Spokespersons3.hicloud.net.tw/aei/官網更新_aaa/20190128更新/106... · 2019. 1. 28. · II COMPANY PROFILE 4 Ⅱ.COMPANY PROFILE I. Established on: 7th May 1992 II. Company History:

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]

Head Office

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

Tel/(03)397-0761

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

The most recent audit financial statements certified by a certified

public accountant

Accountant/Chen, Hui-Ming, Weng, Po-Jen

Accounting Firm /Deloitte Taiwan

Address/12F, No. 156, Sec. 3, Minsheng E. Rd., Songshan Dist., Taipei City 10596,

Taiwan

Website /www.deloitte.com.tw

Tel/(02) 2545-9988

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. Letter to Shareholders…………………………………………………………………………..……1

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

I. Established…………………………………………………………………………………………4

II. Company History………………………………………………………………………………….4

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

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

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

VicePresidents, Heads of Departments and Branches………………………………………….…8

III. Remuneration of Directors, Supervisors, General Manager and Deputy General Manager….…14

IV. Implementation of Corporate Governance………………………………………………………17

Ⅴ. Information on CPA professional fees…………………………………………………………51

Ⅵ. Information on the replacement of the CPA……………………………………………………..52

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 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…...52

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……………………………………………………………………………………….……52

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

relationship between any of the top ten shareholders………………………………...………….54

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………………………………………….…………………………….55

Ⅳ. Information on activities to raise capital………………………………….………………………..56

Ⅰ. Issuance of capital stock and stock shares………………………………………………...……..56

Ⅱ. Circumstances for handling corporate bonds………………………………………………...…..62

Ⅲ. Issuance of preference shares……………………………………………………………………63

Ⅳ. Issuance of Global Depositary Receipts (GDR)………………………………………………....63

Ⅴ. Employee subscription right vouchers…………………………………………………………...63

Ⅵ. Management of restricted stock awards……………………………………………………….…63

Ⅶ. Circumstances of handling new issue of shares due to merger or assignee of other corporate

stocks…………………………………………………………………………………………….63

Ⅷ. Circumstances of the execution of the funds application plan………………………..…………63

Ⅴ. Overview of Operations……………………………………………………………………..………64

Ⅰ. Business Content…………………………………………………………………………..……..64

Ⅱ. Market and Sales Overview……………………………………………………………………...78

Ⅲ. The number of employees employed for the two (2) previous fiscal years, and during the current

fiscal year up to the printing date of the Annual Report, their average years of service, average

age, and education level (including the percentage of employees at each level)………………..87

Ⅳ. Information of environment-oriented expenditures……………………………………………...87

Ⅴ. Labor/Management Relations…………………………………………………………….……...87

Ⅵ. Important Agreements………………………………………………………….………………...88

Ⅵ. Financial Status……………………………………………………………………..……………….89

I. Condensed Balance Sheet and Statement of Comprehensive Income Information for the five (5)

most recent fiscal years, and the names and audited opinions of the attesting CPA is

disclosed……………………………………………………………………………………….....89

II. Financial Summary of The Past Five Years……………………………………………………....93

III. Supervisors' or Audit Committee's Report on Financial Statements for the previous fiscal year..95

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………………………………………………………………………………………95

V. Recent Financial Statements and Reports of Independent Accountants of the parent company...95

VI. If the Company or its affiliated companies have experienced financial difficulties in the previous

fiscal year or during the current fiscal year up to the printing date of the Annual Report, the

Annual Report shall explain how any difficulties will affect the company's financial situation...95

Ⅶ. A review and analysis of the company's financial condition and operational results, and a list of

risks……………..………..…………………………………………………………………………..96

I. Analysis of Financial Status………………………………………………………….…………..96

Ⅱ. Financial Performance……………………………………………………………………………98

Ⅲ. Cash Flow……………………………………………………………………….………………100

Ⅳ. Effect upon financial operations of any major capital expenditures during the previous fiscal

year……………………………………………………….……………………………………..100

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

Counter-Measures, Investment Plan for Next Year…………………………………………….101

Ⅵ. Risk management assessment during the previous fiscal year or during the current fiscal year up

to the printing date of the Annual Report………………………………………………………102

Ⅶ. Other important matters………………………………………………….……………………..106

Ⅷ. Special Events………………………………………………………………………………………107

Ⅰ. Relevant information on affiliate enterprises…………………………………………………...107

Ⅱ. The handling situation of private securities by the printing deadline of the latest Annual

Report…………………………………………………………………………………………...111

Ⅲ. The Company’s stock held or disposed by subsidiaries by the printing deadline of the latest

Annual Report…………………………………………………………………………………..111

Ⅳ. Necessary additional information…………………………………………………………..…..111

Ⅴ. By the printing deadline 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……………...………………………………………112

I

LETTER TO

SHAREHOLDERS

1

Letter to Shareholders

Last year (2017), the global economy improved, the recovery pace was steadier, and the

economies of countries around the world grew moderately. Looking back at Taiwan in particular,

the domestic economy saw cyclical recovery during the second half of 2017. According to the

Directorate General of Budget, Accounting, and Statistics of the Executive Yuan, the 2017 annual

GDP growth rate was 2.86%. The economic growth rate (GDP) of 2018 is expected to fall between

2% and 2.5%. Thanks to the tax reform and salary policy, consumer expenses will grow positively.

As of the end of 2017, MedFirst had a total of 243 stores across the Taiwan Strait, with an

annual consolidated revenue of NT$ 4.3 billion, a record high. The net profit after tax was NT$ 88

million, and the gross profit rate remained stable at 30% ~ 31%. Looking toward 2018, we shall

work with the Ministry of Health and Welfare’s promotion of the Ten-Year Plan 2.0 and integrate

such services as home care and home medical treatment with the hope of building a

multi-dimensional and continuous long-term care service system oriented toward service users.

The core business operations of the Company's stores this year shall not only continue to

consolidate its leading position as a hospital-type store but shall also accelerate the expansion of

community-type stores and strengthen the proper adjustment of the merchandise and customer

sources of community-type stores. In addition to the physical stores, the Company will continue to

improve its e-commerce sales business, which achieved 53% growth rate in 2017. On an ongoing

basis, it shall simultaneously continue to improve business volume, management, and

organizational optimization. Throughout the year, we will continue to seek opportunities for both

investment and cooperation with partners in Taiwan and in mainland China in the same fields, as

well as in different ones. Furthermore, we will integrate more resources to enhance the Company’s

service value, provide more comprehensive medical care services and medical supplies for the

public, create greater benefits for stockholders, and provide the employees with an even better

working environment.

I. Operations Results in 2017

1. Outcome of implementing the business plan:

Unit: NT$ thousand

Item\Year 2017 2016 Change Difference

(%)

Operations Revenue 4,324,407 4,109,619 214,788 5.23%

Gross Profit 1,306,766 1,250,944 55,822 4.46%

Net Operating Income 113,656 106,894 6,762 6.33%

Non-Operations Revenue and

Expenses -1,572 18,056 -19,628 -108.71%

Income Before Tax 112,084 124,950 -12,866 -10.30%

I

LETTER TO

SHAREHOLDERS

2

Net Income 88,795 101,091 -12,296 -12.16%

Earnings per Share (EPS) (NT$) 3.29 4.04 -0.75 -18.56%

2. Operations performance and profitability analysis

Item\Year 2017 2016

Operations

Performance

Accounts receivable turnover (times) 40.44 54.43

Average collection days 9 7

Inventory turnover (times) 4.51 4.66

Average payables turnover (times). 3.37 3.84

Average inventory turnover days 108 95 Real estate property, plant and equipment

turnover (times) 4.42 7.38

Total assets turnover (times) 1.66 2.01

Profitability

Return on total assets (%) 3.77 4.51

Return on shareholders’ equity (%) 11.59 15.23

Pre-tax income-to-capital ratio (％) 39.69 49.50

Net income-to-sales ratio (%) 2.05 2.46

Earnings per Share(NT$) 3.29 4.04

3. Financial Receipt and Expenditures Status

In 2017, our company recorded a net cash inflow of NT$190,254,000 from operations

activities, a net cash outflow of NT$568,133,000 from investment activities, and a

fundraising net cash outflow of NT$438,237,000, for a total cash outflow of

NT$60,358,000 as of the end of the year. Our main investment spending for the year was

the capital spent on developing and opening new retail stores. The most important

investment was the capital expenditure for new retail stores, which are expected to

provide significant revenue growth in the future.

4. Budget Implementation Status

The Company did not disclose a financial forecast for 2017, so information on the

implementation of the budget did not need to be disclosed.

II. 2018 Business Plan Summary

1. The community system will be introduced to move toward a new retail

era.

2. Self-developing stores and mergers and acquisitions will go hand-in-hand

to accelerate access point expansion.

3. The smart logistics center will be established to embody the logistics

foundation for access development.

Last but not least, we would like to express our most sincere gratitude to all shareholders for their

feedback, and we truly hope that they will all continue to support and encourage the development

I

LETTER TO

SHAREHOLDERS

3

of our company.

Yours sincerely,

Chairman Chen, Li-Ju

General Manager Tsai, Te-Chung

MedFirst Healthcare Services, Inc.

II

COMPANY

PROFILE

4

Ⅱ. COMPANY PROFILE

I. Established on: 7th

May 1992

II. 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 the 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.

Company was awarded “the Franchise Headquarter Survey Excellence Award” from

the Department of Commerce under the Ministry of Economic Affairs

2006 Jul. Obtained the Good Service Practice (GSP) certification

Dec. Awarded the Top GSP Benchmark Enterprise in Taiwan

Dec. Pioneered the 7-day goods return service in the industry

Dec. Developed into the market in mainland China 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

II

COMPANY

PROFILE

5

Year Milestones

of Commerce under the Ministry of Economic Affairs

The 160th MedFirst retail store was opened

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

2012 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

stepping into 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 won 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 Taiwan Strait reached 243

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

Devices Commercial Association

Apr. Awarded the 2017 “EXCELLENT SERVICE AWARD” for its excellent

service personnel in the chain store industry

Ⅲ CORPORATE

GOVERNANCE

6

Ⅲ. CORPORATE GOVERNANCE

I. Organization

(1) Organizational Chart

(2) Major Corporate Functions

Department Duties and functions

The Auditing

Office

Responsible for inspecting and assessing 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 retail development strategies and manages them.

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 the shopping mall turnkey-related businesses, implements the

co-development and management of shopping malls.

Mainland China

Operations

Division

Develops, manages and executes business operations in mainland China.

Ⅲ CORPORATE

GOVERNANCE

7

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, network and

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, 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 exploration and measurement of engineering projects, and designs and

monitors construction quality.

Maintains and manages engineering equipment.

Ⅲ CORPORATE

GOVERNANCE

8

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 Female 2017/6/14 3 2011/6/29 1,832,274 6.49% 1,832,274 6.49% 1,657,884 5.87% - -

Master of Business

Administration, Yuan

Ze University

Master of

Entrepreneurship

Management,

National Cheng Chi

University

<Note 1>

Director

and

General

Manager

Tsai, Te-

ChungSpouse

Director

Corporate

shareholderTaiwan

Lucktech

Investment

Limited

- 2017/6/14 3 2011/6/29 9,252,238 32.76% 9,252,238 32.76% - - - - - - - - -

Director

Corporate

representativeTaiwan Tsai, Te-Chung Male 2017/6/14 3 2011/6/29 1,657,884 5.87% 1,657,884 5.87% 1,832,274 6.49% - -

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 2017/6/14 3 2014/6/25 56,228 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 Male 2017/6/14 3 2014/6/25 - - - - - - - -

Ph.D. of Public

Management, Ohio

State University

<Note 1> - - -

Independent

DirectorTaiwan

Tseng, Sheng-

ChengMale 2017/6/14 3 2012/7/11 - - - - - - - -

Department of

Industrial Design,

Ming Chi Institute of

Technology

<Note 1> - - -

Independent

DirectorTaiwan Yeh, Ching-En Male 2017/6/14 3 2012/7/11 - - - - - - - -

Accounting

Department, National

Taipei College of

Business

<Note 1> - - -

Independent

DirectorTaiwan Yang, Shu-Ching Female 2017/6/14 3 2012/7/11 - - - - - - - -

Master, Accounting

Department, National

Taiwan University

Master, Law

Department,

Soochow University

<Note 1> - - -

Shares held in

another’s name

Current

position in

this company

and in

other company

Major

Educational/Experien

ce

Background

<Note 1>

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

April 16th 2017; Shares

Present

shareholdingTitle

Nationality or

Country of

Origin

Term

(Years)

Date of

the initial

election

Shareholding

when electedName Sex

Elected

Date

Present

shareholding of

spouse & minor

children

With spouse or 2nd degree

relative who are a

superior, director or supervisor of

the company

Name Major Experience

Current position in

this company and in

other company

Chen, Li-Ju

Deputy head nurse, internal

medicine, Linkou Chang Gung

Memorial Hospital

Chairman of MedFirst Healthcare Services, Inc.

Chairman of Exactitude Biotech Co., Ltd. (corporate representative)

Chairman of Taiwan Trim Co., Ltd. (corporate representative)

Supervisor of Nanjing MedFirst Healthcare Services, Inc. (corporate

representative)

Supervisor of Shanghai MedFirst Healthcare Services, Inc.

(corporate representative)

Supervisor of Fujian MedFirst Healthcare Services, Inc. (corporate

representative)

Supervisor of Shanghai An gu Medical Equipment Ltd. (corporate

representative)

Supervisor of Hangzhou An gu Medical Equipment Ltd. (corporate

representative)

Supervisor of Nanjing Beijing First Healthcare Services, Inc.


Ⅲ CORPORATE

GOVERNANCE

9

Tsai,

Te-Chung

Section head of Linkou Chang

Gung Memorial Hospital

General manager of MedFirst Healthcare Services, Inc.

Director of Taiwan Trim Co., Ltd. (corporate representative)

Director of Exactitude Biotech 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

Section head of Software

Development Center, MND

Director (corporate representative) and Deputy General Manager of


Director of Information

management and Marketing

Division of MedFirst Healthcare

Services, Inc.

Supervisor of Jingzan Bio-tech Co., Ltd. (corporate representative)

Assistant Vice President of the

Commodity Marketing Division

of MedFirst Healthcare Services,

Inc.

Director of Xingzhou Medicine Co., Ltd. (corporate representative)


Operation Management Division

of MedFirst Healthcare Services,

Inc.

Director of New Zuelling Co., Ltd. (corporate representative)


Information Management

Division of MedFirst Healthcare

Services, Inc.

Li, Hung-Hui

Associate dean of College of

Management, Yuan Ze

University

Supervisor of RICH HORIZON INTERNATIONAL TOUCH

MEDIA CORPORATION

Dean of Undergraduate School

of Management, Yuan Ze

University

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. Director (corporate representative) and Deputy General Manager of

Solartech Energy Corp.

Deputy manager of Engineering

Department Director of Sunshine PV Corp. (corporate representative)

Ⅲ CORPORATE

GOVERNANCE

10

Director of Ming Chi University

of Technology Director of APEX SOLAR CORPORATION (corporate

representative)

Director of SOLARTECH MATERIALS CORPORATION


Director of Jiangxi Solartech Energy Corp. (corporate

representative)

Director of TOP GREEN ENERGY TECHNOLOGIES INC.


Chairman of SINO AMERICAN MATERIAL CORPORATION


Yeh,

Ching-En

General director/general

manager of Practical Taxation

Publisher

Chairman of Taiwan Thinktank

Vice president of KPMG CPA Consultant of Pan Harvest

Director of Moores Rowland CPAs

Yang,

Shu-Ching

7th grade tax auditor, Taipei

National Taxation

Administration Accountant of Crowe Horwath (TW) CPAs

Auditor of Taxation Agency,

MOF Supervisor of Chinese Tax Research Association

Supervisor of Taipei Tax Agent Association

Supervisor of Chinese Tax Agent Association

Director of Aurlia Corporation

Chairperson of Taiwan CPA, National Taxation Association

Ⅲ CORPORATE

GOVERNANCE

11

2. Major institutional shareholders:

April 16th

2018

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. Independence for directors and supervisors with professional knowledge: April 16

th 2018

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-Chen

g - - -

Yeh,

Ching-En - - -

Yang,

Shu-Ching - -

Note: Please tick“” the corresponding boxes that apply to the directors or supervisors over the course of 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 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).

(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).

(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.

Ⅲ CORPORATE

GOVERNANCE

12

(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 as person as defined in Article 27 of the Company Law.

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

Departments and Branches

Stock

(shares)%

Stock

(shares)%

Stock

(shares)% Title Name Relation

General

ManagerTaiwan Tsai, Te-Chung Male 1996/5/1 1,657,884 5.87% 1,832,274 6.49% - -

Department of Industrial

Design, Ming Chi Institute

of Technology

<Note 1> No No No

Associate

General

Manager

Taiwan Wei, Tzu-Wen Male 2011/2/18 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 1999/7/2 81,649 0.29% - - - -

Department of

Information Management,

Yuan Ze University

<Note 1> No No No

Assistant

General

Manager

TaiwanChen, Meng-

HungMale 2010/9/27 83,342 0.30% - - - -

Department of

Accounting, Tamkang

University

<Note 1> No No No

Assistant

General

Manager

TaiwanCheng, Chih-

YuanMale 2017/1/3 - - - - - -

MBA, National Taipei

University<Note 1> No No No

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

With spouse or 2nd degree

relative who are a

superior, director or supervisor

of the company

April 16th 2017; Shares

Elected DateTitle Nationality Name Sex

ShareholdingPresent shareholding of

spouse & minor children

Shares held in

another’s nameMajor

Educational/Experience

Background

<Note 1>

Current position in

this company and in

other company

Ⅲ CORPORATE

GOVERNANCE

13

Name Major Experience Current position in this company and in other company

General Manager of MedFirst Healthcare Services, Inc.

Director of Taiwan Trim Co., Ltd. (corporate representative)

Director of Exactitude Biotech Co., Ltd. (corporate

representative)

Director of Lead Investment Limited

Executive Director and general manager of Nanjing MedFirst


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


Executive Director and general manager of Hangzhou Angu


Executive Director and general manager of Beijing MedFirst


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 MedFirst Healthcare

Services, Inc.

Director of Xingzhou Medicine Co., Ltd. (corporate

representative)

Assistant Vice President of the Operation

Management Division of MedFirst Healthcare

Services, Inc.

Director of Singleton Pharma Logistics Co., Ltd. (corporate

representative)

Assistant Vice President of the Information

Management Division of MedFirst Healthcare

Services, Inc.

Director of Exactitude Biotech Co., Ltd. (corporate

representative)

Assistant Vice President of MedFirst Healthcare Services, Inc.

Chairman of Haojie Industrial Co., Ltd. (corporate representative)

Supervisor of Taiwan Trim Co., Ltd.

Assistant Vice President of MedFirst Healthcare Services, Inc.

Supervisor of Xingzhou Medicine Co., Ltd.

Manger of Human Resource Dept., Xinyi

Real EstateAssistant Vice President of MedFirst Healthcare Services, Inc.

Specialist, Management Division, Yushan

SecuritiesDeputy General Manager of Baodean Co., Ltd.

Senior staff of Human Resource Division,

Yushan Bank

Cheng, Chih-Yuan Manager of KPMG CPA

Tsai, Te-Chung

Tsai, Te-ChungSection head of Linkou Chang Gung

Memorial Hospital

Wei, Tzu-Wen

Wang, Ting-Jui Program designer of TeamMax Technology

Ⅲ CORPORATE

GOVERNANCE

14

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

1. Remuneration of Directors (including Independent Directors)

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

Com

pen

sation P

aid to

Directo

rs from

an In

vested

Com

pan

y

Oth

er than

the C

om

pan

y’s S

ubsid

iary

Remuneratio

n

(A)

Resignatio

n

retirement

pay(B)

Director's

remuneratio

n

(C)

professiona

l fees

(D)

Salary,

bonus,

extraneous

charges, etc.

(E)

Resignat

ion

retireme

nt pay

(F)

Employee rewards

(G)

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

This

company

All

companies

in the

financial

reports

This co

mpan

y

All co

mpan

ies in th

e finan

cial

reports

Cash

bonus

amount

Sto

ck b

onus

amount

Cash

bonus

amount

Sto

ck b

onus

amount

Chairman Chen, Li-Ju

- - - - 2,656 2,656 350 350 33.13 33.13 7,851 7,851 79 79 1,241 - 1,241 - 13.42 13.42 -

Director

Corporate

shareholder

Lucktech

Investment

Limited

Director

Corporate

shareholder

Tsai,

Te-Chung

Director

Corporate

shareholder

Wei,

Tzu-Wen

Director Li,

Hung-Hui

Independen

t Director

Tseng,

Sheng-Chen

g

Independen

t Director

Yeh,

Ching-En

Independen

t Director

Yang,

Shu-Ching

*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 2017 have been duly passed by the Company’s Board of Directors on

March 23th 2018.

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)

The company All 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$5,000,000(excluding) - -

Chen, Li-Ju、Tsai,

Te-Chung, Wei,

Tzu-Wen

Chen, Li-Ju、Tsai,

Te-Chung, Wei,

Tzu-Wen

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





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

Total 7 7 7 7

Ⅲ CORPORATE

GOVERNANCE

15

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

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

ensatio

n P

aid to

Directo

rs from

an In

vested

Co

mp

any O

ther

than

the C

om

pan

y’s S

ub

sidiary

(No

te 9)

Th

is com

pan

y

All co

mp

anies in

the fin

ancial

repo

rts(No

te 5)

Th

is com

pan

y

All co

mp

anies in

the fin

ancial

repo

rts(No

te 5)

Th

is com

pan

y

All co

mp

anies in

the fin

ancial

repo

rts(No

te 5)

This

company

All companies in

the financial

reports(Note 5)

Th

is com

pan

y

All co

mp

anies in

the fin

ancial

repo

rts(No

te 5)

Cash

bon

us am

ou

nt

Sto

ck b

on

us am

ou

nt

Cash

bon

us am

ou

nt

Sto

ck b

on

us am

ou

nt

General

Manager Tsai, Te-Chung

3,159 3,159 79 79 837 837 1,241 0 1,241 0 5,316 5,316 0 Deputy

General

Manager

Wei, Tzu-Wen

Note 1:The distribution of profits and allocation of remuneration to the employees and directors in 2017 have been duly passed by

the Company’s Board of Directors on March 23th 2018.

Remuneration Interval Table

Interval of remuneration paid to each Manager of the company

Names of General Manager and Vice President

This company(Note 6) All companies in the

financial reports(Note 7)

Under NT$2,000,000

NT$2,000,000(included)~NT$5,000,000(excluding) Tsai, Te-Chung,

Wei, Tzu-Wen

Tsai, Te-Chung,

Wei, Tzu-Wen






NT$100,000,000 or above - -

Total 2 2

Ⅲ CORPORATE

GOVERNANCE

16

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

Man

agerial O

fficer

Title Name Bonus in Stock Bonus in

Cash Total

Ratio of Total Amount

to Net Income (%)

General

Manager Tsai, Te-Chung

- 1,443 1,443 1.59%

Deputy General

Manager Wei, Tzu-Wen

Assistant Vice

President Wang, Ting-Jui

Assistant Vice

President

Chen,

Meng-Hung

Assistant Vice

President

Lai, Yen-Jui

(Note)

Assistant Vice

President

Cheng, Chih

Yuan

Note: Assistant Vice President Lai, Yen-Jui resigned the office on 2017/11/17 and did not receive

employee remuneration.

5. 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

2017 2016

This company All companies in the financial

reports This company

All companies in the financial

reports

Total remuneration

Proportion in profit after tax

Total remuneration


Total remuneration


Total remuneration


Directors 3,006 3.31% 3,006 3.39% 3,274 3.21% 3,274 3.24%

General

Manager and

Deputy General

Manager

5,316 5.86% 5,316 5.99% 6,377 6.25% 6,377 6.31%

Total 8,322 9.17% 8,322 9.37% 9,651 9.46% 9,651 9.55%

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

connection with operational performance and future risks:

(1) According to Article 33 of the Articles of Incorporation, the company shall appropriate

Ⅲ CORPORATE

GOVERNANCE

17

1%-15% as compensation to employees to be distributed by stock or cash where there is

annual profit. 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 law, where exposure to future risks should be minimized. (4) The Company established the Remuneration Committee on the 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.

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 eight

occasions during 2017(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 8 0 100.00% -

Director

Lucktech Investment

Limited

Representative:

Tsai, Te-Chung

8 0 100.00%

-

Director Lucktech Investment

Limited

Representative:

Wei, Tzu-Wen

8 0 100.00%

-

Director Li, Hung-Hui 8 0 100.00%

-

Independent

Director Tseng, Sheng-Cheng 8 0 100.00% (Note)

Independent

Director Yeh, Ching-En 8 0 100.00%

(Note)

Independent

Director Yang, Shu-Ching 8 0 100.00%

(Note)

Note: In total, eight board meetings were held in 2017. Three Independent Directors personally

attended the board meetings.

Other notable items:

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

Ⅲ CORPORATE

GOVERNANCE

18

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

of the such opinions should be clarified:

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 or reserved by an

Independent Director with a record or written statement.

Ⅲ CORPORATE

GOVERNANCE

19

Ⅲ CORPORATE

GOVERNANCE

20

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. 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 perfect 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 the board members effectively assume their responsibilities, a consensus shall

be reached through the convening of the Board of Directors. In 2017, eight board meetings

were held, and the important resolutions were disclosed on the investor area of the

Company’s website to improve the disclosure of Board information.

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

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

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

Ⅲ CORPORATE

GOVERNANCE

21

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

1. The state of operations of the audit committee:

A total of 6 (A) Audit Committee meetings took place in 2017. The attendance of the

independent directors is as follows:

Title Name Attendance in

Person (B) By Proxy

Attendance Rate (%)

(B/A) Remark

Independent Director Tseng, Sheng-Cheng 6 0 100.00% -

Independent Director Yeh, Ching-En 6 0 100.00% -

Independent Director Yang, Shu-Ching 6 0 100.00% -


1. If any of the following situations occurs during the operation 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 clarified:

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.

Ⅲ CORPORATE

GOVERNANCE

22

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

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

stated: if the directors involved in the 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.

Ⅲ CORPORATE

GOVERNANCE

23

3.2 The Company’s Visa Accountant attended three Audit Committee meetings in 2017 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) SE/OTC listed companies’ operations, the corrective action plans or countermeasures of the

previous year and as of the annual report printing date

Descriptions

Implementation Status(Note) Difference and

Causes of

Governance

Practice Rules on

Listed Companies Yes No Summary(Note)

Ⅰ. 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

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.

4. Has the Company established

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

Nil.

Ⅲ CORPORATE

GOVERNANCE

24

Descriptions


Causes of

Governance

Practice Rules on


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.

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?

1. 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

discussed and approved during the

Shareholders’ Meeting of the 29th

June 2015.

2. The execution status of the provision

to diversify the Board of Directors of

the 9th

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

Nil.

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

Nil.

Ⅲ CORPORATE

GOVERNANCE

25

Descriptions


Causes of

Governance

Practice Rules on


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.

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 2017. The evaluation results were

reported to the Board of Directors on the

23th

March 2018.

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

Nil.

Ⅲ CORPORATE

GOVERNANCE

26

Descriptions


Causes of

Governance

Practice Rules on


himself/herself or spouse and the

client.

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 10, 2017.

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)?

Assistant Vice President Chen,

Meng-Hung 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

2017, 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 2017, 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 2017, refer to the

“Operation Status of the

Remuneration Committee” in this

annual report.

Nil.

Ⅲ CORPORATE

GOVERNANCE

27

Descriptions


Causes of

Governance

Practice Rules on


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

the Corporate Conference and will post

it on the investors’ zone of the official

website.

Nil.

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

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

Ⅲ CORPORATE

GOVERNANCE

28

Descriptions


Causes of

Governance

Practice Rules on


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)?

(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,

doubts and disputes.

(4) Supplier relations: The Company follows its internal

control system and code of ethical

conduct, emphasizes the

Nil.

Ⅲ CORPORATE

GOVERNANCE

29

Descriptions


Causes of

Governance

Practice Rules on


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

supervisors:

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 2017.

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

6

Tsai,

Te-Chung

1. Eastern

Leader

Lecture -

How to

Realize

Values

2. Important

agreements

before M&A

and keys to

success after

M&A, M&A

practice, and

case analysis

3.

13.5

Ⅲ CORPORATE

GOVERNANCE

30

Descriptions


Causes of

Governance

Practice Rules on


Interpersonal

relationships

in the cyber

world

4. Economic

mission and

social

responsibility

of

entrepreneurs

Wei,

Tzu-Wen

1. Important

agreements

before M&A

and keys to

success after

M&A, M&A

practice, and

case analysis

6

Li, Hung-Hui 1.

International

trends of

long-term

incentives

and bonus

design for

corporate

directors and

senior

managers

2. Corporate

Governance

Forum -

Family

Business

Succession

6

Tseng,

Sheng-Cheng

1. Important

agreements

before M&A

and keys to

success after

M&A, M&A

practice, and

case analysis

6

Yeh,

Ching-En

1. Important

agreements

before M&A

6

Ⅲ CORPORATE

GOVERNANCE

31

Descriptions


Causes of

Governance

Practice Rules on


and keys to

success after

M&A, M&A

practice, and

case analysis

Yang,

Shu-Ching

1. Corporate

Governance

Forum -

Family

Business

Succession

2. Important

agreements

before M&A

and keys to

success after

M&A, M&A

practice, and

case analysis

9

(7) 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.

Ⅲ CORPORATE

GOVERNANCE

32

Descriptions


Causes of

Governance

Practice Rules on


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

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

1. The Articles of Incorporation were amended, the election of all directors has adopted the

nomination system, and the "Rules and Procedures of Shareholders' Meetings" were disclosed at

the public information observation station.

2. A case-by-case vote was adopted in the shareholders’ meeting, and the results of each proposal

are recorded in the shareholders' meeting minutes and application system.

(II) Priority improvement items and measures for 2018:

1. The annual report should disclose the period of each meeting of the Board of Directors and the

Audit Committee.

2. Internal auditors shall have obtained such professional certificates as those for international

internal auditor, international computer auditor, or certified public accountant.

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

1. Information on the Remuneration Committee Members

Title

(Note1)

Condition

Name

Hands-on experience for a minimum of five years? Detachment (Note2)

Number of

companies

where the

person also

acts as an

independen

t director

Remark

s

全

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

Independe

nt director

Tseng,

Sheng-Cheng - - 0 -

Independe

nt director Yeh, Ching-En - - 0 -

Independe

nt director

Yang,

Shu-Ching - 0 -

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

Ⅲ CORPORATE

GOVERNANCE

33

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.

(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 3 meetings (A) in the previous year (2017). 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 3 0 100% -

Committee

Member Yeh, Ching-En 3 0 100% -

Committee

Member Yang, Shu-Ching 3 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:

Ⅲ CORPORATE

GOVERNANCE

34

Meeting date Meeting stage Description

Opposite or

reserved opinions

from independent

directors

1. A proposal for recognition of shares by the remuneration committee of managers

issuing new shares in the company's annual cash increase in 2016.

2. The remuneration committee approved the remuneration proposals for directors

and managers in the financial statements in 2016.

◎Opinions from independent directors:None

◎Corporate dealing with opinions from independent directors:None

◎Resolution result : Except for absence of below personnel associated due to

conflict of interest.

Other participated directors agreed that director (Tsai, Te-Chung,Wei, Chen, Mong-

Hong, Chen, Li-Ju) should avoid discussion and resolution regarding distribution of

rewards for managing employees.

1. Selected the convener of Salary Compensation Committee





1.Passed proposal of 2018 salaries and rewards for directors of the company.

2.Passed proposal of 2018 salaries and rewards for chairman of the company.

3.Passed proposal of 2018 salaries and rewards for manager of the company.





Other participated directors agreed that director (Tsai, Te-Chung,Chen, Chih-Yuan)

should avoid discussion and resolution regarding distribution of rewards for managing

employees.

2017/3/23

2017/6/14 None

2017/12/27 None

NoneThe 8st Session in

2th term

The 1st Session in

3th term

The 2st Session in

3th term

2.Resolutions of the Remuneration Committee that are objected by members or subject to expert

opinion and are recorded or declared in writing, the date of the meeting, the session, the content of

the motion, all members’ opinions and the response to other members’ opinions must be specified:

in the event any directors is involved in a conflict of interest and cannot participate in the

resolution, the content stated in point 1 above is to be referred to.

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.

Ⅲ CORPORATE

GOVERNANCE

35

(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.

(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?

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

Nil.

Ⅲ CORPORATE

GOVERNANCE

36

Descriptions


and Causes of

Corporate

Social

Responsibility


balancing business development with

environmental concerns, 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.

3.Has the Company established

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

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%.

Nil.

Ⅲ CORPORATE

GOVERNANCE

37

Descriptions


and Causes of

Corporate

Social

Responsibility


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 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

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 10th meeting of

the 6th Board of Directors, Article 33 of these

Articles of Incorporation stipulates that “If

Nil.

Ⅲ CORPORATE

GOVERNANCE

38

Descriptions


and Causes of

Corporate

Social

Responsibility


system? 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$4,828,537 for employee remuneration,

in accordance with the performance

assessment system and corporate social

responsibility policy.

Ⅱ.Development of 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 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

Nil.

Ⅲ CORPORATE

GOVERNANCE

39

Descriptions


and Causes of

Corporate

Social

Responsibility


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. Total carbon emission statistical table of

the head office in the past two years:

Year

Total

carbon

emission

Total

store

quantity

Total

store

evaluation

quantity

Average

carbon

emission

(tons/

pyeong)

2016 5,907 203 5,900 1.00

2017 5,017 243 5,991 0.84

In 2017, the total carbon emissions of the

head office amounted to 5,017 metric tons,

and the average carbon emission calculated

per pyeong was 0.84 (metric tons/pyeong),

which was 16% lower than the 1.00 (metric

tons/pyeong) in 2016; thus achieving the

energy saving and carbon reduction target

of 5%. .

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

Nil.

Ⅲ CORPORATE

GOVERNANCE

40

Descriptions


and Causes of

Corporate

Social

Responsibility


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 legitimate rights and interests of

employees. Every quarter, a labor meeting is

held to maintain the two-way communication

with employees.


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 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

Nil.

Ⅲ CORPORATE

GOVERNANCE

41

Descriptions


and Causes of

Corporate

Social

Responsibility


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 provide

high-quality service while ensuring their own

self-development.

Nil.

Ⅲ CORPORATE

GOVERNANCE

42

Descriptions


and Causes of

Corporate

Social

Responsibility



any consumer protection

mechanisms and appeal

procedures regarding research

development, purchasing,

production, operations and

service provision?

The Company has established the

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 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.

Nil.

Ⅲ CORPORATE

GOVERNANCE

43

Descriptions


and Causes of

Corporate

Social

Responsibility


9. Do the contracts between the

Company and its major

suppliers include termination

clauses which enter into legal

force should the suppliers

breach the corporate social

responsibility 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


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.

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.A of 2016, the Company has organized field visits to and carries out 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. Seminars for Mothers and Health Seminars:

The company holds 1 to 2 lectures per month in our stores. In 106, we hold 18 lectures on

Ⅲ CORPORATE

GOVERNANCE

44

Descriptions


and Causes of

Corporate

Social

Responsibility


the following topics：

(1)Select appropriate accessories

(2)Free skin test

(3)Care for your foot health

(4)Lecture on body composition Analysis

(5)Diabetes diet lecture

2.Health checks:

The company and our suppliers irregularly scheduled health testing activities (such as simple

bone assessment) in our stores together. A total of 23 events were held.3. Care in a hundred

communities:

In 2015, the company held the activities of "MEDFIRST, care about your health". By the end

of 2017, the company held 89 fields, go deep into each county and city community, caring

for the patients in the district, and providing auxiliary teaching, testing and teaching services.

4. Public welfare, scholarships:

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

(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

The Company’s Ethical Corporate

Management Best Practice

Principles clearly state various

prohibited unethical behavior, the

Nil.

Ⅲ CORPORATE

GOVERNANCE

45

Descriptions


Causes of Ethical

Corporate


conduct, punishment for violation,

process of appeal, and the

commitment to implement these

policies?

procedure for whistle-blowing

and the disciplinary system,

which are implemented in the

operations of each department.


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 2017.

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.

2. Has the company organized a

full-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

Nil.

Ⅲ CORPORATE

GOVERNANCE

46

Descriptions


Causes of Ethical

Corporate


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

based on standard procedures.

4. Fraud management:

No cases of fraud, bribery, or

insider trading were found in

2017.

5. Information disclosure:

a. Disclose the business

culture and ethical

management on the website –

investors’ zone.

b. Disclose ”the principles of

ethical management” on

MOPS.


policies to prevent conflicts of

interest and provided appropriate

communication channels to

implement such policies?


Regulations Governing the

Management of Grievances and

Whistle-Blowing. The Company

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.

Nil.

mailto:[email protected]

Ⅲ CORPORATE

GOVERNANCE

47

Descriptions


Causes of Ethical

Corporate



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

2017.

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,

and uses these procedures to

handle matters accordingly. There

were no whistle-blowing cases

discovered in 2017.

Nil.


standard operating procedures for

confidential reporting and

investigating cases of accusation?




Whistleblowing, which clearly

states the Company’s standard

operating procedure for

Nil.

Ⅲ CORPORATE

GOVERNANCE

48

Descriptions


Causes of Ethical

Corporate


investigations and confidentiality

procedure.

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.

(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 3rd

evaluation result of corporate governance was in the top

5% ( 34 companies made the top 5%) from among 675 TPEx listed companies.

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

1. Internal control declaration: please refer to page113

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.

Ⅲ CORPORATE

GOVERNANCE

49

(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

2017/06/14

(1)Approve of proposal

concerning 2016 Business

Report and Financial

Statements and profit

distribution.

After passing the resolution, the cash dividend

of NT$ 3.2 per share was issued on August

18, 2017, a total of NT$90,368,000.

(2) Revise “The Operational

Procedures for the Acquisition

and Disposal of Assets”.

Implement the resolution once passed.

(3) Revise the “Articles of

Incorporation”.

The resolution has been passed to implement

the e-voting system, seats and proportion of

Independent Directors, and the change was

registered on July 18, 2017.

(4) Revise the “Rules and

Procedures of the

Shareholders’ Meetings”.

Implement the resolution once passed.

(5) Revise the “Rules for Director

Elections”. Implement the resolution once passed.

(6) Overall director reelection and

relief of the prohibition of

business conflict of new

directors and representatives.

Through vote by ballot of attended

shareholders, the newly elected director list is

provided below, and their term is from June

14, 2017 to June 13, 2020, and the prohibition

of business conflict of new directors and

representatives is relieved; this resolution

shall be implemented once passed.

Director: Chen, Li-Ju

Director: Tsai, Te-Chung (Representative of

Lucktech Investment)

Director: Wei, Tzu-Wen (Representative of

Lucktech Investment)

Director: Li, Hung-Hui

Independent Director: Tseng, Sheng-Cheng

Independent Director: Yeh, Ching-En

Independent Director: Yang, Shu-Ching

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

Date of

Meeting Major Resolution

2017/2/7

1. Passed the Company’s financial budget for 2017.

2. Passed matters related to stipulating the cash increment and share

subscription date in 2016 of the Company.

3. Passed the new director appointment of the Company’s HR management

division.

Ⅲ CORPORATE

GOVERNANCE

50

2017/3/23

1. Passed the proposal in 2016 of manager subscription for newly issued

shares by cash increment by the Company’s Remuneration Committee.

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

related to the 2016 annual financial statement by the Remuneration

Committee.

3. Passed the 2016 annual staff remuneration and director remuneration

distribution proposal of the Company.

4. Passed the Company’s 2016 annual financial report and operating report.

5. Passed the Company’s 2016 surplus distribution proposal.

6. Passed the Company’s 2016 internal control system statement.

7. Passed the amendment of the “Operational Procedures for Acquisition and

Disposal of Assets” of the Company and its subsidiaries.

8. Passed the amendment of the Company’s “Articles of Incorporation”.

9. Passed the amendment of the Company’s “Rules and Procedures of the


10. Passed the amendment of the Company’s “Rules and Procedures of the


11. Passed the overall election of directors and submitted for a vote.

12. Passed the resolution of the Independent Director nomination acceptance

period and confirmed the number to be elected.

13. Passed the relief of prohibition of business conflict of new directors and

representatives.

14. Passed matters related to directors convening the 2017 regular

shareholders’ meeting.

2017/4/28

1. Reviewed the qualification for Independent Director nominators and passed

the nomination proposal.

2. Bank credit line contract renewal proposal.

2017/6/14 1. To handle chairman selection and appointment according to the Company

Law and require new directors of this board to select the chairman.

2017/6/30

1. Xingzhou Medicine Co., Ltd. investment proposal.

2. Internal auditing supervisor change proposal.

3. Cash dividend distribution date proposal.

4. Conversion price adjustment proposal of unsecured conversion of the

Company’s corporate bond in 2016 for the first time.

2017/8/14

1. Accountant supervisor agent change proposal.

2. Far Eastern International Bank credit line contract renewal proposal.

3. Bank SinoPac credit line contract renewal proposal.

2017/11/10

1. Proposal of the Company to provide guarantee for Shanghai MedFirst

Healthcare Services, Inc.

2. Proposal of the Company to draft to apply for general credit limit from

Citibank (Taiwan) Commercial Bank (hereinafter referred to as Citibank).

3. Evaluation on legality and independence of visa accountant.

4. Amendment of the “Rules and Procedures of Board of Directors Meetings”.

5. Amendment of the “Rules of Independent Director Duty Scope”.

6. Amendment of the “Rules of the Audit Committee”.

2017/12/27 1. Director remuneration proposal of the Company for 2018.

Ⅲ CORPORATE

GOVERNANCE

51

2. Chairman remuneration proposal of the Company for 2018.

3. Manager remuneration proposal of the Company for 2018.

4. Internal audit plan for 2018.

5. Annual operational plan of the Company for 2018.

6. Chang Hwa Bank loan limit proposal.

7. Far Eastern International -Bank credit line contract renewal proposal.

(12) Major issues of record or written statements made by any director or supervisor

determining important resolutions passed by the Board of Directors and their

contents for the previous fiscal year and during the current fiscal year up to the date of

printing of the Annual Report: none

(13) Resignation or dismissal of key individuals of the Company, including the

Chairman, CEO, and Heads of departments of accounting, finance, internal audit and

research and development (R&D) for the previous fiscal year and during the

current fiscal year up to the date of printing of the Annual Report: none

Title Name Arrival Date Leaving Date

Reasons for

Resignation or

Dismissal

Internal

Auditing

Supervisor

Chang,

Ching-Ting 2012/11/12 2017/6/30

Personal Career

Planning

Ⅴ.Information on CPA professional fees

Class interval table of information of accountant’s public expenses

Accounting Firm Accountants Period Covered Audit Remark

Deloitte Taiwan Chen,

Hui-Ming

Weng,

Po-Jen 2017.01.01-2017.12.31

Unit: NT$ thousand

Item of public expense

Amount class interval Audit public

expense

Non-audit

public

expense

Total

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

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

4,000,000 3,550 2,080 5,630


6,000,000

- - -


8,000,000

- - -


10,000,000

- - -

6 Above NTD$ 10,000,000

(included)

- - -

Note: A service charge of NT$ 2.08 million was paid to entrust a Deloitte financial

consultant to handle the chain drug store merger and acquisition.

Ⅲ CORPORATE

GOVERNANCE

52

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

affiliated enterprise of the accounting firm 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:

Acco

un

ting

Firm

Acco

un

tants

Au

dit p

ub

lic exp

ense

Non-audit public expense P

eriod

Co

vered

Au

dit

Rem

ark

Sy

stem D

esign

Bu

siness reg

istration

Hu

man

Reso

urces

Oth

er (No

te 2)

To

tal

Delo

itte Taiw

an

Chen, Hui-Ming

3,550 - - - 2,080 5,630

2017.01.01

-

2017.12.31

-

Weng, Po-Jen

Note: A service charge of NT$ 2.08 million was paid to entrust a Deloitte financial consultant to

handle the chain drug store merger and acquisition.

(2) Changes to the accounting firm, 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

Ⅵ.Information on the replacement of the CPA: 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 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:

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

2017 Up to now April 20th, 2018

Shares holding

Increased

(decreased)

shares

Shares pledging

Increased

(decreased)

shares

Shares holding

Increased

(decreased)

shares

Shares pledging

Increased

(decreased)

shares

Chairman Chen, Li-Ju 93,000 - - -

Director

Corporate shareholder

Lead

Investment

Limited

- - - -

Ⅲ CORPORATE

GOVERNANCE

53

Director

Corporate

representative

Tsai,

Te-Chung - - - -

Director

Corporate

representative

Wei,

Tzu-Wen 31,228 - - -

Director Li, Hung-Hui - - - -

Independent Director Tseng,

Sheng-Cheng - - - -

Independent Director Yeh,

Ching-En - - - -

Independent Director Yang,

Shu-Ching - - - -

Assistant

Vice President

Chen,

Meng-Hung -28,987 -

- -

Assistant

Vice President

Wang,

Ting-Jui 22,291 -

- -

Assistant

Vice President

Lai,

Yen-Jui(Note) - -

- -

Assistant

Vice President

Cheng,

Chih-Yuan -

- -

Note: Assistant Vice President Lai, Yen-Jui resigned the office on 2017/11/17.

(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

Ⅲ CORPORATE

GOVERNANCE

54

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

relationship between any of the top ten shareholders

Ⅲ CORPORATE

GOVERNANCE

55

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 5,593,973 100% - - 5,593,973 100%

Fujian Medfirst Healthcare Services, Inc. (Note) 100% - - (Note) 100%

CAYMAN MEDFIRST GROUP LIMITED 5,593,973 100% - - 5,593,973 100%

Nanjing Medfirst Healthcare Services, Inc. (Note) 100% - - (Note) 100%

Shanghai Medfirst Healthcare Services, Inc. (Note) 100% - - (Note) 100%

Taiwan Trim Co., Ltd. 1,000,000 50% - - 1,000,000 50%

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

Shanghai An Gu Medical Equipment Ltd. (Note) 100% - - (Note) 100%

Hangzhou Angu Medical Equipment Ltd. (Note) 100% - - (Note) 100%

Beijing First Healthcare Services, Inc. (Note) 100% - - (Note) 100%

Hsing Chou Healthcare Co., Ltd. 8,610,000 86.1% 8,610,000 86.1%

New Zuelling Co., Ltd. 2,775,600 40% 2,775,600 40%

Hau Jie Industry Co., Ltd. 2,500,00 18.75% 2,500,000 18.75%

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.

Ⅳ Information

on capital

raising

activities

56

Ⅳ.Information on activities to raise capital

Ⅰ. Issuance of capital stock and stock shares

(1) Sources of share capital

1. capital

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-off

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

2000.12 10 5,500,000 55,000 5,500,000 55,000

Capital increase

of

NT$30,000,000

NO

2000.12.13

JIH-CHING (89)

CHUNG-TZU No.

89541037

2003.11 10 8,000,000 80,000 8,000,000 80,000

Capital increase

of

NT$25,000,000

NO

2003.11.13

CHING-SHOU-CH

UNG-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-CH

UNG-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-CH

UNG-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-CH

UNG-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-CH

UNG-TZU No.

09932593820

2011.01 10 50,000,000 500,000 19,500,000 195,000

Capital increase

of

NT$34,000,000

NO

2011.1.18

CHING-SHOU-CH

UNG-TZU No.

10031565100

Ⅳ Information

on capital

raising

activities

57

Year/

Month

Issuing

Price

(NTD)

Authorized Capital

Stock Issued Capital Stock Remark

Stock(shares) Amou

nt

Stock

(shares) Amount

Sources of

share capital

Written-off

with

property

other than

cash

Other

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-CH

UNG-TZU No.

10032344130

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-CH

UNG-TZU No.

10132427530

2014.05 10 50,000,000 500,000 25,240,000 252,400

Capital increase

of

NT$29,700,000

NO

2014.5.13

CHING-SHOU-CH

UNG-TZU No.

10333330810

2017.05 10 50,000,000 500,000 28,240,000 282,400

Capital increase

of

NT$30,000,000

NO

2017.05.02

FU-CHING-TENG-

TZU 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 16th

2017; Unit: Share Composition of

shareholders

Number

Government

Agencies

Financial

institutions

Other legal

person Individuals

Foreign

institutions

and

foreigners

Total

Shareholders - - 21 2,517 1 2,539

No. of shares held - - 10,289,781 17,940,219 10,000 28,240,000

Shareholding % - - 36.43% 63.54% 0.04% 100.00%

Ⅳ Information

on capital

raising

activities

58

(3) Distribution Profile of Share Ownership

1. Common stock

Share value: NT$10 as per the 16th

April 2018; Unit: share

Grouping of shares held No. of shareholders No. of shares held Shareholding %

1 ~ 999 316 47,757 0.17%

1,000 ~ 5,000 1,872 3,349,325 11.86%

5,001 ~ 10,000 191 1,388,404 4.92%

10,001 ~ 15,000 64 778,315 2.76%

15,001 ~ 20,000 18 325,525 1.15%

20,001 ~ 30,000 21 512,721 1.82%

30,001 ~ 50,000 13 495,799 1.76%

50,001 ~ 100,000 24 1,657,885 5.87%

100,001 ~ 200,000 12 1,845,505 6.54%

200,001 ~ 400,000 2 631,328 2.24%

400,001 ~ 600,000 - - 0.00%

600,001 ~ 800,000 - - 0.00%

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

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

Total 2,539 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 16th

2018; Unit: Share(s)

Shares

Name of key shareholders No. of shares held Shareholding %

Lead Investment Limited 9,252,238 32.76%

Chen, Li-Ju 1,832,274 6.49%

Tsai, Chi-En 1,788,258 6.33%

Hung Hsun Investments Limited 1,710,489 6.06%

Tsai, Chi-Hsuan 1,657,884 5.87%

Tsai, Te-Chung 966,293 3.42%

Liu, Chih-Kang 376,328 1.33%

Chen, Yu-Lien 255,000 0.90%

New County and Community

Construction and Investment 200,000 0.71%

Hua Yi Investment Limited 199,000 0.70%

Ⅳ Information

on capital

raising

activities

59

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

Unit: NT$

Year

Item 2016 2017

Current year to

March 31st 2018

Market

price per

shares

Maximum 93.60 81.5 67.8

Minimum 74.10 61 58

Average 83.94 71.20 61.65

Net worth

per shares

Before distribution 25.83 31.06 -

After distribution 22.25 28.46 -

Surplus of

each share

Weighted average stock shares 25,240 thousand

shares

28,240 thousand

shares -

Earnings per Share (EPS) 4.04 3.29 -

Dividend of

each share

Cash dividend 3.2 2.6(Note) -

Stock

dividend

- - - -

- - - -

Cumulative unpaid dividend - - -

Analysis of

investment

reward

Price-earnings ratio 20.78 21.64 -

Price-dividend ratio 26.23 27.38 -

Cash dividend yield rate % 3.81 3.65 -

Note: Distribution of earnings by the Company in 2017 has already been passed by the

Board of Directors on the 23rd

March 2018, and shall be raised in the 2018 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.

Ⅳ Information

on capital

raising

activities

60

2. Performance situation

The Company’s 2017 surplus distribution scheme was passed by the resolution of the

Board of Directors on the 23rd

March 2018 as follows:

Undistributed surplus balance at the beginning of the period 39,344,960

Actual gains and losses included in retained earnings (516,667)

Undistributed earnings after adjustment 38,828,293

Net Income 90,728,391

Drawing of 10% statutory surplus reserve (9,072,839)

Current surplus available for distribution (4,351,709)

Distributable surplus of this year 116,132,136

Distributable items

Shareholders’ dividend–Cash (NT$ 3.2/ share) 73,424,000

Ending undistributed earnings 42,708,136

(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 2017 was calculated as 4% and 2.20% 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 23rd

March 2018 is as follows:

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

Ⅳ Information

on capital

raising

activities

61

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

bonus distributed to employees totaled NT$4,828,000 and NT$2,656,000 to

directors and 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 2017 actual compensation paid to mployees

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 5,325 5,325 0 NO N/A

2. Remuneration

to directors 2,934 2,934 0 NO N/A

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

Ⅳ Information

on capital

raising

activities

62

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%

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$300,000,000

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

Ⅳ Information

on capital

raising

activities

63

(2) Convertible corporate bonds information

Type of corporate bond 1st domestic unsecured convertible corporate bond

Year

Item 2016 2017

Current year to 20th

April 2018

Market price of

convertible

corporate bond

Maximum - Note Note

Minimum - Note Note

Average - Note Note

Conversion price - Note NT$ 75.40

Conversion price as of the

issuance (management) date

and issuance

- Issue date: 23rd

February 2017

Conversion price

as of issuance:

NT$80.2

Issue date: 23rd

February 2017

Conversion price as of issuance:

NT$80.2

Obligation to execute

conversion

- New shares

issuance

New shares issuance

Note 1 : No trading of this convertible corporate bond from the 23rd

February to the 20th

April

2017

Note 2: The conversion price from February to June of 2017 was NT$ 78.90, and the

conversion price from July to December of 2017 was NT$ 75.40. (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 preference 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 new issue of shares due to merger or assignee of other corporate

stocks

: None

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

Ⅴ Overview of

Operations

64

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 mainly 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 also 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 under

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

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.

Ⅴ Overview of

Operations

65

2. Proportion of Main Business Areas

Unit: NT$ thousand

Year

Business Area

2016 2017

Amount Proportion Amount Proportion

Medical Care 2,880,097 70.08% 3,218,137 74.42%

Health Care 579,620 14.10% 351,040 8.12%

Biotechnology Health Care 596,890 14.52% 703,281 16.26%

Other 53,012 1.29% 51,949 1.20%

Total 4,109,619 100.00% 4,324,407 100.00%

3. Products and services of the company

The Company's business type focuses on the mass sales of medical care, health care,

and bio-tech health products. In order to realize the Company's corporate mission of “Your

Family Health Manager”, it will soon introduce more health-related products to provide a

friendly and convenient shopping environment and great services for the public.

The Company currently offers the following main goods and services:

Product category Product Series

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 Turnkey operations

The Company currently offers the following main goods and services:

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

(1) Medical Care

Ⅴ Overview of

Operations

66

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

demand and developments.

(B) Continue to develop the Company’s own products that fulfill customer demands

based on MedFirst’s many years of experience serving customers.

(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.

(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 viewing consumers’

health as the primary goal.

(3) Biotechnological Healthcare

(A) Expand the health foods 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 due to the ever-changing daily habits of customers.

(4) Shopping Mall Turnkey Operations

(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

(1) 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

the changes in trends of demographic factors in Taiwan:

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

Taiwan

Ⅴ Overview of

Operations

67

National Health Expenditure Growth

Source: Ministry of Health and Welfare

National Health Expenditure

Year

National Health

Expenditure (NHE) NHE per Capita GDP per Capita

NHE/G

DP (%)

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 32,282 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 4.0 652,429 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 2.3

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

Source: Ministry of Health and Welfare

According to Statistics of General Health and Welfare, the average NHE per

capita in 2016 was NT$ 46,219, a 4.4% increase from NT$ 44,261 in 2015. As for

the proportion of average NHE per capita to GDP per capita, both have been

maintained at 6% or more since 2016, 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

Ⅴ Overview of

Operations

68

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 other healthcare needs

is bound to increase. Therefore, expenditure on medical supplies is simultaneously

expected to increase.

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

Estimates and Projections”

(2) 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$1,578 hundred million in 2009 to NT$2,020 hundred million in

2017. As of 2016, the amount had increased accounting for 3% of annual growth.

However, the financial and European debt crises of 2009 and 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

The ratio of the elderly population (over 65) to the total population

Projection

Ageing Aged Super-aged

65 years old and over

80 years old

and over

85 years old

and over

Ⅴ Overview of

Operations

69

expected to drive the growth and development of the medical equipment industry.

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

(3) 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 huge population of the country, and the continuous increase per capita in mainland

China and efforts made by the Chinese government to promote many 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 the

implementation of 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 intensify efforts to improve the environment and facilities of medical

institutions in the country to help increase health awareness among consumers in

mainland China, strengthen consumers’ understanding of and demand for healthcare

in the home, and drive the continual increase in the demand for medical devices and

supplies. This market is estimated to experience steady growth over the coming five

years.

Ⅴ Overview of

Operations

70

Mainland China’s medical device market is expected to reach NT$ 22.49 billion in

2018. In recent years, more and more medical device manufacturers in mainland

China have switched to producing high-end medical devices, including CT scanners,

MRI scanners, digital X-ray equipment, and other such products.

(4) Global medical devices market

According to the research report by the Industrial Economics and Knowledge Center

(IEK) under the Industrial Technology Research Institute (ITRI), the global medical

devices market capitalization reached US$340 billion in 2012, and this figure was

estimated to rise to US$405.3 billion in 2017. This demonstrates an annual total

growth rate of 6% between the years 2012 and 2017, whereby the Asia Pacific market

has recorded an annual total growth rate of 8.4%, representing a much higher annual

growth rate than that of the medical devices market globally. The annual total growth

rates recorded in the European and American markets are 2.6% and 6.6% respectively.

These figures show that the market capitalization of the medical devices market of

Asia Pacific, which includes Taiwan and mainland China, is expected to continue to

grow, with the region eventually becoming the focal point of the global medical

devices industry.

According to the research report of the IEK of the ITRI, the global medical devices

market capitalization will reach US$405.3 billion. Due to the strong demand for

products from emerging nations in the Asia Pacific region such as mainland China,

India and ASEAN countries, the medical devices market of Asia Pacific shall witness

an annual total growth of 9.8% from 2012 to 2017, thus becoming the world’s fastest

developing region in this market.

Bandages

and dressing Threa

d

Syringe

and tubes Others Overal

l

Mar

ket

Cap

ital

izat

ion

(N

T$

hund

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

Ⅴ Overview of

Operations

71

(5) Biotechnology health food industry

The increase of health awareness among domestic consumers, the gradual increase in chronic

diseases of the population and the gradual tendency inclining toward the aging society has

increased people’s demand for health foods in the country, which has driven the rapid

development of various biotechnological health food markets including functional foods,

nutritional foods, and dietary supplements. Current biotechnological health food products in

Taiwan mainly consist of products that help control fat in the body, improve gastrointestinal

function, regulate immune system and protect the liver.

The term ‘functional food’ was created in 1984 and swept across Japan. It is basically

what is known as “healthy food” in Taiwan, “nutrition supplements” in the US, and

“health care food” in China. The definition of the Ministry of Welfare of Japan of

functional food is “food that has a relationship between the physiological functions of

food with specific health care effects proven by using various analytical methods”.

Currently, biotechnology and health food in Taiwan mainly focus on products that

promote blood lipid regulation, gastro-intestinal improvement, immune regulation,

and liver protection. According to the investigation and estimation of the Food

Institute’s ITIS program, Taiwan’s health food market in 2016 was worth NT$ 12.4

billion, increasing 3.3% from 2015.

2. Correlation between the 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, healthcare and

biotechnological health food materials and components, including plastic materials,

electronic components, metal manufacturing, biotechnological health food ingredients and

raw materials, and other various materials, whereas the downstream sector of the industry

involves manufacturers of medical care and healthcare products as well as

biotechnological health foods, medical tests and monitoring equipment (such as electronic

Ⅴ Overview of

Operations

72

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

above-mentioned medical supplies and provides consumers with professional consultation

services, thus serving as “the last stepping stone” in the supply chain of the medical supply

industry. The following diagram shows the upstream, midstream and downstream channels

of the industry in which the Company is involved:

Ⅴ Overview of

Operations

73

3. Various Product Trends and Competition

As the purchase of medical supplies includes high-involvement in determining

consumer behavior, as well as due to the lack of information acquired by consumers and

the existence of the gradual demand for health education, enhancing the professionalism of

store personnel has become an important factor when managing consumers’ needs for

medical provisions and healthcare products. At present, various major hospitals have been

actively engaging in the development and construction of software and hardware facilities

to administer remote care. Channel distributors can play a collaborative role in this respect.

Furthermore, taking the initiative to create developmental products is also one of the vital

strategies to enhance product competitiveness. Such strategies are as follows:

(A) Focus on market changes in healthcare management trends, strengthen the market for

home healthcare measurement, and increase the number of consumables that are sold

and are available for sale to fully optimize opportunities for repeat purchases.

(B) Position and import new products within new business opportunities, such as health

foods, home care nutritional food, home care measuring devices, and home care

consumables and daily necessities, to fully monitor and master emerging business

opportunities and next-generation trends.

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

Ⅴ Overview of

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74

4. Development of trends and the competition

(1) Government Policies

The “Six Key Emerging Industries”, including healthcare, biotechnological

tourism, green energy, quality agriculture, and culture and creative arts, as well as the

“Emerging Smart Industries” that include cloud computing, smart electric vehicles,

smart green buildings, and invention and patent industrialization are the key

industries for development under Executive Yuan’s industrial policies.

In order to respond to changing trends such as the aging population, low birth rate,

and health promotion and disease management, the government’s industrial

development policies in the healthcare sector encourage healthcare institutions to

collaborate with the technology industry, drive the use of medical equipment and

information technology, develop innovative healthcare services, invent innovative

business models and offer mutual support to the long-term care system established by

the Ministry of the Interior and the medical system established by the Ministry of

Health and Welfare. This “Information Technology-Enabled Service Pilot Project”

policy has already been incorporated into the industrial development program under

the first stage of the 2015 Economic Development Vision Three-Year Fast Track

Program. Furthermore, in view of the needs of the transformation and upgrading of

the value of the industry, the Ministry of Economic Affairs is promoting the

implementation of the “Medical Care Equipment Industrial Technology Promotion

and Assistance Project” so that the medical devices industry can serve as a platform

and the main industry that drives our country’s economic transformation. The

government’s plans to make Taiwan an international OEM/ODM center for Class II

medical devices and higher has helped increase the market value of our country’s

medical care devices industry to more than NT$100 billion, and helped Taiwan enter

the top 10 global medical devices manufacturing centers in 2015.

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 completed the signing of the “Cross-Strait

Cooperation Agreement on Medicine and Public Health Affairs” on the 21st

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) to carry out

testing, inspection and registration as well as develop manufacturing practices with

the establishment 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 shorten the process of

penetrating the market of the other enterprise. For Taiwan’s biotechnological industry,

this means combining the strengths of each enterprise and driving mutual cooperation

Ⅴ Overview of

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to reach new heights.

(2) 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 family. Furthermore, the low

birth rate trend in society has led to the situation where children’s health is 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 the previous generation. The healthcare

needs of these key consumer groups will increase the demand and business

opportunities for healthcare-related products.

(3) 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 the 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 major considerations including the brand, word-of-mouth

advice, convenience and aftersales service. The pre-purchase expectations of the

quality of product and service are higher in this new generation of consumers than

previously. Therefore, to satisfy the new generation of consumers, more effort and

consideration of detail must be invested in services than ever before.

(4) Effect of information symmetry on price elasticity

In a highly-competitive industry along with the advancement of information

technology, information on products has become more transparent than ever before.

The development of the Internet has allowed many users to share different types of

information in real time. Therefore, consumers now have a better understanding of

product attributes and whether the products are suitable for them when they buy

medical supplies. The channel consumers use to purchase the products they need is

now also included in 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 their understanding of consumer behavior and psychology

have become more vital than ever before.

(3) Research and development overview

The Company is a professional medical supply chain distributor, but has yet to establish

a R&D department, hence the Company has no R&D-related expenses. However, to serve the

needs of the majority of consumers, the Company’s Product Marketing Division is actively

involved in the development and implementation of new products, and plan the Company’s

Ⅴ Overview of

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own packaging strategies, marketing strategies and promotion of distribution channels.

(4) Long and short-term business development plan

The Company shall adopt the concept of “Total Solutions” as its business strategy, where it

will 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 build platform relating to health consultations, including health

testing, consultations on grant applications, doorstep repair services and other health

education related consultation services. As well as focusing on providing high-quality and

professional services, the Company also aims to create and satisfy needs the customer doesn’t

even know he/she has, rather than simply satisfying current ones.

1. Short-term business development plan

(1) Online-to-Offline (O2O) integration (virtual and physical integration):

An Economic Daily News article of the 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 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, servability and professionalism. However, with the Internet and mobile

devices becoming increasingly common, the liquidity and openness of information

lowers the important of the above-mentioned characteristics, thus the need to lean

toward the development of omni-channel retail services. In addition to e-commerce

platforms that are able to 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 servability and

professionalism of the sales of medical devices. Furthermore, should the wearability

of products become even more popular, the acquisition of information will become

even more real and convenient over time, where big data analytics can be used to

achieve precise marketing objectives.

Due to the advancement of technology, there is an increase in the amount of

channels through which customers purchase products. To ensure the safe use of

medical devices and improve the accessibility of medical devices, the Food and Drug

Administration has established a mail-order purchasing channel of low-risk Class I

medical devices as of the 1st November 2012, and further established 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 the 2nd

January 2014. The relevant government

department shall assess the potential establishment of further such channels in the

future such as purchasing channels for other Class II medical devices subject to

assessment of product features and consumer demand, with the goal of intensifying

market competition.

Ⅴ Overview of

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77

Online sales of medical devices are heading towards the integration and

connection between consumers in physical and virtual channels, thus solving

immediate home care needs, which will eventually become a future trend. Virtual

channels not only provide a greater variety of medical supplies from which to choose

for online consumers, but also provide remote consumers with 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 they are now heading

towards customized home care services, providing a more comprehensive, immediate

and convenient business model.

(2) 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. Yet, price is not the 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, creating a complete shopping environment,

including 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

(1) Health management cloud platform:

Due to the promotion of remote care by various major hospitals and the increase

in health awareness 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 and integration, as well as computations are carried out using

information to understand and predict future consumer demands, increase

repeat-custom and build long-term customer loyalty. The process of a health

management service is constructed using technology, which incorporates data

collection, computation, and estimation and predictions, to develop an innovative

service business model that actively drives promotion of the health industry.

Information technology has transformed the traditional medical care model by

incorporating the integration of information technology, the establishment of service

models and provision of remote care. One example of such a transformation is the

introduction of the health promotion industry. Taking diabetes patients as an example,

data measurement and integration, as well as computations, are carried out using

information on diabetes to understand and predict future consumer demands, increase

Ⅴ Overview of

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78

repeat-custom and build long-term customer loyalty.

(2) Customized home care:

With the implementation of remote care, the channels of medical supplies bear

an even greater responsibility. As well as providing related products for consumers to

purchase, these channels will also lease medical devices and provide consultation

services in the future. To respond to this change in trends not only requires 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, a doorstep service will become more prominent as the trend

of aging population continues. Doorstep maintenance, interior decoration, product

repair and daily food delivery shall test the ability of businesses to integrate logistics,

and cash and information flow. When daily living assistance becomes a daily

necessity, customized home care services shall also become mainstream services.

Standardized products will no longer satisfy the needs of such customers. The only

method of fulfilling these service needs is to provide professional training to the

Company’s sales team so they have the tools necessary to provide customized

products and services. In terms of products, the Company shall construct a

highly-flexible and diversified product system, which 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 can only maintain

its competitive advantage by offering customized products and services as well as

offering 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 93% 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.

Unit: NT$ thousands

Year 2016 2017

Region Amount Proportion Amount Proportion

Domestic 3,860,077 93.93% 4,194,186 96.99%

Export 249,542 6.07% 130,221 3.01%

Total 4,109,619 100% 4,324,407 100%

2. Market share

The Company serves the medical supplies chain distribution channel business. According to

data from the Taiwan Chain Store Almanac in 2018, the total number of domestic medical

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supplies chain stores at the end of 2017 was 4,996, whereas the Company had 243 retail stores in

2017, accounting for 4.86% of the total number of domestic medical supplies chain stores. In the

country. Moreover, data from the “Monthly Report on Commercial Revenues” by the Ministry of

Economic Affairs shows that the total sales in the medical drugs, medical supplies and cosmetics

businesses was NT$202 billion, with the Company’s sales revenue as reported in the 2017 Annual

Report totaled NT$4.185 billion, accounting for 3% of the market share.

3. Supply and Demand Status as well as Growth of the Market in Future

(1) Supply

As the company is forms part of the downstream channel of medical products in

the chain industry, the productivity in upstream medical equipment manufacturing is

used to determine the supply analysis. According to BMI statistics, the market scale

of global medical equipment totaled US$336.1 billion in 2016. It is expected to

reach US$382.5 billion in 2018. With the plan of the Industrial Development

Bureau, the turnover of our biotech industry was NT$315 billion in 2016, accounting

for 5.5% of the annual growth. From among this, the turnover of the medical

equipment industry was NT$141.5 billion, accounting for 44.9% of the total amount.

Overall, the output value of our medical equipment industry continuously grew.

Government policies: in view of the development of the aging population in Taiwan,

the National Development Council has listed long-term care services as one of the

key regulatory control and assessment areas of 2015. As relevant laws were passed on

the 15th

May 2015, many peripheral industries have also started to target long-term

care-related markets, including the provisions of care services, home care, and

community and home rehabilitation services.

On the other hand, online medical supplies sales are opening up in stages, which

causes competitive to also gradually emerge among distribution channels. At present,

online stores are only permitted to sell Class I medical devices, but competition in

this market in expected to become stronger in the future.

(2) Demand

(A) Domestic medical supplies market

According to the Taiwan 2014 to 2061 Population Estimates and Projections

by the Council for Economic Planning and Development, the population in Taiwan

aged 65 years and over shall increase from 3,268,000 people in 2017 to 7,152,000

people in 2061. Based on the structure of the older population, the proportion of

the population aged between 65 and 74 years old is decreasing, but the proportion

of the population aged between 75 and 85 years old is on the rise. These figures

show that not only our country’s population aged 65 years old and over is

experiencing a growing trend, but the fact that the country’s population aged 75

years old and over is growing shows the increase in people’s life expectancy. With

Ⅴ Overview of

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80

the increase in the elderly population and the rise in the national average life

expectancy, consumers place greater emphasis on the medical and healthcare

concepts of “Live Longer, Live Better and Live Healthier”. Consumer demand for

medical care, healthcare products and biotechnological healthcare products is

subsequently expected to rise, which will continue to provide a growing platform

from which the Company can continue to serve customers.

Our Country’s Medical Supplies Quarterly Output Value

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

105 3,108 1,782 969 358

110 3,974 2,513 1,038 423

120 5,731 3,217 1,957 557

130 6,815 3,173 2,532 1,110

140 7,391 3,299 2,539 1,553

150 7,152 2,829 2,660 1,663

Year Proportion of age distribution (%)

105 100.0 57.3 31.2 11.5

110 100.0 63.2 26.1 10.6

120 100.0 56.1 34.1 9.7

130 100.0 46.6 37.2 16.3

140 100.0 44.6 34.4 21.0

150 100.0 39.6 37.2 23.3

(B) Medical supplies market in mainland China

With the rise of mainland China’s economy and the problem of an aging

population, the demand for health care and medical supplies will increase rapidly.

Mainland China’s medical equipment market reached US$13.96 billion in 2012,

according to an estimation by the market adjustment company BMI Espicom.

Among the efforts of mainland China’s government to promote and develop the

medical industry, in addition to improving its medical infrastructure and increasing

its procurement of medical supplies, the enhanced healthcare knowledge of

consumers will also drive the consumer demand for related medical equipment

products. From 2015 to 2018, the mainland Chinese market is expected to grow at

the compound annual growth rate of 8.2%. The medical equipment market is

predicted to reach NT$ 22.49 billion in 2018.

(C) Biotechnological health food market

Based on past estimates from the 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,

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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, and 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

(1) Stable customer relations earn customers’ trust

The Company upholds the basic belief of becoming “the health manager for your

family”. The degree of professionalism among employees of the Company is

top-quality, where 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, build upon the professional reputation of the “MedFirst” brand, and

enable customers to instill a high level of trust in the Company.

(2) Product diversity satisfies 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 on offer, thus providing customers with a one-stop shopping

experience. The Company also pioneered the 7-day goods return policy in the

industry, and offers a diverse range of products and comprehensive services to

customers, giving them peace of mind.

(3) 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 customers are

well-protected and rewarded with lower-cost goods.

(4) Focus on providing medical supplies services and getting the brand to shopping malls

The Company also participates in shopping turnkey projects to provide a more

diverse and extensive services covering various aspects of our daily lives. The

Company plays the role of a family health manager to penetrate deeply into every

aspect of daily life with the aim of enhancing the quality of people’s lives.

(5) Strengthening the position of Taiwan on a global scale

The Company has used its experience in developing the market in Taiwan as a

foundation to integrate healthcare professionals into the market in mainland China to

drive the Company’s share of the market there.

Ⅴ Overview of

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5. Favorable and unfavorable factors and countermeasures in the long-term development

vision

(1) 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 action plan shall continuously strengthen established systems and

the technological base of each of the three areas in hopes 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 shall solidify

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. The government initiatives to

actively promote 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 effectively drive the development of this industry, greater

market opportunities, and encourage personnel in the industry to develop more

innovative products.

(B) Increase of national income and 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

moves 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, as well as other medical care and prevention

services are expected to continuously grow, thus driving the growth momentum of

the medical supplies market in the future.

(C) The Company is the leading enterprise in the medical supplies chain distribution

industry and shall continue to expand its retail stores and develop distribution

channels

The Company is the leading enterprise in the medical supplies chain

distribution industry in terms of number of retail stores it owns, and has an

excellent brand image and reputation. The Company owns many retail stores and

shopping malls, where stores are established at strategic locations inside and

around various major hospitals. The shopping malls are operated in such as way

Ⅴ Overview of

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where the Company is appointed as the contractor of the medical supplies sales

department of various major hospitals. The Company shall continue to expand its

retail stores and further develop its distribution channels. Furthermore, the

Company shall continue to expand its product portfolio and develop its services in

the market in Taiwan, as well as 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, develop its own diverse

branded services, and improve 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 first

makes contact with consumers to understand their needs and preferences, and uses

this information to develop its own products that can satisfy customer needs. By

selling products that are more suitable for consumers, the Company will be able to

increase customer satisfaction and gain repeat sales.

(E) Great loyalty and repeat-customers of the brand effectively contributes to the

increase of sales revenue

The Company’s store personnel employ methods such 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. At

present, the number of members who have joined the Company’s membership

scheme exceeds 1.3 million people. 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, in turn, help to

encourage customers to return to the stores. Sales revenue from purchases by

members currently contributes to half of the total monthly sales revenue of the

Company. This figure is continually 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 expansion for the Company.

(2) Unfavorable factors and countermeasures

(A) Increasingly vague industry boundaries and increasing market competition

Due to the trend of the aging population in developed countries, business

opportunities to serve the elderly population have a greater potential for growth in

the future. Furthermore, increasingly vague industry boundaries have led to the

situation where medical supplies are being sold in drug stores, cosmetic retail

stores and on online shopping platforms that sell a wide variety of other products,

therefore, the product and price competition shall become increasingly tough in the

Ⅴ Overview of

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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

will be able 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.

In addition, the Company has established strategic partnerships with agents in

different regions to understand the changing market trends and provide

differentiated services, price competition strategies, and applied brand marketing

abilities and all-in-one service solutions to maintain a long-term stable cooperation

and relationship.

(B) Wide variety of products, wide span of management 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 coming from

a variety of suppliers.

Countermeasures:

Before importing products to be sold on store shelves, the Company must

strengthen quality control of products, evaluate and rate suppliers, and, in other

words, 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 trust of the customers of 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 market of mainland China 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, with Shanghai,

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85

Nanjing, Xiamen, Hangzhou and Beijing, to serve as the market entry points of

the Company 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

meet the customer’s “satisfaction”, enhance customers’ recognition of the

Company’s brand, and further expand into the market in mainland China to help

enhance overall business performance.

(2) Important Applications and the Manufacturing Process of Major Products

1. Applications of Major Products

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.

Commodities sold exclusively by medical supply chain

stores to provide options for medical care, home health

care, preventive medicine, and daily life necessities for

customers.

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.

Major Product Category Suppliers Supply Status

Medical Care Abbott, Zuelli, Kun Yang regular

Healthcare Exactitude, DKSH regular

Biotechnology Health Care FTV, Zuelli, UIC regular

(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

amounts of purchases 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 of increases or decreases in the figures:

The purchase amount of the Company from major suppliers in the past two years has

increased along with revenue scale growth, but the difference has not yet reached 20%.

New

commodity

and market

demand

survey

Trial

category

& store

manager

trial

Collect the

trial

experience

and

questionnaire

Feedback

to the

supplier

for

adjustment

Sell on

the shelf

of the

store

Ⅴ Overview of

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86

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 client, and an explanation of the

reason of increases or decreases in 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 the situation where

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

and manufacturing, therefore, the analysis of changes in production volume does not apply..

(6) Sales unit & amount over two (2) years:

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Ⅲ. The number of employees employed for the two (2) previous fiscal years, and during the

current fiscal year up to the printing date 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-old; year; %

Year 2016 2017 Current year to the

31th

March2018

No. of staff

Internal Staff 178 169 169

Retail Salesperson 875 950 941

Total 1,053 1,119 1,110

Average age 27.49 27.68 27.98

Average Seniority 3 3.13 3.49

Educational

Background (%)

Ph.D. 0.00% 0.09% 0.00%

Master Degree 5.79% 5.00% 4.68%

Bachelor Degree 92.12% 91.51% 90.81%

Senior High School 1.99% 3.22% 4.32%

Below Senior High School 0.09% 0.18% 0.18%

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 up to the printing date of the Annual Report, the total

penalty/fine amount, as well as 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. As the well as paying a salary,

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 discount, totaling up to NT$1,927,000.

Moreover, the Company distributes quarterly bonuses and year-end bonus 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 job

requirements or business needs. Subsidies for professional development are distributed after

assessing such needs. Employees are required to prepare end-of-training reports in order for

the Company to understand the learning process and progress 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

Ⅴ Overview of

Operations

88

position, and shall be assigned a series of education and training courses, including

induction training for new hires, 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 they are

equipped with new knowledge and skills, thus ensuring that employees not only offer the

best-quality service to customers, but also expand upon 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 the 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, in accordance with which problems

between employer and employees shall be handled. In addition, 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.

Furthermore, 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 up to the printing date of the Annual Report, and

disclose 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 up to the printing date of the Annual Report.

Ⅵ. Important Agreements

Agreement Counterparty Contracted

Period

Major

Contents

Restrictions

Short-term Loan Bank SinoPac 2017.08~

2018.08

Short-term

Loan

None

Short-term Secured

Loan

Chang Hwa

Bank

2017.11~

2018.10

Short-term

Secured Loan

None

Short-term Loan Far Eastern

Int’l Bank

2017.12~

2018.12

Short-term

Loan

None

Short-term Loan E.SUN BANK 2018.01~

2019.01

Short-term

Loan

None

Long-term Loan Hua Nan Bank 2018.03~

2019.03

Long-term

Secured Loan

None

Medium-Term Loan Far Eastern

Int’l Bank

2017.06~

2019.06

Medium-Ter

m Loan

None

Long-term Secured

Loan

Chang Hwa

Bank

2013.10~

2028.10

Long-term

Secured Loan

None

Long-term Secured

Loan

Cathay United

Bank

2017.01~

2020.01

Long-term

Secured Loan

None

Ⅵ FINANCIAL

STATUS

89

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 audited opinions of the attesting CPA is disclosed

(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

2013 2014 2015 2016 2017

Current assets 832,113 1,166,539 1,226,312 1,294,321 1,409,872

Real Estate, Plant and Equipment 475,641 456,933 460,080 653,952 1,304,802

Intangible assets 3,120 8,518 17,913 14,680 38,202

Other assets 70,910 78,793 70,633 348,252 1,560,532

Total assets 1,381,784 1,710,783 1,774,938 2,311,205 2,903,536

Current liabilities

Before

distribution 723,536 802,177 827,439 1,396,910 1,181,007

After

distribution 811,876 882,945 928,399 1,487,278 (Note)

Non-current liabilities 273,246 276,447 275,811 258,490 845,511

Total liabilities

Before

distribution 996,782 1,078,624 1,103,250 1,655,400 2,026,518

After

distribution 1,085,122 1,159,392 1,204,210 1,745,768 (Note)

Equity attributable to shareholders

of the parent company 380,722 626,855 667,039 652,063 862,770

Capital stock 222,700 252,400 252,400 252,400 282,400

Capital surplus - 204,900 204,900 204,900 390,115

Earnings retained

Before

distribution 155,006 163,771 205,046 205,371 205,215

After

distribution 66,666 83,003 104,086 115,003 (Note)

Other equity interest 3,016 5,784 4,693 -10,608 -14,960

Treasury stock - - - - -

Non-controlling interest 4,280 5,304 4,649 3,742 14,248

Total equity

Before

distribution 385,002 632,159 671,688 655,805 877,018

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.

Ⅵ FINANCIAL

STATUS

90

2. Condensed Statement of Comprehensive Income -IFRS (Consolidated)

Unit: NT$ thousands

Year Financial Summary for The Past Five Years

Item 2013 2014 2015 2016 2017

Operating Revenue 3,366,492 3,606,527 3,880,229 4,109,619 4,324,407

Gross Profit 1,050,301 1,117,964 1,184,450 1,250,944 1,306,766

Operating income (loss) 117,868 104,746 138,136 106,894 113,656

Non - operating Revenue and Expenses 11,921 16,116 12,100 18,056 -1,572

Income Before Tax 129,789 120,862 150,236 124,950 112,084

Profit from Continuing Operations 129,789 120,862 150,236 124,950 112,084

Loss from Discontinued Operations - - - - -

Net income(loss) 103,308 96,927 121,193 101,091 88,795

Other Comprehensive Income (Income

After Tax) 2,147 1,470 -896 -16,014 -4,868

Total Comprehensive Income 105,455 98,397 120,297 85,077 83,927

Net Income Attributable to

Shareholders of the Parent Company 104,991 98,403 121,848 101,998 90,728

Net Income attributable to

Non-controlling Interest -1,683 -1,476 -655 -907 -1,933

Comprehensive Income attributable to

Shareholders of the Parent Company 107,138 99,873 120,952 85,984 85,860

Comprehensive Income attributable to

Non-controlling Interest -1,683 -1,476 -655 -907 -1,933

Earnings per Share (EPS) 4.71 4.04 4.83 4.04 3.29

Ⅵ FINANCIAL

STATUS

91

3. Condensed Balance Sheet – Republic of China General Accepted Accounting Principles

(R.O.C. GAAP) (Consolidated)

Unit: NT$ thousands

Year

Item

Financial Summary for The Past Five Years

2013 2014 2015 2016 2017

Current assets 765,242 1,069,886 1,143,108 1,189,988 1,209,054

Funds & Investment 61,660 85,709 72,572 343,408 412,669

Plant Assets 456,300 436,417 442,946 443,900 1,092,565

Intangible assets 3,084 8,492 17,899 14,678 8,233

Other assets 67,583 73,944 61,843 275,374 112,563

Total assets 1,353,869 1,674,448 1,738,368 2,267,348 2,835,084

Current liabilities

Before

distribution 702,112 774,021 799,087 1,360,094 1,130,993

After

distribution 790,452 854,789 900,047 1,450,462 (Note)

Long-term liabilities 190,000 186,346 172,949 158,333 741,251

Other liabilities 81,035 87,226 99,293 96,858 100,070

Total liabilities

Before

distribution 973,147 1,047,593 1,071,329 1,615,285 1,972,314

After

distribution 1,061,487 1,128,361 1,172,289 1,705,653 (Note)

Capital stock 222,700 222,700 252,400 252,400 282,400

Capital surplus - 204,900 204,900 204,900 390,115

Retaining earnings

Before

distribution 155,006 163,771 205,046 205,371 205,215

After


Unrealized Gain or Loss on

Financial Instruments - - - - -

Other equity interest 3,016 5,784 4,693 (10,608) (14,960)

Net Loss Unrecognized as

Pension Cost - - - - -

Total amount of

shareholders’ equity

Before

distribution 380,722 626,855 667,039 652,063 862,770

After


Source: Consolidated financial reports of each year reviewed and audited by the certified public accountants

(CPA)

Ⅵ FINANCIAL

STATUS

92

(4)Condensed Balance Sheet –IFRS(Individual) Unit: NT$ thousands

Year

Item


2013 2014 2015 2016 2017

Operating Revenue 3,292,438 3,516,317 3,760,414 3,975,722 4,184,969

Gross Profit 1,026,235 1,088,987 1,148,914 1,166,648 1,258,930

Operating Income (loss) 136,527 117,406 150,782 120,619 134,291

Non - operating Revenue and

Expenses (5,055) 3,858 (920) 4,250 (21,069)

Income Before Tax 131,472 121,264 149,862 124,869 113,222

Profit from Continuing Operations 131,472 121,264 149,862 124,869 113,222

Loss from Discontinued

Operations - - - - -

Net income(loss) 104,991 98,403 121,848 101,998 90,728

Other Comprehensive Income

(Income After Tax) 2,147 1,470 (896) (16,014) (4,686)

Total Comprehensive Income 107,138 99,873 120,952 85,984 85,860

Net Income Attributable to

Shareholders of the Parent

Company

- - - - -

Net Income attributable to

Non-controlling Interest - - - - -

Comprehensive Income

attributable to Shareholders of the

Parent Company

- - - - -

Comprehensive Income

attributable to Non-controlling

Interest

- - - - -

Earnings per Share (EPS) 4.71 4.04 4.83 4.04 3.29

(2) Name of the CPAs and their audit opinion over the five (5) most recent fiscal years

Year Accounting Firm Accountant Audit Opinion

2013 Deloitte Taiwan Hsieh, Ming-Chung,Chen, Hui-Ming Unqualified opinion

2014 Deloitte Taiwan Chen, Hui-Ming,Weng, Po-Jen Unqualified opinion




Note1: Financial statements in the preceding years were audited by other accountant.

Ⅵ FINANCIAL

STATUS

93

II. Financial Summary of The Past Five Years

(1) Financial Analysis -Based on the IFRS (Consolidated):

Unit: Thousand NTD

Year Financial Summary for The Past Five Years

Item 2013 2014 2015 2016 2017

Financial structure

(% )

Debt Ratio 72.14 63.05 62.16 71.62 69.79

Ratio of long-term capital to real estate, plant

and equipment 138.39 198.85 205.94 139.81 132.01

Solvency %

Current ratio 115.01 145.42 148.20 92.66 119.38

Quick ratio 56.05 75.39 75.23 42.49 57.58

Interest earned ratio (times) 49.3 38.25 47.99 40.27 10.92

Operating

performance

Accounts receivable turnover (times) 93.71 93.38 85.29 54.43 40.44

Average collection days 4 4 4 7 9.02

Inventory turnover (times) 5.56 5.16 4.82 4.66 4.39

Accounts payable turnover (times) 3.89 4.23 4.44 3.84 3.37

Average days of sales 66 71 76 78 83.14

Real estate, plant and equipment turnover

(times) 7.21 7.73 8.46 7.38 4.42

Total assets turnover (times) 2.38 2.33 2.23 2.01 1.66

Profitability

Return on total assets (%) 7.46 6.44 7.11 5.08 33.77

Return on stockholders' equity (%) 30.19 19.06 18.59 15.23 11.59

Pre-tax income to paid-in capital (%) 58.28 47.89 59.52 49.50 39.69

Net profit ratio (%) 3.07 2.69 3.12 2.46 2.05

Earnings per share (NT$ in dollars) 4.71 4.04 4.83 4.04 3.29

Cash flow

Cash flow ratio (%) 9.44 10.50 17.36 24.04 16.11

Cash flow adequacy ratio (%) 72.74 60.31 66.30 45.68 33.97

Cash reinvestment ratio (%) 5.23 -0.35 5.13 18.79 4.9

Leverage Operating leverage 7.25 8.93 6.9 9.33 8.57

Financial leverage 1.02 1.03 1.02 1.03 1.11

‧ 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 to real estate.

‧ The increase in the current ratio was caused by the repayment of short-term borrowings in 2017.

‧ The decrease in the interest guarantee multiple was caused by the increase in interest expenses of

long-term borrowings and corporate bonds issued in 2017.

‧ The decreased cash flow ratio and current investment ratio is the result of increased capital

expenditures due to land acquisition in 2017.

Ⅵ FINANCIAL

STATUS

94

(2) Financial Analysis -Based on IFRS (Individual): Year


Item 2013 2014 2015 2016 2017

Financial

structure (% )

Debt Ratio 71.88 62.56 61.63 71.24 69.57

Ratio of long-term capital to real estate, plant

and equipment 142.84 206.32 212.05 204.38 155.97

Solvency %

Current ratio 108.99 138.22 143.05 87.49 106.9

Quick ratio 51.14 68.19 69.97 37.76 44.5

Interest earned ratio (times) 49.93 38.38 47.96 40.24 11.05

Operating

performance

Accounts receivable turnover (times) 89.77 90.19 84.5 54.63 40.71

Average collection days 4 4 4 7 9

Inventory turnover (times) 5.63 5.37 4.86 4.68 4.46

Accounts payable turnover (times) 3.86 4.40 4.43 3.89 3.41

Average days in sales 65 68 75 78 82

Real estate, plant and equipment turnover

(times) 7.39 7.88 8.55 8.97 5.45

Total assets turnover (times) 2.37 2.32 2.2 1.99 1.64

Profitability

Return on total assets (%) 7.71 6.68 7.3 5.22 3.92

Return on stockholders' equity (%) 31.04 19.53 18.83 15.46 11.98

Pre-tax income to paid-in capital (%) 59.04 48.04 59.37 49.47 40.09

Net profit ratio (%) 3.19 2.80 3.24 2.57 2.17

Earnings per share (NT$ in dollars) 4.71 4.04 4.83 4.04 3.29

Cash flow

Cash flow ratio (%) 10.27 11.93 18.26 23.82 14.08

Cash flow adequacy ratio (%) 65.67 55.46 61.95 41.73 27.05

Cash reinvestment ratio (%) 5.88 0.36 5.49 15.35 3.88

Leverage Operating leverage 6.38 7.65 6.21 7.84 6.97

Financial leverage 1.02 1.03 1.02 1.03 1.09

＊＊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

(8) Current ratio = current asset / current liability.

(9) Quick ratio = (current asset – inventory – prepaid expenses) / current liability.

(10) 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.

Ⅵ FINANCIAL

STATUS

95

(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).

III. Supervisors' or Audit Committee's Report on Financial Statements for the previous fiscal year:

refer to page 114-115

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

: refer to pages 116-125

V. Recent Financial Statements and Reports of Independent Accountants of the parent company

: none

VI. If the Company or its affiliated companies have experienced financial difficulties in the

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

Report, the Annual Report shall explain how any difficulties will affect the company's financial

situation

: none

Ⅶ A review and analysis of the

company's financial condition and

operational results, and a list of risks

96

Ⅶ. A 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 2016 2017

Difference

Item Amount %

Total current assets 1,294,321 1,409,872 115,551 8.93%

Investment under equity

66,902 17,870 -49,032 -73.29%

Real Estate, Plant and Equipment 653,952 1,304,802 650,850 99.53%

Computer software costs 14,680 38,202 23,522 160.23%

Other assets 281,350 132,790 -148,560 -52.80%

Total assets 2,311,205 2,903,536 592,331 25.63%

Total current liabilities 1,396,910 1,181,007 -215,903 -15.46%

Long-term liabilities 158,333 741,251 582,918 368.16%

Other liabilities 100,157 104,260 4,103 4.10%

Total liabilities 1,655,400 2,026,518 371,118 22.42%

Capital 252,400 282,400 30,000 11.89%

Additional invested capital 204,900 390,115 185,215 90.39%

Retained earnings 205,371 205,215 -156 -0.08%

Other Equities -10,608 -14,960 -4,352 41.03%

Non-controlling interests 3,742 14,248 10,506 280.76%

Total Equity 655,805 877,018 221,213 33.73%

Reasons for such changes (the change before and after the period is greater than 20%, and the

amount exceeds NT$10 million):

1. Increase in the real estate, plant, and equipment: primarily due to land purchases in 2017.

2. Decrease in other assets: primarily due to equipment completion acceptance and the

reduction of prepayments for equipment.

3. Increase in long-term liabilities: primarily due to the issuance of corporate bonds and

long-term borrowings.

4. Increase in capital reserves: primarily due to cash increment premium and convertible

corporate bond evaluation in 2017.




97

(2) Financial Status – IFRS (Individual)

Unit: NT$ thousands

Year

2016 2017

Difference

Item Increase (decrease)

Amount %

Total current assets 1,189,988 1,209,054 19,066 1.60%

Investment under equity method 343,408 412,669 69,261 20.17%

Real Estate, Plant and Equipment 443,900 1,092,565 648,665 146.13%

Computer software costs 14,678 8,233 -6,445 -43.91%

Other assets 275,374 112,563 -162,811 -59.12%

Total assets 2,267,348 2,835,084 567,736 25.04%

Total current liabilities 1,360,094 1,130,993 -229,101 -16.84%

Long-term liabilities 158,333 741,251 582,918 368.16%

Other liabilities 96,858 100,070 3,212 3.32%

Total liabilities 1,615,285 1,972,314 357,029 22.10%

Capital 252,400 282,400 30,000 11.89%

Additional invested capital 204,900 390,115 185,215 90.39%

Retained earnings 205,371 205,215 -156 -0.08%

Other Equities -10,608 -14,960 -4,352 41.03%

Total Equity 652,063 862,770 210,707 32.31%

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 in the real estate, plant, and equipment: primarily due to land purchases in 2017.

2. Decrease in other assets: primarily due to equipment completion acceptance and the

reduction of prepayments for equipment.

3. Increase in long-term liabilities: primarily due to the issuance of corporate bonds and

long-term borrowings.

4. Increase in capital reserves: primarily due to cash increment premium and convertible

corporate bond evaluation.

(3) Effect of major changes to the financial position in the previous two (2) fiscal years and related

countermeasures:

The changes to the 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

operational needs of the Company.




98

Ⅱ.Financial Performance (1) Main reasons behind major changes in operations 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 2016 2017 Increase (decrease)

Amount Difference %


Operations costs 2,858,675 3,017,641 158,966 5.56%

Gross Profit 1,250,944 1,306,766 55,822 4.46%

Operations expenses 1,144,050 1,193,110 49,060 4.29%

Net Operations Profit (Loss) 106,894 113,656 6,762 6.33%

Non-Operations Revenue and

Expenses 18,056 -1,572 -19,628 -108.71%

Net Profit (Loss) Before Tax 124,950 112,084 -12,866 -10.30%

Income Tax Benefits (Expenses) (23,859) -23,289 570 -2.39%

Net Profit (Loss) 101,091 88,795 -12,296 -12.16%

Total Comprehensive Income 85,077 83,927 -1,150 -1.35%

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. Increase of net income (loss) before tax: primarily due to increasing operation revenue, while both

the operating expense and non-operating expenses increased, which caused profits to decline.

3. 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.

4. Total comprehensive income: primarily due to increasing operation revenue, while both the

operating expense and non-operating expenses increased, which caused profits to decline.

5. Increase in non-operating expenses: primarily due to increased bank loans and corporate bonds

issuance, which caused the financial cost to increase.




99

2. Comparative Analysis of Operations Performance in the Previous Two (2) Fiscal Years –

IFRS (Individual)

Unit: NT$ thousands

Year

Item 2016 2017 Increase (decrease)

Amount Difference %


Operations costs 2,809,074 2,926,039 116,965 4.16%

Gross Profit 1,166,648 1,258,930 92,282 7.91%

Operations expenses 1,046,029 1,124,639 78,610 7.52%

Net Operations Profit (Loss) 120,619 134,291 13,672 11.33%

Non- Operations Revenue and

Expenses 4,250 -21,069 -25,319 -595.74%

Net Profit (Loss) Before Tax 124,869 113,222 -11,647 -9.33%

Income Tax Benefits (Expenses) (22,871) -22,494 377 -1.65%

Net Profit (Loss) 101,998 90,728 -11,270 -11.05%

Total Comprehensive Income 85,984 85,860 -124 -0.14%

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 in property, plant and equipment: mainly due to acquisition of land in 2017.

2. Reduction in other assets: mainly due to equipment completion acceptance, prepaid

equipment payments decline.

3. Increase in long-term liabilities: mainly due to issuance of corporate debt and long-term

borrowing.

4. Capital reserves increase: mainly due to cash premium and convertible corporate debt

evaluation.

(2) Sales volume forecast and the basis thereof, and describe the effect on the Company's

financial operations and countermeasures to be taken:

The Company’s industry is still in the growth stage, and the Company shall pay

attention to the environment and market trends of the industry, expand the Company’s

market share and enhance profitability. It is expected that the Company will manage to

maintain growth of sales volume in the years to come.




100

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)

Investment

Plans

Financing

Plans

469,077 190,254 59,815 (543) 528,892 - -

Analysis of change in cash flow in 2017:

(1) Operations activities: net cash inflow 190,254,000, mainly due to cash income derived from

continuous profit earnings.

(2) Investment activities: net cash outflow 568,133,000, mainly due to the procurement of real estate

and equipment, etc. (3) Financing activities: net cash inflow 438,237,000, mainly due to the increase in loans.

(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

528,892 236,925 (111,891) 653,926 - -

Cash flow analysis for the coming year:

Operations activities: Expected to experience a growth in revenue, resulting in net cash inflow from

operations activities in 2018

Investment activities: Expected to continuously expand retail stores, purchase fixed assets and acquire

a second logistics center, hence resulting in a net cash outflow in 2018

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, hence resulting in a

net cash outflow in 2018

Ⅳ. Effect upon financial operations of any major capital expenditures during the previous fiscal

year: None




101

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

Counter-Measures, Investment Plan for Next Year

Description

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

-818 -818

CAYMAN MEDFIRST GROUP LIMIED USD10,898

Is a holding company

of re-invested business

of the company

-809 -809

Fujian MedFirst Healthcare Services, Inc. USD800

Develop market of

domestic demands in

mainland

2,347 2,347

Nanjing MedFirst Healthcare Services, Inc.USD2,115

RMB1,000

Develop market of

domestic demands in

mainland

-307 -307

Shanghai MedFirst Healthcare Services, Inc.USD1,550

RMB50,700

Develop market of

domestic demands in

mainland

-423 -423

Shanghai An gu Medical Devices Company Limited RMB2,700

Develop market of

domestic demands in

mainland

491 491

Hangzhou An gu Healthcare Services, Inc. RMB1,500

Develop market of

domestic demands in

mainland

1,380 1,380

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. NTD10,000Medical Supply

Retailer926 1233

Mainly because of the cost

of product research and

development and clinical

experience have increased.

Continue the development

of new product.

Hsing Chou Healthcare Co., Ltd. NTD86,100Management

consultancy services450 1,273

Mainly because it still at the

stage of Business

development

Stabilize expenditures of

pharmacies and elevate

revenues.

New Zuelling Co., Ltd. NTD27,756Centralized Dispensing

Service-18,292 -7,317


stage of Business

development

Propose methods to

increase incomes and

reduce expenditures so as

to mitigate expenditures.

Baodean Co., Ltd NTD27,756Distribution of Foreign

medical products3,250 -14,660


stage market development

Proactively develop

business to bring up sales

numbers and growth of

revenue.

Investment plan for one year in the future:

1.Mainly associated with the expansion of shops in mainland China shall be carried on to develop business and achieve scale merit. And development of shops in hospitals shall be done proactively.

2.Other re-invested companies shall propose capital increase to the company depending on operating requirements. The company shall proceed with assessment of related investment and approval

procedures.

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.

Description Improvement scheme

Unit: NT$ thousands

Taiwan Trim Co., Ltd.

Beijing MedFirst Healthcare Services, Inc.

Original

investment

amount.

Policy

Main reasons for profits or 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.Cooperate and negotiate

with large national or

central enterprises in hope

that quality business

locations can be obtained

to expand channels of new

shops.

NTD10,000 Water Ionizer Seller -1,965 -983


stage of market

development

RMB2,000

Develop market of

domestic demands in

mainland

312 312




102

Ⅵ. Risk management assessment during the previous fiscal year or during the current fiscal year

up to the printing date 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

2016 2017

Amount Ratio over

revenue % Amount

Ratio over

revenue %

Interest revenue 2,204 0.05 1,041 0.02

Interest expense 3,182 0.08 11,299 0.26

Net of gain (loss) on exchange (1,026) (0.02) (386) (0.01)

1. Changes to interest rates

The interest incomes of the company and subsidiaries were 2,204,000 and

1,041,000 in 2016 and 2017, accounting for 0.05% and 0.02% of revenue of each

respective year. Interest expenses were 3,182,000 and 11,299,000 in 2016 and

2017, accounting for 0.08% 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 operations of the Company.

The Company has executed stable and conservative use of funds, 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 accordingly. The Company shall accordingly adjust how it uses funds based

on changes to interest rates in the future.

2. Changes to foreign exchange rates

The Company’s losses recognized was NT$1,026,000 in 2016 and

NT$386,000 in 2017, which accounted for 0.96% and 0.34% of the Company’s

operational profits respectively, as well as 0.82% and 0.34% of the Company’s

net income before tax respectively, demonstrating that these percentage values are

not very impacting. 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 had no

immediate significant impact yet. Furthermore, the Company will continue to




103

watch 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, any significant impact caused by

inflation can be avoided.

(2) Policies, main causes of 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 Fund Lending 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 printing date of this annual

report in 2017 and absolutely holds the subsidiary of Shanghai MedFirst Healthcare

Services, Inc. with guarantee provided in December of 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.

Should there be a need for the Company 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

the original shareholders.

(4) Effects on financial operations by domestic or overseas key policies and Article of law, and

related counter-measures.

There is no important policy or changes to laws that affect 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 grasp external

information and adopt corresponding measures as deemed appropriate.

(5) Effects on financial operations by new technology and related

counter-measures:

The company always seizes opportunities from changes in the industry and to market

trends pays close attention to relevant technological development to understand the

preference of consumers and introduce products satisfactory to the general market. As of




104

the date of printing of the Annual Report, there is no important technological change or

change to the industry that is significantly affecting our finances or businesses.

(6) The impact of changes to the corporate image, corporate risk management, and

the Company’s response measures:

The company has been devoted to maintaining its corporate image over the years.

We first created the return and replacement service within 7 days, implemented the

valuable product recycling service, home delivery service, 24-hour customer service

hotline, the “FirstMed e Present” application, all of which are unique services. The

company also carries the branding of “your family health administrator”, which is valued

by customers and is reported in a good light in the media. It is also helps promote the

positive image of the company. The company did not have any business management

crisis due to the change of the corporate image in 2017 and had no such difficulties on the

date of printing of the Annual Report.

(7) Expected benefits from, risks relating to and response to merger and acquisition

plans:

The company and subsidiaries have no plan to acquire another company. However,

should an acquisition plan be created in future, the company will consider the impact 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 relating 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. The Company, therefore, has

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 the original

shareholders.

(9) Risks relating to and response 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, there is no risk arising from

purchasing of stock from one centralized source. In addition, the Company’s sales target




105

is the general consumer, from which no further issue arises in terms of purchasing stock

from a single centralized supplier.

(10) Effects of, risks relating to, and response to large share transfers or changes to shares held

by directors, supervisors, or shareholders with shareholdings of over 10%: none

(11) Effects of, risks relating to, and response to changes in management rights:

As of the 16th

April 2018, all directors hold between them the ratio of 39.25% of

total 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 in the long term.

Moreover, the employees identify with the development direction of the Company and so

the Company has maintained a 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 over the shareholders’ recognition of the work of 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 causes an upset of Company ownership, bringing with it risks and

potentially-damaging changes (as of the date of printing 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 printing date 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, the actual head, major shareholder who

holds more than 10% of the shares or a subsidiary company by the date of printing 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 up to the date of printing of the Annual Report with

details of how the Company is currently handling the matter: none.

(13) Other significant risks and response measures: none




106

Ⅶ. Other important matters

: None.

Ⅷ Special

Events

107

Ⅷ.Special Events

Ⅰ.Relevant information on affiliate enterprises

(一) Affiliate enterprises consolidated operations report

1. Organizational chart of affiliates

Shanghai Angu Medical

Equipment Ltd. (Note 3)

Hangzhou An gu Medical

Equipment Ltd. (Note 4)

100%

Shanghai MedFirst Healthcare

Services, lnc. (Note 1)

82.81% 81.72% 18.28%

100%

CAYMAN MEDFIRST GROUP

LIMITED

100%

11.46%

Beijing MedFirst Healthcare


Nanjing 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%

Ⅷ Special

Events

108

2. Basic Information of Affiliated Companies

Unit: NT$ thousands

Company Date of

Establishment Address

Invested

Capital

Major Business or

Products

ABOVE ADVANCE

LIMITED 2005/07/28

Offshore Chambers, P.O.Box217,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 MedFirst

Healthcare Services, Inc. 2009/09/11

No. 2368, Level 16, Unit B,

Zhongshan West Rd, Xuhui

District, Shanghai City

USD 9,294 Medical Supply

Retailer

Fujian MedFirst Healthcare


No. 123, B1 Floor, Xinyang

Industrial Zone, Haicang

District, Xiamen City

USD 800 Medical Supply

Retailer

Taiwan Trim Co., Ltd. 2012/04/20 4F, No. 1, Ln. 108, Fuxing 1st Rd., Guishan Dist., Taoyuan City

NTD20,000 Water Ionizer Seller

Exactitude Biotech Co., Ltd. 2012/05/03 4F, No. 1, Ln. 108, Fuxing 1st Rd., Guishan Dist., Taoyuan City

NTD10,000 Medical Supply

Retailer

Shanghai An gu Medical

Devices Company Limited 2014/10/29

No. 9506, Unit No. 101

South 5, Humin Rd, Xuhui

District, Shanghai City

RMB2,700 Medical Supply

Retailer

Hangzhou An gu Healthcare


No. 605, Room 1508,

Zhongshan North Rd,

Xiacheng District,

Hangzhou City


Retailer

Beijing MedFirst Healthcare


No. 168, Block 2, Room A,

Litang Rd, Tianbei Street,

Changping District, Beijing

City


Retailer

Hsing Chou Healthcare Co., Ltd. 2016/05/25

3 F-1, No. 1, Ln. 108, Fuxing 1st Rd., Wenhua Vil., Guishan Dist., Taoyuan City

NTD95,000 Management

consultancy services

New Zuelling Co., Ltd. 2013/12/17 12 F, No. 2, Sec. 3, Minquan E. Rd., Zhongshan Dist., Taipei City

NTD69,390 Centralized

Dispensing Service

Baodean Co., Ltd. 2017/05/12 3 F, No. 94, Fuxing 1st Rd., Guishan Dist., Taoyuan City 33375, Taiwan

NTD10,000

Overseas medical supply brand distribution

Ⅷ Special

Events

109

3. Description of the area of business and dealings of the industries covered by the business operations

of all affiliates where a business connection exists with the Company: medical supplies, healthcare,

and biotechnological healthcare retail products.

4. Directors, Supervisors and Managerial Officers of Affiliated Companies Unit: Shares

Company Title Name or Representative Shareholdings

Share % ABOVE ADVANCE LIMITED Director Chen, Li-Ju 4,065,575 100%

CAYMAN MEDFIRST GROUP

LIMITED Director Chen, Li-Ju, Tsai, Te-Chung 4,065,575 100%

Nanjing MedFirst Healthcare Services,

Inc.

Executive

Director Tsai, Te-Chung - 100%

Shanghai MedFirst Healthcare

Services, Inc.

Executive


Fujian MedFirst Healthcare Services,

Inc.

Executive


Taiwan Trim Co., Ltd.

Chairman

Director

Director

Director

Supervisor

Supervisor

Representative of MedFirst Healthcare

Services, Inc.:Chen, Li-Ju


Services, Inc.:Tsai, Te-Chung

Representative of Nihon Trim Co., Ltd.:

Shimizu Takafumi

Representative of Nihon Trim Co., Ltd.:

Torajiro Oda

Chen, Meng-Hung

Morisawa Shinkatsu

1,000,000 50%

Exactitude Biotech Co., Ltd.

Chairman

Director

Director

Supervisor


Services, Inc.:Chen, Li-Ju


Services, Inc.:Tsai, Te-Chung


Services, Inc.:Wang, Ting-Jui


Services, Inc.:Wei, Tzu-Wen

1,000,000 100%

Shanghai An gu Medical Devices

Company Limited

Executive


Hangzhou An gu Healthcare Services,

Inc.

Executive


Beijing MedFirst Healthcare Services,

Inc.

Executive


Hsing Chou Healthcare Co., Ltd.

Chairman

Director

Director

Supervisor


Services, Inc.: Chen, Li-Ju


Services, Inc.: Tsai, Te-Chung


Services, Inc.: Wei, Tzu-Wen

Chen, Meng-Hung

8,610,000 90.63%

New Zuelling Co., Ltd.

Chairman

Director

Director

Supervisor

Representative of Durban Development

Co.Ltd.: Huang, Yung-Lun

Representative of Durban Development

Co.Ltd.: Huang, Chun-Fa


Services, Inc.: Wei, Tzu-Wen


Services, Inc.: Li, Li-Ching

2,775,600 40%

Ⅷ Special

Events

110

5. Situations of business operations of each affiliate enterprise

31st December

2017: Unit: NT$ thousands

Company Capital Total

Assets

Total

Liabilities Net Value

Operating Income

Net Value

Gross Profit

Net Income

(after tax)

Earnings per Share

(EPS)(NT$) (after tax)

ABOVE

ADVANCE

LIMITED

USD4,066 230,837 209 230,628 0 (26) (601) 0

CAYMAN

MEDFIRST

GROUP LIMITED

USD4,066 230,837 0 230,837 0 (149) (426) 0

Nanjing MedFirst

Healthcare

Services, Inc.

USD2,440 19,634 6,833 12,801 12,010 (704) (597) 0

Shanghai MedFirst

Healthcare

Services, Inc.

USD9,294 243,512 14,456 229,056 59,313 (5,199) 120 0

Fujian MedFirst

Healthcare

Services, Inc.

24,667 28,377 8,241 20,136 25,056 2,006 1,880 0

Shanghai An gu

Medical Devices

Company Limited

RMB2,700 9,222 788 8,434 3,657 (1,457) (2,878) 0

Hangzhou An gu

Healthcare

Services, Inc.

RMB1,500 16,448 9,528 6,920 33,549 1,033 1,252 0

Taiwan Trim Co.,

Ltd. 20,000 8,736 1,254 7,482 3,779 (1,726) (1,816) 0

Exactitude Biotech

Co., Ltd. 10,000 42,725 32,870 9,855 119,945 (423) (335) 0

Beijing MedFirst

Healthcare

Services, Inc.

RMB2,000 12,113 3,256 8,857 11,311 (192) (12) 0

Hsing Chou

Healthcare Co., Ltd. 43,050 107,793 15,738 92,055 36,055 (1,639) (2,945) 0

New Zuelling Co.,

Ltd. 69,390 74,726 21,560 53,166 197,821 (9,149) (7,228) 0

Baodean Co., Ltd. 10,000 38,396 25,146 13,250 71,321 27,595 3,250 3.25

(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 in the companies preparing the consolidated corporate financial report of the

Company in 2017 (from January 1 to December 31, 2017), 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 the related

Ⅷ Special

Events

111

enterprises’ consolidated financial report is required to reveal has already been disclosed in

a previous consolidated financial report of the parent company, the related enterprises’

consolidated financial report shall not be prepared separately.

(3) Affiliation Report: N/A

Ⅱ. The handling situation of private securities by the printing deadline of the latest Annual Report

: None.

Ⅲ. The Company’s stock held or disposed by subsidiaries by the printing deadline of the latest

Annual Report

: None.

Ⅳ. Necessary additional information

In accordance with the guidance of the official document issued by TPEx Zheng Gui Shen

Zi # 10301001251 dated the 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 future. MedFirst shall also not give up on increasing annual capital in

Shanghai MedFirst and Nanjing MedFirst in future, and Fujian MedFirst shall not give up

on increasing annual capital in Nanjing MedFirst. If each 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 due to investors who have obtained approval from the stock exchange,

such matter is required to be approved during a special Board of Directors meeting.”

Should these regulations be amended in the future, the Company shall input and disclose

such information on MOPS, and shall also file a formal notice to TPEx.

(2) TPEx shall request the Company to delegate CPAs or an accounting firm authorized by

TPEx when 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, whereby the Company shall be 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

even prior to expiration of the lease.

Ⅷ Special

Events

112

Ⅴ. By the printing deadline 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.

Ⅷ Special

Events

113


Internal Control Declaration Date: 23

rd March 2018

Based on its self-assessment results, the Company hereby states the following in regard to its

internal control system for 2016:

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 2017, it

maintained an effective internal control system in all material aspects (that includes 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 23rd

March

2018, with none (0) of the seven (7) attending directors expressing a dissenting opinion, and all

seven affirming the content of this Declaration.


Chairman: Chen, Li-Ju

General Manager: Tsai, Te-Chung

Ⅷ Special

Events

114

The Audit Committee’s Review Report

This Audit Committee has agreed on the 2017 Financial Statements, Business Report,

and Distribution of Surplus with resolutions by the Board of Directors. The Board of

Directors commissioned Deloitte Taiwan to audit the 2017 Financial Statements and

draft a review report without reserving any of its opinions. The Audit Committee is responsible for supervising the flow of corporate financial

statements. A CPA certified the 2017 Financial Statements of the Company and communicated

the following matters with the Audit Committee: 1. No major issues were found within the scope and time of the audit conducted by

the CPA. 2. The CPA has provided the Audit Committee with an independent statement

regarding the morality of the professional accountant, and all regulated personnel of

the accounting agency must conform to said statement. No issues nor any other

matters were found that might compromise the accountant’s impartiality. 3. The CPA and the Audit Committee have communicated regarding key audit items

and have decided to disclose the inventory losses in the review report. The members of the Audit Committee have agreed that the 2017 Financial Statements,

Business Report, and Distribution of Surplus of the Company conform to the relevant

laws and regulations. The review report has been presented in accordance with

Article 14-4 of the Securities and Exchange Act as above. Please verify: Best regards, The 2018 Shareholders’ Meeting of MedFirst Healthcare Services, Inc. Chairman of the Audit Committee: Tseng, Sheng-Cheng

23rd March 2018

https://www2.deloitte.com/tw/tc.html

Ⅷ Special

Events

115

The Audit Committee’s Review Report

This Audit Committee has agreed on the 2017 Financial Statements (Consolidated)

and Business Report. The Board of Directors commissioned Deloitte Taiwan to audit

the 2017 Financial Statements and draft a review report without reserving any of its

opinions. The Audit Committee is responsible for supervising the flow of corporate financial

statements. A CPA certified the 2017 Financial Statements (Consolidated) of the Company and

communicated the following matters with the Audit Committee: 1. No major issues were found within the scope and time of the audit conducted by

the CPA. 2. The CPA has provided the Audit Committee with an independent statement

regarding the morality of the professional accountant, and all which regulated

personnel of the accounting agency must conform to said statement. No issues nor

any other matter were found that might compromise the accountant’s impartiality. 3. The CPA and the Audit Committee have communicated regarding the key audit

items and have decided to disclose the inventory losses in the review report.

The members of the Audit Committee have agreed that the 2017 Financial Statements

(Consolidated) conform to relevant laws and regulations. The review report has been

presented in accordance with Article 14-4 of the Securities and Exchange Act as

above.

Please verify: Best regards, The 2018 Shareholders’ Meeting of MedFirst Healthcare Services, Inc. Chairman of the Audit Committee: Tseng, Sheng-Cheng

23rd March 2018

https://www2.deloitte.com/tw/tc.html

Ⅷ Special

Events


Chairman: Chen, Li-Ju

20th April 2018

Documents

Spokespersons3.hicloud.net.tw/aei/官網更新_aaa/20190128更新/106... · 2019. 1. 28. · II COMPANY PROFILE 4 Ⅱ.COMPANY PROFILE I. Established on: 7th May 1992 II. Company History: