $ 6,628

205

39. SEPARATELY DISCLOSED ITEMS

a. Information about significant transactions and investees

1) Financing provided to others. (None)

2) Endorsements/guarantees provided. (Table 1)

3) Marketable securities held (excluding investment in subsidiaries, associates and joint ventures).

(Table 2)

4) Marketable securities acquired or disposed of at costs or prices of at least NT$300 million or 20%

of the paid-in capital. (None)

5) Acquisition of individual real estate at cost of at least NT$300 million or 20% of the paid-in capital.

(Table 3)

6) Disposal of individual real estate at a price of at least NT$300 million or 20% of the paid-in capital.

(None)

7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the

paid-in capital. (Table 4)

8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in

capital. (None)

9) Trading in derivative instruments. (Notes 7 and 35)

10) Intercompany relationships and significant intercompany transactions. (Table 5)

11) Information on investees. (Table 6)

b. Information on investments in mainland China

1) Information on any investee company in mainland China, showing the name, principal business

activities, paid-in capital, method of investment, inward and outward remittance of funds,

ownership percentage, net income of investees, investment income or loss, carrying amount of the

investment at the end of the period, repatriations of investment income, and limit on the amount of

investment in the mainland China area. (Table 7)

2) Any of the following significant transactions with investee companies in mainland China, either

directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or

losses: (None)

a) The amount and percentage of purchases and the balance and percentage of the related payables

at the end of the period.

b) The amount and percentage of sales and the balance and percentage of the related receivables at

the end of the period.

c) The amount of property transactions and the amount of the resultant gains or losses.

d) The balance of negotiable instrument endorsements or guarantees or pledges of collateral at the

end of the period and the purposes.

206

e) The highest balance, the end of period balance, the interest rate range, and total current year

interest with respect to financing of funds.

f) Other transactions that have a material effect on the profit or loss for the year or on the financial

position, such as the rendering or receipt of services.

40. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and

assessment of segment performance focuses on the types of goods or services delivered or provided.

Specifically, the Group’s reportable segments under IFRS 8 “Operating Segments” were as follows:

Operating Segments in Taiwan and Operating Segments in China.

a. Segment revenues and results

The following was an analysis of the Group’s revenue and results by reportable segments:

China Taiwan Total


Revenues from external customers $ 172,393 $ 4,460,250 $ 4,632,643

Inter-segment revenue 22,429 212,946 235,375

Eliminations (22,429) (212,946) (235,375)

Consolidated revenue $ 172,393 $ 4,460,250 $ 4,632,643

Segment income (loss) $ (13,063) $ 175,029 $ 161,966

Central administration costs and directors’

salaries (9,764)

Share of loss of associates accounted for

using the equity method (10,352)

Interest income 1,727

Loss on disposal of property, plant and

equipment (267)

Net gain on foreign exchange 424

Loss on valuation of financial instruments (5,750)

Finance costs (8,623)

Miscellaneous income 18,848

Profit before tax $ 148,209


Revenues from external customers $ 130,221 $ 4,194,186 $ 4,324,407

Inter-segment revenue 13,071 162,871 175,942

Eliminations (13,071) (162,871) (175,942)

Consolidated revenue $ 130,221 $ 4,194,186 $ 4,324,407

(Continued)

207

China Taiwan Total

Segment income (loss) $ (6,572) $ 127,712 $ 121,140

Central administration costs and directors’

salaries (7,484)

Share of loss of associates accounted for

using the equity method (8,182)

Gain recognized on disposal of interests in

former associates 4,783

Interest income 1,041

Loss on disposal of property, plant and

equipment (1,147)

Net exchange loss (386)

Loss on valuation of financial instruments (3,210)

Finance costs (11,299)

Miscellaneous income 16,828

Profit before tax $ 112,084

(Concluded)

Segment profit represents the profit before tax earned by each segment without allocation of central

administration costs and directors’ salaries, share of loss of associates, gains recognized on disposal of

interests in former associates, interest income, gains or losses on disposal of property, plant and

equipment, exchange gains or losses, valuation gains or losses on financial investments, finance costs,

other non-operating profit or loss and income tax expense. This was the measure reported to the chief

operating decision maker for the purpose of resource allocation and assessment of segment

performance.

b. Segment total assets

December 31

2018 2017

Segment assets

China $ 306,490 $ 312,453

Taiwan 2,802,369 2,564,719

Investments in associates accounted for using the equity method 7,518 17,870

Current tax assets - 215

Deferred tax assets 14,022 8,279

Consolidated total assets $ 3,130,399 $ 2,903,536

For the purpose of monitoring segment performance and allocating resources between segments, all

assets were allocated to reportable segments other than interest in associates accounted for using the

equity method and current and deferred tax assets. Goodwill was allocated to reportable segments.

Assets used jointly by reportable segments were allocated on the basis of the revenues earned by

individual reportable segments.

208

TABLE 1


ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2018


No.

(Note 1) Endorser/Guarantor

Endorsee/Guarantee

Limits on

Endorsement/

Guarantee

Given on

Behalf of Each

Party (Note 2)

Maximum

Amount

Endorsed/

Guaranteed

During the

Period

Outstanding

Endorsement/

Guarantee at

the End of the

Period

Actual

Amount

Borrowed

Amount

Endorsed/

Guaranteed by

Collaterals

Ratio of

Accumulated

Endorsement/

Guarantee to

Net Equity in

Latest

Financial

Statements (%)

Aggregate

Endorsement/

Guarantee

Limit (Note 3)

Endorsement/

Guarantee

Given by

Parent on

Behalf of

Subsidiaries

Endorsement/

Guarantee

Given by

Subsidiaries on

Behalf of

Parent

Endorsement/

Guarantee

Given on

Behalf of

Companies in

Mainland

China

Note Name Relationship

0 MedFirst Healthcare

Services, Inc.

MedFirst Healthcare

Services, Inc. (SH)

A Company in

which the public

company

directly and

indirectly holds

more than 50

percent of the

voting shares

$ 268,787 $ 46,433 $ - $ - $ - - $ 358,382 Y N Y

Exactitute Biotech Co.,

Ltd.

A Company in

which the public

company

directly and

indirectly holds

more than 50

percent of the

voting shares

268,787 20,000 20,000 15,358 - 2.23 358,382 Y N N

Proterann Healthcare Inc. A Company in

which the public

company

directly and

indirectly holds

more than 50

percent of the

voting shares

268,787 80,000 80,000 26,850 - 8.93 358,382 Y N N

Note 1: Representation of numbers in No. column is as follows:

a. Number 0 represents issuer.

b. Investees are numbered starting from 1.

Note 2: Limits on Endorsement/Guarantee Given on Behalf of Each Party: Shall not exceed thirty percent (30%) of net worth MedFirst Healthcare Services, Inc. $895,955 (in thousands) × 30% = $268,787 (in thousands).

Note 3: Aggregate Endorsement/Guarantee Limit: Shall not exceed forty percent (40%) of net worth MedFirst Healthcare Services, Inc. $895,955 (in thousands) × 40% = $358,382 (in thousands).

209

TABLE 2


MARKETABLE SECURITIES HELD

DECEMBER 31, 2018


Holding Company Name Type and Name of Marketable Securities Relationship with the

Holding Company Financial Statement Account

December 31, 2018

Note Number of

Shares

Carrying

Amount

Percentage of

Ownership (%) Fair Value

MedFirst Healthcare Services, Inc. Domestic unlisted ordinary shares

Hao Jie Industrial Co., Ltd. None Financial assets at fair value

through other

comprehensive income -

non-current

1,500,000 $ 13,065 18.75 $ 13,065

Note 1: Marketable securities in the above table refer to shares, bonds, beneficiary certificates and securities within the scope of IFRS 9 “Financial Instruments”.

Note 2: Refer to Table 6 and Table 7 for information about subsidiaries, associates and joint ventures.

210

TABLE 3


ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST $300 MILLION OR 20% OF THE PAID-IN CAPITAL



Buyer Property Event Date Transaction

Amount Payment Status Counterparty Relationship

Information on Previous Title Transfer If Counterparty is a Related Party Pricing Reference Purpose of Acquisition Other Terms

Property Owner Relationship Transaction Date Amount

MedFirst Healthcare

Services, Inc.

Storage buildings

and equipment.

October 31, 2018 $ 504,880 Payment made

based on terms

of the contract

and progress of

construction

Fu Tai Construction

Co., Ltd

- Not applicable Not applicable Not applicable Not applicable Manufacturer is

shortlisted based

on price

negotiations

Building the logistics

center, in order to

meet the needs of

future operational

development.

-

211

TABLE 4


TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL



Buyer Related Party Relationship

Transaction Details Abnormal Transaction Notes/Accounts Receivable

(Payable) Note

Purchase/

Sale Amount % to Total Payment Term Unit Price Payment Terms Ending Balance % to Total

MedFirst Healthcare Services, Inc. Exactitude Biotech Co., Ltd. Parent company Purchase $ 105,757 3.44 By operating funds Note 1 By operating funds $ (29,119) (2.83)

Proterann Healthcare Inc. Parent company Purchase 91,107 2.97 By operating funds Note 1 By operating funds (17,348) (1.69)

Note 1: As the products the Company purchased from its subsidiaries are customized products, the products and prices have no basis for comparison.

Note 2: The above transaction has already been written off in the consolidated financial statements.

212

TABLE 5


INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT TRANSACTIONS



No.

(Note 1) Investee Company Counterparty

Relationship

(Note 2)

Transactions Details

Financial Statement

Accounts

Amount

(Note 4) Payment Terms

% to Total

Sales or Assets

(Note 3)

0 The Company Exactitude Biotech Co., Ltd. a Purchase $ 105,757 According to mutually agreed price 2.28

Exactitude Biotech Co., Ltd. a Trade payables 29,119 Paid using operating funds 0.93

Proterann Healthcare, Inc. a Purchase 91,107 According to mutually agreed price 1.97

Proterann Healthcare, Inc. a Trade payables 17,348 Paid using operating funds 0.55

Xing Zhou Pharmaceutical Co., Ltd. a Acquisitions of property,

plant and equipment

12,323 According to mutually agreed price 0.39

Note 1: The Company and its subsidiaries are numbered as follows:

a. Number 0 represents the parent company.

b. Number 1 onwards represents subsidiaries.

Note 2: a. Represents the transactions from parent company to subsidiary.

b. Represents the transactions from subsidiary to parent company.

c. Represents the transactions between subsidiaries.

Note 3: The rate of the intercompany transactions to total sales or assets is calculated by the balance at the end of the period if it belongs to assets or liabilities or the accumulated amount in the interim period if it belongs to sales.

Note 4: Transaction has been written off in the consolidated financial statements.

213

TABLE 6


INFORMATION ON INVESTEES


(In Thousands of New Taiwan Dollars, U.S. Dollars or shares, Unless Specified Otherwise)

Investor Company Investee Company Location Main Businesses and

Products

Original Investment Amount As of December 31, 2018 Net Income

(Loss) of the

Investee

Share of Profit

(Loss) Note December 31,

2018

December 31,

2017

Number of

Shares %

Carrying

Amount

MedFirst Healthcare

Services, Inc.

Above Advance Limited Samoa Investment $ 351,812

(US$ 10,898)

$ 351,812

(US$ 10,898)

10,898 100.00 $ 215,502

(US$ 7,016)

$ (5,726)

(US$ -190)

$ (5,726)

(US$ -190) Subsidiary

Taiwan Trim Co., Ltd. Taiwan Sale of water ionizer 10,000 10,000 1,000 50.00 2,676 (165) (82) Subsidiary

Exactitude Biotech Co., Ltd. Taiwan Sale of medical supplies 10,000 10,000 1,000 100.00 10,642 391 567 Subsidiary

Xing Zhou Pharmaceutical Co.,

Ltd.

Taiwan Management consultancy

services

86,100 86,100 8,610 90.63 92,500 2,372 686 Subsidiary

Proterann Healthcare, Inc. Taiwan Agent of foreign medical

supplies

9,260 9,260 926 92.60 29,625 6,638 (374) Subsidiary

Singleton Pharma Logistics Co.,

Ltd.

Taiwan Provider of prescription

drugs

27,756 27,756 2,776 40.00 7,518 (25,501) (10,352) Associate

Above Advance Limited Cayman Medfirst Group Limited Cayman Islands Investment US$ 10,898 US$ 10,898 10,898 100.00 215,709

(US$ 7,023)

(5,726)

(US$ -190)

(5,726)

(US$ -190) Second-tier

subsidiary

Note 1: For information of investments in mainland China, refer to Table 7.

Note 2: Besides Singleton Pharma Logistics Co., Ltd., the shareholding of the subsidiaries has been fully written off.

214

TABLE 7


INFORMATION ON INVESTMENTS IN MAINLAND CHINA


(In Thousands of New Taiwan Dollars, U.S. Dollars, or Ren Min Bi, Unless Specified Otherwise)

Investee Company Main Businesses

and Products Paid-in Capital

Method of

Investment

(Note 1)

Accumulated

Outward

Remittance for

Investment

from Taiwan as

of January 1,

2018

Remittance of Funds Accumulated

Outward

Remittance for

Investment

from Taiwan as

of

December 31,

2018

Net Income

(Loss) of the

Investee

%

Ownership

of Direct

or Indirect

Investment

Investment

Gain (Loss)

(Note 2)

Carrying

Amount as of

December 31,

2018

Accumulated

Repatriation of

Investment

Income as of

December 31,

2018

Note Outward Inward

MedFirst Healthcare

Services, Inc. (FJ)

Sale of medical

supplies

$ 24,667

(US$ 800)

a $ 24,667

(US$ 800)

$ - $ - $ 24,667

(US$ 800)

$ 367 100 $ 367 $ 22,172 $ -

MedFirst Healthcare

Services, Inc. (SH)

Sale of medical

supplies

299,549

(US$ 9,294)

b 299,549

(US$ 1,550)

(RMB 50,700)

-

- 299,549

(US$ 1,550)

(RMB 50,700)

(5,757) 100 (5,757) 215,886 -

MedFirst Healthcare

Services, Inc. (NJ)

Sale of medical

supplies

72,317

(US$ 2,440)

b 72,317

(US$ 2,115)

(RMB 1,000)

- - 72,317

(US$ 2,115)

(RMB 1,000)

(100) 100 (100)

12,004 -

MedFirst Materials &

Supplies, Inc. (SH)

Sale of medical

supplies

13,965

(RMB 2,700)

(Note 3) - - - - (2,916) 100 (2,916) 5,864 -

MedFirst Materials &

Supplies, Inc. (HZ)

Sale of medical

supplies

7,759

(RMB 1,500)

(Note 4) - - - - (2,603) 100 (2,603) 5,689

MedFirst Healthcare

Services, Inc. (BJ)

Sale of medical

supplies

9,946

(RMB 2,000)

(Note 5) - - - - 21 100 21 8,911

Nanjing Baitang Trading

Co., Ltd.

Sale of medical

supplies

2,407

(RMB 450)

(Note 6) - - - - (1,163) 55 (640) 481 -

ShanDong Medfirst

Healthcare Services Trade

Ltd.

Sale of medical

supplies

13,953

(RMB 3,000)

(Note 7) - - - - (972) 100 (972) 12,474 -

Accumulated Outward Remittance for Investment

in Mainland China as of December 31, 2018

Investment Amounts Authorized by the

Investment Commission, MOEA

Upper Limit on the Amount of Investment

Stipulated by the Investment Commission, MOEA

$ 396,533

(US$ 4,465)

(RMB 51,700)

$ 396,533

(US$ 4,465)

(RMB 51,700)

(Note 8)

(Continued)

215

Note 1: The three methods of investment are as follows:

a. Direct investment.

b. Reinvestment in China through a company located in a third region (Cayman Medfirst Group Limited).

c. Other methods.

Note 2: From the financial statements audited by the certified public accountant of the parent company.

Note 3: With own funds from MedFirst Healthcare Services, Inc. (SH), reinvested RMB2.7 million to the Company.

Note 4: With own funds from MedFirst Materials & Supplies, Inc. (SH), reinvested RMB1.5 million to the Company.

Note 5: With own funds from MedFirst Healthcare Services, Inc. (FJ), reinvested RMB2 million to the Company.

Note 6: With own funds from MedFirst Materials & Supplies, Inc. (HZ), reinvested RMB247,500 to the Company.

Note 7: With own funds from MedFirst Healthcare Services, Inc. (SH), reinvested RMB3 million to the Company.

Note 8: The Company has obtained documents from the Ministry of Economic Affairs which show the operational headquarters are still valid during the period; the investment has no limit according to the regulations of the Investment

Commission of the Ministry of Economic Affairs.

(Concluded)

216



20th April 2019

Documents

0s3.hicloud.net.tw/aei/官網更新_aaa/20200109... · COMPANY PROFILE II. COMPANY PROFIL 1. Established on: 7 th May 1992 2. Company History: Year Milestones 1990 Dec. MedFirst Medical