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Information disclosure website designated by the Securities and Futures Bureau:http://mops.tse.com.twThe Company's annual report disclosure website: http://www.makalot.com.tw
Makalot Industrial Co., Ltd.
2017 Annual Report
Publication date: May 18, 2018
Stock Code: 1477
1. Name, job title and contact phone number and email of theCompany's spokesperson and deputy spokesperson
Spokesperson: Lin Heng-Yu Title: Manager Acting Spokesperson: Wen Yu-Chun Title: Division Assistant General Manager Tel: (02) 2345-5588 Email: [email protected]
2. Addresses and Telephone Numbers of Head Office, Subsidiariesand Factories:
Head Office: 8F., No. 550, Sec. 4, Zhongxiao E. Rd., Taipei City Tel: (02) 2345-5588 Sample Center: No.20, Gongye 2nd Rd., Xingnan Village, Minxiong Township, Chiayi County Tel: (05) 221-1216
3. Name, address, website, and telephone of stock transfer agency:Name: Stock Affairs Department, KGI Securities Co., Ltd. Address: 5F., No. 2, Sec. 1, Chongqing S. Rd., Zhongzheng Dist., Taipei CityWebsite: http://www.kgieworld.com.tw Tel: (02) 2389-2999
4. Contact Information of CPAs for Financial Statementsincluding the name of CPAs, accounting firm'sname/address/website and telephone number:
Name of CPAs: Chen Pei-Chi, Yu Chi-Lung Name of Accounting Firm: KPMG Taiwan Address: 68F., No. 7, Sec. 5, Xinyi Rd., Xinyi Dist., Taipei City Website: www.kpmg.com.tw Tel: (02) 8101-6666
5. Name of any overseas securities trading agency and method forsearching the information of the overseas securities: None
6. Company Website: http://www.makalot.com.tw
Makalot Industrial Co., Ltd. Annual Report Contents
Page
I. Letter to Shareholders .......................................................................................................1 II. Company Profile ...............................................................................................................6III. Corporate Governance Report
1. Organization ................................................................................................................11 2.Background Information of Directors, Supervisors, General Manager, Assistant
General Manager, Deputy Assistant General Manager, and heads of departments and branches ........................................................................................................................16
3.Compensations to Directors, Supervisors, General Manager, Assistant General Manager in the most recent year ...................................................................................25
4. Implementation of Corporate Governance ..................................................................34 5. Information Regarding CPA Fees ................................................................................89 6. Information Regarding Replacement of CPAs ............................................................89 7. The information of the Company's Chairman, General Manager, managers in charge of
finance or accounting who has served in a CPA's accounting firm or its affiliated companies in the most recent year shall be disclosed, including their names, job titles and term of office in the CPA's accounting firm or its affiliated companies ...............89
8. Equity transfer or changes to equity pledge of Directors, Supervisors, managers, or shareholders holding more than 10% of Company shares in the most recent year up to the publication date of this report ................................................................................89
9. Information regarding the top 10 shareholders in terms of number of shares held, who are related parties or each other's spouses and relatives within the second degree of kinship defined in the No.6 of Financial Accounting Standards Bulletin .................92
10. Number of shares held by the Company, its Directors, Supervisors, managers and directly or indirectly controlled companies in the same investment companies, and the combined calculation of shareholding percentages ...................................................94
IV. Funding Status 1. Capital and Shares ........................................................................................................972. Issuance of Corporate Bonds .......................................................................................109 3. Issuance of Preferred Shares ........................................................................................109 4. Issuance of Oversea Depository Receipts ....................................................................109 5. Issuance of Employee Stock Options ...........................................................................109 6. Issuance of New Restricted Employee Shares and Mergers and Acquisitions Processing
Situtation .......................................................................................................................1097. Capital Utilization Plan and Implementation ..............................................................109
V. Operational Highlights
1. Business Activities .......................................................................................................1102. Market, Production and Sales Overview ......................................................................120 3. Human Resources .........................................................................................................1274. Information Regarding Environmental Protection Expenditure ..................................128 5. Labor Relations ............................................................................................................1296. Important Contracts ......................................................................................................137
VI. Financial Highlights 1. Condensed balance sheet and income statement in the most recent five years ...........138 2. Financial analysis in the most recent five years ..........................................................142 3. Audit Committee's review reports on financial statements in the most recent year ....146 4. Financial statements in the most recent year ..............................................................146. 5. Parent company only financial statements audited and certified by CPAs in the most
recent year ....................................................................................................................1466. Impact on the Company's financial condition due to financial difficulties experienced
by the Company and its affiliated companies in the most recent year up to the publication date of this report ......................................................................................146
7. Other Supplementary Information ...............................................................................147 VII. Review And Analysis of Financial Conditions And Performance And Risk Items
1. Financial Conditions ....................................................................................................2872. Financial Performance ..................................................................................................287 3. Analysis of Cash Flows ................................................................................................289 4. Major capital expenditures in the most recent year and its impact on the financial status
and business ..................................................................................................................2895. Policy on investment in the most recent year, main reasons for profit/loss resulting
therefrom, improvement plan, and investment plans for the coming year ...................290 6. Risks Items ...................................................................................................................2917. Other Important Items ..................................................................................................305
VIII. Special Notes 1. Affiliated Businesses Information ................................................................................306 2. Private placement of securities in the most recent year up to the date of publication of
this report ......................................................................................................................3123. Securities of the Company held by or disposed of by subsidiaries in the most recent year
up to the date of publication of this report ....................................................................312 4. Other Necessary Disclosures .........................................................................................312 5. Any event that results in substantial impact upon the shareholders equity or security
price as prescribed in Subparagraph 2, Paragraph 2, Article 36 of the Securities and Exchange Act in the most recent year up to the date of publication of this report ......312
I. Letter to Shareholders
Dear shareholders, The year 2017 has been described as a year of recovery in terms of global economy. The
major markets worldwide were gradually regaining stable growth. Following this global trend, Makalot Industrial Co., Ltd. (Makalot) has also remained stable growth in the past year and this has been made possible through our steady and solid business strategies, flexible global positioning and the dedication of all our partners. We expect to continue this trend of growth into 2018 and strive to move forward with the same earnestness.
I. 2017 Business Report
A. Results of 2017 Business Plan and Status of Budget Execution 1. The net operating income of the Company for 2017 was NT$ 22,375,000 thousand, which
represents an increase of 1.12 percent, compared with NT$ 22,127,939 thousand in 2016.The net income after taxes for 2017 came to NT$ 1,296,616 thousand, indicating a decreaseof 15.95 percent, compared with NT$ 1,542,631 thousand in 2016.
2. Budget implementation: According to the Regulations Governing the Publication ofFinancial Forecasts of Public Companies, the Company has not disclosed the financial forecast information of 2017. As a result, it is not required to disclose the analysis data of the implementation of the 2017 budget.
B. Financial balance and profitability analysis: Units: in NT$ thousands
Year Item 2016 2017
Financialrevenue
andexpense
Net revenue 22,127,939 22,375,000Gross profit 4,517,435 4,324,055Net operating income 1,949,040 1,767,253Profit or loss after tax 1,542,631 1,296,616
Profitability
Return on asset 11.70% 10.30%Return on shareholders' equity 17.29% 15.05%Ratio of operational profit to paid-in capital
94.28% 84.40%
Ratio of net income before tax topaid-in capital
92.36% 77.21%
Net income margin 6.97% 5.79%Basic earnings per share (NTD) 7.39 6.18
C. Research and Development Status: In recent years, major countries worldwide have been launching into the development of
Industry 4.0, which grabbed the focus of all industries across the world in a fairly short period of time. Some have celebrated great success (including automated production for the textile and shoe-making industries), but inevitably this new trend has also brought the traditional manufacturers serious impact. In view of the increasing labor costs in Asia and the demand for customization and speed in the Internet era, Makalot is actively investing in relevant research. In addition to continuous observation and learning, we have also teamed up with
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professional multinational manufacturers for various research projects and already seen considerable progress.
In addition, Makalot began implementing the "A+ Industrial Innovative R&D Program” hosted by the Ministry of Economic Affairs (MOEA). This two-year project, themed "Functional Fashion Textile Value Chain Integration Project”, has been completed. Through the process of project implementation, Makalot accumulated a considerable amount of accomplishments in technological R&D. Our achievements have been widely recognized among the panel of project evaluators and we will continue to conduct the R&D of various innovative textile and materials further into expanded business opportunities. At the same time, Makalot further collaborated with the domestic electronic manufacturers, medical institutions, and colleges and universities to develop wearable smart fashion products. The section below maps out our R&D plan for future development. 1. Based on the newest global trend and customers' needs, carry out material conversion for
the fashion, develop various innovative functional fabrics and expand market promotion. 2. Continue to carry out in-depth research on global fashion and styles, materials, patterns,
sewing techniques and specialized equipment of functional apparel, and develop production technology for high-quality/value-added products with high-end brands as benchmarks.
3. Implement the R&D results of the "A+ Industrial Innovative R&D Program" by theDepartment of industrial technology (DoIT), Ministry of Economic Affairs to promote development of various functional and fashionable textile products.
4. Promote collaboration with different industries (electronics, medical care, sports, etc.) forR&D and patent layout for smart apparel.
5. Collaborate with colleges and universities to develop new materials and bio-sensingtechnologies.
6. Participate in the Taiwan Smart Textile Association to reinforce the horizontal links withthe industry.
II. Overview of the Business Plan for this yearInvestment institutions worldwide have given a positive outlook on the global economy in
2018. Their analyses show that the strong financial strategies of the US that will continue to warm up the country’s economy, and the Euro region, as well as the emerging countries, including the three leaders of the Brics, India, Brazil, and Russia, will also see growth. Although the growth of China is expected to slow down, a growth rate of 6 percent or higher is still expected. Overall, the outlook of global economy for 2018 will be positive and optimistic.
Looking ahead into the year of 2018, the major business plans of Makalot are as follows: 1. Global marketing and in-depth market development:
1.1 Develop the major global markets, explore the US market in greater depth and expand the Asian markets.
1.2 Focus on high-growth customers and mainstream products and ensure the quick response to restocking.
1.3 Optimize the portfolios of customers, products and specialized production capacity to enhance profitability.
1.4 Develop new customers/brands with high potential and the momentum for future growth. 1.5 Continue to develop virtual sample-making technology and shorten the design and
development cycle for integrated business development, including customers in all distribution channels and e-commerce.
2. Functional fashion and R&D innovation:
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2.1 Optimize the independent R&D capabilities for full process production (from yarn to garment).
2.2 Expand the upstream/midstream/downstream cooperative R&D system (Fashion + Function), pulling together complementary advantages and create business opportunities for all.
2.3 Launch R&D in greater depth with full utilization of new technologies, equipment and processes.
2.4 Strengthen cross-industry cooperation, continue to develop various types of smart apparel and expand business opportunities in the future.
3. Vertical integration and specialized production:3.1 Optimize global supply chain and reinforce local supply chain at the garment production
bases. 3.2 Refine the quick response to replenishment and improve the production capacity layout. 3.3 Adjust production planning and expand existing advantageous production bases. Also,
evaluate the establishment of production bases in Central America. By shortening the logistics time, we strive to meet the need for quick response to replenishment.
3.4 Assess the feasibility of setting up local supply chain and production capacity in Africa to fully utilize the advantages of tariff reduction on garment exports.
3.5 Enhance the operational and R&D capabilities of the investment businesses (Ecolot Textile and Namtex).
4. Automated production and smart manufacturing:4.1 Improve the deployment ratio of specialized equipment and auxiliary equipment used in
the factory based on the structure and characteristics of the various products to maintain the stability of quality and precision and reduce the rate of nonconforming products.
4.2 Continue to research into garment manufacturing engineering for simplification and integration of the composite processes, break through the bottlenecks, and improve efficiency and production line balance.
4.3 Continue to develop automated patterning technology to reduce the complexity of the grade A processes and gradually reduce the dependence on high-skilled sewing technicians.
4.4 Continuously evaluate the introduction and application of automatic transport systems to reduce the time for semi-finished products to be transported between workstations. The goal is to automate the entire production process.
III. The Company’s future development strategies will be affected by the competitions in thebusiness environment, the regulatory environment and the overall operating environment.
1. Competitions in the business environmentThe main competitors of Taiwan's textile and garment industry include large textile
and garment manufacturers in China, South Korea and Central Asia, such as India, Sri Lanka. In particular, China’s garment industry has encountered the challenge of significant increase in labor costs. Therefore, manufacturers in China has also been actively expanding into global production in recent years. With abundant funds in the Chinese market and the support of Chinese government policies, the Chinese textile and garment industry has been quick to adapt to the trend of automated production and high value-added products. This will be an important issue that Taiwan's textile and garment industry must pay attention to. In addition to thinking about how to effectively integrate the competitive energy of the upstream/midstream and downstream of Taiwan’s textile industry, Taiwan’s textile industry should also think about how to collaborate with different industries, so that we can make breakthroughs in the R&D of innovative
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production technologies and products and effectively integrate and enhance the overall advantages of the industry, in order to cope with emerging global competition in the future.
2. Regulatory Environment
With rapid changes in the policy of the Trump administration in the United States, renegotiations took place or many free trade agreements were canceled. Various tax reform measures to encourage inflow of the overseas capital and resurgence of domestic manufacturing, the U.S. economy began to heat up. This trend has certain impact on the large US apparel brands and their global procurement strategies and attracted a considerable number of manufacturers to assess the feasibility of investing in manufacturing plants in the United States. However, global positioning of production bases must take the policies of the local governments into consideration, as well as the other factors, such as supply chain planning, etc. Therefore, Makalot will pay close attention to the changes in the international situation and carefully evaluate the feasibility of setting up factories in Central America and Africa, taking into consideration the needs of customers and the Company’s strategic plans for global production. It is expected that OEM production will be given priority in the initial stage.
3. Overall Operating Environment
1. The global economy is optimistic, but hidden concerns exist in the internationalpolitical outlook:
According to analysis by major global investment institutions, all large economies, whether they are developed countries or emerging markets, are expected to see positive growth in 2018. However, there are still uncertainties hiding in the international political scene. The sharp turns in policies taken by the Trump administration, the positive and negative influences from the rise of Chinese power, the unstable situation in the Korean Peninsula, and the uncertain outcomes in the elections of several countries taking place in 2018 are giving the prominent global investment institutions certain concerns about the possible risks, aside from the optimistic outlook in economic growth. In view of which, Makalot continues to expand in the global market, making attempts to avoid over-reliance on one-single market, in order to effectively reduce the risks in the process of pursuing growth.
2. The rise of online shopping changed the structure of the retail market:
Rapid rise of online shopping has brought serious impact on the traditional physical channels. In the past, the rise of Taobao.com in China's retail market has caused the traditional physical channels and brands to scale down significantly. Now, the traditional physical retail stores in the United States are facing the challenges from large online shopping portals. Many physical stores and brands have been forced to size down and, in consequence, lay off significant numbers of employees. This has attracted the attention of governments worldwide, forcing them to take countermeasures. Currently, these large tech giants are also facing the challenges imposed by the U.S. and EU governments, as they scrutinize business practices for unfair competitions, market monopolies and privacy protection issues. New control measures and hefty fines imposed by theses government are expected to have certain impact on the models of future business competitions. Makalot has been watching the development of this trend closely. In addition to seizing the business opportunities in online shopping, we will also continue to reinforce our strategic partnership with existing major customers. We
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are committed to providing our customers with products that meet market needs and minimize inventory risks through high-quality design and development services and the capabilities of vertical integration.
3. Global lifestyle apparel market continues to grow:
Urban sports and outdoor leisure activities have continued to flourish in recent years. Leading international apparel brands (including fashion and sportswear brands) continue to introduce fashionable, functional and multi-purpose apparel products, which boosted the lifestyle apparel market to grow continuously. Following this trend, Makalot has also been actively developing the sportswear market in recent years, designing products that integrates function into fashion. Through implementation of the "A+ Industrial Innovative R&D Program" hosted by DoIT, Makalot has built up considerable technical capabilities. In the future, the Company will extend from the achievements of this project and expand the cooperative relationships with our strategic partners in the upstream and midstream. Together, we will bring Taiwan's functional and fashionable textiles to shine continuously in the international market.
Looking forward into 2018, the forecast for the global economy is optimistic and positive. Although there are still uncertainties, Makalot will take the challenges with confidence. We believe that in 2018 Makalot will hand in a brilliant score sheet.
Sincerely, Best Regards
Chairman Li-Ping Chou
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II. Company Profile
Date of Founding: January 10, 1990Company History
1990 The Company was founded in Taipei City. Began production with the garment strategic alliance in the Philippines and launched production of plain-weave garments. Promoted Taiwan's garment strategic alliance production.
1993 Introduced computer-aided (CAD) marking system, which digitalized the full patterning process to save production time, labor cost and fabric losses and effectively increased production volume.
1994 Began to expand the garment knitting business. 1997 The information technology (IT) department was set up to implement the Company-
wide computerization project. 1998 Makalot Chiayi factory began operation.
Began to expand the Indonesian garment strategic alliance production business. Formulated global production strategies. Developed the proprietary “Garment R&D Scheduling and Management System”.
1999 Founded the Leader Garments El Salvador, SA de CV in El Salvador, in response to government policies and for the benefits of quota-free and tariff discount to the United States.
2000 Developed the proprietary "Industrial Engineering Analysis System".Invested in BVI Global Trading Int'l Corp. to meet compliance with the provisions of indirect trade in China. Founded New York and Miami subsidiaries as frontiers for the latest market trend and enhance customer service. The Board of Directors approved the merger of Chengkang Co., Ltd. Set up the Mingxiong factory in Chiayi. Invested in PT Makalot Industrial Indonesia in Indonesia to increase overseas production bases and reduce production costs. Introduced enterprise resource planning system (ERP) and website product database management system (PDM), and collaborated with DOCAD to upgrade the CAD Patterning system.
2001 Invested in three strategic alliance factories in the Philippines, including Leader Garments Corp., Diamond Apparel Manu. Inc., and Primeline Fashion Inc. to facilitate efficient production processes. Officially passed the Corporate Synergy Development Center (CSD) certification, registered on the platform of CSD, and collaborated with CSD to implement the "Supply Chain Management System". Collaborated with NETERER to implement the "AI Marking System".
2002 Invested in BVI Loyal Trading Int’l Inc. to meet compliance with the provisions of indirect trade in China. Expanded garment strategic alliance production in Vietnam. Set up the Vietnam office.Invested in Indonesia's PT Crystal Garments to expand the production capacity in Indonesia.Stock began trading in Taipei Exchange (TPEX) on August 8.
2003 Stock listed on TWSE with stock code 1477 on January 21. Closed down the Miami subsidiary due to business relocation. Merged the business, personnel and equipment of the Chiayi factory into the Minxiong factory to improve management performance. Approved by the Investment Commission to set up Makalot's Shanghai office to
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service the local customers. Expanded the garment strategic alliance production in Cambodia. With approval by the Securities and Futures Commission (2003) Tai-Cai-Zheng (1) No. 0920126737, the Company issued the first unsecured convertible corporate bonds in the total of NT$ 500 million in Taiwan, which began trading at the securities agency on July 28, 2003 with security code 14771. Founded PT Glory Industrial Semarang in Indonesia through Global Trading Int'l Corp., a company invested in BVI by Makalot, to expand production capacity in Indonesia.Launched the technology research project, "Global Logistics Digitalization". Launched the "Safe and Comfortable Protective Garment Design and Development Technology Integration Project".
2004 Founded Makalot Garments (Cambodia) Co., Ltd. in Cambodia through Global Trading Int'l Corp., a company invested in BVI by Makalot, to achieve multi-location positioning strategy. Expand the production of the garment strategic alliance in Sri Lanka and Bangladesh.With approval by the Securities and Futures Commission at (2004) Tai-Cai-Zheng (1) No. 0930119914, the Company issued the second unsecured convertible corporate bonds in the total of NT$ 500 million in Taiwan, which began trading at the securities agency on June 7,2004 with security code 14772. To safeguard shareholders’ interests, the Board of Directors made a resolution to buy back 2,000,000 treasury shares for a total of NT$ 107,305 thousand. Implementation of this plan has been approved by the Financial Supervisory Board by Jin Guan Zheng No. 0930136396.
2005 For operational needs, the Company founded Fortune Star Investment Ltd. in Samoa, which then founded Full Golden Investment Ltd. and Win Way Investment Ltd. in Mauritius. For operational needs, the Minxiong factory was transformed into a sample and R&D center. Set up the Hong Kong office to stay at the frontier of collecting market information and reinforcing customer service. The turnover exceeded NT$ 10 billion.
2006 Founded Makalot Garments (Vietnam) Co., Ltd. in Vietnam through Global Trading Int'l Corp., a company invested in BVI by Makalot, to expand production capacity. Founded Yuanyang International Co., Ltd. through an investment plan to develop the proprietary brand market. The first proprietary brand Pica Pica whose flagship store celebrated its grand opening at the end of 2006 and launched into full operation. Founded Moha Garments Co., Ltd. in Cambodia. through Triple Int’l Corp., a company invested in Samoa by Makalot, to expand production capacity. Invested in Win Way Investment Ltd. through Fortune Star Investment Ltd., a company invested in Samoa by Makalot, and then indirectly invested in Yangzhou Fengyang Garment Co., Ltd. in China to expand production capacity. Implemented capital reduction and liquidation of Leader Garments El Salvador, SA de CV in El Salvador for production planning and adjustment. Sold PT Makalot Industrial Indonesia in Indonesia, a company invested in Indonesia by Makalot, for production planning and adjustment. Selected as the most prestigious and most respected company in the textile industry by the CommonWealth magazine in 2006. Ranked 71st in Asia's Top 100 High-Growth Companies in 2006 by the US Business Weekly (19 medium-sized companies in Taiwan were selected).
2007 Invested in Solar Investment Ltd. in Mauritius through Fortune Star Investment Ltd., a company invested by Makalot, and then indirectly invested in Jiaxing
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Ruiyang Garment Co., Ltd. in China for operational needs. To expand production capacity, the Board of Directors approved the production capacity expansion investment project in South Vietnam, which will be invested by Triple Int'l Corp. in Samoa and set up the Triple Garment (Vietnam) Co., Ltd. Two other production capacity expansion investment projects, the North Vietnam factory II and the Yangzhou factory II were also approved. Implemented short-form merger with Yuanyang International Co., Ltd. and set up Zhongxiao and Chiayi subsidiaries for operational needs. The second proprietary brand, Pandora's Sweet Wardrobe, focused on young lady's home casual wear and pajamas, was officially launched online. For operational needs, Fortune Star Investment Ltd., a company invested by Makalot, invested in three companies in Hong Kong, Wintop, Crown Era and Crownway, which then invested in three companies in China, Shanghai Juyang Garment Co., Ltd., Jiaxing Juyang Garment Co., Ltd. and Jiaxing Jiayang Garment Co., Ltd. Ranked No. 1 consecutively in the CommonWealth's 2007 "Most Reputable Benchmark Enterprises" for the textile and garment industry. Selected as one of the "Taiwan High-Potential Top 99 Enterprises" Award organized by EBC (a total of 72 Taiwanese companies were selected). To expand production capacity in Indonesia, founded PT Starlight Garment Semarang in Indonesia through Fortune Star Investment Ltd., a company invested in Samoa by Makalot.
2008 Ranked No. 2 in the CommonWealth's 2008 "Most Reputable Benchmark Enterprises" for the textile and garment industry. Won the 8th place for mittelstand in the "2008 CommonWealth Magazine World Corporate Citizenship Awards". The first domestic unsecured convertible corporate bonds (securities code 14771) matured on July 22, 2008 and trading ended on July 23, 2008. Introduced the multilingual E-Learning system to build a sound foundation for digitalized talent development, which won the “Initial Enterprise Application Implementation Award” organized by the Industrial Development Bureau of the Ministry of Economic Affairs. Implemented a demonstrative "brand logistics" program. In coordination with the lean plan, the Company implemented liquidation of Makalot Group USA Inc. in the US.
2009 Won the 10th place for mittelstand in the "2009 CommonWealth Magazine World Corporate Citizenship Awards". Implemented the technology research program, "In-depth Development of Full Process Service Value Chain." For operational needs, deregistered the Zhongxiao and Chiayi branch offices. The second domestic unsecured convertible corporate bonds (security code 14772) matured on June 3, 2009 and trading ended on June 4,2009. With approval by the Securities and Futures Commission by Jin Guan Zheng (1) No. 0930119914, the Company issued the third domestic unsecured convertible corporate bonds in the total of NT$ 600 million, which began trading at the securities agency on June 22, 2009 with security code 14773. In coordination with the lean plan, the Company liquidated two companies in the Philippines, Diamond and Primeline. Ranked No. 2 in the CommonWealth Magazine's 2009 "Most Reputable Benchmark Enterprises" for the textile and garment industry.
2010 In response to the global environmental protection trend, reduce fabrics purchase cost and respond to customer needs, the Company invested in Wintop Industrial Limited through Fortune Star Investment Ltd., a company invested by Makalot and then indirectly invested in Liyang Trading (Shanghai) Co., Ltd. In China. Ranked No. 2 in the CommonWealth Magazine's 2010 "Most Reputable Benchmark
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Enterprises" for the textile and garment industry. Won 4-star rating for the 2010 edition Taiwan A+ Club Top 69 by Global Vision Magazine.
2011 In response to customer needs and to integrate the supply chain in Indonesia/Vietnam, the Company founded Ecolot Textile Co., Ltd. Rated A+ in the 8th Information Disclosure Ranking. Won 5-star rating for the 2011 edition Taiwan A+ Club Top 69 by Global Vision Magazine.
Ranked 29th for the 2011 “Corporate Citizenship” organized by the CommonWealth Magazine. Ranked No.2 in the CommonWealth Magazine‘s 2011 "Most Reputable Benchmark Enterprises" for the textile and garment industry. Won the highest-ranking "Health Promotion Badge" in the "Healthy Workplace Self-certification" organized by the National Health Administration.
2012 Rated A+ in the 9th Information Disclosure Ranking. Selected as one of the "2011 Top 100 Innovative Enterprises in Taiwan" organized by the Industrial Development Bureau of the Ministry of Economic Affairs. Won the grand prize in the 2012 (8th) "Corporate Social Responsibility Award" for the Workplace Health Category organized by the Global Vision Magazine. Won the highest 3-star ranking for the 2012 (2nd) Happy Enterprise Award organized by the Department of Labor, Taipei City Government. Ranked No. 2 in the CommonWealth Magazine's 2012 "Most Reputable Benchmark Enterprises" for the textile and garment industry. Ranked 28th for the 2012 “Corporate Citizenship” organized by the CommonWealth Magazine. Approved by the Financial Supervisory Commission by Jin Guan Zheng No. 1010027462, the Company issued the fourth domestic unsecured convertible corporate bonds in the total of NT$ 700 million, which began trading at the securities agency on August 24, 2012 with security code 14774.
2013 Rated A+ in the 10th Information Disclosure Ranking. Selected for the 2012 edition Taiwan A+ Club Top 79 by Global Vision Magazine.Ranked No. 2 in the CommonWealth 2013 "Most Reputable Benchmark Enterprises" for the textile and garment industry. Ranked 210th for the manufacturing category and No. 7 for the textile and garment industry in the CommonWealth Magazine Top 2000 Enterprises. Proprietary brand Fisso was officially launched online, which provides customers diverse and fresh new choices, focusing on casual/simple design, practicability and easy match. To expand production capacity, the Board of Directors approved the investment for the Phase II production capacity of the North Vietnam factory II in North Vietnam.The Phase I construction of the large-scale Demark factory in Semarang, Indonesia was completed and launched into operation in December 2013. The Company crossed over to the upstream textile industry through investing in Namtex Co., Ltd., a textile company in South Vietnam. Procured the Group's head office building. The third domestic unsecured convertible corporate bonds (security code 14773) has been fully converted, and trading ended on December 30, 2013.
2014 Rated A+ in the 11th Information Disclosure Ranking. The turnover exceeded NT$ 20 billion. Ranked 198th for the manufacturing category and No. 7 for the textile and garment industry in the CommonWealth Magazine Top 2000 Enterprises. Consecutively won the highest-ranking "Health Promotion Badge" in the "Healthy Workplace Self-certification" organized by the National Health Administration. Included in constituent stock of TWSE "Taiwan High Compensation 100 Index." Approved by the Financial Supervisory Commission by Jin Guan Zheng No.
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1030020871, the Company issued 20 million shares of common stock for cash capital increase, which were listed on August 26, 2014 for public trading.
2015 In response to customer needs for added production capacity in Vietnam and the demand for sports products, the Board of Directors approved the investment for the high-end functional products flagship factory, Leader Garment (Vietnam) Co., Ltd.,in South Vietnam. To expand production capacity, the Board of Directors approved the production capacity expansion investment project for Moha and Makalot Cam in Cambodia. Rated A+ in the 12th Information Disclosure Ranking. Ranked top 20 percent in the 1st Corporate Governance Evaluation. Ranked 169th for the manufacturing category and No. 5 for the textile and garment industry in the CommonWealth Magazine Top 2000 Enterprises. Applied and passed for the A+ Industrial Innovative R&D Program organized by DOIT of MOEA Cambodia and Vietnam production factories joined the GAP Inc. "PACE Program".The high-end functional product flagship factories, Leader, in South Vietnam was completed and launched into production in January 2016.
2016 The Phase II construction of the large-scale Demark factory in Semarang, Indonesia was completed and launched into operation in January 2016. Ranked top 20 percent in the 2nd Corporate Governance Evaluation. For the Company's future operational needs, the Company founded Xiangtai Functional Sports Fashion Co., Ltd. to take orders for the sports products. Ranked 138th for the manufacturing category and No. 4 for the textile and garment industry in the CommonWealth Magazine Top 2000 Enterprises. Won the Garment Manufacture Benchmark Award organized by the Taiwan Garment Industry Association. Harvard Business Review ranked the Company 27th of 50 Best Performing CEOs in Taiwan
2017 Won the "4th High-Potential Mittelstand Award" and "Excellent Mittelstand with Friendly Workplace Award" organized by the Ministry of Economic Affairs. Ranked top 21 to 35 percent in the 3rd Corporate Governance Evaluation. Won the highest-ranking "Health Promotion Badge" in the "Healthy Workplace Self-certification" organized by the National Health Administration. Ranked 150 for the manufacturing category in the CommonWealth Magazine Top 2000 Enterprises. Founded the Innovative R&D Center.
2018 Ranked top 6 to 20 percent in the 4th Corporate Governance Evaluation.
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III.
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The section below describes the role and duty of each department: Department Duty
Cross-FunctionalCommittee
Resolve operational failures of functional departments and reinforce the process operation mechanism.
Innovation R&D Center
Implements innovative technology development and integration application.Carries out assessment and procurement for investment in innovative equipment.
Chief Executive Officer's Office
Formulates internal strategy and carries out communication, coordination and integration of operational projects. Collects and analyzes external information, assesses operational risks and makes relevant recommendations. Analyzes operational performance and make relevant recommendations, reviews internal processes and implement improvement actions. Reviews the Company's operations and development and make relevant recommendations. Assesses factory construction/expansion investments and industry or cross-industry strategic alliance/merger/acquisition plans (including data collection, feasibility study, proposal, implementation results tracking). Plans new and future business development (including information collection, feasibility study, proposal and performance tracking). Plans, implements and controls collaborative projects with the industry, government and academic institutions. Applies for and controls government projects.
Auditing Office
Audit and evaluates the adequacy, soundness and effectiveness of the internal control practices in various operating procedures. Reviews and evaluates the Company's rules and system of the internal control, and makes timely suggestions for improvement to maximize the functions of internal control.
New Business Development
Group
Fabric manufacturer development Operations and management of the fabric manufacturer.
MarketingDevelopment
Division
Marketing & Supply Chain Management Department Formulates sales and marketing and procurement strategies and sets up procurement supply chain. Improves and implements operating mechanisms. Implements the abnormal loss control project.
Material Research and Development Department Consolidates the trend of material development within Makalot, and carries out R&D for key materials, develops new suppliers and launches material promotion marketing activities. Establishes Makalot's quality control system, completes customer's color and testing certification, inspects fabrics and handles abnormalities. Carries out material-based R&D, technology and quality control development, steering the direction of R&D.
Product Development Department Plans and implements proprietary apparel design development. Consolidates global fashion news and provides information to any units in need of update. Carries out product R&D and design. Organizes material presentation for customers and carries out exhibition design.
12
Department Duty
Sales Division
Sales Departments Plans order development. Incoming orders: Sells the most profitable products in the Company. Order management: Consolidates customer service and product R&D. Customer service: Files and maintains customer data and handles customer
complaints.
CorporateResources
Development Division
Human Resources Department Formulates and implements the Company's human resources strategy, policies, plans and goals. Implements the Company's recruitment, appointment, deployment, reappointment and promotion plans, and establishes and manages relevant rules and procedures to ensure that manpower supply meets the needs of the Company. Establishes and implements an education and training system to improve the quality of talents, attract and retain talents. Establishes and manages payroll policies and structure and performance management system to ensure that the Company's payroll system is competitive and consistent with the Company's payroll philosophy. Establishes and manages employee benefit plans. Manages workplace safety and health. Plans and contracts out general office works projects, and implements procurement and management of office equipment and supplies.
Information System Department Plans the strategies for global information digitization. Implements the Company's information digitization plan, assists the departments and factories to implement IT systems and provides consultation.Plans and implements information digitalization projects. Procures and maintains computer software and hardware. In response to office automation, assesses and sets up software and hardware system. Maintains information system security.
Legal Affairs TeamHandles legal affairs and provides legal consultation.
Finance and Accounting
Management Division
Finance Department Keeps updated of global financial and economic trends, improves the financial structure and implements appropriate financial tools to reinforce financial-related risk management. Plans the overall financial structure, studies, formulates and analyzes the Company's financial goals, strategies and long-/short-term plans. Builds close relationships with banks to ensure access of sufficient funds and maintains costs at reasonable levels, maximizing the international financial functions. Steadily and effectively manages the Company's funds and provides timely management information to the decision-makers.
Accounting Department Provides business analysis data to help the management make effective decisions.Manages global taxation risks and plans investment structure and taxation. Implements financial control over overseas investment projects. Plans, reviews and approves annual budgets and plans.
13
Department DutyEstablishes and implements the accounting system, handles accounting and taxation affairs and issues public announcements as required by laws and regulations.
Stock Affairs & Project TeamTakes charge for corporate governance related affairs, including providing information required by the directors and supervisors to perform their duties, assisting the directors and supervisors to meet compliance with laws and regulations and handling matters related to meetings of the Board ofDirectors and shareholders according to laws and regulations. Handles stock affairs, maintains investor relations, reinforces shareholders' confidence in the Company and enhances the company’s image. Handles inter-departmental project integration plans.
Development and Technical Division
Development and Technology DepartmentPlans sample production capacity, assigns order production and manages and consolidates operations in the department.
Technology Research and Development DepartmentManages global sample production and logistics, and plans/schedules production capacity. Coordinates and consolidates production management operations of Sample Center, implements education and training courses for pattern-making personnel, provides technical coaching and handles problems. Implements R&D of new styles and new technology. Establishes new customers' pattern and sample attributes, sets up customers' base patterns and updates relevant information. Tests applications of new machinery and auxiliary equipment and studies simplified working processes. Handles emergency orders and extraordinary approvals of samples. Price Quotation: Estimates the yardage and makes presentation samples according to the information provided by customers. Provides samples, large-volume production samples, procurement volume and large-volume standard quantity.
Technical Design Department Enhances the speed and quality of communication to meet the needs for customer technology development and professional responses.
Special Processing R&D CenterImplements R&D for special processing technology, sets up production capacity for special processing and manages quality/risks for large-volume production.Develops special processing technology, improves processes and make relevant recommendations.
ManufacturingManagement
Division
Manufacturing Management Department Conducts initiation phase assessment on new factory construction and factory expansion and the associated budget estimations and control, assists each production area to complete factory construction and related works, and establishes factory construction management standards and coordination procedures. Takes the role as the Company's point of contact for external
communication of social responsibility related matters and takes the
14
Department Dutyinitiative to establish the concept and system of social responsibility. Understands customers' requirements and standards for social responsibility and promotes the concepts and systems of social responsibility. Handles other integrated projects in production areas and assigned tasks from supervisors within the scope of manufacturing management. Plans and implements programs to improve the structure and efficiency of the manufacturing management system. Handles integration of manufacturing management information (including systems) and assists in the establishment of production management indicators and utilization of management information to effectively extend the benefits of systematic management and operations.
Production and Sales Management Department Establishes a global logistics mechanism/global strategic alliance contract manufacturing system and plans global production capacity according to the Company's operational goals. Develops and manages global strategic alliance contract manufacturing. Controls contract manufacturing costs. Consolidates/analyzes production capacity and material supply information and makes timely reports.
Logistics Management Department Manages and controls raw material logistics. Manages and controls export operations. Controls import and export and express logistics costs and establishes a verification mechanism. Provides support to global shipping manpower and implements quality enhancement programs. Consolidates and analyzes import and export management information.
Industrial Engineering and Quality Management Department Acts as the point of contact for the Company's external communication for quality issues and establishes/promotes quality policy system. Establishes quality management related specifications and database. Implements education and training courses to promote quality consensus, concepts and systems. Factory strategic layout of standard factories and specialized products and develops factory IE technology. Sets up the targets for production condition standards in each production area and tracks the progress of implementation. Sets up and maintains factory machine platforms. Implements R&D for new products, special processing operations, new machinery and accessories of auxiliary equipment. Manages industrial engineering schedule and implements education and training for IE personnel.
OverseasProduction Area
(China/Indonesia/Philippines/Cambodi
a/Vietnam)
In response to the Company's strategic goals, sets management guidelines for overseas subsidiaries and carries out overall management and development of related operational activities (manufacturing, process technology and financial management).
15
2.B
ackg
roun
d In
form
atio
n of
Dir
ecto
rs, S
uper
viso
rs, G
ener
al M
anag
er, A
ssis
tant
Gen
eral
Man
ager
, Dep
uty
Ass
ista
ntG
ener
al M
anag
er, a
nd h
eads
of d
epar
tmen
ts a
nd b
ranc
hes
(1) D
irec
tors
and
Sup
ervi
sors
A
pril
29, 2
018
Uni
t: N
T$ 1
,000
; sha
res;
%
1.C
oncu
rren
t pos
ition
s in
the
Com
pany
and
oth
er c
ompa
nies
Job
Title
Nat
iona
lity
or
Plac
eof R
egis
trat
ion
Nam
e G
ende
r
Dat
e El
ecte
d(A
ppoi
nted
)
Term
of
Off
ice
Firs
tel
ecte
dda
te
Shar
es h
eld
whe
n el
ecte
dSh
ares
hel
d cu
rren
tly
Shar
es h
eld
curr
ently
by
spou
se, u
nder
age
child
ren
Shar
es h
eld
in n
ames
of
oth
ers
Maj
or E
xper
ienc
es
(Edu
catio
n)
Posi
tion
conc
urre
ntly
hel
d in
th
e C
ompa
ny
and
othe
r com
pani
es
Man
ager
, dire
ctor
or s
uper
viso
r w
ho is
the
spou
se o
r rel
ativ
e w
ithin
seco
nd-d
egre
e ki
nshi
p
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
din
gpe
rcen
tage
Job
Title
N
ame
Rel
atio
nshi
p
Cha
irman
R.O
.C.
Taiw
an Li
-Pin
g C
hou
Mal
eJu
ne 1
9,
2017
3
year
s D
ec. 2
2,
1989
5,
989,
908
2.89 %
5,98
9,90
82.
86%
332,
822
0.16
%0
0%
Form
osta
r Gar
men
t ,C
o.,
Ltd
Gen
eral
Man
ager
of
Stan
dard
Clo
thin
g C
o.
Ltd.
In
dust
rial M
anag
emen
t D
epar
tmen
t, N
atio
nal
Che
ng K
ung
Uni
vers
ity
Cha
irman
cum
Gen
eral
M
anag
er/C
hief
Exe
cutiv
e O
ffic
er o
f Mak
alot
C
hairm
an o
f Eco
lot T
extil
e an
d X
iang
tai F
unct
iona
l Spo
rts
Fash
ion
Co.
, Ltd
.; D
irect
or o
f Le
ader
PH
, Dia
mon
d, T
riple
V
in, F
und
Eagl
e, W
into
p,
Cro
wn
Era,
Cro
wnw
ay a
nd
Lead
er V
in; C
orpo
rate
dire
ctor
re
pres
enta
tive
of G
loba
l, Lo
yal,
Fortu
ne S
tar,
Trip
le, T
op S
hiny
an
d To
p Tr
end.
Dire
ctor
H
sin-
Peng
Cho
u
Fath
eran
d so
n
Dire
ctor
R
.O.C
.Ta
iwan
Hsi
en-
Cha
ngLi
n M
ale
June
19,
20
17
3 ye
ars
May
27,
20
02
124,
196
0.06 %
124,
196
0.06
%0
0%
0 0%
M
aste
r of F
inan
ce,
Nat
iona
l Che
ngch
i U
nive
rsity
Vic
e C
hairm
an o
f Mak
alot
N
one
Non
e N
one
Dire
ctor
R
.O.C
.Ta
iwan
Hun
g-Je
nH
uang
Mal
eJu
ne 1
9,
2017
3
year
s D
ec. 2
2,
1989
2,
549,
113
1.23 %
2,54
9,11
31.
22%
1,00
4,31
20.
48%
00%
Fact
ory
Man
ager
of
Stan
dard
Clo
thin
g C
o.
Ltd.
D
epar
tmen
t of I
ndus
trial
En
gine
erin
g, C
hung
Y
uan
Chr
istia
n U
nive
rsity
Seni
or c
onsu
ltant
of M
akal
ot
Dire
ctor
of L
eade
r PH
, D
iam
ond
and
Prim
elin
e;
Cor
pora
te d
irect
or
repr
esen
tativ
e an
d G
ener
al
Man
ager
of N
amte
x C
o., L
td.
Non
e N
one
Non
e
Dire
ctor
R
.O.C
.Ta
iwan
Kuo
-C
hu Ma
Mal
eJu
ne 1
9,
2017
3
year
s M
arch
20,
19
97
1,05
4,28
90.
51%
1,05
4,28
90.
50%
0 0%
0
0%
TEX
MA
Inte
rnat
iona
l C
o., L
td.
Form
osta
r Gar
men
t ,C
o.,
Ltd
Dep
artm
ent o
f Tex
tile
Engi
neer
ing,
Fen
g C
hia
Uni
vers
ity
Seni
or c
onsu
ltant
of M
akal
ot
Vic
e C
hairm
an o
f Eco
lot
Text
ile
Cor
pora
te d
irect
or
repr
esen
tativ
e of
Tex
lot
Non
e N
one
Non
e
Dire
ctor
R
.O.C
.Ta
iwan
C
hian
Wan
g M
ale
June
19,
20
17
3 ye
ars
July
20,
19
93
3,40
3,48
11.
64 %3,
394,
481
1.62
%0
0%
0 0%
Stan
dard
Clo
thin
g C
o.
Ltd.
D
epar
tmen
t of
Inte
rnat
iona
l Tra
de,
Tam
kang
Uni
vers
ity
Seni
or c
onsu
ltant
of M
akal
ot
Non
e N
one
Non
e
16
Job
Title
Nat
iona
lity
or
Plac
eof R
egis
trat
ion
Nam
e G
ende
r
Dat
e El
ecte
d(A
ppoi
nted
)
Term
of
Off
ice
Firs
tel
ecte
dda
te
Shar
es h
eld
whe
n el
ecte
dSh
ares
hel
d cu
rren
tly
Shar
es h
eld
curr
ently
by
spou
se, u
nder
age
child
ren
Shar
es h
eld
in n
ames
of
oth
ers
Maj
or E
xper
ienc
es
(Edu
catio
n)
Posi
tion
conc
urre
ntly
hel
d in
th
e C
ompa
ny
and
othe
r com
pani
es
Man
ager
, dire
ctor
or s
uper
viso
r w
ho is
the
spou
se o
r rel
ativ
e w
ithin
seco
nd-d
egre
e ki
nshi
p
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
din
gpe
rcen
tage
Job
Title
N
ame
Rel
atio
nshi
p
Dire
ctor
R
.O.C
.Ta
iwan
Hua
ng-
Chi
ngH
oM
ale
June
19,
20
17
3 ye
ars
Mar
20,
19
97
1,52
2,49
60.
73 %1,
522,
496
0.73
%0
0%
0 0%
Uni
on G
arm
ents
Co.
Lt
d.
Hsi
ng-H
wa
Seni
or H
igh
Scho
ol
Con
sulta
nt o
f Mak
alot
N
one
Non
e N
one
Dire
ctor
R
.O.C
.Ta
iwan
Chi
u-Li
ng
Cho
u Fe
mal
eJu
ne 1
9,
2017
3
year
s M
ar 2
0,
2000
37
1,92
20.
18 %37
1,92
20.
18%
0 0%
0
0%
Ass
ista
nt G
ener
al
Man
ager
of S
tand
ard
Clo
thin
g C
o. L
td.
Dep
artm
ent o
f A
ccou
ntin
g, S
ooch
ow
Uni
vers
ity
Seni
or c
onsu
ltant
of M
akal
ot
Non
e N
one
Non
e
Dire
ctor
R
.O.C
.Ta
iwan
Kuo
-Lu
ng
Che
n (N
ote
3)
Mal
eJu
ne 1
9,
2017
3
year
s Ju
ly 2
0,
1993
1,
612,
392
0.78
%1,
602,
392
0.77
%0
0%
0 0%
Man
ager
of
Man
ufac
turin
g M
anag
emen
t, TE
XM
A
Inte
rnat
iona
l Co.
, Ltd
. D
epar
tmen
t of I
ndus
trial
En
gine
erin
g, N
atio
nal
Tsin
g H
ua U
nive
rsity
Ass
ista
nt G
ener
al M
anag
er o
f M
akal
otD
irect
or o
f Lea
der P
H,
Dia
mon
d, P
rimel
ine,
Mak
alot
V
ietn
am a
nd L
eade
r Vin
; G
ener
al M
anag
er o
f Mak
alot
C
am, M
oha,
Trip
le V
in a
nd
Lead
er V
in
Non
e N
one
Non
e
Dire
ctor
R
.O.C
.Ta
iwan
Hsi
n-Pe
ngC
hou
Mal
eJu
ne 1
9,
2017
3
year
s Ju
ne 1
9,
2017
1,
637,
619
0.79 %
2,15
4,31
31.
03%
0 0%
0
0%
Mas
ter o
f Ele
ctric
al
Engi
neer
ing,
Uni
vers
ity
of W
ashi
ngto
n
Dep
uty
Ass
ista
nt G
ener
al
Man
ager
of M
anuf
actu
ring
Man
agem
ent,
Mak
alot
; A
ssis
tant
Gen
eral
Man
ager
of
Sout
h V
ietn
am P
rodu
ctio
n A
rea
Cor
pora
te d
irect
or
repr
esen
tativ
e of
Xia
ngta
i Fu
nctio
nal S
ports
Fas
hion
C
o., L
td.
Cha
irma
nLi
-Pin
g C
hou
Fath
eran
d so
n
Supe
rvis
or
R.O
.C.
Taiw
an
Yu-
Ya
Lin
(Not
e 1)
Fem
ale
June
19,
20
17
3 ye
ars
Mar
20,
20
00
10,2
000%
10,2
000.
00%
0 0.
00%
0 0%
CPA
, Ben
ison
A
ssoc
iate
d C
PAs F
irm
Mas
ter o
f Acc
ount
ing,
N
atio
nal T
aiw
an
Uni
vers
ity
Supe
rvis
or o
f Jia
Rui
yang
, Sh
angh
ai Ju
yang
, Jia
Ju
yang
, Jia
Jiay
ang,
Liy
ang
Trad
ing,
Eco
lot T
extil
e,
Xia
ngta
i Fun
ctio
nal S
ports
Fa
shio
n.
CPA
of B
enis
on A
ssoc
iate
d C
PAs F
irm
Inde
pend
ent
dire
ctor
of
Cig
na
Life
Insu
ranc
e C
o., L
td.
Non
e N
one
Non
e
17
Job
Title
Nat
iona
lity
or
Plac
eof R
egis
trat
ion
Nam
e G
ende
r
Dat
e El
ecte
d(A
ppoi
nted
)
Term
of
Off
ice
Firs
tel
ecte
dda
te
Shar
es h
eld
whe
n el
ecte
dSh
ares
hel
d cu
rren
tly
Shar
es h
eld
curr
ently
by
spou
se, u
nder
age
child
ren
Shar
es h
eld
in n
ames
of
oth
ers
Maj
or E
xper
ienc
es
(Edu
catio
n)
Posi
tion
conc
urre
ntly
hel
d in
th
e C
ompa
ny
and
othe
r com
pani
es
Man
ager
, dire
ctor
or s
uper
viso
r w
ho is
the
spou
se o
r rel
ativ
e w
ithin
seco
nd-d
egre
e ki
nshi
p
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
din
gpe
rcen
tage
Job
Title
N
ame
Rel
atio
nshi
p
Inde
pend
ent
Dire
ctor
R.O
.C.
Taiw
an
Ling
-I
Chu
ng
Fem
ale
June
19,
20
17
3 ye
ars
June
23,
20
14
0 0%
0
0%
0 0%
0
0%
Bac
helo
r of A
rt in
Li
tera
ture
, Tun
ghai
U
nive
rsity
Vic
e Pr
esid
ent (
VP)
of
Gre
ater
Chi
na R
egio
n,
TAR
GET
Mem
ber o
f the
Aud
it C
omm
ittee
/Com
pens
atio
n C
omm
ittee
of M
akal
otN
one
Non
e N
one
Inde
pend
ent
Dire
ctor
R.O
.C.
Taiw
an Y
u-H
uiSu (Not
e 4)
Fem
ale
June
19,
20
17
3 ye
ars
June
2,
2003
0
0%
0 0%
0
0%
0 0%
Prof
esso
r of
Acc
ount
ing,
Soo
chow
U
nive
rsity
PhD
. Bus
ines
s A
dmin
istra
tion,
N
atio
nal T
aiw
an
Uni
vers
ity
Mem
ber o
f Aud
it C
omm
ittee
of
Mak
alot
Prof
esso
r of A
ccou
ntin
g,
Sooc
how
Uni
vers
ity;
Inde
pend
ent D
irect
or o
f In
Win
D
evel
opm
ent I
nc.
Inde
pend
ent D
irect
or, m
embe
r of
Com
pens
atio
n C
omm
ittee
an
d A
udit
Com
mitt
ee o
f En
noco
nn C
orpo
ratio
n an
d TW
i Ph
arm
aceu
tical
s, In
c.
Non
e N
one
Non
e
Inde
pend
ent
Dire
ctor
R.O
.C.
Taiw
an Si
-Fen
g W
ang
(Not
e 5)
Mal
eJu
ne 1
9,
2017
3
year
s Ju
ne 1
4,
2005
89
5 0%
7,
895
0%
6,62
3 0%
0
0%
Prof
esso
r of D
epar
tmen
t of
Psy
chol
ogy,
Fu
Jen
Cat
holic
Uni
vers
ity;
Ass
ocia
te P
rofe
ssor
of
Dep
artm
ent o
f Bus
ines
s A
dmin
istra
tion,
Soo
chow
U
nive
rsity
PhD
. Bus
ines
s A
dmin
istra
tion,
N
atio
nal S
un Y
at-s
en
Uni
vers
ity
Mem
ber o
f the
Aud
it C
omm
ittee
/Com
pens
atio
n C
omm
ittee
of M
akal
otPr
ofes
sor o
f Dep
artm
ent o
f Ps
ycho
logy
, Fu
Jen
Cat
holic
U
nive
rsity
Non
e N
one
Non
e
2.Po
sitio
n co
ncur
rent
ly h
eld
in o
ther
com
pani
es
Job
Title
Nat
iona
lity
or
Plac
eof
Reg
istr
atio
n
Nam
e G
ende
rD
ate
Elec
ted
(App
oint
ed)
Term
of
Off
ice
Firs
tel
ecte
dda
te
Shar
es h
eld
whe
n el
ecte
dSh
ares
hel
d cu
rren
tly
Shar
es h
eld
curr
ently
by
sp
ouse
, und
erag
e ch
ildre
n
Shar
es h
eld
in n
ames
of
oth
ers
Maj
or E
xper
ienc
es
(Edu
catio
n)
Posi
tion
conc
urre
ntly
hel
d in
the
Com
pany
an
d ot
her c
ompa
nies
Man
ager
, dire
ctor
or s
uper
viso
r w
ho is
the
spou
se o
r rel
ativ
e w
ithin
seco
nd-d
egre
e ki
nshi
p
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
din
gpe
rcen
tag
e
Num
ber
of sh
ares
Shar
ehol
din
gpe
rcen
tage
Job
Title
Na
me
Relati
onshi
p
18
Job
Title
Nat
iona
lity
or
Plac
eof
Reg
istr
atio
n
Nam
e G
ende
rD
ate
Elec
ted
(App
oint
ed)
Term
of
Off
ice
Firs
tel
ecte
dda
te
Shar
es h
eld
whe
n el
ecte
dSh
ares
hel
d cu
rren
tly
Shar
es h
eld
curr
ently
by
sp
ouse
, und
erag
e ch
ildre
n
Shar
es h
eld
in n
ames
of
oth
ers
Maj
or E
xper
ienc
es
(Edu
catio
n)
Posi
tion
conc
urre
ntly
hel
d in
the
Com
pany
an
d ot
her c
ompa
nies
Man
ager
, dire
ctor
or s
uper
viso
r w
ho is
the
spou
se o
r rel
ativ
e w
ithin
seco
nd-d
egre
e ki
nshi
p
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber o
f sh
ares
Shar
ehol
ding
perc
ent
age
Num
ber
of sh
ares
Shar
ehol
din
gpe
rcen
tag
e
Num
ber
of sh
ares
Shar
ehol
din
gpe
rcen
tage
Job
Title
Na
me
Relati
onshi
p
Supe
rvi
sor
R.O
.C.
Taiw
an Sh
uang
-Chu
an
Liu
(Not
e 2)
Mal
eJu
ne 1
9,
2017
3
year
s D
ec.
22,1
989
3,60
3,52
21.
72%
3,60
3,52
21.
72%
5,29
2 0.
00%
0 0%
Pres
iden
t of t
he 1
5th
Wor
ld T
aiw
anes
e C
ham
bers
of C
omm
erce
(W
TCC
); Se
nior
A
dvis
er o
f Ove
rsea
s C
omm
unity
Aff
airs
C
ounc
il Pr
esid
ent o
f the
6th
W
orld
Tai
wan
ese
Cha
mbe
rs o
f Com
mer
ce
(WTC
C),
Hon
orar
y Pr
esid
ent o
f Ind
ones
ia
Taiw
an C
ham
ber o
f C
omm
erce
Pa
cific
Wes
tern
U
nive
rsity
, USA
Cha
irman
of
M
inyu
En
terp
rise
Co.
, Ltd
. D
irect
or o
f Yua
nhe
Bio
tech
nolo
gy
App
licat
ions
Co.
, Ltd
.; Se
nior
A
dvis
er o
f Ove
rsea
s Com
mun
ity
Aff
airs
Cou
ncil,
R.O
.C.
Vic
e C
hairm
an o
f Ove
rsea
s Ta
iwan
ese
Com
mer
cial
Tra
vel
Age
ncy
Ltd
Co.
Non
e N
one
Non
e
Not
e 1:
Ms.
Yu-
Ya
Lin
serv
ed a
s su
perv
isor
from
Mar
. 20,
200
0 to
Apr
. 9, 2
007.
She
was
dis
mis
sed
durin
g a
term
due
to p
erso
nal r
easo
ns b
ut re
elec
ted
in a
by-
elec
tion
in th
e 20
07
annu
al g
ener
al m
eetin
g an
d re
sum
ed a
s su
perv
isor
fro
m J
un. 1
3, 2
007.
Afte
r re
elec
tion
of th
e B
oard
on
Jun.
19,
201
7 sh
areh
olde
rs' m
eetin
g, th
e C
ompa
ny s
et u
p th
e A
udit
Com
mitt
ee to
repl
ace
the
supe
rvis
ory
boar
d an
d th
eref
ore
she
has b
egun
to se
rve
as a
dire
ctor
sinc
e Ju
n. 1
9, 2
017.
N
ote
2: M
r. Sh
uang
-Chu
an L
iu s
erve
d as
sup
ervi
sor
from
Dec
. 22,
198
9 to
Jul
. 19,
200
7. F
or a
per
iod
of ti
me,
he
did
not s
erve
as
a di
rect
or o
r su
perv
isor
in th
e C
ompa
ny d
ue to
pe
rson
al re
ason
s. H
e se
rved
as
dire
ctor
from
Mar
. 20,
199
7 to
Mar
. 19,
200
0 an
d su
perv
isor
from
Mar
. 20,
200
0 to
Jun.
1, 2
003,
dire
ctor
from
Jun.
2, 2
003
to M
ay 2
6, 2
008,
and
su
perv
isor
star
ting
from
May
. 27,
200
8. A
fter r
eele
ctio
n of
the
Boa
rd o
n Ju
n. 1
9, 2
017
shar
ehol
ders
' mee
ting,
the
Com
pany
set u
p th
e A
udit
Com
mitt
ee to
repl
ace
the
supe
rvis
ory
boar
d an
d th
eref
ore
he h
as b
egun
to se
rve
as a
dire
ctor
sinc
e Ju
n. 1
9, 2
017.
N
ote
3: M
r. K
uo-L
ung
Che
n se
rved
as
dire
ctor
from
Jul
. 20,
199
3 to
Mar
. 19,
200
0. F
or a
per
iod
of ti
me,
he
did
not s
erve
as
dire
ctor
or
supe
rvis
or in
the
Com
pany
due
to p
erso
nal
reas
ons.
He
resu
med
the
posi
tion
of d
irect
or a
fter r
eele
ctio
n of
the
Boa
rd o
n th
e Ju
ne 1
9, 2
017
shar
ehol
ders
' mee
ting.
N
ote
4: M
s. Y
u-H
ui S
u se
rved
as s
uper
viso
r fro
m Ju
n. 2
, 200
3 to
Jun.
17,
201
5. D
urin
g th
e pe
riod,
she
resi
gned
due
to p
erso
nal r
easo
ns. A
fter r
eele
ctio
n of
the
boar
d on
the
Jun.
19,
20
17 sh
areh
olde
rs' m
eetin
g, sh
e se
rved
as a
n in
depe
nden
t dire
ctor
. N
ote5
3: M
r. Si
-Fen
g W
ang
serv
ed a
s dire
ctor
from
Jun.
14,
200
5 to
Jun.
13,
200
8. F
or a
per
iod
of ti
me,
he
did
not s
erve
as a
dire
ctor
or s
uper
viso
r in
the
Com
pany
due
to p
erso
nal
reas
ons.
Afte
r ree
lect
ion
of th
e bo
ard
on th
e Ju
n. 1
9, 2
017
shar
ehol
ders
' mee
ting,
he
serv
ed a
s ind
epen
dent
dire
ctor
.
19
Condition Name (Note 1)
Has five or more years of work experience and the following
professional qualifications Meet the criteria of independence (Note 2)
Number of other public companies in Taiwan where concurrently serving as anindependent director
Lecturer or higher for the subjects of business, law, finance,accounting, or otheracademic field related to the businessoperations of the Company in public or private colleges and universities.
Currently serving as a judge,prosecutor,lawyer, CPA or other specialist or technical professionalwho are necessary for theCompany's business and have been certified by national examinations and licensed by the competent authorities
Workexperiencenecessary for businessadministration, legal affairs,finance,accounting, or other operationsneeded by the Company
1 2 3 4 5 6 7 8 9 10
DirectorLi-Ping Chou V V V V V V V V 0
Director Hsien-Chang Lin V V V V V V V V V V V 0
DirectorHung-Jen Huang V V V V V V V V 0
DirectorKuo-Chu Ma V V V V V V V V V 0
DirectorChian Wang V V V V V V V V 0
DirectorHuang-Ching Ho V V V V V V V V V V 0
Director Chiu-Ling Chou V V V V V V V V V V 0
DirectorShuang-Chuan Liu V V V V V V V V V V 0
DirectorYu-Ya Lin V V V V V V V V V V 0
DirectorKuo-Lung Chen V V V V V V V V 0
DirectorHsin-Peng Chou V V V V V V V 0
Independent DirectorChung Ling-I
V V V V V V V V V V V 0
Independent DirectorYu-Hui Su
V V V V V V V V V V V V 3
Independent DirectorSi-Feng Wang
V V V V V V V V V V V 0
Note 1: Please add more rows to accommodate additional entries. Note 2: Please add " " in the field under each criteria number if the director or supervisor meets the criteria two years prior to being elected and during his/her term of service.
1 Not employed by the Company or its affiliated companies. 2 Not a director or supervisor of any of the Company's affiliates (excluding independent directors set up by the
Company, its parent company or subsidiaries in compliance with the local regulations). 3 Not a natural person shareholder who holds more than one percent of total shares issued by the Company or is
20
one of the top 10 shareholders by number of shares held, including shares held in the name of the person’s spouse, underage children, or in the name of others.
4 Not a spouse, a family member within the second-degree of kinship, or a lineal relative within the third-degree of kinship of any of the persons described in the preceding three paragraphs.
5 Not a director, supervisor, or employee of a corporate shareholder who directly holds 5 percent or more of the Company's total issued shares or is ranked top-5 among the corporate shareholders.
6 Not a director (executive director), supervisor (member of the supervisory board), manager, or shareholder who holds more than 5 percent of the shares of company or institution that has financial or business exchanges with the Company.
7 Not a professional individual, proprietor, partner, or company/institution owner, partner, director (executive director), supervisor (member of the supervisory board), managers and spouse of any of these persons that provides business, legal, financial and/or accounting services or consultation to the Company or affiliates. However, members of the Compensation Committee fulfilling their duties in accordance with Article 7 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 are not limited to these terms.
8 Not a spouse or a relative within the second-degree of kinship to any director of the Company. 9 Not been involved in any of situations defined in Article 30 of the Company Act. 10 Not elected on behalf of a government agency or corporate or as a representative of these organizations as
defined in Article 27 of the Company Act.
21
(2) B
ackg
roun
d In
form
atio
n of
Gen
eral
Man
ager
, Ass
ista
nt G
ener
al M
anag
er, D
eput
y A
ssis
tant
Gen
eral
Man
ager
, and
hea
ds o
f de
part
men
ts a
nd b
ranc
hes
Apr
il 29
, 201
8,U
nit:
NT$
1,0
00; s
hare
s; %
Job
Title
N
atio
nalit
yN
ame
Gen
der
Dat
e El
ecte
d(A
ppoi
nted
)
Shar
es h
eld
Shar
es h
eld
by
spou
se, u
nder
age
child
ren
Shar
es h
eld
in n
ames
of o
ther
s M
ajor
Exp
erie
nces
(Edu
catio
n)Po
sitio
n co
ncur
rent
ly h
eld
in th
e C
ompa
ny
Man
ager
who
is th
e sp
ouse
or
rela
tive
with
in se
cond
-deg
ree
kins
hip
Num
ber o
f sh
ares
Shar
ehol
ding
perc
enta
geN
umbe
r of
shar
esSh
areh
oldi
ngpe
rcen
tage
Num
ber
of sh
ares
Sh
areh
oldi
ngpe
rcen
tage
Job
Title
N
ame
Rel
atio
nshi
p
Cha
irman
cum
G
ener
al M
anag
er
(Chi
ef E
xecu
tive
Off
icer
)
R.O
.C.
Taiw
an
Li-P
ing
Cho
u M
ale
Feb.
1,19
905,
989,
908
2.86
%33
2,82
20.
16%
0 0%
Form
osta
r Gar
men
t ,C
o., L
td
Stan
dard
Clo
thin
g C
o. L
td.
Indu
stria
l Eng
inee
ring
Dep
artm
ent,
Nat
iona
l Che
ng
Kun
g U
nive
rsity
Cha
irman
of E
colo
t Tex
tile
and
Xia
ngta
i Fun
ctio
nal
Spor
ts F
ashi
on C
o., L
td.;
Dire
ctor
of L
eade
r PH
, D
iam
ond,
Trip
le V
in, F
und
Eagl
e, W
into
p, C
row
n Er
a,
Cro
wnw
ay a
nd L
eade
r Vin
; C
orpo
rate
dire
ctor
re
pres
enta
tive
of G
loba
l, Lo
yal,
Fortu
ne S
tar,
Trip
le,
Top
Shin
y an
d To
p Tr
end.
Seni
or
Man
ager
Hsi
n-Pe
ngC
hou
Fath
eran
d so
n
Ass
ista
nt G
ener
al
Man
ager
of
Man
ufac
turin
g M
anag
emen
t D
ivis
ion
and
Dev
elop
men
t and
Te
chni
cal D
ivis
ion
Gen
eral
Man
ager
of
Prod
uctio
n A
reas
of
the
Phili
ppin
es,
Cam
bodi
an a
nd
Vie
tnam
(Not
e 1)
R.O.
C.
Taiw
an
Kuo
-Lu
ng
Che
n M
ale
Feb.
1,19
901,
602,
392
0.77
%0
0%0
0%
Man
ager
of M
anuf
actu
ring
Man
agem
ent,
TEX
MA
In
tern
atio
nal C
o., L
td.
Dep
artm
ent o
f Ind
ustri
al
Engi
neer
ing,
Nat
iona
l Tsi
ng
Hua
Uni
vers
ity
Dire
ctor
of L
eade
r PH
, D
iam
ond,
Prim
elin
e,
Mak
alot
Vie
tnam
and
Le
ader
Vin
; Gen
eral
M
anag
er o
f Mak
alot
Cam
, M
oha,
Trip
le V
in a
nd
Lead
er V
in
Non
e N
one
Non
e
Seni
or C
onsu
ltant
to
Chi
ef E
xecu
tive
Off
icer
cum
Gen
eral
M
anag
er o
f Chi
na
Prod
uctio
n A
rea
(Not
e 1)
R.O.
C.
He-
Chu
anLi
ang
Mal
e Ja
nuar
y 3,
20
17
00%
00%
00%
Thai
Gar
men
t Exp
ort C
o., L
tdIT
T Te
xtile
Man
ufac
turin
g C
o.,
Ltd.
M
aste
r of M
anag
emen
t Sc
ienc
e, I-
Shou
Uni
vers
ity
Non
eN
one
Non
e N
one
Dep
uty
Ass
ista
nt
Gen
eral
Man
ager
of
Man
ufac
turin
g M
anag
emen
t D
ivis
ion;
Ass
ista
nt
Gen
eral
Man
ager
of
Sout
h V
ietn
am
Prod
uctio
n A
rea
R.O
.C.
Taiw
an
Hsi
n-Pe
ngC
hou
Mal
e Se
ptem
ber 3
0,20
13
2,15
4,31
31.
03%
00%
00%
M
aste
r of E
lect
rical
En
gine
erin
g, U
nive
rsity
of
Was
hing
ton
Cor
pora
te d
irect
or
repr
esen
tativ
e of
Xia
ngta
i Fu
nctio
nal S
ports
Fas
hion
C
o., L
td.
Gen
eral
Man
ager
Li
-Pin
g C
hou
Fath
eran
dso
n
22
Job
Title
N
atio
nalit
yN
ame
Gen
der
Dat
e El
ecte
d(A
ppoi
nted
)
Shar
es h
eld
Shar
es h
eld
by
spou
se, u
nder
age
child
ren
Shar
es h
eld
in n
ames
of o
ther
s M
ajor
Exp
erie
nces
(Edu
catio
n)Po
sitio
n co
ncur
rent
ly h
eld
in th
e C
ompa
ny
Man
ager
who
is th
e sp
ouse
or
rela
tive
with
in se
cond
-deg
ree
kins
hip
Num
ber o
f sh
ares
Shar
ehol
ding
perc
enta
geN
umbe
r of
shar
esSh
areh
oldi
ngpe
rcen
tage
Num
ber
of sh
ares
Sh
areh
oldi
ngpe
rcen
tage
Job
Title
N
ame
Rel
atio
nshi
p A
ssis
tant
Gen
eral
M
anag
er o
f Vie
tnam
Pr
oduc
tion
Are
a (N
ote
1)
R.O
.C.
Taiw
an
Hun
g-Li
n Ts
ai
Mal
e M
arch
11,
20
02
39,9
600.
02%
00%
00%
M
aste
r of A
tmos
pher
ic
Scie
nces
, Nat
iona
l Tai
wan
U
nive
rsity
Gen
eral
Man
ager
, Mak
alot
V
inN
one
Non
e N
one
Indo
nesi
a pr
oduc
tion
area
Se
nior
Dep
uty
Ass
ista
nt G
ener
al
Man
ager
R.O
.C.
Taiw
an
Hao
-Pai
Hsu
Mal
e Ju
ne 2
0, 2
007
43,9
260.
02%
8,06
90%
0 0%
D
epar
tmen
t of I
nter
natio
nal
Bus
ines
s, N
atio
nal T
aiw
an
Uni
vers
ityN
one
Non
e N
one
Non
e
Ass
ista
nt G
ener
al
Man
ager
of
Mar
ketin
g D
evel
opm
ent
Div
isio
n /C
orpo
rate
R
esou
rces
D
evel
opm
ent
Div
isio
n
R.O
.C.
Taiw
an
Yu-
Chi
ngH
uang
Fem
ale
Apr
il 28
, 20
03
139,
270
0.07
%0
0%0
0%
Sale
s Exe
cutiv
e, F
ar E
aste
rn
Text
ile
Mas
ter o
f Bus
ines
s A
dmin
istra
tion,
Nat
iona
l Tai
pei
Uni
vers
ity
Cha
irman
of J
iaxi
ng
Rui
yang
, Sha
ngha
i Juy
ang,
Ji
axin
g Ju
yang
, Jia
Ji
ayan
g
Non
e N
one
Non
e
Sale
s Div
ison
I/Sa
les
Div
ison
V
Ass
ista
nt G
ener
al
Man
ager
R.O
.C.
Taiw
an
Pei-F
ang
Song
Fe
mal
e Ju
ly 7
,200
089
,868
0.04
%4,
901
0%0
0%
Brid
gepo
rt U
nive
rsity
N
one
Non
e N
one
Non
e
Sale
s Div
ison
I D
eput
y A
ssis
tant
G
ener
al M
anag
er
R.O
.C.
Taiw
an
Yi-H
sin
Lin
Fem
ale
June
8, 2
013
5,00
00%
00%
0 0%
U
nive
rsity
of C
alifo
rnia
, USA
Non
e N
one
Non
e N
one
Sale
s Div
ison
II
Seni
or D
eput
y A
ssis
tant
Gen
eral
M
anag
er
R.O
.C.
Taiw
an
Hsi
u-H
uiLa
i Fe
mal
e M
ay 1
.199
316
0,30
00.
08%
00%
0 0%
TE
XM
A In
tern
atio
nal C
o., L
td.
Dep
artm
ent o
f Ban
king
and
In
sura
nce,
Tam
kang
Uni
vers
ityN
one
Non
e N
one
Non
e
Sale
s Div
isio
n II
I Se
nior
Dep
uty
Ass
ista
nt G
ener
al
Man
ager
R.O
.C.
Taiw
an
Mo-
Ku
Liao
M
ale
Oct
. 11,
2005
38,4
500.
02%
00%
0 0%
K-M
art,
USA
D
epar
tmen
t of I
nter
natio
nal
Trad
e, T
akm
ing
Inst
itute
of
Com
mer
ce
Non
eN
one
Non
e N
one
Sale
s Div
isio
n V
D
eput
y A
ssis
tant
G
ener
al M
anag
er
R.O
.C.
Taiw
an
Hsi
ao-
Hsu
n La
iFe
mal
e M
ay 4
, 200
439
,370
0.02
%0
0%0
0%
Dep
artm
ent o
f Tex
tile
and
Clo
thin
g, F
u Je
n C
atho
lic
Uni
vers
ityN
one
Non
e N
one
Non
e
Sale
s Div
isio
n V
I Se
nior
Dep
uty
Ass
ista
nt G
ener
al
Man
ager
R.O
.C.
Taiw
an
Li-Y
u Pu
Fem
ale
Apr
.16
,199
3 27
0,40
20.
13%
97,9
540.
05%
00%
Form
osta
r Gar
men
t ,C
o., L
td
Dep
artm
ent o
f Bus
ines
s M
anag
emen
t, N
atio
nal C
hung
H
sing
Uni
vers
ity
Non
eN
one
Non
e N
one
Sale
s Div
isio
n V
I D
eput
y A
ssis
tant
G
ener
al M
anag
er
R.O
.C.
Taiw
an
Lian
g-Lu
K
uoM
ale
Apr
il 23
, 20
07
00%
00%
00%
D
epar
tmen
t of A
rabi
c La
ngua
ge a
nd C
ultu
re, N
atio
nal
Che
ngch
i Uni
vers
ity
Non
eN
one
Non
e N
one
23
Job
Title
N
atio
nalit
yN
ame
Gen
der
Dat
e El
ecte
d(A
ppoi
nted
)
Shar
es h
eld
Shar
es h
eld
by
spou
se, u
nder
age
child
ren
Shar
es h
eld
in n
ames
of o
ther
s M
ajor
Exp
erie
nces
(Edu
catio
n)Po
sitio
n co
ncur
rent
ly h
eld
in th
e C
ompa
ny
Man
ager
who
is th
e sp
ouse
or
rela
tive
with
in se
cond
-deg
ree
kins
hip
Num
ber o
f sh
ares
Shar
ehol
ding
perc
enta
geN
umbe
r of
shar
esSh
areh
oldi
ngpe
rcen
tage
Num
ber
of sh
ares
Sh
areh
oldi
ngpe
rcen
tage
Job
Title
N
ame
Rel
atio
nshi
p
Man
ufac
turin
g M
anag
emen
t D
ivis
ion
Seni
or D
eput
y A
ssis
tant
Gen
eral
M
anag
er
R.O
.C.
Taiw
an
Shu-
Yin
g C
hen
Fem
ale
Jun
6,19
9443
6,80
70.
21%
297,
455
0.14
%0
0%
Shiy
un G
arm
ent C
o., L
td.
Mas
ter o
f Bus
ines
s A
dmin
istra
tion,
Min
g C
huan
U
nive
rsity
Cor
pora
te d
irect
or
repr
esen
tativ
e of
Xia
ngta
i Fu
nctio
nal S
ports
Fas
hion
C
o., L
td.
Dire
ctor
of J
iaxi
ng
Rui
yang
, Sha
ngha
i Juy
ang,
Ji
axin
g Ju
yang
, Jia
Ji
ayan
g
Non
e N
one
Non
e
Fina
nce
and
Acc
ount
ing
Man
agem
ent
Div
isio
n Se
nior
Dep
uty
Ass
ista
nt G
ener
al
Man
ager
R.O
.C.
Taiw
an
Yu-
Tsen
Wen
Fe
mal
e N
ov. 1
,200
218
0,27
50.
09%
00%
0 0%
Seni
or M
anag
er o
f U
nder
writ
ing
Dep
artm
ent,
Gra
nd C
atha
y Se
curit
ies
Cor
pora
tion
MB
A, U
nive
rsity
of C
alifo
rnia
, Ir
vine
, USA
Dire
ctor
of J
iaxi
ng
Rui
yang
, Sha
ngha
i Juy
ang,
Ji
axin
g Ju
yang
, Jia
Ji
ayan
g
Non
e N
one
Non
e
Acc
ount
ing
Dep
artm
ent
Dep
uty
Ass
ista
nt
Gen
eral
Man
ager
R.O
.C.
Taiw
an
Yu-
Hsi
nLi
n Fe
mal
e Se
p. 1
2,
2011
16
5,00
00.
08%
00%
00%
Ris
k C
ontro
l Dep
artm
ent,
Mas
terli
nk S
ecur
ities
Cor
p.
Inte
rnal
Aud
it of
Bao
tai
Secu
ritie
s Inv
estm
ent
MB
A, D
rexe
l Uni
vers
ity
Cor
pora
te d
irect
or
repr
esen
tativ
e of
Eco
lot
Text
ile
Non
e N
one
Non
e
Spok
espe
rson
Si
ngap
ore
Hen
g-Y
uLi
n M
ale
Jul.
1, 2
007
535
0%0
0%0
0%
Nan
yang
Tec
hnol
ogic
al
Uni
vers
ity, S
inga
pore
D
irect
or o
f Dim
erco
Dat
a Sy
stem
, Co.
N
one
Non
e N
one
Spec
ial A
ssis
tant
, C
hief
Exe
cutiv
e O
ffic
er's
Off
ice
R.O
.C.
Taiw
an
Chi
ng-
Kua
ngH
uang
Mal
e Se
p. 3
,,200
126
,192
0.01
%0
0%0
0%
Mas
ter o
f Bus
ines
s A
dmin
istra
tion,
Nat
iona
l Chu
ng
Che
ng U
nive
rsity
D
irect
or o
f Nam
tex
Non
e N
one
Non
e
Aud
it O
ffic
e M
anag
emen
t R
.O.C
.Ta
iwan
Che
n-C
huan
Yeh
Fem
ale
Aug
. 3.2
001
111
0%69
,057
0.03
%0
0%
Aud
it Te
am M
anag
er o
f Chi
ng
Hsi
ng C
PAs
Juni
or M
anag
er o
f U
nder
writ
ing
Dep
artm
ent,
Li
Shi S
ecur
ities
D
epar
tmen
t of A
ccou
ntin
g,
Sooc
how
Uni
vers
ity
Non
eN
one
Non
e N
one
Not
e 1:
The
job
title
s at t
he p
rodu
ctio
n ar
eas a
re e
quiv
alen
t to
the
jobs
title
s one
-tier
hig
her a
t the
hea
d of
fice.
24
3.C
ompe
nsat
ions
to D
irec
tors
(inc
ludi
ng in
depe
nden
t dir
ecto
rs),
Supe
rvis
ors,
Gen
eral
Man
ager
, Ass
ista
nt G
ener
al M
anag
er in
the
mos
t rec
ent y
ear
(I) C
ompe
nsat
ions
to d
irec
tors
(inc
ludi
ng in
depe
nden
t dir
ecto
rs)
Uni
t: N
T$ 1
000
Job
Title
N
ame
Dire
ctor
s' co
mpe
nsat
ions
R
atio
of s
um o
f ite
ms A
, B, C
and
D
to n
et in
com
e (N
ote
10)
Com
pens
atio
ns p
aid
to c
oncu
rren
t em
ploy
ees
Rat
io o
f sum
of
item
s A, B
, C, D
, E,
F a
nd G
to n
et
inco
me
(Not
e 10
)
Com
pen
sati
ons
from
ot
her
non-
subs
idia
ry
com
pani
es
inve
sted
by
the
Com
pan
y (N
ote
11)
Com
pens
atio
n (A
) (N
ote
2)
Seve
ranc
e pa
y an
d re
tirem
ent
bene
fits (
B)
Dire
ctor
s'co
mpe
nsat
ion
(C)
(Not
e 3)
Expe
nses
from
pr
ofes
sion
al
prac
tice
(D)
(Not
e 4)
Sala
ries,
bonu
ses,
and
spec
ial e
xpen
se (E
) (n
ote
5)
Seve
ranc
e pa
y an
d re
tirem
ent
bene
fits (
F)
Empl
oyee
rem
uner
atio
n (G
) (no
te 6
)
The
Com
pan
y
All
the
com
pan
ies
incl
ude
d in
th
efin
anci
al
stat
em
ents
(N
ote
7)
The
Com
pan
y
All
the
com
pani
esin
clud
ed
in th
e fin
anci
al
stat
eme
nts
(Not
e 7)
The
Com
pany
All
the
com
pani
es
incl
uded
in
the
finan
cial
st
atem
ents
(Not
e 7)
The
Com
pan
y
All
the
com
pani
esin
clud
ed
in th
e fin
anci
al
stat
eme
nts
(Not
e 7)
The
Com
pan
y
All
the
com
pani
esin
clud
ed
in th
e fin
anci
al
stat
eme
nts
(Not
e 7)
The
Com
pany
All
the
com
pani
es
incl
uded
in
the
finan
cial
st
atem
ents
(Not
e 7)
The
Com
pan
y
All
the
com
pani
esin
clud
ed
in th
e fin
anci
al
stat
eme
nts
(Not
e 7)
The
Com
pany
All
the
com
pani
es
incl
uded
in th
e fin
anci
al
stat
emen
ts
(Not
e 7)
Th
e C
ompa
ny
All
the
com
pani
es
incl
ude
d in
th
efin
anci
alst
atem
ents
(N
ote
7)
Cas
ham
ount
Stoc
kam
ou nt
Cas
ham
ount
Stoc
kam
ou nt
Cha
irman
Li
-Pin
g C
hou
(Not
e A
) 0
0 0
0 5,
760
5,86
0 60
75
0.
45 %0.
46%
10,1
02
10,1
02
0 0
1,88
8 0
1,88
8 0
1.38 %
1.39
%
Non
e
Dire
ctor
Hsi
en-C
hang
Lin
608
608
0 0
32,6
60
32,7
60
620
635
2.59 %
2.64
%17
,004
19
,344
7,
641
7,64
1 86
1 0
1,02
1 0
4.56 %
4.77
%
Non
e
Hun
g-Je
n H
uang
K
uo-C
hu M
a C
hian
Wan
g H
uang
-Chi
ng H
o C
hiu-
Ling
Cho
u Sh
uang
-Chu
an L
iuY
u-Y
a Li
n K
uo-L
ung
Che
n H
sin-
Peng
Cho
u In
depe
nden
tD
irect
or
Ling
-I C
hung
Y
u-H
ui S
u Si
-Fen
g W
ang
*Exc
ept t
hose
dis
clos
ed a
bove
, com
pens
atio
ns g
iven
by
any
of th
e co
mpa
nies
list
ed in
the
finan
cial
repo
rts to
dire
ctor
s pro
vidi
ng se
rvic
e fo
r the
m in
the
mos
t rec
ent y
ear (
e.g.
non
-em
ploy
ee c
onsu
ltant
): N
one.
Not
e A
: Pur
chas
e of
one
car
; the
cos
t is N
T$ 1
,217
,000
.
25
Range of Compensations
Range of compensations paid to directors of the Company
Name of Director Total of (A+B+C+D) Total of (A+B+C+D+E+F+G)
The Company (Note 8)
All the companies Included in the
Financial Statements(Note 9)
The Company (Note 8)
All the companies Included in the
Financial Statements(Note 9)
Less than NT$ 2,000,000 Yu-Ya Lin, Si-Feng Wang, Ling-I Chung, Yu-Hui Su
Yu-Ya Lin, Si-Feng Wang, Ling-I Chung, Yu-Hui Su
Yu-Ya Lin, Si-Feng Wang, Ling-I Chung, Yu-Hui Su
Yu-Ya Lin, Si-Feng Wang, Ling-I Chung, Yu-Hui Su
NT$ 2,000,000 (inclusive) to NT$ 5,000,000
Hsien-Chang Lin, Hung-Jen Huang, Chian Wang, Kuo-Chu Ma, Huang-Ching Ho, Chiu-Ling Chou, Shuang-Chuan Liu, Hsin-Peng Chou, Kuo-Lung Chen
Hsien-Chang Lin, Hung-Jen Huang, Chian Wang, Kuo-Chu Ma, Huang-Ching Ho, Chiu-Ling Chou, Shuang-Chuan Liu, Hsin-Peng Chou, Kuo-Lung Chen
Hsien-Chang Lin, Chian Wang Shuang-Chuan Liu, Huang-Ching Ho
Hsien-Chang Lin, Chian Wang Shuang-Chuan Liu, Huang-Ching Ho
NT$ 5,000,000 (inclusive) to NT$ 10,000,000
Li-Ping Chou Li-Ping Chou
Hung-Jen Huang, Chiu-Ling Chou, Hsin-Peng Chou, Kuo-Lung Chen
Hung-Jen Huang, Chiu-Ling Chou, Hsin-Peng Chou, Kuo-Lung Chen
NT$ 10,000,000 (inclusive) to NT$ 15,000,000
Kuo-Chu Ma Kuo-Chu Ma
NT$ 15,000,000 (inclusive) to NT$ 30,000,000
Li-Ping Chou Li-Ping Chou
NT$ 30,000,000 (inclusive) to NT$ 50,000,000 NT$ 50,000,000 (inclusive) to NT$ 100,000,000 NT$ 100,000,000 or more Total 14 Persons 14 Persons 14 Persons 14 Persons
Note 1: The name of each director shall be listed separately (for corporate shareholders, the name of the corporate shareholder and its representative shall be listed separately), and the payments shall be disclosed collectively. If a director also serves as aGeneral Manager or Assistant General Manager, he/she should fill up this form and the forms (3-1) or (3-2) below.
Note 2: Refers to compensations to directors in the most recent year (including salaries, job allowances, severance pay, variousbonuses, and performance rewards).
Note 3: This table presents the compensations paid to directors in the most recent years approved by the Board of Directors. Note 4: Refers to expenses from professional practice paid out to directors in the most recent year (including costs of transportation,
special expenses, various allowances, rooms, cars and so on). If housing, vehicle or other means of transportation, or personal expense is provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, please make a note of the salaries paidto such driver. However, such remuneration shall not be included in the director's compensations.
Note 5: Refers to salaries, job allowance, severance pay, various bonuses, performance rewards, transportation costs, special expenses, various allowances, room and car to directors concurrently holding positions in the Company (including concurrently serving as General Manager, Assistant General Manager, other managers, or employees). If housing, vehicle or other means of transportation, or personal expense is provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is
26
provided, please make a note of the salaries paid to such driver. However, such remuneration shall not be included in the director's compensations. Any compensations listed under IFRS 2 Share-Based Payment, including issuance of employee stock options, new restricted employee shares and cash capital increase by stock subscription shall also be included.
Note 6: Refers to directors concurrently holding positions in the Company (including concurrently serving as General Manager, Assistant General Manager, other managers, or employees) and employees receiving compensations (including stock and cash); the compensations to employees approved by the Board of Directors in the most recent year shall be disclosed. If such compensations cannot be estimated, an estimation for this year shall be calculated in proportion of the compensations paid last year and filled in Form 1-3.
Note 7: Total compensations paid by all companies listed in the consolidated financial report (including this Company) to the Company's directors shall be disclosed.
Note 8: The name of each director shall be disclosed in the range corresponding to the sum of compensations paid to the respective director.
Note 9: The name of each director shall be disclosed in the range corresponding to the sum of compensations paid to the respectivedirector by all companies listed in the consolidated financial report (including the Company).
Note 10: Net income refers to the net income in the most recent year; if IFRS is adopted, the net income refers to the net income of the parent company only or individual financial report of the most recent year.
Note 11: a. Compensations received by the directors from other non-subsidiary companies invested by the Company shall be disclosed in this column. b. If the director receives compensations from other non-subsidiary companies invested by the Company, the saidcompensations shall be included in the column I of the compensation range table and the name of column I shall be changed to “All companies invested by the Company”. c. Compensations refers to rewards, remunerations (including remuneration for company employees, directors or supervisors)and allowances from professional practice received by the director from other non-subsidiary companies invested by this Company for their services as directors, supervisors, or managers.
The content of compensation disclosed in this table is derived based on a concept different from the concept of income stipulatedin the Income Tax Act. The purpose of the table is for the disclosure of information, rather than taxation.
(b) Supervisor's compensations Unit: NT$ 1000
Job Title Name
Supervisor's compensations Ratio of total
amount (A+B+C) to net income (%)
(Note 8)
Compensations from other
non-subsidiary companies invested by
the Company(Note 9)
Compensation (A)
(Note 2)
Compensation (B)
(Note 3)
Expensesfrom
professionalpractice (C)
(Note 4)
TheCompany
All the compa
niesincluded in the
financial
statements
(Note5)
TheCompany
All the compan
iesincluded in the financi
alstateme
nts(Note
5)
TheCompany
All the compa
niesincluded in the financi
alstateme
nts(Note
5)
TheCompany
All the companie
sincluded
in the financialstatement
s(Note 5)
Supervisor Shuang-Chuan
Liu0 0 0 0 30 30 0% 0% None
Supervisor Yu-YaLin 0 0 0 0 30 30 0% 0% None
27
Range of Compensations
Range of compensations paid to supervisors of the Company
Name of Supervisor Total of (A+B+C)
The Company (Note 6) All the companies included in the financial statements
(Note 7) D
Less than NT$ 2,000,000 Shuang-Chuan Liu, Yu-Ya Lin
Shuang-Chuan Liu, Yu-Ya Lin
NT$ 2,000,000 (inclusive) to NT$ 5,000,000 NT$ 5,000,000 (inclusive) to NT$ 10,000,000 NT$ 10,000,000 (inclusive) to NT$ 15,000,000 NT$ 15,000,000 (inclusive) to NT$ 30,000,000 NT$ 30,000,000 (inclusive) to NT$ 50,000,000 NT$ 50,000,000 (inclusive) to NT$ 100,000,000 NT$ 100,000,000 or more
Total 2 Persons 2 Persons
Note 1: The name of each supervisor shall be listed separately (for corporate shareholders, the name of the corporate shareholder and its representative shall be listed separately), and the payments shall be disclosed collectively.
Note 2: Refers to compensations to supervisors in the most recent year (including salaries, job allowances, severance pay, variousbonuses, and performance rewards).
Note 3: This table presents the compensations paid to supervisors in the most recent years approved by the Board of Directors. Note 4: Refers to expenses from professional practice paid out to supervisors in the most recent year (including costs of
transportation, special expenses, various allowances, rooms, cars and so on.) If housing, vehicle or other means of transportation, or personal expense is provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, please make a note of the salaries paid to such driver. However, such remuneration shall not be included in the director's compensations.
Note 5: Total compensations paid to each supervisor by all companies listed in the consolidated financial report (including thisCompany) shall be disclosed.
Note 6: The name of each supervisor shall be disclosed in the range corresponding to the sum of compensations paid to the respective supervisor.
Note 7: The name of each supervisor shall be disclosed in the range corresponding to the sum of compensations paid to the respective supervisor by all companies listed in the consolidated financial report (including the Company).
Note 8: Net income refers to the net income in the most recent year; if IFRS is adopted, the net income refers to the net income of the parent company only or individual financial report of the most recent year.
Note 9: a.Compensations received by the supervisors from other non-subsidiary companies invested by the Company shall be disclosed in this column.
b. If the supervisor receives compensations from other non-subsidiary companies invested by the Company, the saidcompensations shall be included in the column D of the compensation range table and the name of column I shall be changed to “All companies invested by the Company”.
c. Compensations refers to rewards, remunerations (including remuneration for company employees, directors orsupervisors) and allowances from professional practice received by the supervisor from other non-subsidiary companies invested by this Company for their services as directors, supervisors, or managers.
The content of compensation disclosed in this table is derived based on a concept different from the concept of income stipulated in the Income Tax Act. The purpose of the table is for the disclosure of information, rather than taxation.
28
(3) R
ange
of C
ompe
nsat
ions
Pai
d to
the
Gen
eral
Man
ager
and
Ass
ista
nt G
ener
al M
anag
er
Uni
t: N
T$ 1
000
Job
Title
N
ame
Sala
ry (A
) (N
ote
2)
Seve
ranc
e pa
y an
d re
tirem
ent b
enef
its (B
)
Bon
us a
nd
spec
ial e
xpen
se (C
) (N
ote
3)
Empl
oyee
com
pens
atio
ns (D
) (N
ote
4)
Rat
io o
f sum
of i
tem
s A,
B, C
and
D to
net
inco
me
(Not
e 8)
Com
pens
ati
ons f
rom
ot
her n
on-
subs
idia
ry
com
pani
es
inve
sted
by
the
Com
pany
(N
ote
9)
The
Com
pany
All
the
com
pani
es
incl
uded
in
the
finan
cial
stat
emen
ts
(Not
e 5)
The
Com
pany
All
the
com
pani
es
incl
uded
in
the
finan
cial
stat
emen
ts(N
ote
5)
The
Com
pany
All
the
com
pani
es
incl
uded
in
the
finan
cial
stat
emen
ts(N
ote
5)
The
Com
pany
All
the
com
pani
es
incl
uded
in th
e fin
anci
al st
atem
ents
(N
ote
5)
The
Com
pany
All
the
com
pani
es
incl
uded
in
the
finan
cial
st
atem
ents
(N
ote
5)
Cas
ham
ount
Stoc
kam
ount
Cas
ham
ount
Stoc
kam
ount
Gen
eral
Man
ager
/C
hief
Exec
utiv
e O
ffic
er
Li-P
ing
Cho
u(N
ote
A)
5,28
3 5,
283
8787
17,0
5417
,054
2,87
8 0
2,87
80
1.97
%
1.97
%
Non
e A
ssis
tant
G
ener
alM
anag
er
Kuo
-Lu
ngC
hen
Ass
ista
nt
Gen
eral
Man
ager
Pei-F
ang
Song
Not
e A
: Pur
chas
e of
one
car
; the
cos
t is N
T$ 1
,217
,000
. N
ote
B: T
he se
vera
nce
pay
and
retir
emen
t ben
efits
wer
e al
loca
ted
in 2
017.
29
Range of Compensations
Range of compensations paid to General Manager and Assistant General Manager of the Company
Names of General Manager and Assistant General Manager
The Company (Note 6) All the companies included in the financial statements (Note 7)
Less than NT$ 2,000,000
NT$ 2,000,000 (inclusive) to NT$ 5,000,000
NT$ 5,000,000 (inclusive) to NT$ 10,000,000 Kuo-Lung Chen, Pei-Fang Song Kuo-Lung Chen, Pei-Fang Song
NT$ 10,000,000 (inclusive) to NT$ 15,000,000 Li-Ping Chou Li-Ping Chou NT$ 15,000,000 (inclusive) to NT$ 30,000,000 NT$ 30,000,000 (inclusive) to NT$ 50,000,000 NT$ 50,000,000 (inclusive) to NT$ 100,000,000
NT$ 100,000,000 or more
Total 3 Persons 3 Persons
Note 1: The names of General Manager and Assistant General Manager shall be listed separately and the payments shall be disclosed collectively. If a director also serves as the General Manager or Assistant General Manager, he/she shall fill this form and forms (1-1) or (1-2) above.
Note 2: Refers to compensations to General Manager and Assistant General Manager in the most recent year, including salaries, job allowances and severance pay.
Note 3: Refers to various bonuses, rewards, transportation expenses, special expenses, various allowances, rooms and cars provided to the General Manager and Assistant General Manager in actual objects or other forms of compensations. If housing, vehicle or other means of transportation, or personal expense is provided, the nature and cost of the asset provided, the rental calculated based on the actual cost or the fair market value, fuel, and other payments shall be disclosed. If a driver is provided, please make a note of the salaries paid to such driver. However, such remuneration shall not be included in the director's compensations. Any compensations listed under IFRS 2 Share-Based Payment, including issuance of employee stock options, new restricted employee shares and cash capital increase by stock subscription shall also be included.
Note 4: Refers to compensations paid to the General Manager and Assistant General Manager (including stock and cash) approved by the Board of Directors in the most recent year; If such compensations cannot be estimated, an estimation for this year shall be calculated in proportion of the compensations paid last year and filled in Form 1-3. Net income refers to the net income in the most recent year; if IFRS is adopted, the net income refers to the net income of the parent company only or individual financial report of the most recent year.
Note 5: Total compensations paid to the General Manager and Assistant General Manager by all companies listed in the consolidated financial report (including this Company) shall be disclosed.
Note 6: The name of the General Manager and Assistant General Manager shall be disclosed in the range corresponding to the sum of compensations paid to the respective General Manager and Assistant General Manager.
Note 7: The name of each General Manager and Assistant General Manager shall be disclosed in the range corresponding to the sum of compensations paid to the respective General Manager and Assistant General Manager by all companies listed in the consolidated financial report (including the Company).
Note 8: Net income refers to the net income in the most recent year; if IFRS is adopted, the net income refers to the net income of the parent company only or individual financial report of the most recent year.
Note 9: a.Compensations received by the General Manager and Assistant General Manager from other non-subsidiary companies invested by the Company shall be disclosed in this column. (b) If the General Manager and Assistant General Manager receive compensations from other non-subsidiary companies invested by the Company that are not subsidiaries, the said compensations shall be included in the column E of the compensation range table and the name of column I shall be changed to “All companies invested by the Company”. c Compensations refers to rewards, remunerations (including remuneration for company employees, directors or supervisors) and allowances from professional practice received by the General Manager and Assistant General Manager from other non-subsidiary companies invested by this Company for their services as directors, supervisors, or managers.
The content of compensation disclosed in this table is derived based on a concept different from the concept of income stipulated in the Income Tax Act. The purpose of the table is for the disclosure of information, rather than taxation.
30
Names of managers distributing employee's compensation and state of distribution
April 30, 2018
Job Title (Note 1)
Name (Note 1)
StockDividendAmount
CashDividend Total
Ratio of total amount to net
income (%)
Managers
GeneralManager/Chief
Executive Officer Li-Ping Chou
0 8,579 8,579 0.67%
Assistant General Manager
Kuo-Lung ChenPei-Fang Song
Senior Deputy Assistant General
Manager
Hsiu-Hui Lai Li-Yu Pu
Shu-Ying ChenYu-Ching Huang
Mo-Ku Liao Yu-Tsen Wen
Senior Consultant He-Chuan Liang
Deputy Assistant General Manager
Hung-Lin Tsai Liang-Lu Kuo
Hsiao-Hsun LaiYu-Hsin Lin Yi-Hsin Lin
Hsin-Peng ChouHao-Pai Hsu
Special Assistant to CEO
Ching-Kuang Huang
Note 1: individual names and titles shall be disclosed, but compensations received can be disclosed as total sum. Note 2: Refers to compensations paid to the Managers (including stock and cash) approved by the Board of Directors
in the most recent year; If such compensations cannot be estimated, an estimation for this year shall be calculated in proportion of the compensations paid last year. Net income refers to the net income in the most recent year; if IFRS is adopted, the net income refers to the net income of the parent company only or individual financial report of the most recent year.
Note 3: The term "Manager" refers to the positions listed below, as provided in the Financial Supervisory Commission on March 27, 2003 by Tai Cai Zheng 3 Zi No. 0920001301: (1) General Manager and its equivalent (2) Assistant General Manager and its equivalent (3) Deputy Assistant General Manager and its equivalent (4) Head of finance (5) Head of accounting (6) Other personnel authorized to manage the Company's operations and sign for approval.
Note 4: If directors, General Manager, or Assistant General Manager have received employee compensations (including stock and cash), this form shall be filled in addition to Form 1-2.
31
(4) Analysis of the total compensations paid to the directors, supervisors, General manager, and Assistant General Managers of the Company and all companies listed in the consolidated financial statements in the most recent two years in proportion to the net income, and state the policies, standards and portfolios of compensations payment, the procedures of setting the compensations and the relevance business performance and future risks.
1. Analysis of total compensations paid to the Company’s directors, supervisors,General manager, and Assistant General Managers in the two most recent yearsas a percentage of net income
Ratio of total compensations to net income Increase
(decrease) (%) 2016 2017 Director 2.17% 3.10% 40.1%Supervisor 0.34% 0.0% -General Manager and Assistant General Manager
2.67% 1.97% (26.2%)
The increase in the total amount of directors' compensations in 2017 as a percentage of net income compared with 2016 was mainly attributable to the decrease in profit for 2017 and the increase in the number of directors. The total amount of supervisors’ compensations in 2017 as a percentage of net income was 0 percent; which is due to the fact that the supervisory board was replaced by the Audit Committee after reelection of the Board at the 2017 shareholders' meeting. The total amount of General Managers and Assistant General Managers’ compensations in 2017 as a percentage of net income decreased from 2016 was mainly due to the fact that some of the Assistant General Managers retired and were reappointed as senior consultants. (Please refer to the notes on compensations on pages 25 to 33).
2. The policies, standards and portfolios of compensations, the procedures of setting thecompensations and the relevance to business performance and future risks
(1) According to Article 16 of the Company’s Articles of Incorporation, when directors and supervisors of the Company perform duties on behalf of the Company, regardless whether the Company makes a profit or loss, the Company may compensate the directors and supervisors. The Compensation Committee sets a compensation standard based on the degree of their participation (including resolution and evaluation of business operation strategies, future operation risks and corporate social responsibility) and the value of contributions to the operations of the Company within the highest standard set in the Company's Procedure for Compensation Management. Directors of the Company did not receive any compensations, except the subsidies for their travel expenses.
(2) The compensations to directors and supervisors of the Company are implemented in accordance with Article 20 of the Company’s Articles of Incorporation and no more than 5 percent of the Company's annual profit shall be allocated for the compensations, taking into consideration the Company’s operating results and their contributions to the Company’s performance to pay reasonable compensations. Compensations are set based on the Procedure for Evaluation of Director’s Performance, taking into consideration the overall performance of the Company and the risks and development trends in the future of the industry, as well as the performance of each individual and their contribution to the Company’s performance to pay
32
reasonable compensations. Relevant performance evaluation and rationales used to set the compensations are reviewed by the Compensation Committee and submitted to the Board of Directors for approval through resolutions. The compensation system is reviewed at any time based on actual operating conditions and the need to meet legal compliance. The goal is to ensure that we achieve a balance between sustainable management and risk control.
(3) The Company’s compensation policy for General Managers and Assistant General Managers and other managers is based on the salary level of relative positions in the market, the scope of the duties and responsibilities of each position and the degree of contribution to the Company’s operation targets. The compensation structure is planned, taking the characteristics of the industry into consideration and the plan is reviewed and approved by the Compensation Committee after giving full evaluation on the Company's performance, performance of each individual, industry standards and future risks. Bonuses are set based on the overall performance of the Company, the target achievement rate of each individual and their contributions to the Company's performance (including formulation of business strategies, assessment of future business risk, recommendations for risk mitigation and implementation of corporate social responsibility) to pay reasonable compensations and shall be then approved by the Compensation Committee.
33
4. Implementation of Corporate Governance(1) Operations of the Board of Directors The Board of Directors met seven times (A) in the most recent year. The table below summaries the attendance of the directors and supervisors.
Job Title Name
(Note 1) Attendancein Person B
Attendance by Proxy
Rate of attendance in person (%)
B/A(Note 2)
Note
Chairman Li-PingChou 6 1 85.7% Reelected (on Jun. 19, 2017)
Director Hsien-Chang Lin 6 1 85.7% Reelected (on Jun. 19, 2017)
Director Hung-JenHuang 7 0 100.0% Reelected (on Jun. 19, 2017)
Director Kuo-ChuMa 7 0 100.0% Reelected (on Jun. 19, 2017)
Director ChianWang 6 1 85.7% Reelected (on Jun. 19, 2017)
Director Huang-Ching Ho 6 1 85.7% Reelected (on Jun. 19, 2017)
Director Chiu-LingChou 7 0 100.0% Reelected (on Jun. 19, 2017)
Director Shuang-Chuan Liu 1 2 33.3% Newly-elected (on Jun. 19,
2017)
Director Yu-Ya Lin 3 0 100.0% Newly-elected (on Jun. 19, 2017)
Director Kuo-Lung Chen 3 0 100.0% Newly-elected (on Jun. 19,
2017) Director Hsin-Peng
Chou 3 0 100.0% Newly-elected (on Jun. 19, 2017)
IndependentDirector
Ling-IChung 7 0 100.0% Reelected (on Jun. 19, 2017)
IndependentDirector Yu-Hui Su 3 0 100.0% Newly-elected (on Jun. 19,
2017) IndependentDirector
Si-FengWang 3 0 100.0% Newly-elected (on Jun. 19,
2017)
Other required disclosure: 1.If one of the following situations occurs in the operations of the Board of Directors, the
date and term of the board, the content of the proposal, the opinions of all independent directors and the Company’s response to the opinions of independent directors shall be clearly stated:
(1)Matters listed in Article 14-3 of the Securities and Exchange Act:
34
Board of Directors Content of Proposal
Matterslisted in
Article 14-3 of the
Securitiesand
ExchangeAct
Independentdirectorholding
objectionsor
reservations
18thmeeting
of the 9th board
2017.1.19
1. Donation to the Makalot Foundation V 2. Loan to Leader Garment (Vietnam) CompanyLimited in South Vietnam V
Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
19thmeeting
of the 9th board
2017.3.23
1. Loan to Leader Garment (Vietnam) CompanyLimited in South Vietnam V
2.Revision to certain articles of the "Procedure for Acquisition or Disposal of Assets" V
Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
20thmeeting
of the 9th board
2017.5.9
1. Acquire 5 percent of the equity of PT Glory andPT Starlight in Indonesia and implement capital increase for Fort Fortune Star, an invested company 100% owned by Makalot.
V
2. Investment in Phase III production capacityexpansion for Indonesia's Demak factory. V
3. Investment in Phase II expansion of Makalot(Vietnam) factory in Northern Vietnam V
4. Revision to investment in expansion of MakalotCam factory in Cambodia V
5. Revision to certain articles of the "Procedure forLending Funds to Others" V
6. Revision to certain articles of the "Procedure forEndorsement and Guarantee" V
7. Loans to PT Crystal in Indonesia and Leader inSouth Vietnam V
Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
2ndmeeting of the 10th
board2017.8.9
1. The Company's 2017 Q2 financial report V 2. Capital reduction for Fund Eagle and FortuneStar, companies invested by Makalot, to make up for losses, and capital reduction to the initial capitalization for Crownway, Fund Eagle and Fortune Star.
V
3. Loans between invested Companies in China V
35
Board of Directors Content of Proposal
Matterslisted in
Article 14-3 of the
Securitiesand
ExchangeAct
Independentdirectorholding
objectionsor
reservations
production areas. Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
3rdmeeting of the 10th
board2017.11.9
1. The Company's 2017 Q3 financial report V 2. Capital reduction to initial capitalization forinvested companies, Shanghai Juyang, Jiaxing Juyang, Wintop, Crown Era and Fortune Star and earnings distribution.
V
3. Revision to the dividend policy for overseassubsidiaries of garment business V
4. Deregistration of the invested company, FundEagle International Limited V
5. Lending US$ 7.4 million to Leader Garment(Vietnam) Company Limited in South Vietnam V
6. Revision to the Procedure for Organization ofAudit Committee V
Formulate the "Procedure for Supervision and Management of Subsidiaries" and the "Group Management and Authorization Guidelines"
V
7. 2018 Internal audit plan V Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
4thmeeting of the 10th
board2018.1.30
1. Revision to the investment project for phase IIexpansion of Makalot (Vietnam) factory in North Vietnam
V
2. Shares selling of the invested company, JishiInternational Co., Ltd. V
3. 2018 Compensations to CPA V Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
5thmeeting of the 10th
board2018.3.27
1. The Company's 2017 Business and financialreport V
2. 2017 Internal control statement V 3. 2017 Annual earnings distribution V 4. Distribution of cash dividend from capital reserve V 5. Loans to PT Crystal in Indonesia and Leader in V
36
Board of Directors Content of Proposal
Matterslisted in
Article 14-3 of the
Securitiesand
ExchangeAct
Independentdirectorholding
objectionsor
reservations
South Vietnam Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
6thmeeting of the 10th
board2018.5.10
1. The Company's 2018 Q1 financial report V 2. Revision to the investment project for Leaderfactory in South Vietnam V
3. Loans to invested companies and loan extension V 4. Change of CPAs V 5. The Company's CPA Independence Assessment. V Independent Directors' Comments: None The Company's response to the opinions of independent directors: Not applicable Resolution: All attending directors agreed
(2) Other resolutions of the Board of Directors, which the independent directors voiced objection or reservation that are documented or issued through a written statement in addition to the above: None.
2. Cases of directors abstaining from proposals to avoid conflict of interest shall be disclosedwith the names of the directors, the content of the proposals, the reason for avoiding theconflict of interest, and the status of participation in voting: Not applicable.
3. Targets for strengthening the functions of the Board of Directors in the current and themost recent year (e.g., setting up an Audit Committee and enhancing informationtransparency) and evaluation of target implementation:
1 Setting up the Audit Committee: After the Board of Directors was re-elected at the2017 shareholders' meeting, the Board of Directors appointed three independent directors and set up the Audit Committee.
2 Improving information transparency: The Company continues to implement immediate announcement of major resolutions made by the Board of Directors and take the initiative to disclose the monthly operating profits and self-calculated gains and losses on the Market Observation Post System (MOPS), as required by the competent authority. The Company was ranked top 20 percent in the 1st and 2nd Corporate Governance Evaluation. The company was ranked among the 21 to 35 percent in the 3rd corporate governance evaluation. The Company was ranked 6 to 20 percent in the 4th Corporate Governance Evaluation.
3 The Board of Directors set up the "Corporate Governance Best Practice Principles", "Ethical Corporate Management Best Practice Principles ", "Code of Ethical Conduct" and "Corporate Social Responsibility Best Practice Principles" to ensure that corporate value, culture of integrity and corporate ethics are built on a set of principles for ethical conduct.
4 Performance evaluation for the Board of Directors: The Board of Directors passed
37
the "Procedure for Evaluation of the Performance of the Board of Directors" on May 8, 2015 and set the annual performance evaluation on the overall performance of the Board and each individual in the second half of the year. The results of the annual performance evaluation of the Board of Directors in 2017 showed excellence for the overall performance of the Board and each individual.
Note 1: When directors and supervisors are corporate shareholders, the name(s) of the corporate shareholders and their representatives shall be disclosed. Note 2
(1) Where directors or supervisors resign before end of the year, the date of resignation shall be annotated in the "remark" column, and the rate of attendance in person (%) shall be calculated using the number of Board meetings convened and number of attendance in person during the term of service.
(2) Where directors and supervisors were re-elected before end of the year, both the incoming and outgoing directors and supervisors shall be listed accordingly and annotated in the "remark" column to indicate whether the director or supervisor was outgoing, incoming or re-elected, as well as the date of re-election. Rate of attendance in person (%) shall be calculated using the number of Board meetings convened and number of attendance in person during the term of service.
(2) Operation status of the Audit Committee or supervisors’ participation in the operation of the Board of Directors
1. Operations of the Audit Committee
The Audit Committee met three times (A) in the most recent year. Attendance of independent directors is as listed below:
Job Title Name Number of attendance in person
(B)
Number of attendance by proxy
Rate of attendance in person (%)
(B/A) (Note)
Note
IndependentDirector Ling-I Chung 3 0 100% Reelected
(on Jun. 19, 2017)IndependentDirector Yu-Hui Su 3 0 100% Newly-elected
(on Jun. 19, 2017)IndependentDirector
Si-FengWang 3 0 100% Newly-elected
(on Jun. 19, 2017)Note:
When an independent director resigns before end of the year, the date of resignation shall be specified in theremark column. Rate of attendance in person (%) shall be calculated using the number of Audit Committee meetings and the number of attendance in person during the term of service. Where an independent director is re-elected before end of the year, both incoming and outgoing independentdirectors shall be listed accordingly and annotated in the "remark" column to indicate whether the independent director is outgoing, incoming or re-elected, as well as the date of re-election. The rate of attendance in person (%) shall be calculated using the number of Audit Committee's meetings convened and number of attendance in person during the term of service.
2. Supervisors’ participation in the operation of the Board of DirectorsThe Board of Directors met four times (A) (before the 2017 annual general meeting) in the most recent year, and the attendance is as listed below:
38
Job Title Name Number of attendance in person (B)
Rate of attendance in person (%)
(B/A) (Note)
Note
Supervisor Shuang-Chuan Liu 2 50.0%
After the Board was reelected at the shareholders’ meeting on June 19, 2017, the Board set up the Audit Committee to replace the supervisory board.
Supervisor Yu-Ya Lin 4 100.0%
Other required disclosure: If one of the following situations occurs in the operations of the Audit Committee, the date and term of the board, the content of the proposal, the result of the Audit Committee resolution and the Company’s response to the opinions of the members of the Audit Committee shall be clearly stated.(1) Items listed in Article 14-5 of the Securities and Exchange Act:
Board of Directors Content of Proposal
Items Listed in Article 14-5 of
theSecurities
andExchange
Act
Otherresolutions passed by two-thirds of all directors but yet to be approved by the Audit Committee
2ndmeeting of the 10th
board2017.8.9
1. The Company's 2017 Q2 financial report V 2. Capital reduction for Fund Eagle and Fortune Star,companies invested by Makalot, to make up for losses, and capital reduction to the initial capitalization for Crownway, Fund Eagle and Fortune Star.
V
3. Loans between invested Companies in Chinaproduction areas. V
Audit Committee resolutions (Aug. 4, 2017): All attending members of the Audit Committee agreed. The Company's response to the opinions of the Audit Committee: All attending directors agreed.
3rdmeeting of the 10th
board2017.11.9
1. The Company's 2017 Q3 financial report V 2. Capital reduction to initial capitalization forinvested companies, Shanghai Juyang, Jiaxing Juyang, Wintop, Crown Era and Fortune Star and earnings distribution.
V
3. Revision to the dividend policy for overseassubsidiaries of garment business V
4. Deregistration of the invested company, FundEagle International Limited V
5. Lending US$ 7.4 million to Leader Garment(Vietnam) Company Limited in South Vietnam V
39
Board of Directors Content of Proposal
Items Listed in Article 14-5 of
theSecurities
andExchange
Act
Otherresolutions passed by two-thirds of all directors but yet to be approved by the Audit Committee
6. Revision to the Procedure for Organization ofAudit Committee V
Formulate the "Procedure for Supervision and Management of Subsidiaries" and the "Group Management and Authorization Guidelines"
V
7. 2018 Internal audit plan V Audit Committee resolutions (Nov. 7, 2017): All attending members of the Audit Committee agreed. The Company's response to the opinions of the Audit Committee: All attending directors agreed.
4thmeeting of the 10th
board2018.1.30
1. Revision to the investment project for phase IIexpansion of Makalot (Vietnam) factory in North Vietnam
V
2. Shares selling of the invested company, JishiInternational Co., Ltd. V
3. 2018 Compensations to CPA V Audit Committee resolutions (Jan. 30, 2017): All attending members of the Audit Committee agreed. The Company's response to the opinions of the Audit Committee: All attending directors agreed.
5thmeeting of the 10th
board2018.3.27
1. The Company's 2017 Business and financialreport V
2. 2017 Internal control statement V 3. 2017 Annual earnings distribution V 4. Distribution of cash dividend from capital reserve V 5. Loans to PT Crystal in Indonesia and Leader inSouth Vietnam V
Audit Committee resolutions (Mar. 23, 2017): All attending members of the Audit Committee agreed. The Company's response to the opinions of the Audit Committee: All attending directors agreed.
6thmeeting of the 10th
board2018.5.10
1. The Company's 2018 Q1 financial report V 2. Revision to the investment project for Leaderfactory in South Vietnam V
3. Loans to invested companies and extensions V 4. Change of CPAs V 5. The Company's CPA Independence Assessment. V Audit Committee resolutions (May 4, 2018): All attending members of the Audit Committee agreed. The Company's response to the opinions of the Audit Committee: All attending directors agreed.
40
(2) In addition to the above matters, other resolutions agreed by two-thirds of all directors that have not been by the Audit Committee: not applicable.
2. Cases of independent directors abstaining from proposals to avoid conflict of interest shallbe disclosed with the names of the directors, the content of the proposals, the reason foravoiding the conflict of interest, and the status of participation in voting: Not applicable.
3. Communication status between independent directors, internal audit supervisors and CPAs(shall include major events and methods of and results from communication of theCompany's financial and business conditions).
(1) The independent directors of the Company hold regular meetings with the CPAs and the corporate governance unit during the audit of the annual report and Q2 quarterly report, discuss the audit findings by CPAs and check the following practices: 1. Fair presentation of the Company's financial statements.2. Effective implementation of the Company's internal control system.3. Compliance with relevant laws and regulations.4. Management of existing or potential risks.
(2) Communication status between independent directors and internal audit supervisors of the Company: 1. Internal audit of the Company submits audit reports monthly (including audit
findings and recommendations) to independent directors. 2. Exchange views on the impact of regulatory changes and important issues
relating to improvements of operations during the quarterly Board meetings. 3. A meeting is called every six months to review the achievement of important
work targets for the year and the effectiveness of the improvementsrecommended after audit and set the direction for future audit works.
4. Discuss related issues whenever needed by phone calls and e-mail.
41
(3) T
he C
ompa
ny's
stat
us o
f cor
pora
te g
over
nanc
e op
erat
ions
, dis
crep
ancy
from
the
Cor
pora
te G
over
nanc
e B
est P
ract
ice
Prin
cipl
es fo
r T
WSE
/TPE
x L
iste
d C
ompa
nies
and
the
reas
ons
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
1.H
as th
e C
ompa
ny se
t up
and
disc
lose
d th
e C
ompa
ny's
Cor
pora
te G
over
nanc
e B
est P
ract
ice
Prin
cipl
es in
acco
rdan
ce w
ith th
e C
orpo
rate
Gov
erna
nce
Bes
tPr
actic
e Pr
inci
ples
for T
WSE
/TPE
x Li
sted
Com
pani
es?
V
1.Th
e C
ompa
ny’s
Boa
rd o
f Dire
ctor
s has
pas
sed
the
Com
pany
’s "C
orpo
rate
Gov
erna
nce
Bes
t Pra
ctic
e Pr
inci
ples
" at
the
Boa
rd m
eetin
g on
May
8, 2
014
and
revi
sed
on N
ov. 8
, 20
16. T
he k
ey p
rinci
ples
pro
vide
d in
"C
orpo
rate
Gov
erna
nce
Bes
t Pra
ctic
e Pr
inci
ples
for T
WSE
/TPE
x Li
sted
Com
pani
es",
in
clud
ing
prot
ectin
g th
e rig
hts a
nd in
tere
sts o
f sha
reho
lder
s, es
tabl
ishi
ng a
n in
tera
ctio
n m
echa
nism
bet
wee
n th
e C
ompa
ny
and
shar
ehol
ders
, stre
ngth
enin
g th
e fu
nctio
n of
the
Boa
rd o
f D
irect
ors,
fulfi
lling
the
func
tion
of su
perv
isor
s, re
spec
ting
the
right
s and
inte
rest
s of s
take
hold
ers a
nd e
nhan
cing
info
rmat
ion
trans
pare
ncy,
hav
e be
en se
t int
o th
e C
ompa
ny’s
bes
t pra
ctic
e pr
inci
ples
, tak
ing
into
con
side
ratio
ns th
e in
dust
rial
envi
ronm
ent t
he C
ompa
ny o
pera
tes i
n an
d th
e re
gula
tory
re
quire
men
ts.
No
disc
repa
ncy
2.Th
e sh
areh
oldi
ng st
ruct
ure
of th
e C
ompa
ny a
ndsh
areh
olde
rs' r
ight
s(1
) Has
the
Com
pany
est
ablis
hed
an in
tern
al p
roce
dure
fo
r han
dlin
g sh
areh
olde
r pro
posa
ls, i
nqui
ries,
disp
utes
, an
d lit
igat
ion?
Are
such
mat
ters
han
dled
acc
ordi
ng to
th
e in
tern
al p
roce
dure
? (2
) Has
the
Com
pany
mai
ntai
ned
a re
gist
er o
f maj
or
shar
ehol
ders
with
con
trolli
ng p
ower
, as w
ell a
s a
regi
ster
of p
erso
ns e
xerc
isin
g ul
timat
e co
ntro
l ove
r
V V V
(1) I
n ad
ditio
n to
setti
ng u
p a
spok
espe
rson
syst
em a
nd a
stoc
k af
fairs
uni
t, th
e C
ompa
ny se
t up
an in
vest
or m
ailb
ox o
n th
e C
ompa
ny's
web
site
to re
ceiv
e sh
areh
olde
rs'
sugg
estio
ns, i
nqui
ries o
r dis
pute
s. D
edic
ated
per
sonn
el
are
appo
inte
d to
han
dle
corr
espo
nden
ce w
ith
shar
ehol
ders
and
resp
ond
in a
tim
ely
man
ner.
(2) T
he C
ompa
ny's
stoc
k se
rvic
e is
han
dled
by
a pr
ofes
sion
al
stoc
k ag
ent a
nd a
ded
icat
ed p
erso
nnel
is a
ppoi
nted
to
No
disc
repa
ncy
42
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
thos
e m
ajor
shar
ehol
ders
? (3
) Has
the
Com
pany
est
ablis
hed
and
enfo
rced
risk
co
ntro
l and
fire
wal
l sys
tem
s with
its a
ffili
ated
bu
sine
sses
?(4
) Has
the
Com
pany
set u
p in
tern
al ru
les t
o pr
ohib
it th
e C
ompa
ny's
insi
ders
from
trad
ing
secu
ritie
s usi
ng
info
rmat
ion
not d
iscl
osed
to th
e m
arke
t?
V
mai
ntai
n go
od c
onta
ct w
ith th
e m
ajor
shar
ehol
ders
pr
ovid
ed b
y th
e st
ock
affa
irs u
nit.
The
Com
pany
als
o pe
riodi
cally
dis
clos
es m
ater
ial i
nfor
mat
ion
rega
rdin
g pl
edge
s, ch
ange
s in
shar
ehol
ding
and
oth
er m
atte
rs th
at
may
cau
se c
hang
es in
shar
ehol
ding
. Th
e C
ompa
ny p
erio
dica
lly u
ploa
ds m
ater
ial i
nfor
mat
ion
rega
rdin
g th
e ch
ange
s in
shar
ehol
ding
of t
he in
side
rs
(dire
ctor
s, su
perv
isor
s, m
anag
ers a
nd sh
areh
olde
rs
hold
ing
mor
e th
an 1
0 pe
rcen
t of t
he C
ompa
ny’s
stoc
k) to
th
e M
OPS
in a
ccor
danc
e w
ith re
leva
nt la
ws a
nd
regu
latio
ns.
(3) T
he C
ompa
ny's
finan
cial
and
bus
ines
s ope
ratio
ns a
re
inde
pend
ent o
f the
Gro
up a
nd re
late
d pa
rties
. To
mai
ntai
n th
e rig
hts a
nd in
tere
sts o
f the
Com
pany
and
our
sh
areh
olde
rs, w
e se
t up
the
"Pro
cedu
re fo
r Sup
ervi
sion
an
d M
anag
emen
t of S
ubsi
diar
ies"
and
the
"Gro
up
Man
agem
ent a
nd A
utho
rizat
ion
Gui
delin
es".
The
se
syst
ems a
re e
xpec
ted
to e
ffec
tivel
y m
anag
e th
e C
ompa
ny’s
risk
con
trol m
echa
nism
and
fire
wal
l fu
nctio
ns. T
he C
ompa
ny a
lso
disc
lose
s inf
orm
atio
n re
leva
nt to
the
affil
iate
d co
mpa
nies
as r
equi
red.
(4
) The
Com
pany
set u
p th
e "P
roce
dure
for P
reve
ntio
n of
In
side
r Tra
ding
", w
hich
exp
ress
ivel
y pr
ohib
its in
side
rs
from
usi
ng th
e in
form
atio
n un
disc
lose
d to
the
mar
ket t
o bu
y an
d se
ll se
curit
ies.
We
have
als
o in
corp
orat
ed th
is
Proc
edur
e in
to th
e te
rms o
f con
fiden
tialit
y an
d bu
sine
ss-
43
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
sens
itive
info
rmat
ion
in th
e "E
thic
al C
orpo
rate
M
anag
emen
t Bes
t Pra
ctic
e Pr
inci
ples
" an
d "C
ode
of
Ethi
cal C
ondu
ct".
3.
Org
aniz
atio
n an
d re
spon
sibi
litie
s of t
he B
oard
of
Dire
ctor
s(1
) Has
a p
olic
y of
div
ersi
ty b
een
esta
blis
hed
and
impl
emen
ted
for t
he c
ompo
sitio
n of
the
Boa
rd o
f D
irect
ors?
(2
) In
addi
tion
to th
e re
quire
d C
ompe
nsat
ion
Com
mitt
ee
and
Aud
it C
omm
ittee
in c
ompl
ianc
e w
ith th
e la
ws a
nd
regu
latio
ns, h
as th
e C
ompa
ny v
olun
taril
y se
t up
othe
r fu
nctio
nal c
omm
ittee
s?
(3) H
as th
e C
ompa
ny se
t up
Proc
edur
e fo
r Eva
luat
ion
of
the
Perf
orm
ance
of t
he B
oard
of D
irect
ors a
nd th
e m
etho
d of
eva
luat
ion
and
impl
emen
ted
the
eval
uatio
n re
gula
rly e
very
yea
r?
(4) H
as th
e co
mpa
ny im
plem
ente
d ev
alua
tion
on th
e in
depe
nden
ce o
f the
CPA
s reg
ular
ly?
V V V V
(a) T
he C
ompa
ny h
as p
ut fo
rwar
d in
the
Cor
pora
te
Gov
erna
nce
Bes
t Pra
ctic
e Pr
inci
ples
that
div
ersi
ty a
nd th
e ov
eral
l com
posi
tion
of th
e B
oard
of D
irect
ors s
hall
be
take
n in
to c
onsi
dera
tion
whe
n el
ectin
g an
d ap
poin
ting
dire
ctor
s. M
embe
rs o
f the
Boa
rd o
f Dire
ctor
s sha
ll ge
nera
lly h
ave
the
know
ledg
e, sk
ills a
nd q
ualit
ies
nece
ssar
y to
per
form
thei
r dut
ies w
hich
are
cle
arly
stat
ed
in th
e Pr
oced
ure
for E
lect
ion
of D
irect
ors.
The
Com
pany
’s B
oard
of D
irect
ors i
s com
pose
d of
14
mem
bers
, inc
ludi
ng th
ree
inde
pend
ent d
irect
ors f
or a
term
of
thre
e ye
ars.
The
dire
ctor
s inc
lude
10
men
and
four
w
omen
and
all
of th
em a
re c
itize
ns o
f R.O
.C. A
ll m
embe
rs o
f the
Boa
rd o
f Dire
ctor
s are
exp
erie
nced
pr
ofes
sion
als w
ith p
rofe
ssio
nal b
ackg
roun
d, c
over
ing
the
field
s of m
anag
emen
t, sa
les,
engi
neer
ing,
fina
nce
and
acco
untin
g.(2
) The
Com
pany
has
set u
p a
Com
pens
atio
n C
omm
ittee
and
an
Aud
it C
omm
ittee
as r
equi
red
by la
ws a
nd re
gula
tions
. Pl
ease
refe
r to
the
“Ope
ratio
ns o
f the
Com
pens
atio
n C
omm
ittee
” on
pag
es 6
0 to
62
of th
is a
nnua
l rep
ort a
nd
the
“Ope
ratio
ns o
f the
Aud
it C
omm
ittee
” on
pag
es 3
8 to
41
.
No
disc
repa
ncy
44
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
(3) T
he C
ompa
ny’s
Boa
rd o
f Dire
ctor
s pas
sed
the
"Pro
cedu
re
for E
valu
atio
n of
the
Perf
orm
ance
of t
he B
oard
of
Dire
ctor
s" o
n M
ay 1
1, 2
015.
The
eva
luat
ion
proc
edur
e en
tails
col
lect
ion
of in
form
atio
n on
the
activ
ities
of t
he
Boa
rd o
f Dire
ctor
s bef
ore
end
of e
ach
year
and
con
duct
su
rvey
s thr
ough
the
"Boa
rd o
f Dire
ctor
s Per
form
ance
Ev
alua
tion
Self-
asse
ssm
ent Q
uest
ionn
aire
", "F
unct
iona
l C
omm
ittee
s Per
form
ance
Eva
luat
ion
Self-
asse
ssm
ent
Que
stio
nnai
re"
and
"Boa
rd M
embe
rs P
erfo
rman
ce
Eval
uatio
n Se
lf-A
sses
smen
t Que
stio
nnai
re."
Th
e fr
amew
ork
and
cont
ent o
f the
"B
oard
of D
irect
ors
Perf
orm
ance
Eva
luat
ion
Self-
asse
ssm
ent Q
uest
ionn
aire
" co
vers
five
maj
or a
spec
ts: t
he d
egre
e of
par
ticip
atio
n in
th
e C
ompa
ny's
oper
atio
ns, t
he d
ecis
ion-
mak
ing
qual
ity o
f th
e B
oard
of D
irect
ors,
the
com
posi
tion
and
stru
ctur
e of
th
e B
oard
of D
irect
ors,
sele
ctio
n an
d ap
poin
tmen
t of
dire
ctor
s, co
ntin
uous
edu
catio
n an
d in
tern
al c
ontro
l. Th
e fr
amew
ork
and
cont
ent o
f the
"Fu
nctio
nal C
omm
ittee
Pe
rfor
man
ce E
valu
atio
n Se
lf-as
sess
men
t Que
stio
nnai
re"
cove
rs th
ree
maj
or a
spec
ts: o
rgan
izat
iona
l pro
cedu
res,
com
posi
tion
of th
e co
mm
ittee
s, co
mm
ittee
man
date
s and
co
nven
ing
of m
eetin
gs a
nd c
omm
ittee
invo
lvem
ent.
The
fram
ewor
k an
d co
nten
t of t
he "
Boa
rd M
embe
rs
Perf
orm
ance
Eva
luat
ion
Self-
asse
ssm
ent Q
uest
ionn
aire
" co
vers
six
maj
or a
spec
ts: t
he C
ompa
ny's
goal
s and
task
s, aw
aren
ess o
f dire
ctor
s' re
spon
sibi
litie
s, th
e de
gree
of
45
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
parti
cipa
tion
in th
e C
ompa
ny's
oper
atio
ns, m
anag
emen
t an
d co
mm
unic
atio
n of
inte
rnal
rela
tions
hip,
pro
fess
iona
l an
d co
ntin
uing
edu
catio
n of
dire
ctor
s and
inte
rnal
con
trol.
Fina
lly, t
he B
oard
secr
etar
y co
llect
s the
que
stio
nnai
res,
give
s sco
res t
o ea
ch q
uest
ionn
aire
bas
ed o
n th
e ev
alua
tion
indi
cato
rs, r
ecor
ds th
e as
sess
men
t res
ults
, and
then
su
bmits
the
resu
lts to
the
Boa
rd o
f Dire
ctor
s for
revi
ew
and
impr
ovem
ent.
The
Com
pany
com
plet
ed th
e pe
rfor
man
ce e
valu
atio
n of
th
e B
oard
and
its d
irect
ors i
n Ja
nuar
y 20
18 a
nd fo
rwar
ded
a re
port
on re
sults
of t
he a
sses
smen
t and
the
dire
ctio
n fo
r co
ntin
uous
enh
ance
men
t to
the
Boa
rd m
eetin
g on
Janu
ary
30, 2
018.
Res
ults
of 2
017
Boa
rd o
f Dire
ctor
s Pe
rfor
man
ce E
valu
atio
n: T
he B
oard
of D
irect
ors a
nd
indi
vidu
als a
re d
eem
ed to
hav
e pe
rfor
med
with
ex
celle
nce.
(3
) The
Com
pany
’s in
depe
nden
t dire
ctor
s eva
luat
e th
e in
depe
nden
ce o
f the
CPA
s in
the
first
hal
f of t
he y
ear.
In
addi
tion
to th
e st
atem
ent o
f ind
epen
denc
e is
sued
by
the
CPA
s, th
e C
ompa
ny h
as a
lso
impl
emen
ted
an e
valu
atio
n to
ass
ess t
he in
depe
nden
ce o
f the
aud
it te
am b
ased
on
the
inte
rnal
CPA
Inde
pend
ence
Ass
essm
ent F
orm
. Eva
luat
ion
indi
cato
rs in
clud
e:
1.H
as m
embe
rs o
f the
aud
it te
am a
nd th
eir s
pous
es b
een
serv
ing
as d
irect
ors,
supe
rvis
ors o
r man
ager
s of t
he
Com
pany
or a
ffili
ated
com
pani
es, o
r any
pos
ition
s tha
t
46
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
may
hav
e si
gnifi
cant
influ
ence
to th
e au
dit c
urre
ntly
or
with
in m
ost r
ecen
t tw
o ye
ars?
2.
Is a
ny o
f the
mem
bers
of t
he a
udit
team
, his
/her
spou
sean
d un
dera
ge c
hild
ren
a sh
areh
olde
r of t
he C
ompa
ny w
ho
hold
s mor
e th
an o
ne p
erce
nt o
f the
Com
pany
's to
tal
issu
ed sh
ares
or i
s ran
ked
top-
10 a
mon
g th
e na
ture
per
son
shar
ehol
ders
of t
he C
ompa
ny?
3.Is
any
of t
he m
embe
rs o
f the
aud
it te
am o
r his
/her
spou
se a
dire
ctor
, sup
ervi
sor o
r man
ager
of a
cor
pora
te
shar
ehol
der w
ho d
irect
ly h
olds
mor
e th
an fi
ve p
erce
nt o
f th
e to
tal i
ssue
d sh
ares
of t
he C
ompa
ny o
r is r
anke
d to
p-5
amon
g th
e co
rpor
ate
shar
ehol
ders
? D
oes a
ny o
f the
mem
bers
of t
he a
udit
team
pro
vide
non
-au
dit s
ervi
ces t
hat m
ay a
ffec
t it i
mpa
rtial
ity?
5.A
re th
ere
othe
r situ
atio
ns th
at m
ay a
ffec
t the
impa
rtial
ity o
f the
aud
it te
am?
The
Boa
rd o
f Dire
ctor
s has
pas
sed
the
CPA
Inde
pend
ence
A
sses
smen
t for
this
yea
r on
May
10,
201
8.
4.D
oes t
he T
WSE
/GTS
M li
sted
com
pany
hav
e a
dedi
cate
d un
it/pe
rson
nel i
n ch
arge
of t
he C
ompa
ny's
corp
orat
e go
vern
ance
aff
airs
(inc
ludi
ng b
ut n
ot li
mite
dto
pro
vidi
ng in
form
atio
n re
quire
d fo
rdi
rect
or/s
uper
viso
r's o
pera
tions
, con
veni
ngB
oard
/sha
reho
lder
mee
tings
in c
ompl
ianc
e w
ith th
ela
ws a
nd re
gula
tions
, app
lyin
g fo
r/cha
nge
com
pany
regi
stry
and
pre
parin
g m
eetin
g m
inut
es o
f
V
The
com
pany
's A
ssis
tant
Gen
eral
Man
ager
of F
inan
ce a
nd
Acc
ount
ing
Man
agem
ent,
Yu-
Tsen
Wen
, has
bee
n ap
poin
ted
as th
e de
dica
ted
corp
orat
e go
vern
ance
off
icer
, tak
ing
char
ge to
sa
fegu
ard
shar
ehol
ders
' int
eres
ts a
nd st
reng
then
the
func
tions
of
the
Boa
rd o
f Dire
ctor
s. M
s. W
en h
as m
ore
than
thre
e ye
ars
of e
xper
ienc
e in
fina
ncia
l and
stoc
k af
fairs
man
agem
ent a
t a
publ
ic c
ompa
ny. T
he m
ain
resp
onsi
bilit
ies o
f the
cor
pora
te
gove
rnan
ce o
ffic
er is
to p
rovi
de th
e in
form
atio
n ne
cess
ary
for
No
disc
repa
ncy
47
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
Boa
rd/s
hare
hold
er m
eetin
gs)?
th
e di
rect
ors t
o ca
rry
out t
heir
wor
k, a
ssis
t the
dire
ctor
s to
mee
t com
plia
nce
with
the
law
s and
regu
latio
ns a
nd m
anag
e ac
tiviti
es re
latin
g to
the
Boa
rd o
f Dire
ctor
s and
shar
ehol
ders
’ m
eetin
g in
acc
orda
nce
with
the
law
s and
regu
latio
ns.
Task
s im
plem
ente
d in
201
7 ar
e as
follo
ws:
1.
Ass
ist i
ndep
ende
nt d
irect
ors a
nd g
ener
al d
irect
ors i
npe
rfor
min
g th
eir d
utie
s by
prov
idin
g th
e ne
cess
ary
info
rmat
ion
and
arra
ngin
g fo
r con
tinui
ng e
duca
tion
for
dire
ctor
s:(1
) Reg
ular
ly re
port
the
late
st re
visi
ons a
nd a
men
dmen
ts o
f la
ws a
nd re
gula
tions
rela
ted
to th
e C
ompa
ny's
busi
ness
es a
nd
corp
orat
e go
vern
ance
to th
e m
embe
rs o
f the
Boa
rd o
f D
irect
ors.
(2) R
evie
w th
e co
nfid
entia
lity
leve
l of r
elev
ant i
nfor
mat
ion
and
prov
ide
com
pany
info
rmat
ion
need
ed b
y th
e di
rect
ors,
mai
ntai
n co
mm
unic
atio
n an
d in
tera
ctio
n be
twee
n th
e B
oard
of
Dire
ctor
s and
hea
ds o
f the
div
isio
ns.
(3) A
ssis
t ind
epen
dent
dire
ctor
s to
arra
nge
mee
tings
with
the
supe
rvis
or o
f int
erna
l aud
it or
CPA
s in
acco
rdan
ce w
ith th
e C
ompa
ny's
Cor
pora
te G
over
nanc
e B
est P
ract
ice
Prin
cipl
es
whe
n th
ey n
eed
to h
ave
a be
tter v
iew
on
the
Com
pany
's fin
anci
al o
pera
tions
. (4
) Ass
ist i
ndep
ende
nt d
irect
ors a
nd g
ener
al d
irect
ors t
o dr
aw
up a
n an
nual
pla
n fo
r con
tinui
ng e
duca
tion
and
mak
e ar
rang
emen
ts fo
r the
cou
rses
, tak
ing
into
con
side
ratio
n th
e na
ture
of t
he in
dust
ry a
nd th
e ex
perie
nce
and
back
grou
nd o
f
48
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
the
dire
ctor
s. 2.
Ass
ist i
n m
atte
rs re
late
d to
the
proc
eedi
ngs o
f the
Boa
rdm
eetin
gs a
nd sh
areh
olde
rs' m
eetin
gs a
nd e
nsur
e le
gal
com
plia
nce
of th
e re
solu
tions
: (1
) Rep
ort t
he o
pera
tions
of c
orpo
rate
gov
erna
nce
at th
e C
ompa
ny to
the
Boa
rd o
f Dire
ctor
s, in
depe
nden
t dire
ctor
s and
th
e A
udit
Com
mitt
ee, a
nd c
onfir
m w
heth
er th
e co
nven
ing
of
shar
ehol
ders
' mee
tings
and
boa
rd m
eetin
gs c
ompl
y w
ith
rele
vant
law
s and
regu
latio
ns, a
s wel
l as t
he C
orpo
rate
G
over
nanc
e B
est P
ract
ice
Prin
cipl
es.
(2) A
ssis
t and
rem
ind
the
dire
ctor
s of t
he la
ws a
nd re
gula
tions
th
at sh
ould
be
follo
wed
whe
n co
nduc
ting
busi
ness
or m
akin
g a
form
al B
oard
reso
lutio
n.
(3) T
ake
char
ge to
exa
min
e an
d re
spon
d to
mat
ters
rela
ted
to
rele
ase
of m
ater
ial i
nfor
mat
ion
rega
rdin
g th
e re
solu
tions
mad
e by
the
Boa
rd o
f Dire
ctor
s to
ensu
re th
e co
mpl
ianc
e an
d ac
cura
cy o
f the
con
tent
and
ava
ilabi
lity
of in
form
atio
n to
the
inve
stor
s. 3.
Mai
ntai
n in
vest
or re
latio
ns: A
rran
ge fo
r dire
ctor
s to
inte
ract
and
com
mun
icat
e w
ith m
ajor
shar
ehol
ders
, cor
pora
te in
vest
ors
or g
ener
al sh
areh
olde
rs, s
o th
at in
vest
ors h
ave
suff
icie
nt
info
rmat
ion
to e
valu
ate
and
dete
rmin
e th
e C
ompa
ny's
fair
mar
ket v
alue
and
ens
ure
that
shar
ehol
ders
' int
eres
ts a
re w
ell
mai
ntai
ned.
4.
Dra
ft th
e m
eetin
g ag
enda
, inf
orm
the
dire
ctor
s 7 d
ays p
rior
to th
e m
eetin
g an
d pr
ovid
e m
eetin
g in
form
atio
n, re
min
d th
e
49
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
parti
cipa
nts o
f cer
tain
issu
es th
at m
ay re
quire
cer
tain
in
divi
dual
s to
avoi
d co
nflic
t of i
nter
est a
nd c
ompl
ete
and
send
ou
t the
mee
ting
min
utes
to th
e B
oard
mem
bers
with
in 2
0 da
ys
afte
r the
mee
ting.
5.
Han
dle
prio
r reg
istra
tion
for s
hare
hold
ers'
mee
tings
, pre
pare
mee
ting
notic
es, a
gend
a ha
ndbo
ok, m
eetin
g m
inut
es w
ithin
th
e st
atut
ory
dead
line
and
proc
ess r
egis
tratio
n of
cha
nges
re
sulte
d fr
om re
visi
ons o
f pro
cedu
res a
nd g
uide
lines
and
re-
elec
tion
of d
irect
ors.
5.H
as th
e C
ompa
ny se
t up
chan
nels
of c
omm
unic
atio
nfo
r sta
keho
lder
s (in
clud
ing
but n
ot li
mite
d to
shar
ehol
ders
, em
ploy
ees,
cust
omer
s and
supp
liers
),de
dica
ted
a se
ctio
n on
the
Com
pany
's w
ebsi
te fo
rst
akeh
olde
r aff
airs
and
ade
quat
ely
resp
onde
d to
stak
ehol
ders
' inq
uirie
s on
sign
ifica
nt c
orpo
rate
soci
alre
spon
sibi
lity
issu
es?
V
The
com
pany
has
set u
p a
stak
ehol
der s
ectio
n on
the
Com
pany
's w
ebsi
te a
nd p
rovi
des a
com
plet
e ne
twor
k of
co
ntac
ts, i
nclu
ding
inve
stor
rela
tions
, sto
ck a
ffai
rs, c
usto
mer
se
rvic
e an
d su
pplie
rs (i
nclu
ding
con
tact
tele
phon
e nu
mbe
r and
po
stal
add
ress
) to
ensu
re th
at th
e co
mm
unic
atio
n ch
anne
l is
unim
pede
d. T
he C
ompa
ny a
lso
prov
ides
inte
rnal
co
mm
unic
atio
n ch
anne
ls fo
r em
ploy
ees.
Empl
oyee
s can
ex
pres
s the
ir op
inio
ns b
y em
ail,
tele
phon
e or
lette
r.
No
disc
repa
ncy
6.H
as th
e C
ompa
ny c
omm
issi
oned
a p
rofe
ssio
nal s
tock
affa
ir ag
ency
to m
anag
e sh
areh
olde
rs' m
eetin
gs a
ndot
her r
elev
ant a
ffai
rs?
VTh
e co
mpa
ny h
as a
ppoi
nted
KG
I, a
prof
essi
onal
stoc
k af
fairs
ag
ency
, to
man
age
shar
ehol
ders
' mee
ting
rela
ted
affa
irs.
No
disc
repa
ncy
7.In
form
atio
n D
iscl
osur
e(1
) Has
the
Com
pany
set u
p a
web
site
to d
iscl
ose
info
rmat
ion
on fi
nanc
ial o
pera
tions
and
cor
pora
te
gove
rnan
ce?
(2) H
as th
e C
ompa
ny a
dopt
ed o
ther
mea
ns o
f inf
orm
atio
n di
sclo
sure
(suc
h as
setti
ng u
p an
Eng
lish
web
site
,
V V
(a) T
he C
ompa
ny h
as se
t up
a co
rpor
ate
web
site
to d
iscl
ose
finan
cial
, bus
ines
s, co
rpor
ate
gove
rnan
ce a
nd o
ther
m
ater
ial i
nfor
mat
ion.
(b
) The
Com
pany
's co
rpor
ate
web
site
is m
ainl
y re
nder
ed in
C
hine
se. A
n En
glis
h ve
rsio
n ha
s als
o be
en se
t up
for
No
disc
repa
ncy
50
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cy fr
om
"the
Cor
pora
te
Gov
erna
nce
Bes
t-Pr
actic
e Pr
inci
ples
fo
r TW
SE/T
PEx
List
ed C
ompa
nies
" an
d re
ason
s
Yes
No
Sum
mar
y
appo
intin
g a
dedi
cate
d pe
rson
nel t
o co
llect
and
dis
clos
e co
mpa
ny in
form
atio
n, se
tting
up
a sp
okes
pers
on
syst
em a
nd d
iscl
osin
g th
e pr
oces
s of i
nves
tor
conf
eren
ces o
n th
e C
ompa
ny's
web
site
)?
fore
ign
inve
stor
s, pr
ovid
ing
faci
litie
s for
inqu
ire. A
uni
t ha
s bee
n de
lega
ted
for t
he d
utie
s to
colle
ct a
nd d
iscl
ose
info
rmat
ion.
A sp
okes
pers
on a
nd a
ctin
g sp
okes
pers
on
has a
lso
been
set u
p to
form
the
spok
espe
rson
syst
em a
nd
info
rmat
ion
rega
rdin
g th
e in
vest
or c
onfe
renc
es is
fully
di
sclo
sed
on th
e C
ompa
ny's
web
site
. 8.
Has
the
Com
pany
dis
clos
ed o
ther
info
rmat
ion
tofa
cilit
ate
bette
r und
erst
andi
ng o
f its
cor
pora
tego
vern
ance
(inc
ludi
ng b
ut n
ot li
mite
d to
em
ploy
ee's
right
s, em
ploy
ee c
are,
inve
stor
rela
tions
, sup
plie
rre
latio
ns, s
take
hold
ers'
right
s, fu
rther
edu
catio
n of
dire
ctor
s and
supe
rvis
ors,
impl
emen
tatio
n of
risk
man
agem
ent p
olic
ies a
nd m
easu
rem
ent s
tand
ards
,im
plem
enta
tion
of c
usto
mer
pol
icie
s and
pur
chas
e of
liabi
lity
insu
ranc
e fo
r the
dire
ctor
s and
supe
rvis
ors o
fth
e C
ompa
ny)?
V
Plea
se re
fer t
o pa
ges 5
3 to
60
of th
is a
nnua
l rep
ort.
No
disc
repa
ncy
9.B
ased
on
the
corp
orat
e go
vern
ance
eva
luat
ion
resu
lts p
ublis
hed
by T
aiw
an S
tock
Exc
hang
e's C
orpo
rate
Gov
erna
nce
Cen
ter,
plea
se sp
ecify
the
Com
pany
's im
prov
ed si
tuat
ion
and
the
prio
ritiz
ed im
prov
emen
t ite
ms a
nd m
easu
res f
or it
ems y
et to
be
impr
oved
.Th
e 4t
h (2
017)
cor
pora
te g
over
nanc
e ev
alua
tion
rank
ed th
e C
ompa
ny a
mon
g th
e to
p 6
to 2
0 pe
rcen
t. Th
e C
ompa
ny h
as a
lso
impl
emen
ted
impr
ovem
ents
, tar
getin
g on
the
area
s whe
re p
oint
s wer
e lo
st. T
he d
etai
ls a
re p
rovi
ded
belo
w:
(1)
Impr
oved
situ
atio
n:
Impr
oved
item
s Im
prov
emen
t mea
sure
s
Set u
p th
e A
udit
Com
mitt
ee
The
Aud
it C
omm
ittee
was
set u
p af
ter r
eele
ctio
n of
the
Boa
rd a
t the
201
7 sh
areh
olde
rs' m
eetin
g.
51
Impr
oved
item
s Im
prov
emen
t mea
sure
s
Issu
ed a
n En
glis
h sh
areh
olde
rs' m
eetin
g no
tice.
Th
e En
glis
h ve
rsio
n no
tice
for
2017
ann
ual
gene
ral
mee
ting
was
rele
ased
on
May
17,
201
7.
Rei
nfor
cem
ents
for d
iscl
osur
es in
the
Com
pany
's an
nual
re
port
1.H
as th
e C
ompa
ny d
iscl
osed
info
rmat
ion
rega
rdin
gim
plem
enta
tion
of th
e re
solu
tions
mad
e at
the
annu
alge
nera
l mee
ting
of th
e pr
evio
us y
ear?
2.H
as th
e C
ompa
ny c
ondu
cted
Boa
rd p
erfo
rman
ceev
alua
tions
on
a re
gula
r bas
is (a
t lea
st o
nce
a ye
ar) a
nddi
sclo
sed
the
resu
lts o
n th
e C
ompa
ny's
web
site
or
annu
al re
port?
3.H
as th
e C
ompa
ny d
iscl
osed
the
divi
dend
pol
icie
s in
acl
ear a
nd c
onci
se m
anne
r in
the
Com
pany
's an
nual
repo
rt ?
Rei
nfor
ced
disc
losu
re h
as b
een
impl
emen
ted
in th
e 20
17 a
nnua
l rep
ort.
Is th
e co
mpa
ny c
ertif
ied
for I
SO 1
4001
or s
imila
r en
viro
nmen
tal m
anag
emen
t sys
tem
?
The
Com
pany
w
as
succ
essf
ully
ce
rtifie
d fo
r th
e O
EKO
-TEX
sy
stem
(d
etec
ting
resi
dual
ha
rmfu
l su
bsta
nces
tha
t m
ay a
ffec
t hu
man
hea
lth o
n te
xtile
s an
d ga
rmen
ts) i
n 20
17.
Prep
ared
cor
pora
te so
cial
resp
onsi
bilit
y (C
SR) r
epor
t ac
cord
ing
to th
e G
loba
l Rep
ortin
g In
itiat
ive
(GR
I)
Gui
delin
es.
The
2017
CSR
repo
rt ha
s bee
n pr
epar
ed b
ased
on
the
GR
I gui
delin
es.
(2)
Furth
er im
prov
emen
ts: T
he p
riorit
y is
giv
en to
the
follo
win
g ar
eas i
n 20
18:
Are
as to
be
impr
oved
Im
prov
emen
t mea
sure
s In
form
atio
n no
t pro
vide
d in
Eng
lish
1.A
nnua
l rep
ort
2.Sh
areh
olde
rs' h
andb
ook
3.M
ater
ial i
nfor
mat
ion
The
Com
pany
exp
ects
to
publ
ish
the
Engl
ish
vers
ion
annu
al r
epor
t an
d sh
areh
olde
rs'
mee
ting
man
ual
in
2018
an
d ha
s m
ade
a pl
an
to
prov
ide
mat
eria
l in
form
atio
n in
Eng
lish
in th
e co
min
g ye
ars.
Has
the
Com
pany
's cl
early
spec
ified
in th
e "P
roce
dure
for
Eval
uatio
n of
the
Perf
orm
ance
of t
he B
oard
of D
irect
ors"
to
impl
emen
t an
exte
rnal
eva
luat
ion
on th
e pe
rfor
man
ce o
f the
We
have
mad
e a
plan
to e
ngag
e ex
tern
al e
xper
ts to
co
nduc
t per
form
ance
eva
luat
ion
of th
e B
oard
in 2
018.
52
Are
as to
be
impr
oved
Im
prov
emen
t mea
sure
s B
oard
at l
east
onc
e ev
ery
thre
e ye
ar?
Has
the
Com
pany
est
ablis
hed
a su
pplie
r man
agem
ent p
olic
y,
requ
iring
the
supp
liers
to m
eet c
ompl
ianc
e on
en
viro
nmen
tal,
safe
ty o
r hea
lth is
sues
, enc
oura
ging
supp
liers
to
join
the
Com
pany
in c
orpo
rate
soci
al re
spon
sibi
lity
actio
ns a
nd p
ublis
hing
CSR
repo
rt on
thei
r com
pany
w
ebsi
tes?
The
Com
pany
has
mad
e a
plan
to d
raft
supp
lier
man
agem
ent p
olic
y in
201
8, w
hich
will
spec
ifica
lly
requ
est s
uppl
iers
to m
eet c
ompl
ianc
e on
en
viro
nmen
tal,
safe
ty o
r hea
lth is
sues
.
Has
the
Com
pany
dis
clos
ed o
ther
inf
orm
atio
n to
fac
ilita
te b
ette
r un
ders
tand
ing
of i
ts c
orpo
rate
gov
erna
nce
(incl
udin
g bu
t no
t lim
ited
to
empl
oyee
's rig
hts,
empl
oyee
car
e, i
nves
tor
rela
tions
, sup
plie
r re
latio
ns, s
take
hold
ers'
right
s, fu
rther
edu
catio
n of
dire
ctor
s an
d su
perv
isor
s, im
plem
enta
tion
of r
isk
man
agem
ent
polic
ies
and
mea
sure
men
t st
anda
rds,
impl
emen
tatio
n of
cus
tom
er p
olic
ies
and
purc
hase
of
liabi
lity
insu
ranc
e fo
r the
dire
ctor
s and
supe
rvis
ors o
f the
Com
pany
)?
(1) E
mpl
oyee
s' R
ight
s and
Em
ploy
ee C
are
The
Com
pany
int
rodu
ced
the
Empl
oyee
Ass
ista
nce
Prog
ram
(EA
P) i
n 20
07,
whi
ch p
rovi
des
prof
essi
onal
con
sulta
tion
to a
ssis
t ou
r em
ploy
ees
to re
solv
e is
sues
in h
ealth
, mar
riage
, fam
ily, f
inan
ce, l
aw, e
mot
ions
, stre
ss, a
nd m
ore.
..Thi
s pr
ogra
m p
rovi
des
our e
mpl
oyee
s w
ith a
face
t for
stre
ss re
lief a
way
from
thei
r bus
y w
ork
and
cons
truct
s sou
nd m
enta
lity
tow
ards
wor
k, a
imin
g to
bui
ld a
hea
lthy
wor
kpla
ce
for o
ur e
mpl
oyee
s.
(2) I
nves
tor R
elat
ions
In a
dditi
on t
o di
sclo
sing
rel
evan
t in
form
atio
n on
MO
PS a
s re
quire
d, t
he C
ompa
ny h
as a
lso
set
up a
n “I
nves
tors
” se
ctio
n on
the
C
ompa
ny’s
web
site
with
reg
ular
upd
ate
of th
e C
ompa
ny’s
fin
anci
al, b
usin
ess
and
stoc
k-re
late
d in
form
atio
n fo
r in
vest
ors’
inqu
iries
. A
inve
stor
ser
vice
poi
nt o
f con
tact
has
als
o be
en s
et u
p to
pro
vide
a c
hann
el fo
r tw
o-w
ay c
omm
unic
atio
n be
twee
n th
e in
vest
ing
publ
ic a
nd
the
Com
pany
.
In a
dditi
on, t
he C
ompa
ny is
invi
ted
from
tim
e to
tim
e to
par
ticip
ate
in c
orpo
rate
inve
stor
con
fere
nces
org
aniz
ed b
y la
rge-
scal
e br
oker
s or
Ta
iwan
Sto
ck E
xcha
nge
to p
rese
nt t
he C
ompa
ny's
finan
cial
/bus
ines
s ov
ervi
ew.
Info
rmat
ion
disc
lose
d at
the
cor
pora
te i
nves
tor
conf
eren
ces i
s als
o up
load
ed to
MO
PS a
nd th
e C
ompa
ny w
ebsi
te fo
r fre
e in
quiry
.
(3) S
uppl
ier R
elat
ions
The
Com
pany
impl
emen
ts re
late
d op
erat
ions
and
con
trol m
echa
nism
s in
acco
rdan
ce w
ith th
e “M
ain
Mat
eria
ls P
rocu
rem
ent P
roce
dure
” to
min
imiz
e cr
edit
risks
and
set
up
a pr
ocur
emen
t se
rvic
e de
partm
ent
to c
arry
out
sup
plie
r m
anag
emen
t an
d m
aint
ain
a sm
ooth
co
mm
unic
atio
n ch
anne
l, sa
fegu
ardi
ng th
e rig
hts a
nd in
tere
sts o
f our
supp
liers
.
53
(4) S
take
hold
ers'
Rig
hts
To s
afeg
uard
the
int
eres
ts o
f ou
r st
akeh
olde
rs,
the
Com
pany
has
set
up
mul
tiple
com
mun
icat
ion
chan
nels
for
uni
mpe
ded
exch
ange
, in
clud
ing
dedi
cate
d pe
rson
nel t
o ha
ndle
the
spok
espe
rson
's m
ailb
ox, h
andl
ing
stak
ehol
der i
nqui
ries
base
d on
the
prin
cipl
e of
goo
d fa
ith
and
resp
onsi
ble
attit
ude,
and
mak
ing
full
effo
rts to
fulfi
ll co
rpor
ate
soci
al re
spon
sibi
lity.
(5) F
urth
er E
duca
tion
for D
irect
ors a
nd S
uper
viso
rs
The
supe
rvis
ors a
nd d
irect
ors h
ave
take
n co
urse
s rec
omm
ende
d by
the
"Dire
ctio
ns fo
r the
Impl
emen
tatio
n of
Con
tinui
ng E
duca
tion
for
Dire
ctor
s and
Sup
ervi
sors
of T
WSE
Lis
ted
and
TPEx
Lis
ted
Com
pani
es"
and
prog
ram
s tha
t mee
t the
ir pe
rson
al n
eeds
.
Titl
eN
ame
App
oint
ed
onD
ate
of s
tudi
esO
rgan
izer
Cou
rse
title
Len
gth
of th
e cu
rric
ulum
Tot
al
cour
se
hour
s St
art D
ate
End
Dat
e
Dire
ctor
Li-P
ing
Cho
uJu
n. 1
9,
2017
Oct
. 17,
20
17O
ct. 1
7,
2017
Taiw
an C
orpo
rate
Gov
erna
nce
Ass
ocia
tion
Ana
lysi
s of
the
Key
Mes
sage
s in
Fi
nanc
ial R
epor
ts3
6.0
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Dire
ctor
Hsi
en-
Cha
ng L
inJu
n. 1
9,
2017
Nov
. 29,
20
17N
ov. 2
9,
2017
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
sW
ill a
nd In
herit
ance
Pra
ctic
es3
15.0
Nov
. 27,
20
17N
ov. 2
7,
2017
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
sW
hen
Entru
sted
, Do
You
r Bes
t3
Oct
. 3,
2017
Oct
. 3,
2017
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
sH
ow to
Res
pond
to th
e M
oney
La
unde
ring
Con
trol A
ct3
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Jul.
26,
2017
Jul.
26,
2017
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
sR
espo
ndin
g to
the
New
Am
endm
ents
of
Mon
ey L
aund
erin
g C
ontro
l Act
3
Dire
ctor
Hun
g-Je
nH
uang
Jun.
19,
20
17
Nov
. 7,
2017
Nov
. 7,
2017
Secu
ritie
s an
d Fu
ture
s In
stitu
teC
ase
Stud
ies
of F
raud
ulen
t Cor
pora
te
Mer
gers
- fr
om th
e Pe
rspe
ctiv
e of
C
orpo
rate
Gov
erna
nce
3
6.0
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
54
Titl
eN
ame
App
oint
ed
onD
ate
of s
tudi
esO
rgan
izer
Cou
rse
title
Len
gth
of th
e cu
rric
ulum
Tot
al
cour
se
hour
s St
art D
ate
End
Dat
e
Dire
ctor
Kuo
-Chu
M
aJu
n. 1
9,
2017
Sep.
6,
2017
Sep.
6,
2017
Secu
ritie
s an
d Fu
ture
s In
stitu
te
Dis
cuss
ion
on th
e Is
sues
of I
nter
grat
ion
of H
uman
Res
ourc
es a
nd M
erge
rs a
nd
Acq
uisi
tion
durin
g th
e m
ergi
ng
proc
edur
e of
the
com
pani
es.
3
6.0
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Dire
ctor
Chi
en
Wan
gJu
n. 1
9,
2017
Dec
. 5,
2017
Dec
. 5,
2017
Secu
ritie
s an
d Fu
ture
s In
stitu
teFu
nctio
ns o
f the
Boa
rd fr
om th
ePe
rspe
ctiv
e of
Cor
pora
te F
raud
3
6.0
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Dire
ctor
Hua
ng-
Chi
ng H
oJu
n. 1
9,
2017
Sep.
5,
2017
Sep.
5,
2017
Secu
ritie
s an
d Fu
ture
s In
stitu
tePr
actic
es o
f Cor
pora
te G
over
nanc
e an
dIn
depe
nden
t Dire
ctor
s3
6.0
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Dire
ctor
Chi
u-Li
ng
Cho
uJu
n. 1
9,
2017
Nov
. 17,
20
17N
ov. 1
7,
2017
Taiw
an C
orpo
rate
Gov
erna
nce
Ass
ocia
tion
How
Dire
ctor
s D
o Th
eir B
est
"Atte
ntio
ns"
3
6.0
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Dire
ctor
Shua
ng-
Chu
an L
iuJu
n. 1
9,
2017
Sep.
7,
2017
Sep.
7,
2017
Secu
ritie
s an
d Fu
ture
s In
stitu
te
Cas
e A
naly
sis:
Dire
ctor
s and
su
perv
isor
s gui
lty fo
r crim
inal
Bre
ach
of T
rust
and
the
esta
blis
hmen
t of
Spec
ial B
reac
h of
Tru
st
3
6.0
Aug
. 9,
2017
Aug
. 9,
2017
Taiw
an In
stitu
te o
f Dire
ctor
sN
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Dire
ctor
Y
u-Y
a Li
n Ju
n. 1
9,20
17
Nov
. 16,
20
17
Nov
. 16,
20
17
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
s H
ow to
Mak
e In
quiri
es fo
r Inf
orm
atio
n on
Ant
i-Mon
ey L
aund
erin
g 3
34.0
O
ct. 2
3,
2017
O
ct. 2
3,
2017
A
ssoc
iatio
n of
Cer
tifie
d Pu
blic
A
ccou
nts
App
rais
al a
nd A
naly
sis u
nder
IFR
S 9
3
55
Titl
eN
ame
App
oint
ed
onD
ate
of s
tudi
esO
rgan
izer
Cou
rse
title
Len
gth
of th
e cu
rric
ulum
Tot
al
cour
se
hour
s St
art D
ate
End
Dat
e
Oct
. 3,
2017
O
ct. 3
, 201
7A
ssoc
iatio
n of
Cer
tifie
d Pu
blic
Acc
ount
s H
ow to
Res
pond
to th
e M
oney
La
unde
ring
Con
trol A
ct
3
Sep.
28,
20
17
Sep.
28,
20
17
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
s Pr
actic
es o
f Clo
sely
-hel
d C
orpo
ratio
n 3
Aug
. 9,
2017
A
ug. 9
, 20
17
Taiw
an In
stitu
te o
f Dire
ctor
s N
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Aug
. 1,
2017
A
ug. 1
, 20
17
Taiw
an In
stitu
te o
f Dire
ctor
s Ta
x A
dmin
istra
tion
in th
e A
nti-T
ax
Avo
idan
ce E
ra
3
Jun.
7,
2017
Ju
n. 7
, 201
7A
ssoc
iatio
n of
Cer
tifie
d Pu
blic
Acc
ount
s
Def
icie
ncie
s Ide
ntifi
ed d
urin
g th
e A
uditi
ng a
nd A
ttest
atio
n of
Fin
anci
al
Stat
emen
ts Is
sued
by
Publ
icly
Lis
ted
Com
pani
es
3
Apr
. 19,
20
17
Apr
. 19,
20
17
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
s C
orpo
rate
Acc
ount
ing
Prin
cipl
es Q
&A
3
Mar
. 22,
20
17
Mar
. 22,
20
17
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
s Fi
ling
Bus
ines
s Inc
ome
Tax
in 2
016
7
Mar
. 20,
20
17
Mar
. 20,
20
17
Ass
ocia
tion
of C
ertif
ied
Publ
ic
Acc
ount
s Th
e R
ole
of C
PA in
Boa
rd M
eetin
g 3
Dire
ctor
Kuo
-Lun
g C
hen
Jun.
19,
20
17
Oct
. 24,
20
17
Oct
. 25,
20
17
Secu
ritie
s and
Fut
ures
Inst
itute
12
-Hou
r Tra
inin
g C
ours
e fo
r Firs
t-tim
e D
irect
ors a
nd S
uper
viso
rs (i
nclu
ding
In
depe
nden
t Dire
ctor
s)
12
15
Aug
. 9,
2017
A
ug. 9
, 20
17
Taiw
an In
stitu
te o
f Dire
ctor
s N
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
Dire
ctor
Hsi
n-Pe
ng
Cho
u Ju
n. 1
9,
2017
Aug
. 29,
20
17
Aug
. 30,
20
17
Secu
ritie
s and
Fut
ures
Inst
itute
Pr
actic
es o
f Dire
ctor
s and
Sup
ervi
sors
(in
clud
ing
Inde
pend
ent D
irect
ors)
12
15
Aug
. 9,
2017
A
ug. 9
, 20
17
Taiw
an In
stitu
te o
f Dire
ctor
s N
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
56
Titl
eN
ame
App
oint
ed
onD
ate
of s
tudi
esO
rgan
izer
Cou
rse
title
Len
gth
of th
e cu
rric
ulum
Tot
al
cour
se
hour
s St
art D
ate
End
Dat
e
Inde
pend
ent
Dire
ctor
Ling
-IC
hung
Ju
n. 1
9,
2017
Aug
. 9,
2017
A
ug. 9
, 20
17
Taiw
an In
stitu
te o
f Dire
ctor
s N
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
6Ju
n. 1
6,
2017
Ju
n. 1
6,
2017
Ta
iwan
Cor
pora
te G
over
nanc
e A
ssoc
iatio
n Th
e B
oard
of D
irect
ors a
nd It
's R
espo
nsib
ilitie
s 3
Inde
pend
ent
Dire
ctor
Yu-
Hui
Su
Jun.
19,
2017
Aug
. 10,
20
17
Aug
. 10,
20
17
Taiw
an C
orpo
rate
Gov
erna
nce
Ass
ocia
tion
Man
agin
g In
form
atio
n Se
curit
y - T
he
Tren
d an
d C
halle
nges
3
9A
ug. 9
, 20
17
Aug
. 9,
2017
Ta
iwan
Inst
itute
of D
irect
ors
New
Inte
rnat
iona
l Tax
atio
n O
rder
- Ta
x A
dmin
istra
tion
in th
e A
nti-T
ax
Avo
idan
ce E
ra
3
Aug
. 1,
2017
A
ug. 1
, 20
17
Taiw
an In
stitu
te o
f Dire
ctor
s Ta
x A
dmin
istra
tion
in th
e A
nti-T
ax
Avo
idan
ce E
ra
3
Inde
pend
ent
Dire
ctor
Si-F
eng
Wan
g Ju
n. 1
9,
2017
Aug
. 9,
2017
A
ug. 9
, 20
17
Taiw
an In
stitu
te o
f Dire
ctor
s N
ew In
tern
atio
nal T
axat
ion
Ord
er -
Tax
Adm
inis
tratio
n in
the
Ant
i-Tax
A
void
ance
Era
3
6Ju
l. 7,
20
17
Jul.
7, 2
017
Secu
ritie
s and
Fut
ures
Inst
itute
Le
gal C
ompl
ianc
e of
Pub
licly
-list
ed
Com
pany
Insi
der E
quity
Tra
ding
3
57
(6) Implementation of risk-management policies and risk assessment standards 1. Risk Management Policy:
(1) The Company as a whole is included in the scope of risk management with the goals of maximizing the benefits of customers and investors, preventing potential risks, and finding a balance between risk management and reward, while enhancing the value of the Company.
(2) The Company has established and implemented a risk management system to effectively identify, analyze, evaluate and handle the risks that may affect the Company in various business activities. Activities are also planned to monitor and review the effectiveness of the system, ensuring that each department is fully aware of the risks and has undertaken adequate control measures to ensure sustainable development of the company.
From top down, the Company is committed to continuously enhance employees' awareness of the risks up to the management. We ensure that risk assessment is incorporated into the Company's decision-making process, implementing programs to develop employees' risk management capabilities, making efforts to develop a corporate culture of risk management and integrate risk management in the operational processes.
2. Risk Management Organization:The Company has officially organized the Risk Management Project Taskforce in October 2006. The overall risk management policy is set on the objective of prevention and set up risk warning network at various frequencies, as well as a reporting system, targeting on the risks that may harm the Company's reputation, affect order (reaching the targets, customer satisfaction), . delay production and delivery (insufficient or idled capacity, garment quality, shipping delays…), . . damage physical health and property, impede supply of raw material (inferior quality or delays in supplies…) and information, aiming to respond to the various emergency situations and minimize the impacts risks through setting risk control and monitoring in order and effective management.
The risk management organization structure is laid out in the table below: Organization Name Role and Responsibility Board of Directors and Higher-Rank Decision-Making
1. Corporate risk management culture and policy setting2. Supervise response to major risks and ensure theeffectiveness of risk management mechanisms
Audit Office
1.Convey risk management decisions made by the decision-making organization.
2.Alert major risks for the future and current time, assesspotential losses, follow-up on the countermeasures orremove the alert.
3.Consolidate the results of managing major risk events.
All units at the head office and subsidiaries
1. Carry out daily risk management activities in the scope ofoperations of each department.
2.Implement corporate governance risk policy.3.Proactively report concrete countermeasures, development
trends and implementation effectiveness of major riskevents monitored by the Company.
58
3, Risks and Management Structure:
Major risk Risk management unit Risk review mechanism
Decision-making and supervision
Market Risks - New customer development - Competitors' actions - Changes in raw material prices
Sales & Marketing Group
Business Decision Meeting
Board of Directors: The highest supervisory body for risk responses and management.
Audit Office: Responsible for monitoring and tracking risks.
Production Capacity Risks - Insufficient orders, delayed material supply - Unavoidable natural disasters- Strike and work to rule
Sales & Marketing GroupManufacturingManagement Division
Business Decision Meeting
Information Risks - Information system not operating properly
Information TechnologyDepartment
Information Committee
Policy and legal compliance Audit Office Business Decision Meeting
Investment, reinvestment and the benefits of merger and acquisition
AccountingDepartment
Business Decision Meeting
Interest rates, exchange rates and financial risks Finance Department Budget Committee
Loans to others, endorsements or guarantees, derivatives trading and management of capital utilization.
Finance Department Business Decision Meeting
Financial statement presentation and information disclosure
AccountingDepartment
Business Decision Meeting
Chief ConvenerChief Executive Officer
Corporate Governance Team
Legal Affairs TeamStock Affairs Team
SustainableDevelopment Team
Manufacturing Management Division, Human Resources
Department, Supply Management Department, Production Area
Human Rights Development Team
Social Responsibility Section, Production Area,
Human Resources Department
Social Welfare Team
Human Resources Department, Social
Responsibility Section, Production Area,
Foundation
Executive Officer
59
Major risk Risk management unit Risk review mechanism
Decision-making and supervision
Litigation and non-contentious matters
Legal Team, Corporate Resource Development Division
Business Decision Meeting
Changes in the equity ownership of directors, supervisors and major shareholders.
Secretary of the Board Board of Directors
Board of Directors Meeting Management Secretary of the Board Board of Directors
(7) Implementation of Customer Policies The Company's business organization is formed on the customer-oriented Vertical Team concept. This team provides customer services and maintains close connections with customers. In addition, a quality control team has also been set up; this team carries out analysis on the results of customer evaluation toward the suppliers and proposes improvement strategies to meet customers’ standards, striving to become an excellent supplier for long-term partnership with the customers.
(8) Purchase of liability insurance for directors and supervisors: The company has purchased liability insurance for directors and supervisors. The insurance covers from November 2017 to November 2018 with an insured amount of US$ 5 million.
(9) Other important information that may provide better understanding of the operations of corporate governance: 1. The directors and supervisors of the Company take actions to avoid conflict of
interest of proposals.2. The company has set up and implemented the Rules of Procedure for the
Shareholder's Meeting.3. The Company has set up and implemented the Rules of Procedure for Meetings of the
Board of Directors.4. The Company has established and implemented the Ethical Corporate Management
Best Practice Principles and Ethical Code of Conduct.5. Except those unable to attend the Board meeting due to official duties, all directors
and supervisors of the Company participated in the entire process to supervise anddiscuss the relevant proposals.
6. The Company was ranked top 20 percent in the 1st and 2nd Corporate GovernanceEvaluation.
7. The company was ranked among the 21 to 35 percent in the 3rd corporate governanceevaluation.
8. The Company was ranked 6 to 20 percent in the 4th Corporate GovernanceEvaluation.
(4) If the Company has set up a Compensation Committee, information regarding the composition, responsibilities and operations of the Committee shall be disclosed:
The Compensation Committee is responsible for assisting the Board of Directors to establish the Company's policy and related measures regarding performance evaluation and compensations to directors, supervisors and managers, with a comprehensive consideration of the Company's operating performance, performance of each member, industrial standards and future risks. The Compensation Committee also evaluates the system regularly. Please
60
refer to the Procedure for Organization of the Compensation Committee on the Company's website.
As of end of March, 2018, the Company’s Compensation Committee has three members, who have completed the review of the Company’s 2017 compensation system, the 2017 plan for compensation payments to managers, the 2017 plan for compensation payments to directors and supervisors and the 2018 plan for compensations to managers. Results of relevant reviews have been submitted to the Board of Directors for approval.
1. Profiles of the Members of the Compensation Committee
Job Title
(Note 1)
Condition
Name
Has five or more years of work
experience
and the following professional
qualifications?
Meet the criteria of independence (Note 2)
Number of other public
Companies where
concurrently
serving as a member
of the Compens
ation Committe
e
Note (Note 3)
Lecturer or higher in public or private colleges anduniversities for subjectsrelevant to business administration, legal affairs, finance, accounting or other operations needed by the Company.
Currently serving as a judge, prosecutor, lawyer, CPA or other specialist or technicalprofessional who are necessary for the Company's business and have been certified by national examinations and licensed by the competent authorities
Work experiencenecessary for business administration, legal affairs, finance, accounting, or other operationsneeded by the Company.
1 2 3 4 5 6 7 8
Independent Director
Ling-IChung V V V V V V V V V 0 N/A
Independent Director
Si-Feng Wang V V V V V V V V V 0 N/A
Others Chun-Chi Yang V V V V V V V V V 4 N/A
Note 1: For job title, please fill in director, independent director or other. Note 2: Please add " " in the field under each criteria number if the member meets the criteria two years prior to
being elected and during his/her term of service.1 Not employed by the Company or its affiliated companies. 2 Not a director or supervisor of the Company or its affiliated companies. Independent directors set up
by the Company, its parent company or subsidiaries in compliance with the local regulations are not restricted by this term.
3 Not a natural person shareholder who holds more than one percent of total shares issued by the Company or is one of the top 10 shareholders by number of shares held, including shares held in the name of the person’s spouse, underage children, or in the name of others.
4 Not a spouse, a family member within the second-degree of kinship, or a lineal relative within the
61
third-degree of kinship of any of the persons described in the preceding three paragraphs. 5 Not a director, supervisor, or employee of a corporate shareholder who directly holds 5 percent or
more of the Company's total issued shares or is ranked top-5 among the corporate shareholders. 6 Not a director (executive director), supervisor (member of the supervisory board), manager, or
shareholder who holds more than 5 percent of the shares of company or institution that has financial or business exchanges with the Company.
7 Not a professional individual, proprietor, partner, or company/institution owner, partner, director (executive director), supervisor (member of the supervisory board), managers and spouse of any of these persons that provides business, legal, financial and/or accounting services or consultation to the Company or its affiliates.
8 Not been involved in any of situations defined in Article 30 of the Company Act. Note 3: If the members are directors, please indicate whether they meet the requirements stated in Subparagraph 5,
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. Information on the operations of the Compensation Committee(1) The Company's Compensation Committee has three members.(2) Term of office of the current members: From June 19, 2017 to June 18, 2018. The
Compensation Committee met three times (A) in the most recent year. The table below provides information on the qualifications and attendance of the members.
Job Title Name
Number of attendance in person
(B)
Number of attendance by proxy
Rate of attendance in person (%) (B/A)(Note)
Note
Convener Ling-IChung 3 0 100% Reelected
(on Jun. 19, 2017) Committee
Member Si-FengWang 3 0 100% Newly-elected
(on Jun. 19, 2017) Committee
Member Chun-Chi
Yang 3 0 100% Reelected (on Jun. 19, 2017)
Other required disclosure: 1. If the Board of Directors disapproves or revises the recommendations of the
Compensation Committee, the date and term of the board, the content of the proposal, theresult of the Board resolution and the Company’s response to the opinions of themembers of the Compensation Committee shall be clearly stated (if the Board ofDirectors approved a compensation plan that is better than the plan recommended by theCompensation Committee, the differential and the reason shall be stated): Not applicable.
2. When any of the members of the Compensation Committee holds objection or reservationto a resolution and such objection or reservation is on record or raised through a writtenstatement, the date, term, content of proposals, opinion from every member and theCompany’s response to the members’ opinions shall be provided in detail: Notapplicable.
Note:1. Note: When a member of the Compensation Committee resigns before end of the year, the date of
resignation shall be annotated in the "remark" column, and the rate of attendance in person (%)shall be calculated using the number of Compensation Committee meetings convened andnumber of attendance in person during the term of service.
2. Where members of the Compensation Committee were reelected before end of the year, both theincoming and outgoing members shall be listed accordingly and annotated in the "remark"column to indicate whether the member is outgoing, incoming or re-elected, as well as the date ofreelection. Rate of attendance in person (%) shall be calculated using the number ofCompensation Committee meetings convened and number of attendance in person during theterm of service.
62
(5) C
orpo
rate
Soc
ial R
espo
nsib
ility
:
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
1.Im
plem
enta
tion
of C
orpo
rate
Gov
erna
nce
(1) H
as th
e C
ompa
ny se
t up
a po
licy
or sy
stem
of
corp
orat
e so
cial
resp
onsi
bilit
y (C
SR) a
nd re
view
ed
the
effe
ctiv
enes
s of i
mpl
emen
tatio
n?
(2) H
as th
e co
mpa
ny p
rovi
ded
regu
lar t
rain
ing
on
corp
orat
e so
cial
resp
onsi
bilit
y to
pics
? (3
) Has
the
com
pany
est
ablis
hed
an e
xclu
sive
ly (o
r co
ncur
rent
ly) d
edic
ated
uni
t for
pro
mot
ing
corp
orat
e so
cial
resp
onsi
bilit
y? Is
the
unit
auth
oriz
ed b
y th
e B
oard
of D
irect
ors t
o im
plem
ent C
SR a
ctiv
ities
at
the
exec
utiv
e le
vel?
Doe
s the
uni
t rep
ort t
he
prog
ress
of s
uch
activ
ities
to th
e B
oard
of D
irect
ors?
(4) H
as th
e co
mpa
ny se
t up
a re
ason
able
com
pens
atio
n po
licy
and
linke
d th
e po
licy
to th
e em
ploy
ee
perf
orm
ance
eva
luat
ion
syst
em a
nd c
orpo
rate
soci
al
resp
onsi
bilit
y po
licy
and
esta
blis
hed
a cl
ear r
ewar
d an
d pe
nalty
syst
em?
V V V V
(A)
The
Com
pany
set i
ts so
cial
resp
onsi
bilit
y po
licy
in 2
005
to p
rovi
de th
e C
ompa
ny a
nd o
vers
eas s
ubsi
diar
ies a
set
of g
uide
lines
for i
mpl
emen
tatio
n of
cor
pora
te so
cial
re
spon
sibi
lity
rela
ted
prac
tices
. Th
e C
ompa
ny se
t up
a C
SR ta
skfo
rce
in 2
014,
re
posi
tioni
ng th
e C
ompa
ny's
soci
al re
spon
sibi
lity
polic
y an
d sy
stem
on
the
four
maj
or d
imen
sion
s, an
d m
ade
plan
s to
impl
emen
t the
pra
ctic
es.
(B)
In a
dditi
on to
the
clas
sroo
m c
ours
es, w
e ha
ve a
lso
set
up a
n in
tern
al o
nlin
e le
arni
ng p
latfo
rm fo
r soc
ial
resp
onsi
bilit
y re
late
d ed
ucat
ion
and
train
ing.
Eac
h ne
w
empl
oyee
mus
t tak
e th
is se
ries o
f cou
rses
, and
oth
er
empl
oyee
s can
cho
ose
thei
r cou
rses
thro
ugh
the
onlin
e pl
atfo
rm. T
he C
ompa
ny a
lso
orga
nize
dis
cuss
ions
from
tim
e to
tim
e on
soci
al re
spon
sibi
lity
issu
es to
shar
e op
inio
ns in
tern
ally
dur
ing
mee
tings
. (C
)Th
e C
ompa
ny h
as se
t up
a de
dica
ted
soci
al
resp
onsi
bilit
y un
it si
nce
2005
to im
plem
ent a
nd
prom
ote
soci
al re
spon
sibi
lity
rela
ted
polic
ies,
supe
rvis
e ov
erse
as su
bsid
iarie
s to
ensu
re th
at th
ey m
eet f
ull
com
plia
nce
with
loca
l lab
or la
ws a
nd so
cial
re
spon
sibi
lity
polic
ies,
and
inco
rpor
ate
activ
ities
of t
he
Foun
datio
n to
pla
n ch
arity
eve
nts a
nd e
ncou
rage
No
disc
repa
ncy
63
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
empl
oyee
par
ticip
atio
n.
In 2
014,
the
Boa
rd o
f Dire
ctor
s off
icia
lly a
utho
rized
the
man
agem
ent t
o se
t up
a C
SR ta
skfo
rce.
Thi
s tas
kfor
ce
take
s cha
rge
to c
arry
out
rele
vant
wor
ks a
nd re
port
to
the
Boa
rd o
f Dire
ctor
s on
a re
gula
r bas
is. F
or th
e ro
le
and
resp
onsi
bilit
ies o
f the
CSR
task
forc
e, p
leas
e re
fer
to p
ages
74
to 7
5 of
this
ann
ual r
epor
t. (D
)Th
e C
ompa
ny h
as se
t up
a co
mpr
ehen
sive
co
mpe
nsat
ion
and
empl
oyee
per
form
ance
eva
luat
ion
syst
em. A
ccor
ding
to A
rticl
e 20
of t
he C
ompa
ny’s
A
rticl
es o
f Inc
orpo
ratio
n, if
the
Com
pany
mak
es a
pr
ofit
in th
e ye
ar, o
ne to
eig
ht p
erce
nt o
f the
pro
fit sh
all
be a
lloca
ted
for e
mpl
oyee
com
pens
atio
ns a
nd n
o m
ore
than
five
per
cent
shal
l be
allo
cate
d fo
r com
pens
atio
ns o
f th
e di
rect
ors a
nd su
perv
isor
s. H
owev
er, t
he C
ompa
ny
shal
l res
erve
a p
ortio
n of
pro
fit to
mak
e up
for
accu
mul
ated
loss
es, i
f any
. In
addi
tion,
the
Com
pany
ha
s als
o se
t up
a re
war
d po
int s
yste
m fo
r par
ticip
atio
n in
th
e co
rpor
ate
soci
al re
spon
sibi
lity
activ
ities
. The
rew
ard
poin
ts c
an b
e re
deem
ed fo
r one
-day
pai
d w
ork
leav
e,
and
activ
e pa
rtici
pant
s will
be
publ
icly
com
men
ded
in
the
Com
pany
’s c
onse
nsus
cam
p, a
nd th
e re
cord
s are
lis
ted
as su
pple
men
tary
info
rmat
ion
for p
erfo
rman
ce
eval
uatio
n.2.
Dev
elop
ing
sust
aina
ble
envi
ronm
ent
(1) I
s the
Com
pany
com
mitt
ed to
impr
ovin
g th
e V
(A) T
he c
ompa
ny is
com
mitt
ed to
the
prom
otio
n of
en
viro
nmen
tal p
rote
ctio
n:
No
disc
repa
ncy
64
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
effic
ienc
y of
var
ious
reso
urce
s and
util
izin
g re
new
able
reso
urce
s tha
t will
redu
ce th
e im
pact
on
the
envi
ronm
ent?
(2
) Has
the
com
pany
est
ablis
hed
an a
dequ
ate
envi
ronm
ent m
anag
emen
t sys
tem
(EM
S), t
akin
g in
to c
onsi
dera
tion
the
natu
re o
f the
indu
stry
? (3
) Is t
he c
ompa
ny c
once
rned
with
glo
bal c
limat
e ch
ange
and
how
it m
ay a
ffec
t bus
ines
s act
iviti
es?
Has
the
com
pany
impl
emen
ted
gree
nhou
se g
as
(GH
G) i
nven
tory
and
form
ulat
e st
rate
gies
to re
duce
en
ergy
con
sum
ptio
n, c
arbo
n em
issi
ons,
and
gree
nhou
se g
as re
duct
ion?
V V
1.Th
e C
ompa
ny a
dvoc
ates
off
ice
envi
ronm
enta
lpr
otec
tion,
from
savi
ng e
nerg
y an
d cu
t dow
n w
aste
s.Fo
r exa
mpl
es: c
ut d
own
use
of a
ir-co
nditi
onin
g an
dpa
per,
inst
all w
ater
-sav
ing
devi
ces,
use
envi
ronm
enta
lly-f
riend
ly to
ners
, rec
ycle
tone
rca
rtrid
ges a
nd u
se e
nerg
y-sa
ving
ligh
t bul
bs.
2.W
e ha
ve in
stal
led
was
tew
ater
trea
tmen
t sys
tem
s in
over
seas
subs
idia
ries'
prod
uctio
n ar
eas.
Was
tew
ater
istre
ated
bef
ore
disc
harg
ing
to c
ompl
y w
ith lo
cal
envi
ronm
enta
l pro
tect
ion
stan
dard
s. Pa
rt of
the
was
tew
ater
can
be
recy
cled
and
reus
ed a
fter
treat
men
t. B
eyon
d m
aint
aini
ng a
hea
lthy
and
safe
wor
kpla
ce a
nd m
akin
g al
l eff
orts
to p
reve
nten
viro
nmen
tal p
ollu
tion,
som
e of
our
fact
orie
s are
also
inst
alle
d w
ith ra
inw
ater
reco
very
syst
ems.
Rec
ycle
d ra
inw
ater
can
be
reus
ed fo
r dom
estic
utili
ties (
flush
ing
toile
ts/w
ater
ing
plan
ts) t
o fu
rther
save
wat
er re
sour
ces.
3.A
ll lig
hts a
t man
ufac
turin
g fa
ctor
ies o
f ove
rsea
ssu
bsid
iarie
s are
repl
aced
with
ene
rgy-
savi
ng/L
EDla
mps
. We
are
plan
ning
to re
plac
e th
e ex
istin
geq
uipm
ent w
ith g
reen
ene
rgy
equi
pmen
t at a
ll ne
wan
d ol
d fa
ctor
ies (
such
as s
ewin
g eq
uipm
ent w
ithse
rvom
otor
s) to
ach
ieve
the
targ
ets o
f env
ironm
enta
lpr
otec
tion
and
ener
gy-s
avin
g. F
or th
e bo
ilers
, we
have
beg
un to
repl
ace
or p
urch
ase
eco-
frie
ndly
boi
lers
65
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
(usi
ng fa
bric
was
te a
s fue
ls) o
r oth
er b
oile
rs w
ith
rela
tivel
y lo
w c
arbo
n em
issi
ons t
o co
al-f
ired
boile
rs
(suc
h as
ele
ctric
boi
lers
or n
atur
al g
as b
oile
rs) a
t all
new
and
exi
stin
g fa
ctor
ies t
o re
duce
car
bon
emis
sion
s an
d cu
t dow
n th
e us
e of
die
sel f
uel a
nd c
oal.
4.D
evel
op su
stai
nabl
e te
xtile
s: In
add
ition
to th
ede
velo
pmen
t of p
rodu
cts o
f Rec
ycle
fabr
ics,
in 2
016,
we
laun
ched
nat
ural
dye
pro
duct
s to
cut d
own
the
burd
en a
nd im
pact
on
the
envi
ronm
ent b
roug
ht b
ych
emic
al fi
ber d
yes.
At t
he c
urre
nt st
age,
ove
r 200
tons
of t
his p
rodu
ct se
ries h
ave
been
ship
ped,
savi
ngov
er 8
00,0
00 li
ters
of w
ater
and
cut
ting
dow
n40
0,00
0 kg
of C
O2
emis
sion
.5.
Dig
ital p
rintin
g en
able
s fas
t sam
ple
mak
ing/
larg
e-vo
lum
e pr
oduc
tion
and
sign
ifica
ntly
redu
ces
was
tew
ater
con
tain
ing
dyes
from
bei
ng d
isch
arge
d.6.
We
will
als
o co
ntin
ue to
dev
elop
pro
duct
s with
phys
ical
func
tions
, suc
h as
moi
stur
e-w
icki
ng,
antib
acte
rial a
nd d
eodo
rizin
g w
ith p
erm
anen
tef
fect
iven
ess,
to re
duce
the
use
of c
hem
ical
add
itive
san
d m
inim
ize
the
impa
ct o
n th
e en
viro
nmen
t.7.
The
Com
pany
's m
anuf
actu
ring
proc
esse
s com
ply
with
the
Oek
o-te
x100
stan
dard
s and
bee
n ce
rtifie
d in
201
7.A
ll pr
oduc
ts a
re fr
ee fr
om su
bsta
nces
kno
wn
to b
eha
rmfu
l to
hum
an h
ealth
. Our
man
ufac
turin
gpr
oces
ses a
nd w
aste
dis
posa
l hav
e no
t cau
sed
any
66
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
adve
rse
impa
ct o
n th
e en
viro
nmen
t or g
ener
ate
pollu
tion.
(2) T
he c
ompa
ny h
as se
t up
envi
ronm
enta
l man
agem
ent
polic
ies a
nd a
sust
aina
ble
deve
lopm
ent m
anag
emen
t sy
stem
, est
ablis
hing
an
info
rmat
ion
syst
em fo
r tra
ckin
g an
d m
anag
ing
actio
n pl
ans t
arge
ting
on e
nerg
y-sa
ving
an
d ca
rbon
redu
ctio
n.
(3) T
he h
ead
offic
e in
Tai
pei c
alcu
late
d th
e vo
lum
e of
gr
eenh
ouse
gas
es g
ener
ated
from
max
imum
pow
er
(Sco
pe 2
) to
deriv
e th
e em
issi
ons f
or 2
016
and
2017
, w
hich
are
540
,938
(kg
CO
2e/k
Wh)
(GH
G e
mis
sion
co
effic
ient
is 0
.529
kg
CO
2e/k
Wh)
and
674
,025
(kg
CO
2e/k
Wh)
(GH
G e
mis
sion
coe
ffic
ient
is 0
.529
kg
CO
2e/k
Wh)
resp
ectiv
ely.
Th
e C
ompa
ny e
stab
lishe
d a
five-
year
zer
o-ca
rbon
em
issi
on p
lan
for t
he h
ead
offic
e in
201
5 (im
plem
ente
d in
201
6), a
nd e
xpec
ts to
pla
nt 7
,500
tree
s in
Taiw
an
befo
re 2
020.
The
hea
d of
fice
also
beg
an to
col
lect
dat
a on
the
use
of e
nerg
y in
ove
rsea
s fac
torie
s and
set 5
% a
s a
targ
et o
f ene
rgy
savi
ng.
In a
dditi
on, t
o m
eet c
usto
mer
's re
quire
men
ts a
nd
stra
tegi
es fo
r env
ironm
enta
l pro
tect
ion,
our
ove
rsea
s fa
ctor
ies h
ave
cond
ucte
d se
lf-as
sess
men
t on
the
envi
ronm
enta
l pro
tect
ion
prac
tices
bas
ed o
n th
e H
igg
inde
x. T
he h
ead
offic
e al
so b
egan
to c
olle
ct th
e in
form
atio
n of
stan
dard
ope
ratin
g pr
oced
ures
and
will
67
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
train
our
fact
orie
s how
to d
o in
ord
er to
the
targ
et le
vel
1 .
3.Sa
fegu
ardi
ng S
ocia
l Wel
fare
(1) H
as th
e C
ompa
ny se
t up
rele
vant
man
agem
ent
polic
ies a
nd p
roce
dure
s, ta
king
refe
renc
es o
f re
leva
nt la
ws a
nd in
tern
atio
nal h
uman
righ
ts
treat
ies?
(2
) Has
the
Com
pany
set u
p an
em
ploy
ee g
rieva
nce
syst
em a
nd c
hann
els a
nd h
andl
ed th
e is
sues
ad
equa
tely
? (3
) Has
the
Com
pany
pro
vide
d em
ploy
ees w
ith sa
fe
and
heal
thy
wor
kpla
ces,
as w
ell a
s reg
ular
edu
catio
n on
safe
ty a
nd h
ealth
? (4
) Has
the
Com
pany
set u
p a
syst
em to
regu
larly
co
mm
unic
ate
with
its e
mpl
oyee
s and
use
d ap
prop
riate
mea
ns to
not
ify e
mpl
oyee
s of o
pera
tion
chan
ges t
hat m
ay re
sult
in m
ater
ial i
mpa
cts?
(5
) Has
the
Com
pany
set u
p an
eff
ectiv
e ca
reer
and
co
mpe
tenc
y de
velo
pmen
t pro
gram
for e
mpl
oyee
s?
(6) H
as th
e C
ompa
ny se
t up
rele
vant
pol
icie
s and
sy
stem
s to
prot
ect t
he ri
ghts
of c
onsu
mer
s and
pr
ovid
e a
chan
nel f
or c
omm
unic
atio
n in
the
proc
ess
of R
&D
, pro
cure
men
t, pr
oduc
tion,
ope
ratio
ns a
nd
serv
ices
? (7
) Has
the
Com
pany
met
com
plia
nce
with
rele
vant
la
ws a
nd in
tern
atio
nal s
tand
ards
gov
erni
ng th
e
V V V V V V V V
V
(A)T
he C
ompa
ny c
ompl
ies w
ith th
e La
bor S
tand
ards
Act
an
d re
leva
nt la
ws a
nd re
gula
tions
, as w
ell a
s in
tern
atio
nal h
uman
righ
ts c
onve
ntio
ns o
n ge
nder
eq
ualit
y, ri
ght t
o w
ork
and
elim
inat
ion
of a
ll fo
rms o
f di
scrim
inat
ion.
We
prov
ide
bene
fits t
hat a
re b
ette
r tha
n th
e st
atut
ory
labo
r req
uire
men
ts, s
uch
as a
dditi
onal
pai
d le
aves
and
regu
lar h
ealth
che
ckup
s. (B
)Em
ploy
ees o
f the
Com
pany
may
lodg
e th
eir c
ompl
aint
s to
the
Hum
an R
esou
rces
Dep
artm
ent d
irect
ly o
r thr
ough
th
e C
EO's
mai
lbox
. The
Com
pany
als
o pr
ovid
es
mul
tiple
com
mun
icat
ions
cha
nnel
s to
our e
mpl
oyee
s, in
clud
ing
regu
lar e
mpl
oyee
-man
agem
ent m
eetin
gs a
nd
unsc
hedu
led
"Em
ploy
ee S
atis
fact
ion
Surv
ey",
aim
ing
to
build
a lo
ng-te
rm p
artn
ersh
ip w
ith o
ur e
mpl
oyee
s and
m
aint
ain
a ha
rmon
ious
wor
ker-
man
agem
ent
rela
tions
hip.
(C)
The
Com
pany
pro
vide
s saf
e an
d he
alth
y w
ork
envi
ronm
ent f
or o
ur e
mpl
oyee
s, in
clud
ing
nece
ssar
y he
alth
and
firs
t-aid
faci
litie
s, an
d m
akes
all
effo
rts to
m
inim
ize
fact
ors t
hat m
ay je
opar
dize
em
ploy
ees'
safe
ty
and
heal
th a
nd p
reve
nt o
ccup
atio
nal a
ccid
ents
. The
C
ompa
ny's
corp
orat
e he
ad o
ffic
e ha
s bee
n ce
rtifie
d by
(1) t
o (8
) No
disc
repa
ncy.
(9) A
lthou
gh th
e co
ntra
cts b
etw
een
the
Com
pany
and
its
supp
liers
do
not p
rovi
de
this
opt
ion,
we
will
up
hold
this
spiri
t and
co
mm
unic
ate
with
our
su
pplie
rs b
efor
e en
terin
g a
cont
ract
to
ensu
re th
at o
ur
supp
liers
als
o co
mpl
y w
ith re
leva
nt so
cial
re
spon
sibi
lity
polic
ies
and
envi
ronm
enta
l pr
otec
tion
requ
irem
ents
.
68
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
mar
ketin
g an
d la
belin
g of
its p
rodu
cts a
nd se
rvic
es?
(8) H
as th
e C
ompa
ny e
valu
ated
on
past
reco
rds o
f the
su
pplie
rs a
nd v
erifi
ed w
heth
er th
eir p
ast r
ecor
ds h
ad
impa
ct o
n th
e en
viro
nmen
t and
the
soci
ety
prio
r to
enga
ging
in b
usin
ess w
ith th
ese
com
pani
es?
(9) D
o th
e co
ntra
cts b
etw
een
the
Com
pany
and
its
maj
or su
pplie
rs in
clud
e te
rms t
hat p
rovi
des t
he
Com
pany
with
the
optio
ns to
term
inat
e or
resc
ind
the
cont
ract
s at a
ny ti
me
whe
n su
pplie
rs a
re fo
und
to
have
vio
late
d th
e C
ompa
ny's
corp
orat
e so
cial
re
spon
sibi
lity
polic
y an
d ca
used
sign
ifica
nt im
pact
on
the
envi
ronm
ent a
nd so
ciet
y?
the
U.S
. Gre
en B
uild
ing
Cou
ncil
for t
he L
EED
Gol
d C
ertif
icat
ion
on N
ovem
ber 1
1, 2
016.
We
impl
emen
t the
fo
llow
ing
prac
tices
regu
larly
to m
aint
ain
the
heal
th a
nd
safe
ty o
f our
wor
kpla
ces.
1.O
ffic
e fir
e sa
fety
insp
ectio
n, re
porti
ng a
nd a
dvoc
acy
(Oct
ober
ann
ually
) 2.
Off
ice
elev
ator
serv
ice
(twic
e m
onth
ly)
3.O
ffic
e di
sinf
ectio
n (q
uarte
rly)
In a
dditi
on to
em
ploy
ee h
ealth
car
e, w
e im
plem
ent
regu
lar e
duca
tion
cour
ses t
o ra
ise
our e
mpl
oyee
s’
awar
enes
s on
heal
th a
nd sa
fety
: 1.
Ann
ual e
mpl
oyee
hea
lth c
heck
up, c
oord
inat
ed w
ithhe
alth
sem
inar
s and
hea
lth re
port
cons
ulta
tion,
aim
sto
rais
e em
ploy
ees’
aw
aren
ess o
n th
e co
rrec
tpr
even
tive
heal
th c
are
and
pers
onal
hea
lthm
anag
emen
t.2.
We
are
com
mitt
ed to
cre
atin
g he
alth
y w
orkp
lace
s.O
ur e
ffor
ts h
ave
been
reco
gniz
ed b
y th
e Ta
ipei
City
Hea
lthy
Wor
kpla
ce S
elf-
Aud
it C
ertif
icat
ion
Prog
ram
.3.
We
impl
emen
ted
a pr
ogra
m to
car
e fo
r our
em
ploy
ees
and
the
disa
dvan
tage
d gr
oups
. Sin
ce 2
012,
the
“Ene
rgy
Mas
sage
Sta
tion”
has
bee
n se
t up
in th
eC
ompa
ny. W
e br
ough
t in
visu
ally
-impa
ired
mas
sage
ther
apis
ts to
hel
p ou
r em
ploy
ees r
elax
and
relie
vest
ress
from
thei
r bus
y w
ork.
Thi
s pro
gram
not
onl
y
69
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
prov
ides
our
em
ploy
ees a
rela
mom
ent,
but a
lso
job
oppo
rtuni
ties t
o th
e di
sadv
anta
ged
grou
ps.
(D)T
he C
ompa
ny h
olds
regu
lar e
mpl
oyee
-man
agem
ent
mee
ting
to e
stab
lish
a sm
ooth
inte
rnal
com
mun
icat
ion
chan
nel.
This
cha
nnel
pro
vide
s our
em
ploy
ees a
n op
portu
nity
to fu
lly e
xpre
ss th
eir o
pini
ons.
A c
onse
nsus
ca
mp
is a
lso
held
twic
e ev
ery
year
; in
whi
ch, t
he se
nior
su
perv
isor
s pre
sent
the
Com
pany
’s o
pera
tiona
l pla
ns a
nd
perf
orm
ance
eva
luat
ion
to a
ll m
embe
rs o
f the
C
ompa
ny. .
Maj
or in
tern
al n
ews o
f the
Com
pany
are
an
noun
ced
thro
ugh
inte
rnal
web
site
s and
the
inte
rnal
de
partm
ent m
eetin
gs. A
nnou
ncem
ents
are
mad
e th
roug
h th
e in
tern
al e
mai
l sys
tem
, as w
ell a
s the
inte
rnal
pos
t sy
stem
(SPS
), w
hich
con
solid
ates
the
Com
pany
’s
mat
eria
l inf
orm
atio
n an
d m
ade
info
rmat
ion
avai
labl
e fo
r fr
ee in
quiry
and
bro
wsi
ng w
ithin
the
Com
pany
to
achi
eve
open
ness
and
tran
spar
ency
of i
nfor
mat
ion.
We
also
invi
te se
nior
exe
cutiv
es to
shar
e th
eir v
iew
s bas
ed
on th
e sp
ecifi
c to
pics
of t
he y
ear o
n th
e in
tern
al p
ost
syst
em (S
PS) a
nd c
onve
y th
e C
ompa
ny's
futu
re b
usin
ess
goal
s and
dire
ctio
n w
ith h
ighe
r cla
rity
and
prec
isio
n.
(E)
“Tal
ents
are
the
mos
t im
porta
nt a
sset
s of t
he C
ompa
ny."
To
dev
elop
pro
fess
iona
ls fo
r the
gar
men
t ind
ustry
and
im
prov
e th
e qu
ality
of h
uman
reso
urce
s, th
e C
ompa
ny
has p
lann
ed a
trai
ning
syst
em a
ccor
ding
to it
s cor
e co
mpe
tenc
ies o
f eac
h jo
b fu
nctio
n. T
hrou
gh c
ontin
uous
70
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
lear
ning
, we
led
our e
mpl
oyee
s to
grow
with
the
Com
pany
. D
iver
sifie
d ta
lent
dev
elop
men
t sys
tem
: 1.
To p
rovi
de a
bas
is fo
r the
ove
rall
oper
atio
ns o
f the
hum
an re
sour
ce m
echa
nism
, we
defin
ed th
e "m
issi
on,
visi
on, p
olic
y an
d co
mm
itmen
t of t
he C
ompa
ny’s
tale
nt d
evel
opm
ent"
and
pla
nned
a tr
aini
ng sy
stem
acco
rdin
g to
the
core
com
pete
ncie
s of e
ach
job
func
tion.
The
trai
ning
syst
em is
div
ided
into
four
larg
e gr
oups
: new
em
ploy
ee tr
aini
ng, p
rofe
ssio
nal
train
ing
and
man
agem
ent t
rain
ing
and
lear
ning
deve
lopm
ent.
2.W
e fo
unde
d th
e "M
akal
ot A
cade
my"
, and
the
Com
pany
’s "
Prof
essi
onal
Pro
gram
Pla
nnin
gC
omm
ittee
" pla
nned
a se
ries o
f pro
fess
iona
l cou
rses
to m
eet t
he n
eeds
of p
rofe
ssio
nal c
ompe
tenc
yde
velo
pmen
t. In
tegr
ated
with
the
E-le
arni
ng sy
stem
,th
e ov
eral
l sys
tem
com
bine
s the
ory
and
prac
tice
topr
ovid
e a
syst
emat
ic le
arni
ng e
nviro
nmen
t.3.
Our
trai
ning
syst
em is
a d
ual-t
rack
dev
elop
men
tm
odel
for p
rofe
ssio
nal a
nd m
anag
emen
t per
sonn
el.
Thro
ugh
job
rota
tion,
our
em
ploy
ees g
ain
dive
rsifi
edw
ork
expe
rienc
es a
nd e
xpan
d sc
ope
of th
eir p
erso
nal
care
er d
evel
opm
ent.
Effe
ctiv
e us
e of
the
IDP
(Ind
ivid
ual D
evel
opm
ent P
rogr
am) a
llow
s us t
ost
ratif
y tra
inin
g, a
ccel
erat
e gr
owth
and
bui
ld a
tale
nt
71
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
pool
for M
akal
ot.
4.Si
nce
we
intro
duce
d th
e le
arni
ng o
rgan
izat
ion
oper
atio
n in
199
9, a
new
lear
ning
team
has
bee
nfo
rmed
for o
ver 1
9 ye
ars.
Thro
ugh
expe
rient
ial
lear
ning
and
team
wor
k m
issi
on a
chie
vem
ent,
our
empl
oyee
s bui
lt th
eir p
erso
nal n
etw
ork
acro
ssde
partm
ents
and
eng
aged
in in
tera
ctiv
e ex
chan
ge. U
pto
201
7, w
e ha
d la
unch
ed 2
7 se
ssio
ns w
ith 7
90pa
rtici
pant
s.(F
)Th
e C
ompa
ny se
t up
a de
dica
ted
unit
to p
rom
ptly
han
dle
cust
omer
com
plai
nts a
nd is
sues
, and
ded
icat
ed p
erso
nnel
is
app
oint
ed to
mon
itor t
he p
rogr
ess o
f cus
tom
er
com
plai
nts c
ases
. The
qua
lity
assu
ranc
e de
partm
ent
revi
ews t
he so
urce
of i
ssue
s and
impl
emen
t im
prov
emen
ts to
the
prod
uctio
n an
d qu
ality
con
trol
proc
esse
s. (G
)The
Com
pany
ens
ures
that
all
prac
tices
of m
arke
ting
and
labe
ling
of p
rodu
cts a
nd se
rvic
es m
eet c
ompl
ianc
e w
ith
rele
vant
law
s in
targ
et m
arke
ts a
nd in
tern
atio
nal
stan
dard
s. (H
)The
Com
pany
's ev
alua
tion
of n
ew a
nd e
xist
ing
supp
liers
fo
cuse
s on
qual
ity, p
rice,
serv
ice
and
spee
d, a
imin
g to
bu
ild a
syst
em o
f qua
lifie
d su
pplie
rs. A
s a lo
ng-te
rm
partn
er, w
e w
ill e
mph
asiz
e th
e C
ompa
ny's
requ
irem
ents
fo
r env
ironm
enta
l pro
tect
ion
and
hum
an ri
ghts
stan
dard
s an
d re
quire
gar
men
t man
ufac
turin
g su
pplie
rs to
com
ply
72
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
the
Cor
pora
te S
ocia
l R
espo
nsib
ility
Bes
t Pr
actic
e Pr
inci
ples
for
TWSE
/GTS
M L
iste
d C
ompa
nies
and
reas
ons
Yes
No
Sum
mar
y (N
ote
2)
with
inte
rnat
iona
lly-r
ecog
nize
d no
rms o
f hum
an ri
ghts
, as
wel
l as r
evie
win
g th
e ef
fect
iven
ess o
f im
plem
enta
tion
to e
nsur
e th
at c
orpo
rate
gov
erna
nce
is e
nfor
ced
in o
ur
supp
ly c
hain
. (I
)Th
e co
ntra
cts b
etw
een
the
Com
pany
and
its m
ajor
su
pplie
rs d
o no
t pro
vide
the
optio
ns to
term
inat
e or
re
scin
d th
e co
ntra
cts a
t any
tim
e w
hen
they
are
foun
d to
ha
ve v
iola
ted
the
Com
pany
's co
rpor
ate
soci
al
resp
onsi
bilit
y po
licy.
4.
Rei
nfor
cing
Info
rmat
ion
Dis
clos
ure
(1) D
oes t
he c
ompa
ny d
iscl
ose
rele
vant
and
relia
ble
info
rmat
ion
rela
ting
to c
orpo
rate
soci
al
resp
onsi
bilit
y on
its o
ffic
ial w
ebsi
te o
r the
MO
PS?
V
Sinc
e 20
06, t
he C
ompa
ny h
as b
egun
to p
ublis
h its
ann
ual
soci
al re
spon
sibi
lity
repo
rt an
d pl
aced
it o
n th
e C
ompa
ny's
web
site
to d
iscl
ose
the
Com
pany
’s so
cial
resp
onsi
bilit
y pr
actic
es.
Star
ting
from
201
7, th
e C
ompa
ny a
dopt
ed th
e la
test
GR
I St
anda
rds f
or it
s 201
6 co
rpor
ate
soci
al re
spon
sibi
lity
annu
al
repo
rt.
No
disc
repa
ncy
5.If
the
Com
pany
has
set
up
its o
wn
Cor
pora
te S
ocia
l Res
pons
ibili
ty B
est P
ract
ices
Prin
cipl
es b
ased
on
the
"Cor
pora
te S
ocia
l Res
pons
ibili
ty B
est
Prac
tice
Prin
cipl
es fo
r TW
SE/G
TSM
Lis
ted
Com
pani
es",
des
crib
e an
y di
scre
panc
ies
betw
een
the
pres
crib
ed b
est p
ract
ices
and
act
ual a
ctiv
ities
take
n pl
ace
in th
e co
mpa
ny:
The
Com
pany
has
take
n re
fere
nce
of th
e "C
orpo
rate
Soc
ial R
espo
nsib
ility
Bes
t Pra
ctic
e Pr
inci
ples
for T
WSE
/GTS
M L
iste
d C
ompa
nies
", se
t up
our o
wn
corr
espo
ndin
g "C
orpo
rate
Soc
ial R
espo
nsib
ility
Bes
t Pra
ctic
e Pr
inci
ples
", a
nd im
plem
ente
d th
e pr
inci
ples
acc
ordi
ngly
.6.
Oth
er im
porta
nt in
form
atio
n th
at m
ay fa
cilit
ate
bette
r und
erst
andi
ng o
f the
Com
pany
's co
rpor
ate
soci
al re
spon
sibi
lity
oper
atio
ns: T
he st
ruct
ure
and
the
role
s and
resp
onsi
bilit
ies o
f the
cor
pora
te so
cial
resp
onsi
bilit
y or
gani
zatio
n is
pro
vide
d be
low
. Ple
ase
refe
r to
the
Com
pany
's w
ebsi
tefo
r det
ails
.
73
Cat
egor
yFu
nctio
nIm
plem
enta
tion
focu
s
Cor
pora
teG
over
nanc
eTe
am
Esta
blis
h co
rpor
ate
gove
rnan
ce s
truct
ure
and
Cod
e of
Et
hica
l Con
duct
. En
sure
com
plia
nce
of th
e C
ompa
ny's
busi
ness
act
iviti
es.
Safe
guar
d th
e in
tere
sts o
f sta
keho
lder
s.
Set u
p pr
oced
ures
and
gui
delin
es a
nd im
plem
ent r
elev
ant
train
ing
cour
ses f
or a
dvoc
acy.
C
arry
out
im
plem
enta
tion
and
impr
ovem
ent
of v
ario
us
proc
edur
es a
nd g
uide
lines
.
Sust
aina
ble
Dev
elop
men
t Te
am
Set u
p en
viro
nmen
tal m
anag
emen
t sys
tem
s Se
t up
impo
rtant
man
agem
ent i
ndic
ator
s Im
plem
ent p
rogr
am e
valu
atio
n an
d pr
omot
ion
to e
nhan
ce
cust
omer
satis
fact
ion.
Wor
k w
ith c
onsu
lting
com
pany
to m
ake
a fe
asib
le p
lan
for
impl
emen
tatio
n of
ene
rgy-
savi
ng a
nd c
arbo
n re
duct
ion
prac
tices
, the
n se
lect
a fa
ctor
y to
impl
emen
t im
prov
emen
ts
and
furth
er
impl
emen
t th
e pl
an
to
othe
r pr
oduc
tion
area
s/fa
ctor
ies.
Chi
ef C
onve
ner
Chi
ef E
xecu
tive
Off
icer
Cor
pora
te G
over
nanc
e T
eam
Lega
l Aff
airs
Tea
mSt
ock
Aff
airs
Tea
m
Sust
aina
ble
Dev
elop
men
t T
eam Man
ufac
turin
g M
anag
emen
t D
ivis
ion,
Hum
an R
esou
rces
D
epar
tmen
t,Sup
ply
Man
agem
ent
Dep
artm
ent,
Prod
uctio
n A
rea
Hum
an R
ight
s D
evel
opm
ent T
eam
Soci
al R
espo
nsib
ility
Sec
tion,
Prod
uctio
n A
rea,
Hum
an
Res
ourc
es D
epar
tmen
t
Soci
al W
elfa
re T
eam
Hum
an R
esou
rces
Dep
artm
ent,
Soci
al
Res
pons
ibili
ty S
ectio
nPr
oduc
tion
Are
a, F
ound
atio
n
Exec
utiv
e O
ffic
er
74
Cat
egor
yFu
nctio
nIm
plem
enta
tion
focu
sH
uman
R
ight
sD
evel
opm
ent
Team
Mee
t com
plia
nce
with
hum
an re
sour
ce p
olic
ies
and
ensu
re
hum
an ri
ghts
pro
tect
ion
Ensu
re e
mpl
oyee
saf
ety
and
heal
thy
wor
kpla
ce a
nd s
et u
p an
d m
aint
ain
good
com
mun
icat
ion
chan
nels
Con
tinue
to
as
sist
al
l pr
oduc
tion
area
s to
im
plem
ent
hum
an ri
ghts
pro
tect
ion
prac
tices
Pl
an a
nd im
plem
ent e
mpl
oyee
car
e an
d re
late
d ac
tiviti
es.
Soci
alW
elfa
reTe
am
Parti
cipa
te i
n lo
cal
com
mun
ity d
evel
opm
ent
and
soci
al
char
ity e
vent
s to
prom
ote
the
Com
pany
's in
fluen
ce
Plan
and
pro
mot
e pu
blic
wel
fare
act
iviti
es i
n pr
oduc
tion
area
s Se
t up
budg
et a
nd c
ontin
uous
ope
ratio
n m
echa
nism
s
7.If
the
Com
pany
's C
SR h
as b
een
certi
ficat
ion
by a
ny c
ertif
icat
ion
bodi
es, t
he d
etai
ls sh
all b
e di
sclo
sed:
Non
e.
75
(6) I
mpl
emen
tatio
n of
Eth
ical
Cor
pora
te M
anag
emen
t
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
th
e Et
hica
l C
orpo
rate
Man
agem
ent B
est
Prac
tice
Prin
cipl
es
for T
WSE
/GTS
M
List
ed C
ompa
nies
an
d re
ason
s
Yes
No
Sum
mar
y
1.Fo
rmul
atin
g po
licie
s and
pla
ns fo
r eth
ical
cor
pora
tem
anag
emen
t(1
) Has
the
Com
pany
cle
arly
exp
ress
ed it
s pol
icie
s and
pr
actic
es re
late
d to
eth
ical
cor
pora
te m
anag
emen
t in
its
proc
edur
es a
nd g
uide
lines
and
doc
umen
ts o
pen
to
exte
rnal
vie
wer
s, an
d ha
ve th
e C
ompa
ny’s
Boa
rd o
f D
irect
ors a
nd m
anag
emen
t mad
e ac
tive
effo
rts to
fulfi
ll th
eir c
omm
itmen
ts to
cor
pora
te p
olic
ies?
(2
) Has
the
Com
pany
set a
pla
n to
fore
stal
l une
thic
al
cond
uct,
clea
rly p
resc
ribed
pro
cedu
res/
best
pr
actic
es/d
isci
plin
ary
actio
ns a
nd re
porti
ng sy
stem
s for
vi
olat
ions
in p
lans
, and
impl
emen
ted
the
plan
s ac
cord
ingl
y?
(3) H
as th
e co
mpa
ny e
stab
lishe
d pr
even
tive
mea
sure
s for
ac
tiviti
es p
resc
ribed
in P
arag
raph
2, A
rticl
e 7
of th
e "E
thic
al C
orpo
rate
Man
agem
ent B
est P
ract
ice
Prin
cipl
es
for T
WSE
/GTS
M L
iste
d C
ompa
nies
" or
bus
ines
s ac
tiviti
es d
eem
ed to
hav
e hi
gher
risk
s with
in th
e sc
ope
of th
e C
ompa
ny’s
bus
ines
s ope
ratio
ns?
V V V
1.Th
e C
ompa
ny u
phol
ds th
ree
core
val
ues,
“int
egrit
y,te
amw
ork,
and
shar
ing”
. “C
ore
valu
es, m
ain
spiri
t,co
mpa
ny m
odel
s and
gui
delin
es c
orre
spon
ding
tosp
ecifi
c be
havi
ors”
are
con
veye
d in
new
em
ploy
ees’
onbo
ardi
ng tr
aini
ng, p
rovi
ding
new
em
ploy
ees w
ith a
nin
sigh
t int
o th
e C
ompa
ny's
polic
y of
eth
ical
cor
pora
tem
anag
emen
t. A
serie
s of a
ctiv
ities
(con
sens
us c
amps
,va
lue
and
beha
vior
s, ne
w e
mpl
oyee
mod
el e
lect
ion
and
Mak
alot
cul
ture
act
ion
poin
t col
lect
ion
card
) are
hel
dan
nual
ly to
con
solid
ate
cons
ensu
s and
inst
ill th
ebu
sine
ss p
hilo
soph
y an
d co
de o
f con
duct
of t
heC
ompa
ny in
the
corp
orat
e cu
lture
.2.
The
Com
pany
pre
vent
s une
thic
al c
ondu
cts a
ndim
plem
ents
eth
ical
cor
pora
te m
anag
emen
t thr
ough
good
gov
erna
nce,
risk
con
trol m
echa
nism
and
com
preh
ensi
ve p
roce
dure
s and
syst
ems.
In 2
015,
ade
dica
ted
unit
dire
ctly
und
er th
e B
oard
of D
irect
ors
was
set u
p in
coo
rdin
atio
n w
ith th
e es
tabl
ishm
ent o
f the
Com
pany
’s "C
orpo
rate
Gov
erna
nce
Bes
t Pra
ctic
ePr
inci
ples
"," E
thic
al C
orpo
rate
Man
agem
ent B
est
Prac
tice
Prin
cipl
e"s a
nd "
Cod
e of
Eth
ical
Con
duct
",
No
disc
repa
ncy
76
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
th
e Et
hica
l C
orpo
rate
Man
agem
ent B
est
Prac
tice
Prin
cipl
es
for T
WSE
/GTS
M
List
ed C
ompa
nies
an
d re
ason
s
Yes
No
Sum
mar
y
whi
ch p
rovi
des a
syst
em fo
r pre
vent
ing
and
repo
rting
un
ethi
cal c
ondu
cts a
nd fa
cilit
ate
impl
emen
tatio
n of
the
syst
em.
3.Th
e C
ompa
ny's
prot
ectio
n ag
ains
t the
risk
of u
neth
ical
cond
uct w
as o
rigin
ally
gov
erne
d by
the
wor
k ru
les a
ndre
leva
nt in
tern
al re
gula
tions
and
the
empl
oyee
s wer
eex
plic
itly
rem
inde
d to
reje
ct g
ifts f
rom
supp
liers
as a
decl
arat
ion
of th
e C
ompa
ny's
guid
elin
es fo
r ant
i-br
iber
y.To
pre
vent
act
iviti
es p
resc
ribed
in P
arag
raph
2, A
rticl
e 7
of th
e "E
thic
al C
orpo
rate
Man
agem
ent B
est P
ract
ice
Prin
cipl
es fo
r TW
SE/G
TSM
Lis
ted
Com
pani
es"
orbu
sine
ss a
ctiv
ities
dee
med
to h
ave
high
er ri
sks w
ithin
the
scop
e of
the
Com
pany
’s b
usin
ess o
pera
tions
, the
Com
pany
set u
p th
e "C
ode
of E
thic
al C
orpo
rate
Man
agem
ent a
nd E
thic
al C
ode
of C
ondu
ct"
to p
rovi
de a
set o
f gui
delin
es fo
r the
mem
bers
of t
he B
oard
and
all
empl
oyee
s.2.
Impl
emen
ting
ethi
cal c
orpo
rate
man
agem
ent
(1) H
as th
e C
ompa
ny e
valu
ated
the
reco
rds o
f its
bus
ines
s pa
rtner
s rel
atin
g to
bus
ines
s eth
ics a
nd st
ipul
ated
term
s of
eth
ical
con
duct
s in
the
cont
ract
with
them
? (2
) Has
the
Com
pany
est
ablis
hed
a de
dica
ted
(or
conc
urre
nt) u
nit f
or im
plem
enta
tion
of e
thic
al c
orpo
rate
V V
1.A
ll bu
sine
ss a
ctiv
ities
of t
he C
ompa
ny a
re c
arrie
d ou
tw
ith fa
irnes
s and
tran
spar
ency
. Bef
ore
a tra
nsac
tion
ism
ade,
we
verif
y th
e au
then
ticity
and
bus
ines
s int
egrit
y of
the
coun
terp
arty
and
abs
tain
from
eng
agin
g in
bus
ines
stra
nsac
tions
or s
igni
ng c
ontra
ct w
ith c
ompa
nies
kno
wn
to
No
disc
repa
ncy
77
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
th
e Et
hica
l C
orpo
rate
Man
agem
ent B
est
Prac
tice
Prin
cipl
es
for T
WSE
/GTS
M
List
ed C
ompa
nies
an
d re
ason
s
Yes
No
Sum
mar
y
man
agem
ent d
irect
ly u
nder
the
Boa
rd o
f Dire
ctor
s and
ha
d th
is u
nit r
epor
t to
the
Boa
rd o
f Dire
ctor
s reg
ular
ly
for t
he st
atus
of i
mpl
emen
tatio
n?
(3) H
as th
e C
ompa
ny e
stab
lishe
d po
licie
s to
prev
ent
conf
lict o
f int
eres
ts, p
rovi
de a
dequ
ate
chan
nels
for
grie
vanc
e an
d im
plem
ente
d th
ese
polic
ies a
ccor
ding
ly?
(4) H
as th
e C
ompa
ny se
t up
an e
ffec
tive
acco
untin
g sy
stem
an
d in
tern
al c
ontro
l sys
tem
for e
nfor
cem
ent o
f eth
ical
co
rpor
ate
man
agem
ent a
nd a
ppoi
nted
the
Com
pany
's in
tern
al a
udit
unit
or e
ngag
ed a
CPA
to c
arry
out
regu
lar
audi
t?(5
) Doe
s the
Com
pany
impl
emen
t reg
ular
inte
rnal
and
ex
tern
al tr
aini
ng p
rogr
ams f
or e
thic
al c
orpo
rate
m
anag
emen
t?
V V V
have
reco
rds o
f une
thic
al c
ondu
cts.
A c
laus
e re
quiri
ng
both
par
ties t
o fu
lfill
thei
r obl
igat
ions
in g
ood
faith
is
incl
uded
in th
e co
ntra
ct.
2.In
Mar
ch 2
015,
the
Com
pany
off
icia
lly se
t up
a de
dica
ted
corp
orat
e go
vern
ance
uni
t und
er th
e B
oard
of D
irect
ors.
This
uni
t is r
espo
nsib
le fo
r pro
mot
ing
inte
grity
-rel
ated
busi
ness
aff
airs
and
regu
larly
repo
rting
to th
e B
oard
of
Dire
ctor
s on
the
stat
us o
f im
plem
enta
tion.
3.Th
e R
ules
of P
roce
dure
for M
eetin
gs o
f the
Boa
rd o
fD
irect
ors s
et fo
rth th
at a
ny d
irect
or o
r a le
gal p
erso
nre
pres
ente
d by
a d
irect
or is
dee
med
to h
ave
conf
lict o
fin
tere
st w
ith a
pro
posa
l, th
e di
rect
or sh
all s
tate
nat
ure
ofth
e co
nflic
t of i
nter
est a
t the
resp
ectiv
e m
eetin
g. W
hen
the
Com
pany
’s in
tere
sts m
a y b
e je
opar
dize
d, th
e di
rect
orsh
all a
bsta
in fr
om d
iscu
ssio
n or
vot
ing
of th
e pr
opos
alan
d w
ithdr
aw fr
om e
xerc
isin
g th
e vo
ting
right
for a
nydi
rect
or.
The
Com
pany
's w
ork
rule
s stip
ulat
e th
at a
ny e
mpl
oyee
of
the
Com
pany
shal
l not
dis
clos
e an
y co
nfid
entia
lin
form
atio
n re
gard
ing
the
Com
pany
's bu
sine
ss o
rte
chno
logy
or b
row
se o
r kee
p an
y do
cum
ents
,co
rres
pond
ence
, des
ign
draw
ings
, ele
ctro
nic
files
and
info
rmat
ion
that
are
irre
leva
nt to
his
/her
wor
k.4.
The
Com
pany
’s a
ccou
ntin
g sy
stem
was
est
ablis
hed
in
78
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
th
e Et
hica
l C
orpo
rate
Man
agem
ent B
est
Prac
tice
Prin
cipl
es
for T
WSE
/GTS
M
List
ed C
ompa
nies
an
d re
ason
s
Yes
No
Sum
mar
y
acco
rdan
ce w
ith th
e re
gula
tions
set f
orth
by
the
com
pete
nt a
utho
rity,
and
fina
ncia
l rep
orts
are
pre
pare
d in
ac
cord
ance
with
the
Stat
emen
t of F
inan
cial
Acc
ount
ing
Stan
dard
. The
fina
ncia
l rep
orts
are
aud
ited
and
certi
fied
by C
PAs t
o en
sure
the
fairn
ess a
nd c
redi
bilit
y.
The
Com
pany
impl
emen
ted
rele
vant
cor
pora
te
gove
rnan
ce re
gula
tions
, est
ablis
hed
com
plia
nce
polic
ies/
risk
man
agem
ent m
echa
nism
s/in
tern
al c
ontro
l sy
stem
/inte
rnal
aud
it m
echa
nism
s, en
forc
ed th
e et
hica
l co
rpor
ate
man
agem
ent p
rinci
ples
, and
app
oint
ed a
n in
tern
al a
udit
unit
to c
arry
out
aud
it op
erat
ions
. 5.
The
Com
pany
will
con
tinuo
usly
adv
ocat
e an
d pr
omot
ein
-dep
th d
evel
opm
ent o
f our
bus
ines
s phi
loso
phy
and
ethi
cal c
ode
of c
ondu
ct th
roug
h th
e an
nual
act
iviti
es(c
onse
nsus
cam
ps).
Educ
atio
n an
d tra
inin
g co
urse
s for
busi
ness
inte
grity
wer
e al
so la
unch
ed o
n th
e C
ompa
ny's
onlin
e le
arni
ng p
latfo
rm in
201
5. A
ll em
ploy
ees,
incl
udin
g ne
w e
mpl
oyee
s, of
the
Com
pany
are
requ
ired
tota
ke th
e “C
ode
of E
thic
al C
orpo
rate
Man
agem
ent a
ndEt
hica
l Cod
e of
Con
duct
” co
urse
. In
2018
, rel
evan
ted
ucat
ion
and
train
ing
prog
ram
s wer
e la
unch
ed w
ith 3
37pa
rtici
pant
s for
a to
tal o
f 77.
07 m
an-h
our.
3.O
pera
tion
of w
hist
lebl
owin
g m
echa
nism
s in
the
Com
pany
V
1.Th
e ru
les o
f rew
ard
and
pena
lty a
re se
t out
in th
eN
o di
scre
panc
y
79
Ass
esse
d ite
ms
Stat
us o
f Im
plem
enta
tion
(Not
e 1)
D
iscr
epan
cies
from
th
e Et
hica
l C
orpo
rate
Man
agem
ent B
est
Prac
tice
Prin
cipl
es
for T
WSE
/GTS
M
List
ed C
ompa
nies
an
d re
ason
s
Yes
No
Sum
mar
y
(1) H
as th
e C
ompa
ny e
stab
lishe
d a
conc
rete
whi
stle
blow
ing
and
rew
ard
syst
em w
ith a
cces
sibl
e ch
anne
ls fo
r re
porti
ng a
nd a
ppoi
nted
a d
edic
ated
per
sonn
el to
han
dle
the
case
s?
(2) H
as th
e C
ompa
ny se
t up
stan
dard
ope
ratin
g pr
oced
ures
(S
OP)
and
rele
vant
syst
ems t
o se
cure
con
fiden
tialit
y of
th
e ca
ses u
nder
inve
stig
atio
n?
(3) H
as th
e C
ompa
ny a
dopt
ed m
easu
res t
o pr
otec
t w
hist
lebl
ower
s fro
m in
app
ropr
iate
trea
tmen
t?
V V
Com
pany
's w
ork
rule
s, sp
ecify
ing
diff
eren
t dis
cipl
inar
y ac
tions
for v
arie
d le
vels
of v
iola
tion
of la
ws a
nd
regu
latio
ns, i
nfrin
gem
ent o
f the
Com
pany
's in
tere
sts o
r co
nduc
ts o
f cor
rupt
ion.
2.
The
Com
pany
mai
ntai
ns u
nim
p ede
d in
tern
alco
mm
unic
atio
n ch
anne
ls fo
r em
ploy
ees.
As t
o th
ere
porti
ng a
nd w
hist
lebl
owin
g of
vio
latio
n ag
ains
tet
hica
l cor
pora
te m
anag
emen
t, th
e un
it ha
ndlin
g th
eca
ses h
as th
e ob
ligat
ion
to k
eep
the
info
rmat
ion
stric
tlyco
nfid
entia
l. D
iscl
osur
e w
ithou
t aut
horiz
atio
n is
stric
tlypr
ohib
ited.
The
Com
pany
has
set u
p th
e Pr
oced
ure
for
Rep
ortin
g an
d W
hist
lebl
owin
g an
d th
e co
nfid
entia
lity
mec
hani
sm in
Aug
ust 2
015.
3.Th
e C
ompa
ny h
as a
dopt
ed c
onfid
entia
lity
and
prot
ectio
n m
easu
res t
o pr
otec
t the
whi
stle
blow
ers f
rom
inap
prop
riate
trea
tmen
t.4.
Rei
nfor
cing
Info
rmat
ion
Dis
clos
ure
(1) H
as th
e co
mpa
ny d
iscl
osed
the
cont
ents
of i
ts E
thic
al
Cor
pora
te M
anag
emen
t Bes
t Pra
ctic
e Pr
inci
ples
and
the
effe
ctiv
enes
s of r
elev
ant a
ctiv
ities
on
its o
ffic
ial w
ebsi
te
or th
e M
OPS
?
V
The
Com
pany
has
dis
clos
ed it
s bus
ines
s int
egrit
y ph
iloso
phie
s, th
e co
re v
alue
s of "
Inte
grity
, tea
mw
ork,
and
sh
arin
g" a
nd sp
ecifi
c co
de o
f con
duct
s on
the
Com
pany
’s
web
site
and
dis
clos
ed th
e C
ompa
ny's
ethi
cal c
orpo
rate
m
anag
emen
t pra
ctic
es in
the
annu
al re
port.
No
disc
repa
ncy
5.If
the
Com
pany
has
set u
p its
ow
n Et
hica
l Cor
pora
te M
anag
emen
t Bes
t Pra
ctic
e Pr
inci
ples
bas
ed o
n th
e "C
orpo
rate
Man
agem
ent B
est P
ract
ice
Prin
cipl
es fo
r TW
SE/G
TSM
Lis
ted
Com
pani
es",
des
crib
e an
y di
scre
panc
ies b
etw
een
the
pres
crib
ed b
est p
ract
ices
and
act
ual a
ctiv
ities
take
n pl
ace
in th
e co
mpa
ny: N
one
80
6.O
ther
key
info
rmat
ion
that
faci
litat
es b
ette
r und
erst
andi
ng o
f the
Com
pany
's op
erat
ion
situ
atio
n of
its
ethi
cal c
orpo
rate
man
agem
ent :
(e.g
., re
visi
ons
toth
e C
ompa
ny's
Ethi
cal C
orpo
rate
Man
agem
ent B
est P
ract
ice
Prin
cipl
es)
The
Com
pany
has
upd
ated
its
Ethi
cal C
orpo
rate
Man
agem
ent B
est P
ract
ice
Prin
cipl
es a
nd E
thic
al C
ode
of C
ondu
ct in
201
4 an
d se
t up
and
impl
emen
ted
the
“Cod
e of
Eth
ical
Cor
pora
te M
anag
emen
t and
Eth
ical
Cod
e of
Con
duct
” an
d th
e “P
roce
dure
for
Rep
ortin
g (O
ffen
ces)
in th
e G
roup
” in
201
5. T
heA
udit
Off
ice
has b
een
appo
inte
d as
the
dedi
cate
d un
it fo
r eth
ical
cor
pora
te m
anag
emen
t rel
ated
ope
ratio
ns a
nd is
resp
onsi
ble
for r
epor
ting
to th
e B
oard
of
Dire
ctor
s.
Bus
ines
sph
iloso
phy
Join
tm
anag
emen
t &
adva
nce
with
the
times
Con
nota
tion
1.M
akal
ot is
form
ed b
y pa
rtner
s who
shar
e th
e sa
me
visi
on a
nd w
ork
toge
ther
to a
chie
ve th
e co
mm
on g
oal o
fbe
com
ing
an e
nter
pris
e of
exc
elle
nce.
2. M
akal
ot u
phol
ds th
e id
eal o
f con
tinuo
us le
arni
ng a
nd g
row
th a
nd c
reat
es n
ew
valu
e fo
r the
indu
stry
thro
ugh
cont
inuo
us in
nova
tion
of o
ur o
pera
tiona
l mod
els.
3. M
akal
ot e
mph
asiz
es se
rvic
e, sp
eed,
in
nova
tion,
and
exe
cutio
n. E
very
one
in th
e C
ompa
ny is
con
stan
tly th
inki
ng a
bout
how
to im
prov
e an
d to
pur
sue
even
hi
gher
stan
dard
s. 4.
Eve
ryon
e at
Mak
alot
has
est
ablis
hed
spec
ific
goal
s for
indi
vidu
al a
nd c
orpo
rate
dev
elop
men
t and
w
orks
tire
less
ly to
ach
ieve
the
goal
s. 5.
Mak
alot
is o
wne
d an
d op
erat
ed b
y al
l em
ploy
ees o
f the
Com
pany
and
shar
e th
e fr
uits
of a
chie
vem
ent.
Them
e A
spec
t C
ode
of C
ondu
ct
Val
ue
Inte
grity
Des
crip
tion
Ever
y em
ploy
ee o
f the
Com
pany
repr
esen
ts M
akal
ot, a
nd e
very
mem
ber o
f Mak
alot
cha
rges
forw
ard
in fu
ll fo
rce
tofu
lfill
his/
her p
rom
ises
and
take
s ful
l res
pons
ibili
ties f
or th
e ac
tions
.
Act
ions
1.M
embe
rs o
f Mak
alot
trea
t eve
ry p
erso
n w
ith si
ncer
ity. 2
. Mem
bers
of M
akal
ot c
harg
es fo
rwar
d w
ith fu
ll fo
rce
tofu
lfill
thei
r pro
mis
es to
cus
tom
ers,
supp
liers
and
col
leag
ues.
3. M
embe
rs o
f Mak
alot
are
not
afr
aid
to m
ake
mis
take
s;
they
do
not r
un a
way
from
thei
r res
pons
ibili
ties i
n th
e fa
ce o
f mis
take
s, an
d th
ey h
ave
the
cour
age
to ta
ke th
e re
spon
sibi
litie
s, re
view
thei
r act
ions
and
mak
e im
prov
emen
ts. 4
. Mem
bers
of M
akal
ot d
o no
t vio
late
the
Com
pany
's ru
les o
r law
s for
per
sona
l gai
ns.
Team
wor
k
Des
crip
tion
Ever
y em
ploy
ee p
lays
a k
ey ro
le in
the
Mak
alot
fam
ily. W
e re
spec
t eac
h ot
her,
wor
k w
ith e
ach
othe
r and
wor
k to
geth
erto
ach
ieve
com
mon
goa
ls.
Act
ions
1.B
e cl
ear o
f you
r rol
e in
the
team
, tak
e th
e in
itiat
ive
to p
artic
ipat
e in
the
team
's ta
sks a
nd ta
ke re
spon
sibi
litie
s. 2.
Tak
ete
am g
oals
as p
riorit
y, re
spec
t diff
eren
t opi
nion
s, co
mm
unic
ate
fully
and
col
labo
rate
to re
ach
cons
ensu
s. 3.
Kee
p up
date
d of
the
stat
us o
f the
team
mem
bers
and
pro
vide
ass
ista
nce
proa
ctiv
ely
whe
n so
meo
ne is
in n
eed.
4. B
e w
illin
g to
ta
ke a
ctio
ns to
cre
ate
a po
sitiv
e at
mos
pher
e fo
r the
team
and
mai
ntai
n th
e te
am's
repu
tatio
n.
Shar
ing
Des
crip
tion
Mem
bers
of M
akal
ot a
re o
pen-
min
ded,
will
ing
to sh
are
know
ledg
e an
d ex
perie
nce,
take
s an
activ
e at
titud
e to
parti
cipa
te in
cha
rity
activ
ities
and
live
the
spiri
t of s
harin
g th
roug
h ac
tions
.
Act
ions
1.H
ave
enth
usia
sm fo
r wor
k, ta
ke th
e in
itiat
ive
to sh
are
the
corr
ect w
ork
conc
ept,
beha
vior
and
atti
tude
. 2. B
e w
illin
gto
shar
e th
e su
cces
ses a
nd fa
ilure
s in
the
wor
k ex
perie
nce
and
help
par
tner
s gro
w to
geth
er. 3
. Pro
activ
ely
prov
ide
prof
essi
onal
info
rmat
ion
and
sugg
estio
ns to
pro
mot
e cr
oss-
depa
rtmen
tal c
oope
ratio
n an
d ex
chan
ges.
4. T
ake
actio
ns to
su
ppor
t pub
lic w
elfa
re, g
ive
back
to th
e so
ciet
y an
d fu
lfill
the
resp
onsi
bilit
ies a
s a c
orpo
rate
citi
zen.
81
(7) If the Company has established Corporate Governance Best Practice Principles and related procedures, method for inquiry shall be disclosed:Under the "Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies", the Company successively set up the "Rules of Procedure for Meetings of the Board of Directors", "Rules and Procedures of Shareholders' Meetings", "Rules of Procedure of the Compensation Committee", "Procedure for Prevention of Insider Trading", "Procedure for Online Information Disclosure", "Corporate Governance Best Practice Principles", "Ethical Corporate Management Best Practice Principles", "Ethical Code of Conduct and Corporate Social Responsibility Best Practice Principles". For details, please visit the Company's website http://www.makalot.com.tw.
(8) Other information that facilitates better understanding of the corporate governance operations of the Company may be disclosed together:Managers participating in the Company's corporate governance education and training courses
List of Managers Training Course TrainingHours
Li-Ping Chou, General Manager
Analysis of the Key Messages in Financial Reports 3 New International Taxation Order - Tax Administration in the Anti-Tax Avoidance Era 3
Kuo-Lung Chen,Assistant General
Manager
12-Hour Training Course for First-time Directors and Supervisors (including Independent Directors) 3
New International Taxation Order - Tax Administration in the Anti-Tax Avoidance Era 3
Yu-Hsin Lin, AccountingSupervisor
Continuing Education for Securities Issuers, Securities Brokers and Accounting Supervisors 12
Chen-Chuan Yeh, Audit Supervisor
Internal Control 2.0 - Data Analysis, Big Data, Internet of Things, Information Security and Fraud Detection 6
Auditors Reading and Analysis - the "New IFRS Financial Report" and "New Financial Statement Audit Report" 6
(9) Implementation of Internal Control System 1. Statement of Internal Control System
Makalot Industrial Co., Ltd. Statement of Internal Control System
Date: March 27, 2018 The Company hereby forwards this statement noting that the information provided below has been derived from the results of self-audit of the internal control system in 2017:
1 The Company acknowledges that the establishment, implementation and maintenance of the internal control system are the responsibilities of the Board of Directors and managers of the Company. The Company has established such system. The objectives of the internal control system is to provide reasonable assurance to achieve the goals of effectiveness and
82
efficiency of operations (including profitability, performance and safeguarding of assets), reliability, timeliness, transparency of our reporting, and compliance with applicable ruling, laws and regulation.
2 The internal control system has inherent limitations, and no matter how comprehensive its design may be, an effective internal control system is only capable of providing adequate assurance for achieving the above-mentioned three objectives. Moreover, the effectiveness of the internal control system may be altered by changes in the environment and under different situations. Nevertheless, the Company's internal control system contains self-monitoring mechanisms, and the Company takes immediate remedial actions in response to any identified deficiencies.
3 The Company determines whether the design and operations of the internal control system is effective based on the judgement items provided in the "Regulations Governing Establishment of Internal Control Systems by Public Companies" (hereafter the "Regulations"). The judgement items adopted by the "Regulations" identify five key components of internal control system based on managerial control procedure :(1) Control Environment;(2)Risk Assessment; (3)Control Activities; (4)Information and Communication; and(5)Monitoring Activities. Each constituent element includes a number of categories. Please refer to "The Regulations" for the aforementioned categories.
4 The Company has evaluated the effectiveness of the design and operation of its internal control system according to the aforesaid judgement items.
5 Based on the above results, the Company believes that the design and operation of its internal control systems (including supervision and management of its subsidiaries), as of December 31, 2017, including the understanding of the level of goal achievement in regards to operational effectiveness and efficiency, as well as whether the reporting is reliable, timely and transparent and whether it complies with the relevant laws and regulations, is effective and can reasonably assure the accomplishment of the abovementioned goals.
6 This Statement will become an integral part of the Annual Report and the Prospectus of the Company and will be available to the public. If the aforementioned content contains illegal matters such as fraudulent or hidden information, the Company will be in question of breaching Articles 20, 32, 171, and 174 in the Securities and Exchange Act and face legal consequences.
7 This statement has been approved by the Company's Board of Directors on March 20, 2018, and out of the 14 Board members in attendance, none had objected to it and all consented to the content expressed in this statement.
83
Makalot Industrial Co., Ltd. Chairman cum General Manager: Li-Ping Chou
8 CPA's report for audit of the internal control system: None.
(10) From the most recent year up to the publication date of the Annual Report, state the circumstances in which the Company and its personnel have been punished by law, the Company has undertaken disciplinary actions against its personnel for failure to comply with the internal control system, main failures and improved situation: None.
(11) Major resolutions made in/by the shareholders' meeting and the Board meetings in the most recent year up to the publication date of this annual report:
Date
Board of Directors
Shareholders'Meeting
Summary of proceedings
2017.01.09 Board of Directors
1. Approved closure of Yangzhou Fengyang Garment Co., Ltd., aninvested company by Makalot in China.
2017.01.19 Board of Directors
1. Approved the 2017 Business Plan.2. Approved donation to the Makalot Foundation.3. Approved removal of the manager non-compete clause.4. Approve the loan to Leader factory in South Vietnam for US$ 7.4
million.5. Approved the proposal reviewed by the Compensation
Committee for 2017 manager compensation plan, salaryadjustment, year-end bonuses and incentive bonus.
6. Approved the proposal reviewed by the CompensationCommittee for 2017 appropriation of compensations of directors,supervisors and managers.
7. Approved the Company's registration of change brought bycapital increase from conversion of convertible corporate bondsissued in January 2017 into ordinary shares.
2017.03.23 Board of Directors
1. Approved the proposal reviewed by the CompensationCommittee for payment of 2016 compensations of directors andsupervisors.
2. Approved the Company's employee compensation payment planand the 2016 plan for manager compensation payment reviewedby the Compensation Committee.
3. Approved the 2017 financial report.4. Approved the 2016 business report.5. Approved the 2016 internal control statement.6. Approved the 2016 earnings distribution: The plan entails
distribution of cash dividends in the amount of NT$1,390,828,999 (NT$ 6.72 per share). When revision of thisearnings distribution plan is called for due to changes in thenumber of ordinary shares of the Company, the shareholders’
84
Date
Board of Directors
Shareholders'Meeting
Summary of proceedings
meeting shall give the Chairman full authorization to handle relevant issues.
7. Approved loans to the Leader factory in South Vietnam for theamount of US $ 6.35 million.
8. Approved the revisions to certain articles of the "Procedure forAcquisition or Disposal of Assets."
9. Approved the proposals related to the preparation of this year'sannual general meeting
10. Approve nominations of director candidates.11. Approved removal of the manager non-compete clause.
2017.05.09 Board of Directors
1. Recognized acquisition of 5 percent of the equity of PT Gloryand PT Starlight in Indonesia respectively and implementcapital increase for Fort Fortune Star, an invested company100% owned by Makalot.
2. Approved the Phase III production capacity investment Projectof Demak factory in Indonesia: To meet the need for productioncapacity expansion brought by the Company's growth, theamount of investment for this project is US$ 2.95 million,which will be met through an investment of US$ 0.74 millionfrom the capital and a loan of US $ 2.21 million from theCompany processed based on the Procedure for Lending Fundsto Others.
3. Approved the revision to investment in expansion of MakalotCam factory in Cambodia: Revision is made to meet the volumeof customers orders; the amount after revisions comes to US$1.3 million.
4. Approved the investment in Phase II expansion of Makalot(Vietnam) factory in North Vietnam: The total investment forthis project is US$ 3.8 million and a loan of US$ 1 million willbe lent by the Company in accordance with the Procedure forLending Funds to Others for Phase II factory establishment.
5. Approved the loan to PT Crystal in Indonesia and Leader inSouth Vietnam
6. Approved the Company's CPA Independence Assessment.7. Approved the Company's Procedure for Organization of the
Audit Committee.8. Approved the revisions to certain articles of the "Procedure for
Lending Funds to Others"9. Approved the revisions to certain articles of the "Procedure for
Endorsement and Guarantee"10. Approved the proposal to add additional objectives for
convening this year's annual general meeting.11. Approved the list of director candidates for Board election in
the Company's 2017 annual general meeting12. Approved the Company's registration of change brought by
capital increase from conversion of convertible corporatebonds issued in May 2017 into ordinary shares.
85
Date
Board of Directors
Shareholders'Meeting
Summary of proceedings
2017.06.19 Shareholders' Meeting
1. Recognized the 2017 business report and financial report2. Recognized the 2016 earnings distribution plan: The plan entails
distribution of cash dividends in the amount of NT$1,390,828,999 (NT$ 6.72 per share). When revision of thisearnings distribution plan is called for due to changes in thenumber of ordinary shares of the Company, the shareholders’meeting shall give the Chairman full authorization to handlerelevant issues.
3. Approved the revisions to certain articles of the "Procedure forAcquisition or Disposal of Assets."4. Approved the revisions to certain articles of the Procedure forLending Funds to Others
5. Approved the revisions to certain articles of the Procedure forEndorsement and Guarantee
6. Result for election of directors: 14 directors including, Li-PingChou, Hsien-Chang Lin, Hung-Jen Huang, Chian Wang, Kuo-Chu Ma, Huang-Ching Ho, Chiu-Ling Chou, Shuang-Chuan Liu,Yu-Ya Lin, Kuo-Lung Chen, Hsin-Peng Chou, Ling-I Chung(independent director), Yu-Hui Su (independent director) and Si-Feng Wang (Independent Directors).
7. Approved removal of the director non-compete clause.
2017.06.19 Board of Directors
1. Result of reelection of the Chairman and Vice Chairman: Alldirectors unanimously elected Mr. Li-Ping Chou as the Chairmanand Mr. Hsien-Chang Lin was re-elected as the Vice Chairman.
2. Approved the qualification review and appointment of the 3rdCompensation Committee.
2017.08.09 Board of Directors
1. Approved the proposal reviewed by the Company's AuditCommittee for capital reduction for Fund Eagle and Fortune Star,companies invested by Makalot, to make up for losses, andcapital reduction to the initial capitalization for Crownway, FundEagle and Fortune Star.
2. Approved the proposal reviewed by the Company's AuditCommittee for loans between invested Companies in Chinaproduction areas.
3. Approved revisions to certain articles of the procedures andguidelines for organization of the Audit Committee.
4. Approved the Company's registration of change brought bycapital increase from conversion of convertible corporate bondsissued in August 2017 into ordinary shares.
2017.11.09 Board of Directors
1. Approved the proposal reviewed by the Company's AuditCommittee for capital reduction to initial capitalization forinvested companies, Shanghai Juyang, Jiaxing Juyang, Wintop,Crown Era and Fortune Star and earnings distribution.
2. Approved the proposal reviewed by the Company's AuditCommittee for deregistration of the invested company, FundEagle International Limited.
3. Approved the proposal reviewed by the Company's Audit
86
Date
Board of Directors
Shareholders'Meeting
Summary of proceedings
Committee for the loan of US$ 7.4 million to Leader Garment (Vietnam) Company Limited in South Vietnam.
4. Approved the proposal reviewed by the Company's AuditCommittee for the revisions to the Procedure for Organization ofAudit Committee.
5. Approved the proposal reviewed by the Company's AuditCommittee for the formulation of the "Procedure for Supervisionand Management of Subsidiaries" and the "Group Managementand Authorization Guidelines"
6. Approved the proposal reviewed by the Company's AuditCommittee for the 2018 internal audit plan.
7. Approved the Company's registration of change brought bycapital increase from conversion of convertible corporate bondsissued in November 2017 into ordinary shares.
2018.01.30 Board of Directors
1. Approved donation to the Makalot Foundation.2. Approved the proposal reviewed by the Compensation
Committee for 2018 manager compensation plan, salaryadjustment, year-end bonuses and incentive bonus.
3. Approved the proposal reviewed by the CompensationCommittee for 2018 compensations of directors, supervisors andmanagers.
2018.03.27 Board of Directors
1. Approved the 2017 business report and financial report reviewedby the Company's Audit Committee.
2. Approved the 2017 internal control statement reviewed by theCompany's Audit Committee.
3. Approved the proposal reviewed by the CompensationCommittee for payment of 2017 compensations of directors.
4. Approved the Company's employee compensation payment planand the 2017 plan for manager compensation payment reviewedby the Compensation Committee.
5. Approved the proposal for 2017 earnings distribution reviewedby the Company's Audit Committee: The planned distribution ofcash dividend is NT$ 1,067,874,822 (NT$ 5.1 per share).
6. Approved the proposal to distribute cash dividend from capitalreserve reviewed by the Company's Audit Committee: Theplanned distribution of cash dividend is NT$ 188,448,498 (NT$0.9 per share).
7. Approved the proposal reviewed by the Audit Committee for theloans to PT Glory in Indonesia and Leader in South Vietnam inthe amount of US$ 1.68 million and US$ 6.35 millionrespectively.
8. Approved removal of the manager non-compete clause.9. Approved the proposals related to the preparation of this year's
annual general meeting
2018.05.10 Board of Directors
1. Approved the proposal reviewed by the Audit Committee forrevision to the investment project for Leader factory in SouthVietnam.
87
Date
Board of Directors
Shareholders'Meeting
Summary of proceedings
2. Approved the proposal reviewed by the Audit Committee forloans and loan extensions.
3. Approved the proposal reviewed by the Audit Committee forreplacement of CPAs.
4. Approved the proposal reviewed by the Audit Committee for theCompany's CPA Independence Assessment.
(11-1) Implementation status of resolutions of 2017 annual general meeting. 1. Recognized 2016 business report and financial reports.2. Recognized 2016 earnings distribution.
Implementation status: Ex-dividend date was set on July 23, 2017 and dividend hasbeen fully paid in accordance with the resolution made at the shareholders' meetingon August 16, 2017 (NT$ 6.71153663 per share).
3. Approved the revisions to certain articles of the "Procedure for Acquisition orDisposal of Assets".Implementation status: The revision has been announced on the Company'swebsite on June 21, 2017 and relevant operations have been carried out accordingto the revised procedure.
4. Approved the revisions to certain articles of the Procedure for Lending Funds toOthersImplementation status: The revision has been announced on the Company'swebsite on June 21, 2017 and relevant operations have been carried out accordingto the revised procedure.
5. Approved the revisions to certain articles of the Procedure for Endorsement andGuaranteeImplementation status: The revision has been announced on the Company'swebsite on June 21, 2017 and relevant operations have been carried out accordingto the revised procedure.
6. Election of DirectorsImplementation status:1. List of elected directors: Li-Ping Chou, Hsien-Chang Lin, Hung-Jen Huang,
Chian Wang, Kuo-Chu Ma, Huang-Ching Ho, Chiu-Ling Chou, Shuang-ChuanLiu, Yu-Ya Lin, Kuo-Lung Chen, Hsin-Peng Chou.
2. List of elected independent directors: Ling-I Chung , Yu-Hui Su and Si-FengWang.
3. The Board of Directors was approved for registration by the Ministry ofEconomic Affairs on July 3, 2017 and announced on the Company's website.
7. Approved removal of the director non-compete clause.
(12) Any of the directors or supervisors holds objection or reservation to a resolution made at the Board meeting and such objection or reservation is on record or raised through a written statement in the most recent year up to the publication date of this annual report; the main content: None.
88
(13) Summary of resignation or dismissal of personnel related to financial report (including the Chairman, General Manager, accounting supervisor, financial supervisor, internal audit supervisor and R&D director, etc.) in the most recent year up to the publication date of this annual report: None.
5. Information Regarding CPA Fees(1) When the non-audit fees paid to the CPAs, their firm, and its affiliated companies
account for 25 percent or more to the total audit fees, the amount of audit fees and non-audit fees and the content of non-audit services must be disclosed.
Unit: NT$1,000
Name of firm
Name of CPA Audit fee
Non-audit fee
Audit period Note Syste
mDesign
Business
registration
Human resourc
es
Others (Note 2) Subtotal
KPMGTaiwan
Bei-ChiChen
Chi-LungYu
4,590 - 90 - 711 801 106.1.1~106.12.31
The non-audit fees under "Others" are BEPS project service fees.
Note 1: Where this Company replaces the CPA or accounting firm, the audit periods of the former and successor CPA or firm shall be annotated separately with the reason for replacement. The audit and non-audit fees paid to the former and succeeding CPA or firm shall also be disclosed: Not applicable.
Note 2: Non-audit fees shall be annotated separately in various service items. If the "Others" column in non-audit fees reaches 25 percent of the total non-audit fees, details of this service shall be provided in the "Remarks" column.
(2) When the accounting firm is replaced and the audit fee for the current year is lower than that of the previous year, the amount of the reduction, percentage and reason shall be disclosed: Not applicable.
(3) When the audit fees are reduced by more than 15 percent compared with the previous year, the amount and percentage of the reduction of audit fees and the reason shall be disclosed: Not Applicable.
6. Information Regarding Replacement of CPAs: None7. The information of the Company's Chairman, General Manager,
managers in charge of finance or accounting who has served in a CPA'saccounting firm or its affiliated companies in the most recent year shallbe disclosed, including their names, job titles and term of office in theCPA's accounting firm or its affiliated companies : Not applicable.
8. Equity transfer or changes to equity pledge of Directors, Supervisors,managers, or shareholders holding more than 10% of Company sharesin the most recent year up to the publication date of this report
89
(1) Changes in shareholdings of directors, supervisors, managers and major shareholders
Unit: Share
Job Title Name
2017 As of March 31, 2018 Increase (decrease) in number of shares
held
Increase (decrease) in number of shares
pledged
Increase (decrease) in number of shares
held
Increase (decrease) in number of shares
pledged Chairman cum
GeneralManager/Chief
Executive Officer
Li-Ping Chou 0 0 0 0
Director Hsien-ChangLin 0 0 0 0
Director Hung-JenHuang 100,000 0 0 0
Director Kuo-Chu Ma 0 0 0 0Director Chian Wang 0 0 (9,000) 0
Director Huang-Ching Ho 0 0 0 0
Director Chiu-LingChou 0 0 0 0
Director Shuang-Chuan Liu 0 100,000 0 0
Director Yu-Ya Lin 0 0 0 0Director cum
Assistant General Manager
Kuo-LungChen 0 0 0 0
Director cum Deputy Assistant General Manager
Hsin-PengChou 470,694 0 (14,000) 0
IndependentDirector Ling-I Chung 0 0 0 0
IndependentDirector Yu-Hui Su 0 0 0 0
IndependentDirector
Si-FengWang 0 0 7,000 0
Senior Consultant Kuang-HanSong 0 0 0 0
Assistant General Manager
He-ChuanLiang 0 0 0 0
Assistant General Manager
Pei-FangSong
20,000 0 0 0
Senior Deputy Assistant General
Manager
Yu-ChingHuang 40,000 0 0 0
Senior Deputy Assistant General
ManagerHsiu-Hui Lai (16,000) 0 0 0
Senior Deputy Assistant General
ManagerMo-Ku Liao 20,000 0 0 0
Senior Deputy Assistant General
ManagerLi-Yu Pu 47,694 0 0 0
90
Job Title Name
2017 As of March 31, 2018 Increase (decrease) in number of shares
held
Increase (decrease) in number of shares
pledged
Increase (decrease) in number of shares
held
Increase (decrease) in number of shares
pledged Senior Deputy
Assistant General Manager
Shu-YingChen (50,000) 0 0 0
Senior Deputy Assistant General
Manager
Wen-ChinChou 0 0 Note 3 Note 3
Senior Deputy Assistant General
Manager
Yu-TsenWen 0 0 0 0
Deputy AssistantGeneral Manager Wei Liao 0 0 Note 3 Note 3
Deputy Assistant General Manager
Hung-LinTsai
2,000 0 0 0
Deputy Assistant General Manager
Hsiao-HsunLai
5,000 0 0 0
Deputy Assistant General Manager
Liang-LuKuo
0 0 0 0
Deputy AssistantGeneral Manager Yi-Hsin Lin 0 0 2,000 0
Deputy AssistantGeneral Manager Hao-Pai Hsu Note 1 Note 1 0 0
Office of Chief Executive Officer Special Assistant
Ching-Kuang Huang 0 0 0 0
Deputy Assistant General Manager
of Accounting Department
Yu-Hsin Lin 20,000 0 0 0
Spokesperson Heng-Yu Lin Note 2 Note 2 0 0 Note 1: New insider on January 1, 107. Note 2: New insider on February 1, 2018. Note 3: Managers who have been removed from the list of insider as of March 31, 2018: Deputy Assistant General Manager,
Wei Liao (dismissed on February 1, 2018) and Deputy Assistant General Manager, Wen-Chin Chou (dismissed on March 16, 2018).
(2) Information regarding equity transfer When the counterpart of the equity transfer is a related party, the name of the related party, his/her relationship with the Company, the directors, supervisors, and shareholders holding more than 10 percent of the Company’s shares, and the details of the shares acquired:
91
Name (Note 1)
Reason for transfer of
equity (Note 2)
TransactionDate Counterparty
Relationshipbetweencounterparty and the Company, its directors,supervisors and shareholdersholding more than 10 percent of the shares
Number of shares
Transactionprice
Mei-HsiangChen Gift Jan. 2017 Hung-Jen
Huang Spouse 100,000 N/A
Hsiu-Hui Lai Gift Jul. 2017 Ke-Wei Lai Aunt and nephew 16,000 N/A
Li-Yu Pu Gift Oct. 2017 Si-Chi Chiu Mother and daughter 16,000 N/A Chui-Pang
Chiu Gift Oct. 2017 Lin-Hsiang Chiu Father and daughter 16,000 N/A
Shu-YingChen Gift Oct. 2017 Yuan-Ting
Wang Mother and daughter 50,000 N/A
Tai-ChangWang Gift Oct. 2017 Yuan-Chen
Wang Father and daughter 50,000 N/A
Note 1: Fill the names of the Company's directors, supervisors, managers and shareholders holding more than 10 percent of the issued shares. Note 2: Fill in disposal or acquisition.
(3) Information on pledge of equity: None.
9. Information regarding the top 10 shareholders in terms of number ofshares held, who are related parties or each other's spouses and relativeswithin the second degree of kinship
NAME (NOTE 1)
SHARES HELD
SHARES HELD BY SPOUSE OR UNDERAGE CHILDREN
TOTAL SHAREHOLDI
NG IN THE NAME OF OTHERS
ALIAS OR NAME AND RELATIONSHIP OF THE TOP 10 SHAREHOLDERS WHO ARE DEFINED BY THE STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO.6 TO BE A RELATED PERSON, SPOUSE OR RELATIVE WITHIN THE SECOND-DEGREEOF KINSHIP. (NOTE 3)
NOTE
NUMBEROF
SHARES
SHAREHOLDING
(%)
NUMBEROF
SHARES
SHAREHOLDING
(%)
NUMBER OF SHAR
ES
SHAREHOLDING (%)
FIRM(OR
NAME)
RELATIONSHIP
Nanshan Life Insurance Co., Ltd. 9,935,917 4.75% 0 0% 0 0% N/A N/A
92
NAME (NOTE 1)
SHARES HELD
SHARES HELD BY SPOUSE OR UNDERAGE CHILDREN
TOTAL SHAREHOLDI
NG IN THE NAME OF OTHERS
ALIAS OR NAME AND RELATIONSHIP OF THE TOP 10 SHAREHOLDERS WHO ARE DEFINED BY THE STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO.6 TO BE A RELATED PERSON, SPOUSE OR RELATIVE WITHIN THE SECOND-DEGREEOF KINSHIP. (NOTE 3)
NOTE
NUMBEROF
SHARES
SHAREHOLDING
(%)
NUMBEROF
SHARES
SHAREHOLDING
(%)
NUMBER OF SHAR
ES
SHAREHOLDING (%)
FIRM(OR
NAME)
RELATIONSHIP
Nanshan Life Insurance Co., Ltd. Representative: Ying-Tsung Tu
0 0% 0 0% 0 0% N/A N/A
Fubon LifeInsurance Co., Ltd. 9,923,355 4.74% 0 0% 0 0% N/A N/A
Fubon Life Insurance Co., Ltd. Representative: Ming-Hsing Tsai
0 0% 0 0% 0 0% N/A N/A
Cathay Life Insurance Co., Ltd. 8,638,000 4.13% 0 0% 0 0% N/A N/A
Cathay Life Insurance Co., Ltd. Representative: Tiao-Kui Tsai
0 0% 0 0% 0 0% N/A N/A
Li-Ping Chou 5,989,908 2.86% 332,822 0.16% 0 0% N/A N/A
Deutsche Bank hosted Bolong Emerging Market Fund Investment Account
5,846,936 2.79% 0 0% 0 0% N/A N/A
Mercuries Life Insurance Co., Ltd. 4,421,923 2.11% 0 0% 0 0% N/A N/A
Mercuries Life InsuranceRepresentative: Hsiang-ChiehChen
0 0% 0 0% 0 0% N/A N/A
New System Labor Retirement 4,170,000 1.99% 0 0% 0 0% N/A N/A
93
NAME (NOTE 1)
SHARES HELD
SHARES HELD BY SPOUSE OR UNDERAGE CHILDREN
TOTAL SHAREHOLDI
NG IN THE NAME OF OTHERS
ALIAS OR NAME AND RELATIONSHIP OF THE TOP 10 SHAREHOLDERS WHO ARE DEFINED BY THE STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO.6 TO BE A RELATED PERSON, SPOUSE OR RELATIVE WITHIN THE SECOND-DEGREEOF KINSHIP. (NOTE 3)
NOTE
NUMBEROF
SHARES
SHAREHOLDING
(%)
NUMBEROF
SHARES
SHAREHOLDING
(%)
NUMBER OF SHAR
ES
SHAREHOLDING (%)
FIRM(OR
NAME)
RELATIONSHIP
Pension Fund
Shuang-Chuan Liu 3,603,522 1.72% 5,292 0.00% 0 0% N/A N/A
Chian Wang 3,394,481 1.62% 0 0% 0 0% N/A N/A
China Life InsuranceCompany
3,111,314 1.49% 0 0% 0 0% N/A N/A
China Life InsuranceCompany Representative: Ming-Yang Wang
0 0% 0 0% 0 0% N/A N/A
Note 1: Names of top-10 shareholders shall be listed in full and for corporate shareholders shall be listed separately from their representatives.
Note 2: Calculation of the shareholding ratio should separately indicate the percentage of shares held under the name of the shareholder, spouse, underage children and others.
Note 3: Relationships between the aforementioned shareholders, including nature person and corporate shareholders, shall be disclosed in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
10. Number of shares held by the Company, its Directors, Supervisors,managers and directly or indirectly controlled companies in thesame invested companies, and the combined calculation ofshareholding percentages
94
Unit: shares; %; March 31, 2018
Invested Entities (Note)
Invested by the CompanyInvestments of directors, supervisors, managers and directly or indirectly controlled businesses
Composite Investment
Number of shares
Shareholding (%)
Number of shares
Shareholding (%)
Number of shares
Shareholding (%)
Leader Garments Corp. 249,995 99.99% 5 0.01% 250,000 100.00%
Diamond Apparel Manu., Inc. (Note 2) 149,995 99.99% 5 0.01% 150,000 100.00%
Primeline Fashion, Inc.(Note 2) 99,995 99.99% 5 0.01% 100,000 100.00%
PT Crystal Garment 993,191 99.40% 0 0.00% 993,191 99.40%
Loyal Trading Int'l, Co., Ltd. 10,000 100.00% 0 0% 10,000 100.00%
Global Trading Int'l Corp. 15,740 100.00% 0 0% 15,740 100.00%
Fortune Star Investment Limited 21,603,591 100.00% 0 0% 21,603,591 100.00%
Triple International Corp. 10,800,000 100.00% 0 0% 10,800,000 100.00%
Ecolot Textile Co., Ltd. 9,864,000 61.65% 1,639,896 10.25% 11,503,896 71.90%
Glida Arhleties Co., Ltd. 500,000 100.00% 0 0% 500,000 100.00%
PT Glory Industrial semarang 0 0% 64,100 100.00% 64,100 100.00%
Makalot Garments Industrial (Cambodia) Co., Ltd. 0 0% 1,000 100.00% 1,000 100.00%
Makalot Garments Industrial (Vietnam) Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
Moha Garments Co., Ltd. 0 0% 1,000 100.00% 1,000 100.00%
Triple Garment (Vietnam) Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
Top Trend Global Inc. 0 0% 5,200,000 100.00% 5,200,000 100.00%
Fund Eagle Int'l Limited 0 0% 0 100.00% 0 100.00%
Wintop Industrial Limited 0 0% 10,370,000 100.00% 10,370,000 100.00%
Crown Era Industrial Limited 0 0% 3,580,000 100.00% 3,580,000 100.00%
Crownway Int'l Development Limited 0 0% 4,560,000 100.00% 4,560,000 100.00%
PT Starlight Garment Semarng 0 0% 21,000 100.00% 21,000 100.00%
Shanghai Makalot Garment Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
Jiaxing Suntex Garment Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
Jiaxing Rising Garment Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
95
Invested Entities (Note)
Invested by the CompanyInvestments of directors, supervisors, managers and directly or indirectly controlled businesses
Composite Investment
Number of shares
Shareholding (%)
Number of shares
Shareholding (%)
Number of shares
Shareholding (%)
Jiaxing Ruiyang Garment Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
Eco-Lot Textile Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
Namtex Co., Ltd. (Note 1) 0 0% 0 50.00% 0 50.00%
Leader Garment (Vietnam) Co., Ltd. (Note 1) 0 0% 0 100.00% 0 100.00%
Top Shiny Industrial Limited 0 0% 1,200,000 100.00% 1,200,000 100.00%
Texlot Company Limited 0 0% 1,500 6.88% 1,500 6.88%
Note: Invested by the Company using the equity method Note 1: Unissued shares of the Company Note 2: The company is in the process of liquidation.
96
IV. Funding Status1. Capital and Shares
Year and Month
Issued price(NT$)
Authorized Capital Paid-in capital Note
Number of shares (per 1000
shares)
Amount (NT$ 1000)
Number of shares(per 1000
shares)
Amount (NT$ 1000)
Source of Capital
Payment by
properties other
than cash
Others
79.01 10 (Note 01) 800 8,000 800 8,000 Founding None Note
02
79.06 10 (Note 01) 1,440 14,400 1,440 14,400 Capital increase of NT$ 6,400,000
by cash None —
81.12 10 (Note 01) 2,340 23,400 2,340 23,400 Capital increase of NT$ 9,000,000
by cash None Note03
82.11 10 (Note 01) 4,500 45,000 4,500 45,000 Capital increase of NT$ 21,600,000
by cash None Note04
86.10 10 (Note 01) 8,400 84,000 8,400 84,000 Capital increase of NT$ 39,000,000
by cash None Note05
87.11 10 16,500 165,000 16,500 165,000 Capital increase of NT$ 81,000,000 by cash None Note
06
89.07 25 80,000 800,000 33,000 330,000
Capital increase of NT$ 66,000,000 by cash Capital increase of NT$ 16,500,000 by retained earnings Consolidated issuance of new shares in the sum of NT$ 82,500,000.
None Note07
90.07 20 80,000 800,000 61,875 618,750
Capital increase of NT$ 212,850,000 by cash Capital increase of NT$ 42,900,000 by retained earning Capital increase of NT$ 33,000,000 by capital reserve
None Note08
91.07 10 81,000 810,000 80,437 804,375
Capital increase of NT$ 111,375,000 by retained earning Capital increase of NT$ 61,875,000 by capital reserve Capital increase of NT$ 12,375,000 by employee dividends
None Note09
92.07 10 150,000 1,500,000 97,329 973,290
Capital increase of NT$ 80,437,500 by retained earning Capital increase of NT$ 80,437,500 by capital reserve Capital increase of NT$ 8,040,000 by employee dividends
None Note10
93.01 10 150,000 1,500,000 97,569 975,695Conversion of convertible bonds into ordinary shares at NT$ 2,405,000
None Note11
93.04 10 150,000 1,500,000 98,882 988,817Conversion of convertible bonds into ordinary shares at NT$ 13,122,000
None Note12
97
93.08 10 150,000 1,500,000 116,108 1,161,076
Capital increase of NT$ 49,441,000 by retained earning Capital increase of NT$ 98,882,000 by capital reserve Capital increase of NT$ 14,000,000 by employee dividends Conversion of convertible bonds into ordinary shares at NT$ 9,936,000
None Note13
93.10 10 150,000 1,500,000 115,196 1,151,956
Conversion of convertible bonds into ordinary shares at NT$ 10,880,000 Deregistration in treasury stock at NT$ 20,000,000
None Note14
94.02 10 150,000 1,500,000 115,713 1,157,130Conversion of convertible bonds into ordinary shares at NT$ 5,174,000
None Note15
94.04 10 150,000 1,500,000 115,753 1,157,530 Conversion of convertible bonds into ordinary shares at NT$ 400,000 None Note
16
94.08 10 160,000 1,600,000 121,605 1,216,046
Capital increase of NT$ 57,876,000 by capital reserve Conversion of convertible bonds into ordinary shares at NT$ 640,000
None Note17
94.12 10 160,000 1,600,000 122,500 1,224,996Conversion of convertible bonds into ordinary shares at NT$ 8,950,000
None Note18
95.02 10 160,000 1,600,000 123,002 1,230,024 Convertible debt converted into ordinary shares at NT$ 5,028,000 None Note
19
95.04 10 160,000 1,600,000 123,050 1,230,503 Conversion of convertible bonds into common shares at NT$ 479,000 None Note
20
95.07 10 160,000 1,600,000 125,034 1,250,343Conversion of convertible bonds into ordinary shares at NT$ 19,841,000
None Note21
95.12 10 160,000 1,600,000 128,639 1,286,393Conversion of convertible bonds into ordinary shares at NT$36,050,000
None Note22
96.02 10 160,000 1,600,000 131,759 1,317,592Conversion of convertible bonds into ordinary shares at NT$ 31,198,000
None Note23
96.04 10 160,000 1,600,000 132,893 1,328,927Conversion of convertible bonds into ordinary shares at NT$ 11,336,000
None Note24
96.08 10 200,000 2,000,000 141,343 1,413,431
Capital increase of NT$ 66,446,000 by capital reserve Conversion of convertible bonds into ordinary shares at NT$ 18,058,000
None Note25
96.10 10 200,000 2,000,000 142,562 1,425,620Conversion of convertible bonds into ordinary shares at NT$ 12,188,000
None Note26
97.02 10 200,000 2,000,000 143,275 1,432,755Conversion of convertible bonds into ordinary shares at NT$ 7,135,000
None Note27
97.04 10 200,000 2,000,000 146,078 1,460,780Conversion of convertible bonds into ordinary shares of NT$ 28,025,000
None Note28
98
97.09 10 200,000 2,000,000 151,347 1,513,473Conversion of convertible bonds into ordinary shares at NT$ 52,693,000
None Note29
98.05 10 200,000 2,000,000 151,711 1,517,106Conversion of convertible bonds into ordinary shares at NT$ 3,633,000
None Note30
98.09 10 200,000 2,000,000 152,327 1,523,266 Convertible bonds converted into ordinary shares at NT$ 6,161,000 None Note
31
98.12 10 200,000 2,000,000 152,974 1,529,739Conversion of convertible bonds into ordinary shares at NT$ 6,473,000
None Note32
99.02 10 200,000 2,000,000 153,507 1,535,074Conversion of convertible bonds into ordinary shares at NT$ 5,335,000
None Note33
99.04 10 200,000 2,000,000 154,161 1,541,614Conversion of convertible bonds into ordinary shares at NT$ 6,540,000
None Note34
99.09 10 200,000 2,000,000 156,289 1,562,892Conversion of convertible bonds into ordinary shares at NT$ 21,278,000
None Note35
99.12 10 200,000 2,000,000 158,182 1,581,823Conversion of convertible bonds into ordinary shares at NT$ 18,920,000
None Note36
100.02 10 200,000 2,000,000 159,119 1,591,189Conversion of convertible bonds into ordinary shares at NT$ 9,376,000
None Note37
100.04 10 200,000 2,000,000 159,661 1,596,609Conversion of convertible bonds into ordinary shares at NT$ 5,420,000
None Note38
100.07 10 200,000 2,000,000 160,714 1,607,136Conversion of convertible bonds into ordinary shares at NT$ 10,527,000
None Note39
100.11 10 200,000 2,000,000 162,525 1,625,248Conversion of convertible bonds into ordinary shares at NT$ 18,112,000
None Note40
101.02 10 200,000 2,000,000 162,826 1,628,258Conversion of convertible bonds into ordinary shares at NT$ 3,010,000
None Note41
101.06 10 200,000 2,000,000 163,091 1,630,911Conversion of convertible bonds into ordinary shares at NY$ 2,653,000
None Note42
101.09 10 200,000 2,000,000 165,003 1,650,034Conversion of convertible bonds into ordinary shares at NT$ 19,123,000
None Note43
101.12 10 200,000 2,000,000 165,188 1,651,882Conversion of convertible bonds into ordinary shares at NT$ 1,848,000
None Note44
102.02 10 200,000 2,000,000 165,568 1,655,679Conversion of convertible bonds into ordinary shares at NT$ 3,797,000
None Note45
102.05 10 200,000 2,000,000 166,632 1,666,318Conversion of convertible bonds into ordinary shares at NT$ 10,639,000
None Note46
102.08 10 200,000 2,000,000 168,143 1,681,427Conversion of convertible bonds into ordinary shares at NT$ 15,109,000
None Note47
102.11 10 200,000 2,000,000 168,809 1,688,088 Convertible debt converted into ordinary shares at NT$ 6,660,000 None Note
48
99
Note 01: The IPO denomination is NT$ 1,000, which was divided into NT$ 100 per share in November 1993 and then divided into NT$ 10 per share in November 1998. Note 02: The effective (approved) date and the document number of this capital increase is Jan. 10, 1990 and Jian Yi No. 090185. Note 03: The effective (approved) date and the document number of this capital increase is Dec. 12, 1992 and Jian Yi No.695225.
103.02 10 200,000 2,000,000 169,075 1,690,747Conversion of convertible bonds into ordinary shares at NT$ 2,659,000
None Note49
103.05 10 200,000 2,000,000 170,227 1,702,266 Convertible bonds converted into ordinary shares at NT$ 11,519,000 None Note
50
103.09 10 200,000 2,000,000 190,471 1,904,708
Capital increase of NT$ 200,000,000 by cash Conversion of convertible bonds into ordinary shares at NT$ 2,442,000
None Note51
103.11 10 200,000 2,000,000 190,882 1,908,818Conversion of convertible bonds into ordinary shares at NT$ 4,111,000
None Note52
104.02 10 200,000 2,000,000 190,969 1,909,695 Conversion of convertible bonds into ordinary shares at NT$ 876,000 None Note
53
104.05 10 200,000 2,000,000 191,313 1,913,135Conversion of convertible bonds into ordinary shares at NT$ 3,441,000
None Note54
104.08 10 200,000 2,000,000 198,111 1,981,112
Capital increase of NT$ 66,958,000 by capital reserve Conversion of convertible bonds into ordinary shares at NT$ 1,018,000
None Note55
104.11 10 200,000 2,000,000 198,466 1,984,656Conversion of convertible bonds into ordinary shares at NT$ 3,544,000
None Note56
105.02 10 200,000 2,000,000 198,731 1,987,307Conversion of convertible bonds into ordinary shares at NT$ 2,651,000
None Note57
105.05 10 200,000 2,000,000 198,889 1,988,886Conversion of convertible bonds into ordinary shares at NT$ 1,580,000
None Note58
105.08 10 250,000 2,500,000 205,970 2,059,701
Capital increase of NT$ 69,593,000 by capital reserve Conversion of convertible bonds into ordinary shares at NT$ 1,222,000
None Note59
105.11 10 250,000 2,500,000 206,715 2,067,152 Convertible bonds converted into ordinary shares at NT$ 7,451,000 None Note
60
106.02 10 250,000 2,500,000 206,735 2,067,349 Conversion of convertible bonds into ordinary shares at NT$ 197,000 None Note
61
106.05 10 250,000 2,500,000 207,090 2,070,900Conversion of convertible bonds into ordinary shares at NT$ 3,551,000
None Note62
106.08 10 250,000 2,500,000 207,230 2,072,296Conversion of convertible bonds into ordinary shares at NT$ 1,396,000
None Note63
106.11 10 250,000 2,500,000 209,387 2,093,872Conversion of convertible bonds into ordinary shares at NT$ 21,576,000
None Note64
100
Note 04: The effective (approved) date and the document number of this capital increase is Nov. 26, 1993 and Jing(1992) No. 124444. Note 05: The effective (approved) date and the document number of this capital increase is Nov. 10, 1997 and Jian Yi No. 86348386. Note 06: The effective (approved) date and the document number of this capital increase is Nov. 9, 1998 and Jing(1998) No. 087136185. Note 07: The effective (approved) date and the document number of this capital increase is Jul. 18, 2000 and (2000)Tai Cai Zheng(1) No. 59636. Note 08: The effective (approved) date and the document number of this capital increase is Jul. 12, 2001 and (2001)Tai Cai Zheng(1) No. 144754. Note 09: The effective (approved) date and the document number of this capital increase is Jun. 12, 2002 and Tai Cai Zheng 1 Zi No. 0910131554. Note 10: The effective (approved) date and the document number of this capital increase is Jul. 10, 2003 and Tai Cai Zheng 1 Zi No. 0920130754. Note 11: The effective (approved) date and the document number of this capital increase is Jan. 28, 2004 and Jing Shou Shang Zi No. 09301012400. Note 12: The effective (approved) date and the document number of this capital increase is Apr. 29, 2004 and Jing Shou Shang Zi No. 09301070030. Note 13: The effective (approved) date and the document number of this capital increase is Aug. 4, 2004 and Jing Shou Shang Zi No. 09301146030. Note 14: The effective (approved) date and the document number of this capital increase is Oct. 27, 2004 and Jing Shou Shang Zi No. 09301199320. Note 15: The effective (approved) date and the document number of this capital increase is Feb. 3, 2005 and Jing Shou Shang Zi No. 09401021070. Note 16: The effective (approved) date and the document number of this capital increase is Apr. 29, 2005 and Jing Shou Shang Zi No. 09401072910. Note 17: The effective (approved) date and the document number of this capital increase is Aug. 19, 2005 and Jing Shou Shang Zi No. 09401158060. Note 18: The effective (approved) date and the document number of this capital increase is Dec. 22, 2005 and Jing Shou Shang Zi No. 09401260580. Note 19: The effective (approved) date and the document number of this capital increase is Feb. 24, 2006 and Jing Shou Shang Zi No. 09501033230. Note 20: The effective (approved) date and the document number of this capital increase is Apr. 21, 2006 and Jing Shou Shang Zi No. 09501071490. Note 21: The effective (approved) date and the document number of this capital increase is Jul. 24, 2006 and Jing Shou Shang Zi No. 09501153570. Note 22: The effective (approved) date and the document number of this capital increase is Dec. 5, 2006 and Jing Shou Shang Zi No. 09501272610. Note 23: The effective (approved) date and the document number of this capital increase is Feb. 9, 2007 and Jing Shou Shang Zi No. 09601032180. Note 24: The effective (approved) date and the document number of this capital increase is Apr. 30, 2007 and Jing Shou Shang Zi No. 09601090980. Note 25: The effective (approved) date and the document number of this capital increase is Aug. 28, 2007 and Jing Shou Shang Zi No. 09601205120. Note 26: The effective (approved) date and the document number of this capital increase is Oct. 19, 2007 and Jing Shou Shang Zi No. 09601252560.
101
Note 27: The effective (approved) date and the document number of this capital increase is Feb. 04, 2008 and Jing Shou Shang Zi No. 09701026850. Note 28: The effective (approved) date and the document number of this capital increase is Apr. 17, 2008 and Jing Shou Shang Zi No. 09701092600. Note 29: The effective (approved) date and the document number of this capital increase is Sep. 05, 2008 and Jing Shou Shang Zi No. 09701227200. Note 30: The effective (approved) date and the document number of this capital increase is May 06, 2009 and Jing Shou Shang Zi No. 09801089370. Note 31: The effective (approved) date and the document number of this capital increase is Sep. 04, 2009 and Jing Shou Shang Zi No. 09801203510. Note 32: The effective (approved) date and the document number of this capital increase is Dec. 3, 2009 and Jing Shou Shang Zi No. 09801279090. Note 33: The effective (approved) date and the document number of this capital increase is Feb. 5, 2010 and Jing Shou Shang Zi No. 09901026240. Note 34: The effective (approved) date and the document number of this capital increase is Apr. 16, 2010 and Jing Shou Shang Zi No. 09901075020. Note 35: The effective (approved) date and the document number of this capital increase is Sep. 7, 2010 and Jing Shou Shang Zi No. 09901201950. Note 36: The effective (approved) date and the document number of this capital increase is Dec. 02, 2010 and Jing Shou Shang Zi No. 09901269630. Note 37: The effective (approved) date and the document number of this capital increase is Feb. 14, 2011 and Jing Shou Shang Zi No. 10001024200. Note 38: The effective (approved) date and the document number of this capital increase is Apr. 19, 2011 and Jing Shou Shang Zi No. 10001075060. Note 39: The effective (approved) date and the document number of this capital increase is Jul. 29, 2011 and Jing Shou Shang Zi No. 10001174030. Note 40: The effective (approved) date and the document number of this capital increase is Nov. 25, 2011 and Jing Shou Shang Zi No. 10001269770. Note 41: The effective (approved) date and the document number of this capital increase is Feb. 3, 2012 and Jing Shou Shang Zi No. 1010107440. Note 42: The effective (approved) date and the document number of this capital increase is Jun. 18, 2012 and Jing Shou Shang Zi No. 10101109930. Note 43: The effective (approved) date and the document number of this capital increase is Sep. 03, 2012 and Jing Shou Shang Zi No. 10101183670. Note 44: The effective (approved) date and the document number of this capital increase is Dec. 17, 2012 and Jing Shou Shang Zi No. 10101258120. Note 45: The effective (approved) date and the document number of this capital increase is Feb. 1, 2013 and Jing Shou Shang Zi No. 10201022440. Note 46: The effective (approved) date and the document number of this capital increase is May 28, 2013 and Jing Shou Shang Zi No. 10201096560. Note 47: The effective (approved) date and the document number of this capital increase is Aug. 19, 2013 and Jing Shou Shang Zi No. 10201170980. Note 48: The effective (approved) date and the document number of this capital increase is Nov. 25, 2013 and Jing Shou Shang Zi No. 10201236680. Note 49: The effective (approved) date and the document number of this capital increase is Feb. 06, 2014 and Jing Shou Shang Zi No. 10301019110.
102
Note 50: The effective (approved) date and the document number of this capital increase is May 21, 2014 and Jing Shou Shang Zi No. 10301092200. Note 51: The effective (approved) date and the document number of this capital increase is Sep. 2, 2014 and Jing Shou Shang Zi No. 10301183860. Note 52: The effective (approved) date and the document number of this capital increase is Dec. 18, 2014 and Jing Shou Shang Zi No. 10301238530. Note 53: The effective (approved) date and the document number of this capital increase is Feb. 26, 2015 and Jing Shou Shang Zi No. 10401023510. Note 54: The effective (approved) date and the document number of this capital increase is May 25, 2015 and Jing Shou Shang Zi No. 10401092250. Note 55: The effective (approved) date and the document number of this capital increase is Aug. 20, 2015 and Jing Shou Shang Zi No. 10401176740. Note 56: The effective (approved) date and the document number of this capital increase is Nov. 19, 2015 and Jing Shou Shang Zi No. 10401243390. Note 57: The effective (approved) date and the document number of this capital increase is Feb. 17, 2016 and Jing Shou Shang Zi No. 10501025520. Note 58: The effective (approved) date and the document number of this capital increase is May 31, 2016 and Jing Shou Shang Zi No. 10501112720. Note 59: The effective (approved) date and the document number of this capital increase is Aug. 19, 2016 and Jing Shou Shang Zi No. 10501200770. Note 60: The effective (approved) date and the document number of this capital increase is Nov. 25, 2016 and Jing Shou Shang Zi No. 10501273870. Note 61: The effective (approved) date and the document number of this capital increase is Feb. 10, 2017 and Jing Shou Shang Zi No. 10601015530. Note 62: The effective (approved) date and the document number of this capital increase is May 17, 2017 and Jing Shou Shang Zi No. 10601064580. Note 63: The effective (approved) date and the document number of this capital increase is Aug. 22, 2017 and Jing Shou Shang Zi No. 10601118850. Note 64: The effective (approved) date and the document number of this capital increase is Nov. 30, 2017 and Jing Shou Shang Zi No. 10601160910.
Unit: Share April 29, 2018
Type of shares Authorized Capital
NoteOutstanding Shares (Note) Unissued shares Total
Registeredordinary shares 209,387,220 40,612,780 250,000,000 None
Note: It is a publicly-listed stock.
103
(2) Shareholder StructureApril 29, 2018
Shareholderstructure
Quantity
Government Agency
FinancialInstitution
Other Legal Person Individual
ForeignInstitution
and Foreigner Total
Number of People 0 20 148 20,022 182 20,372
Number of Shares Held 0 41,629,807 18,407,370 104,243,964 45,106,079 209,387,220
Shareholding (%) 0% 19.88% 8.79% 49.79 21.54% 100.00%
(3) Dispersion of Equity Ownership April 29, 2018
Range of Number of shares Number of Persons Number of shares
1 - 999 5,600 27.49% 792,961 0.38%1,000 - 5,000 11,804 57.94% 21,704,120 10.37%5,001 - 10,000 1,484 7.29% 10,334,519 4.94%
10,001 - 15,000 530 2.60% 6,310,553 3.01%15,001 - 20,000 222 1.09% 3,873,913 1.85%20,001 - 30,000 221 1.08% 5,317,021 2.54%30,001 - 40,000 134 0.66% 4,631,847 2.21%40,001 - 50,000 53 0.26% 2,383,903 1.14%50,001 - 100,000 131 0.64% 9,399,259 4.49%
100,001 - 200,000 85 0.42% 11,768,327 5.62%200,001 - 400,000 39 0.19% 11,195,473 5.35%400,001 - 600,000 18 0.09% 8,945,176 4.27%600,001 - 800,000 14 0.07% 9,885,656 4.72%800,001 - 1,000,000 5 0.02% 4,510,134 2.15%1,000,001 or more 32 0.16% 98,334,358 46.96%
One-thousandth and less 20,266 99.48% 76,925,332 36.74%total: 20,372 100.01% 209,387,220 100.00%
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(4) List of major shareholders Name, number of shares held, and shareholding percentage of shareholders who hold more than 5 percent of the shares or are top-10 shareholders.
April 29, 2018
Name of substantial shareholders Number of Shares Held
Shareholding (%)
Nan Shan Life Insurance Co., Ltd. 9,935,917 4.75
Fubon Life Insurance Co., Ltd. 9,923,355 4.74
Cathay Life Insurance 8,638,000 4.13
Li-Ping Chou 5,989,908 2.86
Deutsche Bank hosted Bolong Emerging Market FundInvestment Account 5,846,936 2.79
Mercuries Life Insurance Co., Ltd. 4,421,923 2.11
New System Labor Retirement Pension Fund 4,170,000 1.99
Shuang-Chuan Liu 3,603,522 1.72
Chien Wang 3,394,481 1.62
China Life Insurance Co., Ltd. 3,111,314 1.49
(5) Market price per share, net value per share, earnings per share, dividends per share, and related information in the most recent two years
Item 2016 2017 As of March 31, 2018
Market price per share
Highest 235 151.5 142.5Lowest 103.5 109 122.5Average 161.28 130.59 134.21
Net worth per share
(Note 1)
Before distribution 41.56 40.11 41.28
After distribution 34.83To be resolved by the shareholders'
meeting
Earnings per share
(Note 2)
Weighted average of shares (per 1000 shares) 206,110 207,947 209,387Earnings per share - before retroactive adjustment 7.39 6.18 1.53Earnings per share - after retroactive adjustment 7.26 N/A N/A
Dividend per share Cash dividend 6.72
To be resolved by the shareholders'
meeting
Year
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Item 2016 2017 As of March 31, 2018
Dividend distribution
Dividend from retainedearnings
0To be resolved by the shareholders'
meeting
Dividend from capital reserve 0
To be resolved by the shareholders'
meeting Accumulated unpaid dividends (Note 3) 0 0
Analysis of ROI
Ratio of price to earnings (P/E) (Note 4) 21.8 21.1
Ratio of price to dividends (P/D) (Note 5) 24.0
To be resolved by the shareholders'
meeting
Cash dividend yield (Note 6) 4.2To be resolved by the shareholders'
meeting
Note 1: This shall be filled by using the shares already issued by year-end as a basis, and also by referencing the distribution that the shareholders' meeting has decided on for the subsequent year.
Note 2: If there are any retroactive adjustments needed due to dividend distribution, earnings per share before and after the adjustment should be listed.
Note 3: If there are any conditions in issuing equity securities that allow for undistributed dividends for the year to be accumulated to the subsequent years in which there is profit, the Company shall disclose the accumulated undistributed dividends separately up to that year.
Note 4:Price/earning ratio = Average closing price per share for the year/Earnings per share Note 5: Price/dividend ratio = Average closing price per share for the year/Cash dividend per share Note 6: Cash dividend yield = Cash dividend per share / Average closing price per share for the year
(6) Dividend Policy and Its Implementation1. The current Articles of Incorporation of the Company provides the following
term for dividend policy:(1)When there are earnings in the annual final accounts of the Company, 10 percent of
the balance, after deducting all taxes and making up for the losses in the past years, shall be set aside for the legal reserves, except when the cumulative legal reserves has reached the paid-in capital of the Company. Special reserves required by Article 41 of the Securities and Exchange Act shall also be appropriated and the balance shall then be added with the undistributed earnings from previous years. Subsequently, after taking into consideration the capital needed for operations, financial structure, the current annual earnings and the stability of dividend distribution, the Board of Directors shall plan the earnings distribution and forward a proposal to the shareholders' meeting for approval.
(2)The Company is still in the growth stage. Therefore, dividends will be given in forms of stock or cash whichever is deemed appropriate after taking into consideration the capital required for future development and dilution of capital. In principle, cash dividend shall not be less than 10 percent of the total dividends.
(3)When reduction in shareholders equity occurs, the earnings shall be distributed after the special reserve is allocated in accordance with relevant regulations. After the balance of the reduction in shareholder equity is reversed, the reversed earnings may then be transferred to the earnings of the year and distributed as described above.
Year
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2. The Company's future dividend policy:Earnings distribution of the Company may be achieved by ways of cash dividend, stockdividends or a mix of cash and dividends. Currently, the Company’s distribution ofearnings is mainly cash dividend based. Since the Company launched its IPO in 2003,the dividend payout rate has been maintain between 70 and 90 percent. In the future,the Company will continue to maintain a stable cash dividend policy and the dividendpayout rate will be maintained between 70 and 90 percent. We will study the feasibilityof distributing stock dividends, taking into consideration the needs of funds and theextent of capital expansion. Nevertheless, the cash dividend shall not be less than 10percent of the total of dividends.
3. The plan for dividend distribution to be proposed at the shareholders' meeting issummarized below:(1) For earnings distribution in this period, the 2017 earnings distribution is prioritized.
The net income for the 2017 is NT$ 1,286,086,494, plus NT$ 41,975,057, the undistributed earnings at the beginning of the period after adjustment. The accumulated distributable earnings came to NT$ 1,328,061,551. After NT$ 128,608,649 and NT$ 114,601,220 for legal reserve and special reserve respectively are set aside, cash dividends for shareholders is planned with the sum of NT$ 1,067,874,822 (NT$ 5.1 per share)
(2) The current cash dividends are calculated by rounding down to the whole NT dollar; the fractional amounts are aggregated and recorded as other income of the Company.
(3) The ex-dividend basis for the distribution of cash dividends and the payment date will be set by the Chairman after the approval of the annual general meeting.
2017 Earnings distribution table
Item Total
Undistributed earnings at beginning of period 43,592,678Plus (minus):
Remeasurements of 2017 defined benefit plan (1,617,621)Undistributed earnings at the beginning of period after adjustment 41,975,057Plus:
Net income 1,286,086,494Earnings available for distribution 1,328,061,551Minus:
Legal reserves Special reserves - reduction of shareholders' equity
128,608,649114,601,220
Allocation:Shareholders' dividends- cash (NT$ 5.1 per share) 1,067,874,822
Undistributed earnings at the end of period 16,976,860
(7). Effect upon business performance and earnings per share of any stock dividend distribution proposed or adopted at the shareholders' meeting this time: Not applicable.
(8) Compensation of employees, directors and supervisors
1. The percentage or scope of compensation for employees, directors andsupervisors as prescribed by the Company's Articles of Incorporation
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If the Company makes a profit in the year, one to eight percent of the profit shall be allocated for employee compensations and no more than five percent shall be allocated for compensations of the directors and supervisors. But the Company shall reserve a portion of profit to make up for accumulated losses, if any.
2. The basis for estimation of the compensations to employees, directorsand supervisors in the current period, the basis for calculation of thenumber of shares for employee compensations distributed by stock, andthe accounting treatment used when there are differentials between theactual distributed amount and the estimated amount:Compensations for the Company's employees, directors and supervisors in 2017are estimated based on the pre-tax net income before deducting thecompensations for employees, directors and supervisors, which is multiplied bythe percentage of compensations for employees, directors and supervisorsprovided in the Company’s Articles of Incorporation. The compensations arerecognized as operating costs or expenses of 2017. If there are discrepanciesbetween the actual distributed amount and the estimated amount, thediscrepancies are treated as changes in accounting estimates and recognized asprofit or loss of 2018. Employee compensations for 2017 will be paid in cash.No stocks will be distributed as compensations of employees.
3. Board of Directors' approval of the compensation plan:The proposal for the compensations of the Company’s employees, directors and supervisors for 2017 has been approved by the Board of Directors through a special resolutions. The distribution is as follows: (1) Compensations of employees, directors and supervisors to be paid in cash or
stock. When there are discrepancies between the actual amount of compensations for employees, directors and supervisor distributed and the annual estimated amount, the difference, reason and disposition shall be disclosed.A. Employee compensations will be paid in cash for the total of NT$
92,746,401.B. Directors' compensations will be paid in cash for the total of
NT$38,420,000. The difference between the proposed amount and the amount listed in the accounts is NT$224,333, which will be recognized as a change in accounting estimates through a resolution of the Board of Directors. The difference occurred due to conformance with the resolution made by the Board of Directors.
(2) The amount of employee compensation distributed in stocks and the amount as a percentage of net income stated in the parent company only financial reports or individual financial reports for the current period and total employee compensation: Not applicable.
4. Actual distribution of compensations of employees, directors andsupervisors in the previous year (including the number, sum and price of shares distributed), and where there were discrepancies with the recognized compensations of employees, directors, and supervisors, the sum, cause and accounting treatment of the discrepancy shall be described: Information regarding the actual amount of compensations of employees, directors and supervisors for the previous year (2016) is summarize below:
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Unit: NT$; Shares Compensations approved by the
Board of Directors Discrepancy
Payment status: 1. Cash compensation for employees 110,472,669 2. Stock compensation for employees
(1) Number of shares 0 (2) Amount 0 (3)As a percentage in the shares
outstanding at end of the year 0%
3. Compensations for directors andsupervisors 37,500,000
(9) Purchase of shares by the Company: None.
2. Issuance of Corporate Bonds(1)Corporate bonds outstanding and pending: None.(2)Corporate bonds maturing within one year: None.(3)Issued corporate bonds convertible to ordinary shares,
overseas depository receipts or other securities: None. (4) Issued exchangeable corporate bonds: None.(5)The Company raises and issues general corporate bonds by
shelf registration: None. (6) Issued corporate bonds with attached warrant: None.(7)Private placement of bonds in the most recent three years:
None.3. Issuance of Preferred Shares: None.4. Issuance of Oversea Depository Receipts: None5. Issuance of Employee Stock Options: None6.Issuance of New Restricted Employee Shares in Connection with Mergers
and Acquisitions: None.7. Capital Utilization Plan and Implementation
(1) Content of the plan Any issuance or private placement of securities is still in progress or is completed during the most recent three years; of which, the benefits of the plan have not been realized: None.
(B) Implementation: Not applicable.
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V. Operational Highlights
1. Business Activities(1) Scope of Business
1. Main Businesses:(1) Garment industry. (2) Apparel product manufacturing industry. (3) Other textile and product manufacturing industries. (4) Retail of fabric, clothing, shoes, caps, umbrellas and apparel products. (5) Retail without physical store. (6) International trade.
2. Major Products and Business Distribution2017
Product Name Business Distribution
Garment 96.6%Income from services and others 3.4%
3. Current Products and ServicesThe Company has been in business for more than 28 years and its main
businesses are garment design, manufacture and sales. The main products are divided into three categories: (1) fashion; (2) sportswear; and (3) nightwear, covering a range of trousers and shorts, T-shirts, dresses, shirts, pajamas and underwear, sports combos, skirts, vests, knitwear and jackets. Our services include material development, supplier search and management, style design, fashion trends, manufacturing, research and development, logistics and electronic information exchange. We have extensive experiences in R&D and production of various products and have the capabilities to provide customers with diverse product selections and one-stop shopping services.
4. Plans to develop new products and servicesProduct diversification is the Company's core strategy. We set our goal to
provide the major retail channels with a complete product line and differentiate from our competitors. Therefore, for knit wear for men and women’s apparel or even for children, we have powerful design capacities. Our strategies are very different from the boutique oriented competitors in Hong Kong and Taiwan and this differentiation reinforced our collaboration with customers in greater breadth and depth. As functional products rise to the mainstream in the market, the Company has also invested in related research and brought in the needed equipment and talents, aiming to further reinforce the Company's competitiveness.
Vertical integration is also one of the Company's strategies for future development. Through close collaboration with the upstream fabric
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manufacturers, fabric traders and strategic supplies, we reinforce the advantages of localized supply of raw materials, improve product quality and ensure the stability of raw material supply. Moreover, we can control the flexibility of upstream material in order to quickly respond to changes in the market.
In services, our customers have continuously expanded collaboration with Makalot, especially in design, material development, technology research and marketing. In-depth interaction between the two sides has been elevated to a higher level from product conceptualization to sharing of information at the final step of selling. Therefore, in the future, we will develop service in even greater depth to integrate with the market by providing our customers with feedback from market sales information, inventory recommendations, proposals for seasonal product development, product suggestions for the next season and low-quantity high-variety production services.
(2) Overview of the Industry 1. The Current Status and Development of the Industry
In 2017, the global garment market saw a slow growth. Total garment imports in the United States showed a negative growth, -0.6 percent (table 1), which results in a decline in revenue and profitability along the supply chain. The EU's total garment imports slightly grew by 3.3 percent, showing a recovery from two consecutive years of negative growth (table 2). Japan saw a meager growth of 0.1 percent, as devaluation of Yen drove the value of US-dollar denominated imports to go down (table 3). In raw materials, the price hikes in crude oil and raw materials in 2017 and the continuous increase in wages in South East Asia have resulted in an increase in raw material prices of around 5 to 15 percent in each region. Therefore, we focused on R&D, created added values and output value for service, introduced automated equipment, implemented improvements to machines, conducted the market expansion planning in multiple countries and integrated the development of upstream industries and supply chain management to set a direction of the continuous development of Makalot.
According to the statistics of import from all countries into the U.S. market (table 1), China’s costs of products are generally higher than that of other exporting countries, which results in a continuous decline in the United States and the growth turned negative to -3.4 percent. Although the development of TPP in Vietnam was once stagnated when the United States withdrew from negotiations, the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) is still moving along and drove Vietnam's garment exports to the United States to grow by 7.1 percent. President Trump of the United States proposed policies, such as made in the USA and improving trade deficits, that lead to protectionism. The impact on the industrial supply chain requires continuous attention.
The EU’s garment imports in 2017 grew by 3.3 percent (Table 2). The regions EU countries imported garment from are mainly China, Bangladesh and Turkey, while the ASEAN countries continue to rise in market share. Especially, Cambodia achieved double-digit growth for three consecutive years, taking a firm foothold as the fifth-largest exporter of garment garments to the EU. The export scale of Myanmar is still small, but the annual growth rate is as high as 67.4 percent.
In the Japanese market (Table 3), the amount and ratio of garments imported from China continued to decline, giving way to the ASEAN countries. With
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abundant manpower, low wages and preferred tariff terms, countries such as Vietnam, Indonesia, Cambodia, Myanmar, and the Philippines are growing in market share.
The low-cost advantages of China's textile and garment industry are disappearing, and international brands have successively moved their factories to Southeast Asia. China's domestic cotton prices are higher than the international cotton prices, which are eroding the profitability. Under such circumstances, the number of small and medium size textile and garment manufacturers in China is decreasing gradually, while the large-scale high-performance manufacturers continue to stay competitive.
Table 1: Market share and growth rate of the major garment exporting countries to the United States from 2015 to 2017
(amount of imports) 2015 2016 2017Sort by market share in
2017
(Unit: %) Ratio GrowthRate Ratio Growth
Rate Ratio GrowthRate
Total Import 100.0 3.8 100.0 -5.5 100.0 -0.61 China 36.1 1.8 34.7 -9.0 33.7 -3.42 Vietnam 12.2 13.8 13.2 2.2 14.2 7.13 Bangladesh 6.1 11.7 6.3 -2.2 6.1 -4.74 Indonesia 5.8 2.3 5.8 -4.6 5.7 -3.25 India 4.3 7.5 4.5 -0.9 4.6 1.16 Mexico 4.3 - 4.4 4.3 -4.7 4.6 4.77 Honduras 3.2 3.2 3.2 -5.0 3.1 -3.18 Cambodia 2.9 0,1 2.6 -13.5 2.7 0.89 Sri Lanka 2.4 14.3 2.4 -4.1 2.4 -0.7
10 El Salvador 2.3 2.4 2.4 -0.4 2.4 -0.911 Nicaragua 1.7 - 3.0 1.8 0.3 1.8 0.812 Jordan 1.5 9.9 1.5 1.1 1.7 8.013 Italy 1.6 - 6.4 1.6 -8.4 1.7 3.014 Guatemala 1.7 6.53 1.7 -5.1 1.7 -3.115 Pakistan 1.7 - 1.8 1.6 -8.5 1.6 0.916 Haiti 1.0 4.8 1.0 -5.2 1.1 1.817 Thailand 1.2 - 0.6 1.1 -11.2 1.1 -8.018 The Philippines 1.3 0.2 1.2 -13.4 1.0 -15.1
19 Dominican Republic 0.9 6.5 1.0 -7.2 0.9 -6.7
20 Egypt 1.0 3.1 0.8 -12.8 0.9 5.4
Source: U.S. Customs
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Table 2: Market share and growth rate of major garment exporting countries to EU from 2015 to 2017
(amount of import) 2015 2016 2017Sort by market share in
2017
(Unit: %) Ratio GrowthRate Ratio Growth
Rate Ratio GrowthRate
Total Import 100.0 -7.9 100.0 -0.3 100.0 3.31 China 37.2 -11.3 34.2 -8.2 33.3 0.72 Bangladesh 17.0 3.1 18.4 8.0 18.6 4.33 Turkey 11.7 -14.5 11.8 0.4 11.7 2.64 India 6.4 -8.2 6.3 -0.4 6.1 -1.25 Cambodia 3.7 10.2 4.2 13.6 4.5 11.46 Vietnam 3.5 5.3 3.7 6.2 3.8 7.07 Pakistan 2.8 4.2 3.0 7.2 3.3 11.18 Morocco 2.9 -16.4 3.1 9.0 3.2 6.89 Tunisia 2.5 -20.2 2.4 -2.3 2.4 2.9
10 Sri Lanka 2.0 -9.9 1.8 -8.5 1.9 6.511 Indonesia 1.6 -12.6 1.6 0.3 1.5 -5.712 Myanmar 0.5 50.2 0.8 -0.1 1.4 67.413 Switzerland 0.8 -6.2 0.9 1.5 0.9 11.814 United States 0.7 5.1 0.7 9.2 0.6 -14.015 Thailand 0.6 -20.2 0.6 0.6 0.5 -1.316 Macedonia 0.6 -19.0 0.6 7.5 0.5 -0.317 Egypt 0.5 -13.5 0.5 -3.8 0.5 6.818 Serbia 0.4 -10.0 0.5 7.1 0.5 10.819 Albania 0.3 -11.2 0.4 23.1 0.4 17.120 Hong Kong 0.8 5.0 0.8 9.3 0.4 -41.7
Source: Eurostat
Table 3: Market share and growth rate of the main garment exporting countries to Japan from 2015 to 2017
(amount of import) 2015 2016 2017Sort by market share in
2017
(Unit: %) Ratio GrowthRate Ratio Growth
Rate Ratio GrowthRate
Total Import 100.0 -8.5 100.0 -1.9 100.0 0.11 China 68.0 -13.2 64.7 -6.8 63.5 -1.72 Vietnam 10.5 8.4 11.7 9.5 12.5 6.4
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(amount of import) 2015 2016 2017Sort by market share in
2017
(Unit: %) Ratio GrowthRate Ratio Growth
Rate Ratio GrowthRate
3 Indonesia 3.3 5.1 3.4 17.1 3.5 4.14 Bangladesh 2.8 19.6 3.4 0.7 3.3 -4.95 Cambodia 2.4 35.7 3.1 14.6 3.2 3.66 Italy 2.6 -10.7 2.9 18.0 2.8 -0.97 Myanmar 2.2 3.6 2.5 12.0 2.7 9.58 Thailand 1.7 -1.9 1.8 4.3 1.8 1.09 India 0.9 -9.2 0.9 -2.2 0.9 0.7
10 Romania 0.4 -11.0 0.5 -2.4 0.5 -3.311 The Philippines 0.4 -3.5 0.4 0.3 0.5 6.4
Source: Japan Customs
2. Correlation among upstream, midstream and downstream of the industry
The Company is mainly engaged in manufacture and sale of garments. We are a part of the textile industry positioned in the downstream of the supply chain and linking to all achievements to the textile value chain. We produce the final products and deliver them to end users in the market. Taiwan’s textile industry has formed a complete and full-scale production system from man-made fibers, spinning, weaving, dyeing and finishing to garments. The upstream of the supply chain are raw material suppliers for garments, the midstream includes raw material processing and garment manufacturers, and the downstream consists of distribution channels, such as trade agents and brand dealers. The Company is a garment manufacturer positioned in the midstream of the industry’s value chain and products we produced can be sold to the end consumers. The correlation map among the upper, middle and lower sections of the supply chain is shown in Figure 1. To improve the competitiveness of the Company and create a higher service values, we have gone beyond downstream garment manufacturing into integrated upstream fabric service. We aim to expand the supply chain synergy and improve business performance to build a solid foundation for full process integration services in the future.
In addition to the connection among the upper, middle and lower sections of the industrial value chain, as the market and supply chain continues to shift, integration between regions and repositioning of the value chain are also very important. For example, countries, such as Indonesia, Vietnam, and India, have gradually established a complete value chain of the textile industry. Therefore, the mode of cooperation among countries has gradually taken shape. Therefore, how to find a feasible business or profit model in different countries is an important issue for the textile industry.
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Figure 1: Correlation Map of the Industrial Supply Chain Source: Industry & Technology Intelligence Services Project (ITIS) of Ministry of Economic Affairs by Market Intelligence & Consulting Institute, October 2000
3. Product development trendsDimensions of the End Consumer Market
(1) Changes in consumption patterns In recent years, consumers' habits have changed and online and mobile
shopping have brought serious impact on the traditional brand retailers. More and more brand marketers closed down stores with poor profitability and make adjustment to their operating models to accelerate integration of physical and virtual distribution channels. This change brought consumers diverse ways and channels to make purchase and such omni-channel retailing model is expected to become a prevalent trend in the future.
(2) Environmental protection, organic and circular economy "The Paris Climate Agreement", an important convention against global
warming, came into effect in November 2016, and the major global supply chains are taking a ride along the trend of “green economy”. World-renowned sports brands successively presented their green declarations, making commitments to use more sustainable materials. Although the United States announced its withdrawal from the Paris climate agreement in June 2017, the rise of consumer awareness on environmental protection and continuous advocacy of sustainable development steer consumers’ purchase decisions to take environmentally-friendly textiles into primary consideration.
(3) Localized production and the trend of customization Due to the changes in consumption patterns, products are now produced in
shortened cycles, which enables brand marketers to achieve quicker responses to market trends and cut down the inventory risks. Moreover, taking into consideration lower tariffs and transport costs, automated production and formation of a supply chain by neighboring markets and local manufactures, developing the ability to provide customized services has become a trend.
Customers
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(4) Rising of lifestyle apparel In recent years, rise of fitness trends brought rapid growth of the sports
population and subsequently the demand for sports apparel products. The line between fashion and sports is blurring out and the market is moving toward the middle ground, which means that designs that combine the elements of fashion and sports are becoming more and more prominent. The fashion is now developing towards sports lifestyles and the original sports looks are now blending with the elements of fashion. In recent years, the thrusting force of sportswear sales has grown much stronger than other categories of products.
(5) Development of Smart Fashion Rapid development of information technology and the Internet of Things,
coupled with consumers’ shifting attention to recreation needs and health management, the entire industry of smart wearable apparel has been booming. The focus of the future development of smart apparel will be placed on cross-industry collaboration, combining the advantages of electronics and textile industries to bring consumers better integrated services.
4. Competitions(1) Taiwan:
The Company's main business is export of garments. Currently, competitions in Taiwan include other garment exporters, such as Tainan Enterprises Co. Ltd., Nien Hsing Textile, Eclat Textile Co., Ltd., Texma International Co. Ltd., Kuohwa Textile and Tai Ya Fashion.
(2) China/Hong Kong: China has a complete textile supply chain, so the competition
encountered in China is also very intense. The Company's partners in China are mainly large brands and distributors. Therefore, the major competitors include Shenzhou International, Jingyuan Group, Lianye Group, Liantai Group, and Hengfu Group.
(3) Other Asian Countries: Southeast Asian countries have attracted a large number of foreign-
invested enterprises, who sought out advantages of low labor costs and policy support. Industrial clusters and supply chains have gradually formed and the countries have become main exporters for garments worldwide. At the current stage, main competitions still come from Korean manufacturers, including Sae-A, Hansae, Hansoll and Youngone.
The textile industry in South Asian countries has grown year by year under government incentives and population advantage. In addition to India and Bangladesh, whose export values from garments continue to grow year by year, Sri Lanka has emerged as a new textile manufacturing country in recent years. Among them, local textile leaders MAS and Brandix are the main players in the industry.
(4) Central America, Europe, Africa and Other Countries: These countries have taken considerable market share in Europe and the
United States either because of geographical proximity, short delivery time or the advantages of economic cooperation and preferential import tariffs. However, as the quota in these regions and countries were lifted in 2005 and
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the countries have gradually recovered from the financial crisis, Central American countries, who has relatively higher wages, are losing market shares in two major markets, Europe and the United States. However, due to the quick response to market demands, the market share is rising again. In addition, as wages in South East Asia soar year by year, distributors and brand marketer have begun to extend their supply chain into countries with lower wages and tariff-free treaties, such as the Caribbean countries and low development countries in Africa in order to gain better profit margins.
(5) Developed Countries (Japan, Europe, the United States and Canada): The production cost in these areas are higher than that in others. Such
condition is not conducive to the development of the garment industry. They mainly produce low-volume high-price products to meet the special demands in the domestic market. Most garments sold in these markets still rely on imports, which forms the three main garment importing regions.
(3) Overview of Technology and R&D 1. R&D expenses invested in the most recent year up to the date of publication
of this annual reportUnit: NT$ 1,000
YearItem 2016 2017 As of March 31,
2018 R&D expenses 173,131 154,785 54,789 Total operating
income 22,127,939 22,375,000 5,131,088
Ratio of R&D expenses to 0.78% 0.69% 1.07%
2. Successfully developed technologies or productsThe Company's recent R&D projects are aligned with the development
trend of the textile industry, focusing on the R&D of high value-added functional products and integrating the R&D advantages of upstream suppliers to develop special functions, such as moisture-permeable waterproofing, moisture wicking, virus impeding and fire retarding. We have also developed proprietary waterproofing and virus impeding sewing technology, as well as standardized high-precision processes. Our strict standardized manufacturing process has been successfully applied to the production of medical protective and fire protection clothing and registered for patent rights Taiwan.
In addition, in November 2007, we introduced the E-learning system, which implements online digital learning for employees, aiming to enhance the effectiveness of learning and reduce the cost of education and training. Since its introduction, 165 online courses have been launched. The section below provides a list of proprietary technology development in recent years: (1) Functional Apparel - Protective clothing for medical operations
From September 2003 to June 2004, we applied for the “Safety and Comfort Protection Clothing Design and Development Technology Integration Project” organized by the Department of Industrial Technology (DOIT), Ministry of Economic Affairs (MOEA) and successfully developed disposable and
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reusable protective clothing that can block out SARS virus. This technology has been registered for patent of R.O.C.
(2) Functional Apparel - Fireproof Clothing We are now a specialist manufacturer for the fireproof series children's
clothing in the United States. (3) Functional apparel - Design and development of lifestyle wear
a. Extend the R&D experience of protective clothing into the developprofessional lifestyle wear series. b. Integrate the R&D advantages of upstream fabric manufacturers todevelop general lifestyle apparel.
(4) R&D of specialized production processes (5) Proprietary "Industrial Engineering Analysis Technology and System" (6) Proprietary “Garment R&D Scheduling and Management System”. (7) Using Microsoft's corporate portal software to customize the internal
corporate collaboration platform (8) IE Estimation and Report System (9) YY (yardage yield) analysis system (10) Cloud Marking System (11) Special Processing Management System (12) Operation Management Information Platform (13) Thread Usage Management System (14) Special Sewing Management System (15) Digital Work Time Analysis System (16) Electronic Productive Recording System (17) Material Usage System (18) Smart Clothing Conductive Fabric Bonding Technology (19) Sample Production Management System
(4) Long-term and short-term business development plans 1. Short-term business development plan
(1) Marketing Strategy: A. In-depth development of the U.S. market
a. Existing customers: Increase services items, taking services into a higherlevel.
b.New customers: Continue to develop renowned U.S. brands.c. Reinforce quick response capabilities
B. Actively expand into new markets in Asia and Europe a. Asian Market: The market share in the Japan market has been increasing
year by year. In the future, we will seek in-depth cooperation withcustomers and expand the market through value-added services.
b.European market: Continue to reinforce cooperation with renownedEuropean brands and build partnerships with a vision to expand themarket in the future.
C. Customer ratings a. Large-scale customers: The focus will be placed on stable growth and
expanding opportunities for horizontal integration to increase product lines.
b.Medium-size customers: These customers have high potential for growth;therefore, the focus is placed on investing resources to develop customers with growth potential.
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c. New customers: These customers are drivers for future growth; therefore,a dedicated team and more resources will be allocated to providecustomized services.
D. Product strategies a. Material-centered product planningb.Develop fashion and functional apparel in response to sports fashionc. Provide style design and fashion trend based on customer brand
positioning (2). Production policy: specialized production/ consolidated production area/
factory clusters A. Specialized production
a. Develop manufacturing capabilities for specialized products withstreamline, low-variety and specialized production at each individualfactory.
b. Reinforce the efficiency of factory management and actively recruitmanagement and technical talent to effectively improve production efficiency, technology and product quality.
B. Consolidated production areas: Taking cost and speed into consideration, we plan to develop production areas into higher concentration.
C. Factory clusters: Factories will be built as extensions to the existing factories.
2. Long-term business development plan(1) Marketing Strategy:
A. Reinforce market development globally, in the United States, Asia, Europe and Australia.
B. Synchronize with customers' information to better understand customers' needs and initiate proposals.
C. Make adjustments to the marketing organizations and build a professional marketing team.
D. Increase new product R&D and invest in environmentally-friendly and green energy-related product research.
(2) Production policy: A. We will expand the development of low-cost production areas and move
toward the concept of factory development to expand the scale of production, while cutting down production costs.
B. We will carry out in-depth product specialization and build specialized production bases for varied products, including functional apparel, to expand the scale of production and maximize production efficiency and product quality.
C. The global production layout of production areas will be centered on the supply chain and, with the advantages of specialization of factories, reinforce raw material supply for localized production.
2. Market, Production and Sales Overview(1) Market Analysis
1. The Company’s main marketsThe main markets of the Company's products are the United States, Asia and
European countries. Unit: NT$ 1,000
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Year Domestic sales
Export Total United States Other Countries 2015 836,976 17,939,569 4,581,962 23,358,507 2016 721,411 16,899,519 4,507,009 22,127,939 2017 231,936 15,989,930 6,153,134 22,375,000
2. Market shareOne of the main market for the Company's products is the U.S. market; the United States is also the one-single country with the largest demand for garments in the world. The table below shows that the Company's market share in the United States is above the level of 0.5 percent, and the market share in the global market is maintained up to a certain level. This shows that the Company has a place in the global garment market.
Unit: US$ 100 million Item/year 2012 2013 2014 2015 2016
Global garment import value 4,230 4,603 4,833 4,450 4,430 U.S. garment import value 880 910 932 970 910 Ratio of global garment exports to the United States 20.80% 19.76% 19.28% 21.80% 20.5%
Revenue of Makalot 5.36 6.04 6.93 7.4 6.9 Market share in the United States 0.61% 0.66% 0.74% 0.76% 0.76%
Market share globally 0.13% 0.13% 0.14% 0.17% 0.16%
Source: Statistics from 2012 to 2016 are derived from the World Trade Statistical Review 2017 (WTO)
3. Market supply and demand in the future and potential of market growth(1) Future market demand
Clothing is necessity in people's lives. They are the so-called normal goods in the definition of economics. With the increase in people’s income, personal spending on clothing also rises. In the long run, consumer spending on garments accounts for a certain percentage of the national income. From this, we can see that future market demand for garments will grow steadily.
(2) Future supply in the market
In the aspect of supply, the major supply of garments to Europe, the United States, Japan and other countries comes from Asia. Asia’s competitiveness and complete value chain have already formed certain level of advantages. In general, only manufacturers who have complete layout in the low-cost Asian countries and the capabilities to run global operations will maintain their competitive advantages. Other than the market supply to countries in Europe, America and Japan, the growth of China cannot be underestimated, as they transform from the world's factory to the world market. The Southeast Asian countries are also emerging markets that are extending their spending powers into the world, as their economies continue to develop.
4. Competitive advantages
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(1) In-depth development of the global market and solid customer relationships
The United States is the world’s largest importer of garments. In the U.S. garment market, retailers and brand marketers are the main distributors. The Company has long been developing these two types of sellers as the main customer base and will continue to explore into the U.S. market. In value creation, the Company focuses on building stabile partnership with our customers with a complete range of services (from front-end R&D to back-end sales and stock replenishment). From the perspective of the value chain, the Company plays more and more roles in the market. Our customer-centered organization and operational model makes our customers to rely on us more and more every day. Our large-scale customers even regard us as a strategic partner. This means that our cooperative relationship is long-term and mutually beneficial. On such a foundation, the threshold for competitors to replace us is relatively high. This is also the competitive advantage built by the company in the value chain management capabilities.
Beyond the U.S. market, as the Asian markets mature, many European, U.S. and Japanese brands have steered their focus on their development of the Asian markets. The Company has been actively expanding into the Asian market and gained substantial results. Now, we are entering into a stage of steady growth.
(2) Cost, speed and quality advantages of production areas
In recent years, the Company has shifted its focus to the five production bases in Indonesia, Vietnam, Cambodia, China and the Philippines. At the same time, the Company seeks integration of the supply chain in order to speed up delivery. Especially, in recent years, our expansion in the production countries, such as Indonesia and Vietnam, brought us the opportunities to reinforce our competitive advantages through consolidating the supply chain.
(3) Diversified products and in-depth services
Development of diversified products has always been the Company's marketing strategy. Under the trend of customer concentration on the supply chain, this advantage is even more prominent and creates differentiation from the competitors, as well as more extensive business opportunities. In addition, deepening cooperation with customers is also an important indicator of differentiation, including R&D extension services, so that customers do not need to develop their own designers. Material development and supply allows customers to shorten product development time and process. Paying close attention to customers’ sales Information enables us to remind customers to replenish stock or change products, and subsequently cutting down the inventory for both parties. These in-depth services rely on the Company's forward-looking strategies. The Company has begun talent training a few years ago and set up IT tools to achieve real-time interaction with suppliers and customers. Business opportunities and close partnership resulted from our strategies have created a rather high threshold for competitors.
5. Advantages, disadvantages and responding strategies for prospects ofdevelopment
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(1) favorable factors A. Sufficient human resources in the company
The Company has continuously recruited talents in recent years and built a talent pool with younger and more diverse human resources than the competitors. This provides us great potential for further development in the future competitive market.
B. Global garment trading will continue to grow in the future The garment-importing countries will continue to expand their imports, and retailers will continue conducting centralized procurement. This Company is a large-scale garment manufacturer and will have considerable advantages in the development of business opportunities.
C. In-depth service, diverse products and specialized production The Company has the capability to provide design services and implement the strategy of product diversification, which enables us to provide our customers with a complete range of products and services to meet customers’ needs for one-stop shopping. In addition, the Company implements the strategy of specialized production at our manufacturing sites around the world to increase production efficiency. Under the strategy of “business diversification and specialization of production areas”, the Company will be able to win orders with complete products and services, and flexible production scheduling at each production area and has high flexibility in utilization of production capacity.
(2) Unfavorable factors and responding strategies A. Fluctuation in raw material prices
The prices of raw materials have been affected by the price hikes of crude oil and threats of climate change, natural disasters or the stockpile policy of raw material supply countries in recent years have tipped the market supply and demand off balance. Instability in raw material prices often affects customers’ mode of order placement. Therefore, how to provide customers with instant information on the prices of materials and alternatives is a key factor to the stability of orders.
Responding strategies: Set up a dedicated unit to monitor the trend of changes in the prices of
raw materials on a continuous basis. Reinforce cooperation with suppliers and negotiate purchase prices in
advance to mitigate the risk of rising costs. Develop new supply chains to spread the risks from fluctuation of the
prices of raw materials in China, as well as the value of RMB. Strengthen long-term partnerships and negotiate with customers/suppliers to work together through unfavorable circumstances when experiencing price hikes in raw material, creating a triple-win model for our customers, suppliers and the Company.
B. Rising labor costs in Asian countries The wages in Asian countries, such as Indonesia and Vietnam, continue to rise due to shifting orders from China and the rise of awareness in labor rights protection. Retention of skilled workers and continuous adjustment to employee salaries have become the key factors that maintain the competitiveness in the industry.
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Responding strategies: Improve production efficiency and increase employee output value Consolidate production in the production areas to maximize management efficiency.
Use automated equipment to increase productivity. C. Price competition from developing countries
Developing countries, such as Vietnam, have been actively developing their own high-quality garment manufacturers. Their governments provide high subsidies or technical assistance to ensure that their manufactures are capable of handling customer orders independently, instead of becoming simple production tools.
Responding strategies: Reinforce global logistic and scheduling capacity Makalot has established global logistics for over a decade and developed a solid foundation and certain level of abilities to manage the global operation. It is estimated that garment manufacturers in developing countries will not be able to carry out global flexible scheduling and deployment in the short run. Reinforce the role of value chain integrator Reinforce the strategy of localization of raw material supply in production countries to save cost and time. Establish a complete connection between suppliers and customers, bring them into cooperation and interaction right from R&D to value chain integration. And actively establish strategic alliances to build a comprehensive network and cooperation system for development of the advantages of industrial clustering, enabling members to provide mutual assistance and support of information, technology and raw material supply on a win-win business model. Reinforce customer relationships and provide in-depth and differentiated services
From providing fashion information before orders are placed, the Company completes development of market trends for customers in advance to enhance the added value of services and reinforce the cooperative relationships with customers, including in-depth services of product planning, design and sales proposals, developing mutually beneficial relationships.
D. Shortening product life cycle In a pessimistic consumer market, customers place considerable emphasis on the responses from market to prevent the pressure of overstocking. Therefore, low-volume high-variety orders or quick response model that replenishes the stock according to the statistics of sales are becoming more and more effective in terms of customer interaction and are expected to become the mainstream model for order placement in the future. Therefore, how to produce for low-volume high-variety orders and how to achieve instant stock replenishment during peak time will become a challenge for garment manufacturers.
Responding strategies:
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Expand R&D resources Invest in design and R&D resources, using external fashion databases to supplement the internal data for analysis to provide customers with more accurate market trends.
Reinforce the abilities to produce for urgent orders and the abilities to management deployment at the production areas
Improve the order process, make adjustments to the production line operation model and reinforce the time effectiveness of information exchange between the head office and production areas. Reinforce supply chain management and develop quick response capabilities
Develop strategic cooperative suppliers, strictly select manufacturers with quick response capabilities and global layout and accelerate implementation of localized procurement to reduce costs and accelerate the process.
(B) Main functions and the production process of the main products 1. Important uses of the main products
The Company's main product category is garments. Besides the basic protection against cold weather, we also provide comfortable, aesthetic and fashionable attire.
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2. Production process of main products
(3) Supply of main raw materials The main raw materials for garment-making can be divided into the main
materials (fabric and lining) and accessories (zippers, buttons, etc.). The company procures various types of fabrics and accessories from the major domestic and foreign manufacturers according to customers specifications and styles. Our principles for procurement of raw materials are to place orders with well-known domestic and foreign manufacturers, taking into consideration the stability of quality, price and timeliness of delivery, as well as the suppliers’ environmental protection principles. In addition, the Company actively pushes forward localization of raw material procurement, in order to create an environment for quick production capacity adjustment, shorten the time for material supply, accelerate the product-to-market process and speed up replenishment of products to help our customers reduce inventory. The Company also sends staff to evaluate the factories regularly. For new suppliers, we carry out assessment according to the customers' specifications and requirements and only engage them after they are verified to meet the standards.
The Company's cooperation model with the major suppliers was built based on long-term partnerships, aiming to maintain stable material supply. For the best prices, we also send inquiries to other suppliers for price comparison, seeking stable prices.
(4) Names and value/ratio of purchases (sales) of customers accounting for over 10 percent of total purchase (sales) in any of the most recent two years 1. Information of main suppliers in the most recent two years
There were no suppliers that accounted for more than 10 percent of the total purchase amount in the most recent two years as of Q 1 of 2018.
The Company is mainly engaged in manufacturing and trading of garments. Products purchased from the top-ten suppliers in the most recent two years are fabrics. Since the garment is part of the fashion industry, the designs and fabrics required vary from year to year. Therefore, the garment manufacturers procure from different factories or garment manufacturers according to customers’ designs and requirements.
Incoming material inspection
Pattern-m
aking
Grading
Marking
Cutting
Sewing
Mid-section inspection
Knitting
Opening
buttonhol
Attaching
buttons
Washing
Full inspection
Ironing andpressing
Final-section inspection
Packaging and labeling
Export
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2.In
form
atio
n on
the
mai
n cu
stom
ers i
n th
e m
ost r
ecen
t tw
o ye
ars
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t: N
T$ 1
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s(%
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with
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A
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to n
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with
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the
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s to
deve
lop
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ith g
row
th p
oten
tial i
n th
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ars t
o di
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se th
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ks in
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s and
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sue
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er
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orm
ance
. Ove
rall,
the
mai
n cu
stom
ers o
f the
Com
pany
are
reno
wne
d m
ultin
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nal a
nd d
omes
tic c
ompa
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and
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(e) T
able
of p
rodu
ctio
n vo
lum
e an
d va
lue
in th
e m
ost r
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t tw
o ye
ars:
U
nit:
NT$
100
0, 1
000
doze
nsY
ear
Prod
uctio
n vo
lum
e M
ajor
Pro
duct
2016
2017
Cap
acity
Out
put
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put v
alue
Cap
acity
Out
put
Out
put v
alue
Gar
men
t-
10,8
5817
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,130
- 11
,675
17
,877
,903
Not
e 1:
The
com
pany
is a
gar
men
t man
ufac
ture
r and
the
mai
n pr
oces
s is
the
sew
ing
stag
e of
gar
men
t pro
duct
ion.
How
ever
, in
the
proc
ess
of s
ewin
g,
the
prof
icie
ncy
of th
e st
aff a
nd th
e co
mpl
exity
of t
he w
ork
and
whe
ther
the
raw
mat
eria
ls u
sed
are
easy
to p
roce
ss w
ill a
ffec
t the
spe
ed o
f out
put
and
norm
al p
rodu
ctio
n ca
paci
ty o
f eac
h eq
uipm
ent c
anno
t be
calc
ulat
ed.
Not
e 2:
The
ann
ual o
utpu
t inc
lude
s the
num
ber o
f out
sour
ced
proc
essi
ng a
nd th
e pr
ocur
ed g
arm
ents
.
126
(6) Sales volume in the most recent two years: Unit: NT$ 1000, 1000 dozens
YearSales Volume Main Product
2016 2017
Domestic sales Export Domestic sales Export
Salesvolume
Salesvalue
Salesvolume
Salesvalue
Salesvolume
Salesvalue
Salesvolume Sales value
Garment 26 721,411 11,221 20,767,985 138 231,936 11,528 21,383,019
Fabric (Note) 0 0 0 638,543 0 0 0 760,045
Total 26 721,411 11,221 21,406,528 138 231,936 11,528 22,143,064
Note: Fabrics are trading items and there is no quantitative information.
(7) Key performance indicators of the Company that are industry-specific: The Company is a garment manufacturer, and the industry is not regulated by any specific key performance indicators. The Company's internal key performance indicators (KPIs) include the following:
2015 2016 2017Business volume
(standard) growth rate 10.6% -4.3% 6.9%
Revenue growth rate 11.8% -5.3% 1.1% Net income growth rate 26.6% -29.5% -15.9%
Consolidated gross margin 23.6% 20.42% 19.33%
3. Human Resources(a) The number of employees, average years of service, average age and
distribution of education in the most recent two years up to the date of publication of this annual report.
Individual Information (Taiwan)
Year 2016 2017 As of March 31, 2018
Number of
employees
Indirect labor 717 738 737 Direct labor 45 46 46
Total 762 784 783Average age 37.1 37.1 37.9
Averageyears of service 7.02 7.34 7.39
Education PhD 0.00% 0.00% 0.00%
Master's degree 24.93% 23.85% 23.75%
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Year 2016 2017 As of March 31, 2018
Bachelor degree 61.81% 63.01% 63.22%
High school 8.27% 7.91% 7.92% Below high
school 4.99% 5.23% 5.11%
Consolidated information (global regions)
Year 2016 2017 As of March 31, 2018
Number of
employees
Indirect labor 8,631 7,846 7,839
Direct labor 24,593 23,445 23,502
Total 33,224 31,291 31,341
Average age 30.27 30.70 30.71
Averageyears of service
3.4 3.52 3.47
Education PhD - - -
Master's degree 0.57% 0.60% 0.60%
Bachelor degree 3.32% 3.48% 3.48%
High school 22.07% 22.03% 22.04%
Below high school 74.04% 73.89% 73.88%
(b) Employee output value (productivity):NT$17,877,903/ 784 persons = NT$ 22,803,000 /person.
4. Information Regarding Environmental Protection Expenditure(1) Total amount of losses (including compensation) and penalties incurred due to
environmental pollution in the most recent year up to the date of publication of this annual report: none.
(2)Responding strategy and possible expenditures: The Company's production processes did not cause pollution or any loss due to any environmental event. In effort to fulfill our corporate responsibility for environmental protection, we have continued to collaborate with the Society of Wilderness since 2009 to host environmental education activities, such as wetland conservation and natural farming. From 2015, Makalot continued to work with the Society of Wilderness and launched the farmland adoption campaign. We collaborate with local smallholder farmers in Yilan 52A Wetland to encourage natural farming, aiming to minimize the damage to the land caused by conventional farming. From 2015 to 2017, a total of 1,170 kilograms of Makalot rice was produced from 6000 m2 of land. In 2017, Makalot teamed up with 104.com to launch the Dream Incubator Campaign. Through this campaign, we raised NT$ 200,000 from the public with the funding platform and donated it to the Society
128
of Wilderness in support of their continuous advocacy of natural farming. Our overseas factories also began to use green energy equipment (LED/energy-saving lamps, environmentally-friendly boilers, wastewater/rainwater recycling equipment, etc.) to further instill the practices of environmental protection. In addition, in view of the rising awareness of environmental protection among consumers and the global attention to the issue of global warming, the Company responded to this trend through launching the development of Recycle materials and began to promote natural dye products in 2016 to relieve the burden and mitigate the impact on the environmental brought by chemical fiber dyes. At the current stage, over 200 tons of this product series have been shipped, saving over 800,000 liters of water and cutting down 400,000 kg of CO2 emission. We have also begun to use digital printing for rapid sample preparation/large-volume production to significantly reduce dye contaminated effluent. We will also continue to develop products with physical functions, such as wicking, antibacterial and deodorizing, to reduce the use of chemical additives and minimize the impact on the environment with permanent effect.
5. Labor RelationsSince founding, the Company has always adhered to the principle of sharing ouroperating results with employees and taking care of our employees. Our personneland benefit systems are planned under this principle. Specific practices are presentedin the reasonableness of the personnel system, measures to improve employees’benefits, employee training and education programs and the retirement pensionsystem. The details are further discussed in the section below:
(I) Reasonableness of the personnel system 1.Talent recruitment and reward system: We recruit talents with positive attitude
and diverse backgrounds and implement a performance-based reward system toencourage performance and share our operating results.
2.Talent retention and organizational structure: In coordination with the Company’slong-term development, we took an inventory of manpower and planned thesuccession system to ensure that our employees are placed in the right position.We continue to reinforce organizational integration, promote reasonablemanpower placement and implement talent development programs to improveemployee productivity.
(II) Employee Benefits 1. Protection of employees' rights
(1) All employees of the Company are provided with labor insurance andNational Health Insurance from the day they report to work, and all claims are met according to relevant laws and regulations.
(2) All employees of the Company are provided with leaves (annual, maternity and sick leaves) and holidays as stipulated in the Labor Standards Act; above which, every employee of the Company is given extra three days of paid holiday, superior to the laws and regulations.
(3) The Employee Welfare Committee has been set up in accordance with the relevant laws and regulations to facilitate organization of welfare activities.
2. Employee welfare and quality measures
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(1)Provide employees with group insurance, which is also open to employees’ families.
(2)Provide subsidies for department dinner parties to encourage interaction between colleagues in the same department.
(3)Spring dinner party is held at beginning of each year and prize money is provided for lucky draw.
(4)Gift and condolence money for wedding and funeral, gifts or gift vouchers on the three major festivals; gift money for birthday celebrations.
(5)A company-wide employee trip (domestic and international travel) is held every year. Colleagues can choose their travel destinations and are encouraged to bring their families, and subsidies are available for the activities.
(6)To promote physical and mental health, a series of social clubs have been set up (such as golf, volleyball, yoga, aerobic and art appreciation clubs) to encourage friendship building and healthy lifestyle.
(7)Every year, we provide our employees health checkups that are superior to the packages required by labor laws and track the health status of employees on regular basis.
(8) We set up an emergency relief program to help our employees through serious accidents or emergency situations, give immediate attention to their needs and provide timely financial assistance.
(9)Launch discount campaigns for products of the Company.(10) Provide employee discounts at partner stores.
(c) Education and Training At Makalot, we believe that "talent is the company's most important asset."
Therefore, to develop talents for the garment industry and improve the quality of our personnel, we planned a company training system based on the core competencies for each job functions. This system covers four major aspects: new employee training, professional training, management training, and learning and development, providing our employees opportunities to grow with the company through continuous learning.
In November 2007, the Company began to implement the digital learning platform to provide our employees with instant and flexible online learning. In November 2008, the Company won the 2008 "Initial Enterprise Application Implementation Award" organized by the Industrial Development Bureau, the Ministry of Economic Affairs and was also certified for "Digital Learning Service Quality AA" organized by the Digital Learning Quality Certification Center. In December 1998, we received the Bronze award from the "Taiwan Training Quality System (TTQS)" Standard Assessment (Corporate Assessment) organized by Council of Labor Affairs, the Executive Yuan. In 2000, we passed the human resources improvement plan review by Vocational Training Center and received subsidies for the training. The quality of the Company’s training courses was widely recognized.
In 2017, the Company organized training (internal and external), including classroom courses for 210 sessions with 3,700 visits and online courses for 299 sessions with 1,813 visits. The total of 19,624 training hours were implemented and the annual training expenditure came to approximately NT$ 2,882,000. The
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overall training satisfaction rate was: 4.69 points (out of 5 points) for the classroom courses and 4.55 points (out of 5 points) for the online courses.
1. New employee training system:
(1) Onboarding training
Dedicated personnel from the Human Resources Department are responsible for guiding the new employees through the onboarding process, introducing the Company's culture and values, overview of the industry, organizational system, role and function of each department, products and customers, factory production processes, IT system and everyday practices and providing a complete lineup of online courses. Through the digital learning platform, we provide new employees flexible learning. With guidance of appointed senior colleagues, new employees adapt themselves to the environment, learn work related skills and quickly integrate into the Makkalot team.
"Integrity" is the most important value of Makalot, as well as our core management principle. To ensure that our employees understand the concept clearly, we have set up relevant codes, such as: Ethical Corporate Management Best Practice Principles, Code of Ethical Conduct, and published the codes on internal websites and external official website of the Company. At the same time, we have also produced online courses to introduce our employees to the concept of corporate social responsibility, Code of Ethical Corporate Management and Ethical Code of Conduct and related issues. These courses are required for the new employees and open to all employees of the Company through the E-learning learning platform.
(2) New Employee Training Camp
In each quarterly New Employee Training Camp, we guide the new employees through a complete curriculum, covering the subjects of important customers and their product features, introduction to fashion and product planning, the correct concept of order management and important fabric characteristics. Through a variety of activities, including delivery of new tasks, value exploration and face-to-face discussion with senior supervisors, we brought our new employees to experience and further identify with the values of Makalot.
2. On-job training system:
In addition to the development of professional training courses in each department based on its function, the Company has also set up the “Makalot Academy” and “Program Planning Committee” to systematically develop professional talents for the garment industry. This Committee is composed of senior supervisors, employees and lecturers from various professional departments and courses are designed based on garment expertise, such as sales, procurement, materials and accessories, and garment technology, as well as internal lecturer training courses to maintain the quality of the classes. The “Skill Certification Mechanism” has also been set up to verify whether our employees have professional skills needed to perform their functions. In addition to the Company's internal training courses, our employees can also apply to take external training courses, providing a wide range of options for skills training.
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3. Management training system:
The courses are designed for management personnel of different levels for the competencies required to perform their management functions. The courses are divided into training for middle and senior management and cover the subjects of self-exploration and interpersonal communication, problem analysis and problem-solving skills, public expression briefing skills, training for mentoring (coaching), performance management and leadership and coordinated with the mentor mechanism to facilitate transfer of management experiences.
4. Learning and development system:
(1) Employee seminars
Monthly seminars are launched for learning of new knowledge in a wide range of topics to help our employees achieve balanced development of work and physical/mental health.
(2) Employee Consensus Camp
Every six months, the Company launches a large-scale event for all employees of the Company to provide opportunities for two-way interactions between colleagues and the Company, facilitating the management to convey the Company’s vision and philosophy and develop unity in the Company.
(3) Book Club
Through book clubs of various levels, we aim to develop a corporate culture of knowledge-sharing and create an environment of learning for all.
(d) Retirement system 1. The Company has set up a retirement plan for the formal employees in
accordance with the Labor Standards Act. Since April 1998, the Companybegan to make a contribution of 2 percent of the total monthly salary of eachemployee to the account of the Retirement Reserve Supervision Committeefor management. The reserve is deposited in the Labor Insurance PaymentSection of the Trust Department of the Bank of Taiwan under the name of theRetirement Reserve Supervisory Committee, which takes charge to superviseand conduct the distribution of retirement pensions. In addition, in accordancewith the amendment to the Labor Standards Act, starting from 2015, thebalance in the labor retirement reserve account shall be audited before end ofeach year and the balance insufficient for one lump-sum payment to theplanned retirement in the following year shall be made up before end ofMarch of the following year and forwarded to the Retirement ReserveSupervision Committee for review.
2. Since implementation of the new pension system on July 1, 2005, employeesare given the option to choose the old or new system. For employees whochoose the old system, the original terms apply to the Company’s contributionto the pension account. For those who choose the new system and thoseemployed after July 1, 2005, a monthly contribution of 6 percent of theapplicable salary rank is made to the personal pension account. Both of theoptions are implemented in compliance with the laws and regulations.
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(5) Employee Code of Conduct and Ethics The Company's values are “integrity, teamwork, and sharing”. In addition to
embedding these values into various activities, we set up specific behavioral standards to provide a set of guidelines for conducts. Our nominations for the “Value Behavior Model Election” and “New Employee Model Election” are evaluated based on the “actual events of ethical practices”. Employees of Makalot who are exemplary of our corporate values are openly commended to encourage our employees to turn our values into practices in their work and life. Starting from 2014, the nomination events were transformed to the “Makalot Culture Action Point Collection Card”, turning the Company’s corporate values into cultural activities and behavioral paradigm into four major activities:
1. Makalot's Enthusiasm: encourages employees to participate in socialwelfare activities.
2. Sharing happiness: encourages our employees to share their lives andwork experiences through internal publications and participate in clubactivities and seminars.
3. Dedication to Learning: encourages our employees to pass down theirprofessional knowledge through, for examples, serving as internallecturer or mentor and so on.
4. Team Helper: encourage the team spirit of service, by taking up the roleas a point of contact for public affairs.
With the diversified and interesting point collection scheme, and diverse reward mechanisms and open commendation, we encourage our employees to proactively participate in these activities and transform the corporate values into actions in their daily work and life. In 2017, a total of 62 events were held with cumulative 1,476 participants, who created a cumulative of 4,340 points. As high as 83 percent of our employees enthusiastically participated in the events. This shows that the overall response toward this campaign was positive and deemed effective in terms of encouraging our employees to actively participate in various activities and implement the core values in their daily work and life.
In addition, from the employee satisfaction survey implemented at end of 2013, we found that we are often shy from giving each other praises, encouragement and complements. In response, we launched the “Hi, Go Go Bravo!” campaign to encourage our employees to express thanks or praises that are normally difficult to convery verbally to their partners by writing down specific behaviors that have given them effective help and their appreciation on a thank-you card. These cards were posted on the public bulletin boards on all floors. During this two-week event in 2015, 66 percent of all employees have written a "Go Go Bravo! Thank You Card” and 86 percent have received a thank-you card. Our employees’ enthusiastic participation brought the Company a positive force that encourages our employees to affirm each other and instill the value of "sharing".
Continuing from the 2016 "Comprehensive Incentive Scheme", we focused on praising our teams and employees for their implementation effectiveness and outstanding performance regarding to the Company’s overall development strategy and key performance indicators under the core spirits of "instant reward, immediate sharing and direct feedback". We aim to reinforce outstanding
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performance and create an atmosphere of proactive spirit. In 2017, we rewarded 100 cases with NT$ 1.5 million prize-money.
Makalot manages the garment industry with the concept of service and innovation, creating the greatest value for customers, employees, shareholders, and suppliers. For the development of the Company and the welfare of our employee, all employees of Makalot shall closely observe the following code of conduct:
1. Clearly separate public and private interests, give mutual respect, showsincerity and collaborate to achieve the Company’s business goals.
2. Follow orders of supervisors at all levels.
3. Carry your conducts with honesty and integrity and stay away from derogatory,extravagant, promiscuous, gambling and other actions that may damage the reputation of the Company.
4. Refrain from engaging in businesses that hinders or are in competition with theCompany’s businesses.
5. Keep strict confidentiality of the Company’s business or technical secretes.
6. Refrain from browsing or keeping any documents, correspondence, designdrawings, electronic files and information that are irrelevant to your work.
7. Give care to all public properties and refrain from causing wastage.
8 Take challenges and responsibilities and never procrastinate any tasks.
(6) Labor agreements and employees' rights The Company has always attached great importance to the labor-
management relations. Apart from meeting full compliance with the Labor Standards Act and related laws and regulations, when drafting policies, we take employees rights into consideration with priority. We introduced the Employee Assistance Program (EAP) to help our employees deal with health, marriage, family, financial, legal, emotional, and stress issues, aiming to help our employees stay healthy physically and mentally.
The utilization rate of the Employee Assistance Program for 2017 was 3.81 percent and 100 percent of those who have used the service responded in the questionnaire survey gave 4 points or higher (agreed) to the conclusion that the EAP service help them solve their issues, and 100 percent of our employees were satisfied with the overall EAP service and affirmed EAP's professional level. The satisfaction rate for the overall service was 4.2 points (out of 5 points).
To enable our employees to express their opinions without reservations, in addition to the means provided by the administrative system, the following communication channels have also been set up:
1. Regularly labor-management conferences.
2. Unscheduled Employee Satisfaction Survey: was commissioned to externalconsultants for data collection and analysis. The survey was carried outthrough the online system in anonymous mode, aiming to achieve in-depthlisten and understanding of our employees’ true voices and facilitate effective
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improvement. Excluding employees who are on business trips, 100 percent of our employees answered the online survey in 2011, 2013, 2015 and 2017.
3. Annual theme selection campaign: encourages our employees to participate inand provide ideas for operations and management and set the Company'sannual theme for action plan through collective brainstorming.
4. Frank's Mailbox (direct mailbox of General Manager).
5. The Human Resources Department handles employee complaints directly.
6. Unscheduled talks.
7. Innovative proposal reward system: encourages our employees to proposerecommendations for improvement and feasible plans.
Thanks to the diversified communication channels, we have established long-term and harmonious labor-management relations.
(7) Protection of workplace and employees' personal safety 1. Health and work safety related policies
To protect our employees from harm and provide a healthy workplace, especially for factory employees, the Company carried out a systematic update to reinforce the protection mechanisms in the software and hardware. In August 2004, the Social Responsibility Team was set up at Taipei Head Office, and a second and third tier social responsibility organization was set up in each production area. Every manufacture factory is staffed with one social responsibility officer, who takes charge to create a healthy working environment, maintain work safety, protect our employees' rights and supervise the Company’s operations for social responsibility targets. Through a network of interactions, we instilled the concept of social responsibility in all production areas. In addition, to achieve respect for our employees' rights and protect their personal safety, We set up the "Makalot Social Responsibility Best Practice Principles”, which provides a clear set of guidelines for social responsibility operations drafted based on the corporate culture of Makalot. We are committed to not only creating a safe work environment and safeguarding our employees’ safety, but also building a Makalot family where every member id healthy, happy and united.
2. Achievements in health care and work safety
The company is committed to providing comprehensive health care to our employees. As part of the comprehensive system, we implement regular education programs to raise our employees’ awareness on the health and safety. In addition to the annual health checkups, which provides better terms than the statutory requirements, the same package extends from 2014 to 2015. Differentiated health checkup packages customize the content for different age groups and provides a more comprehensive range of coverage. In 2015, we expanded the budget for the health checkup program again and updated the test items to meet our employees’ needs for an even more complete and comprehensive health checkup program. For eight consecutive years (2000 to 2017), the Taipei Head Office once again achieved 100 percent participation rate in the health checkup program and in 2017, all staff employees who underwent health checkups responded with a satisfaction of 4.3 points (out of 5). In addition to the annual health checkup, we launch health seminars from time to time and
135
provide consultation services for their health reports, as well as taking the initiative to track our employees’ health conditions, aiming to raise our employees’ awareness on health risk prevention and implement personal health management.
In 2011, we participated in the Health 100 Exercise for Taiwan organized by the Health Promotion Administration and won the Taipei Healthy Workplace Health Excellence Award. At the same time, we were certified by the Health Promotion Administration for the Healthy Workplace Self-certification with Health Promotion Badge. In 2012, we won the 8th CSR Corporate Social Responsibility Award organized by the Global Vision Magazine for the "First Prize of Healthy Workplace", the highest "3-star rating" in the 2nd "Best Companies to Work for" organized by Taipei City Government, the "Best Breastfeeding Room certification" by Department of Health, Taipei City Government. In 2013 and 2016, we once again received a "3-year Best Breastfeeding Room Certification" from the Department of Health, Taipei City Government. In 2014, we were awarded the Healthy Workplace Self-certification with Health Promotion Badge (for the highest level of three years). And in 2017, we successfully extended our Healthy Workplace Self-certification with Health Promotion Badge (for the highest level of three years).
We implemented a program to care for our employees and the disadvantaged groups. In 2012, the “Energy Massage Station” was set up in the Company. We brought in visually-impaired massage therapists to help our employees relax and relieve stress from their busy work. This program not only provides our employees with a relaxing moment, but also job opportunities to the disadvantaged groups. In 2017, this service was used 3,900 times, and users responded with a score of 4.8 (out of 5 points) for the satisfaction rate of the overall service. To provide our employees with better and more convenient massage reservation services, we developed our own "Energy Massage Station Online Reservation System”. This system was launched in the end of 2013 to provide our employees a convenient way for making an appointment and the users responded with a satisfaction score of 4.86 (out of 5 points) for this system. At the same time, we offer massage coupons to department heads on quarterly basis, which they can use as an incentive tool to boost morale.
Each of our production factories is staffed with a professional physician and nurses. They implement unscheduled health education courses and health care programs for all employees and collaborate with hospitals in the community to ensure that our employees receive professional and proper medical attention in the first instance in case of accident.
(8) Losses arising as a result of labor disputes in the most recent year up to the publication date of this annual report and disclosure of potential amount of loss in the current and future terms and the responding strategies: none
The Company has built harmonious labor relations. No labor dispute has arisen from the current employees and therefore no loss has occurred due to labor disputes. It is estimated that there will be no losses arising from labor disputes in the coming years.
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6. Important Contracts
Nature of contract Party Contract beginning Date Main content
Limit of LiabilityClause
Long-term loans secured with real estate (Note)
Changhua Bank 15 years from November 15, 2013
1.Credit Line:NT$ 1.13 billion
2.Activated inbatches through aperiod of 15 years
None
Note: As of April 30, 2018, the outstanding balance of long-term loan limit secured with real estate was 0.
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VI. Financial Highlights
Condensed balance sheet and income statement in the most recent five years
A. Information on Balance Sheet 1. Condensed Balance Sheet - Consolidated information based onTIFRSs
Units: NT$ 1,000 Year
Item
Financial information for the most recent year Current year up toup to March 31, 2018 (Note 3) Audited by CPAs2013
2014 (After
restatement)2015 2016 2017
Current assets 5,551,080 7,131,037 8,140,059 7,458,764 7,225,364 7,023,202Property, plant and equipment (Note 2) 4,121,238 4,367,751 4,612,928 4,972,200 4,750,341 4,660,939
Intangible assets 35,965 42,471 50,301 38,354 21,317 17,418Other assets (Note 2) 387,165 452,886 751,866 666,459
569,906 572,089
Total assets 10,095,448 11,994,145 13,555,154 13,135,777 12,566,928 12,273,648
Currentliabilities
Beforedistribution 3,010,193 3,616,325 4,233,948 4,169,028
3,806,500 3,279,861
Afterdistribution 1,699,449 2,143,241 2,341,025 2,778,199
To be resolved by the shareholders' meeting
To be resolved by the shareholders' meeting
Non-currentliabilities 1,755,139 215,599 209,067 238,858
256,047 248,528
Totalliabilities
Beforedistribution 4,765,332 3,831,924 4,443,015 4,407,886
4,062,547 3,528,389
Afterdistribution 3,454,588 2,358,840 2,550,092 3,017,057
To be resolved by the shareholders' meeting
To be resolved by the shareholders' meeting
Equity attributable to owners of parent company
5,299,354 8,146,840 9,053,865 8,591,390 8,398,407 8,644,274
Capital stock 1,690,722 1,909,695 1,987,306 2,067,349 2,093,872 2,093,872Capital reserve 1,224,647 3,385,665 3,397,605 3,403,403 3,544,777 3,544,777
Retainedearnings
Beforedistribution 2,366,578 2,700,563 3,388,679 2,980,720
2,874,359 3,194,339
Afterdistribution 1,055,834 1,227,479 1,495,756 1,589,891
To be resolved by the shareholders' meeting
To be resolved by the shareholders' meeting
Other equity (2,593) 150,917 280,275 139,918 (114,601) (188,714)Treasury stock 0 0 0 0 0 0Non-controlling interests 30,762 15,381 58,274 136,501 105,974 100,985
Totalequity
Beforedistribution 5,330,116 8,162,221 9,112,139 8,727,891 8,504,381 8,745,259
Afterdistribution 4,019,372 6,689,137 7,219,216 7,337,062
To be resolved by the shareholders' meeting
To be resolved by the shareholders' meeting
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2. Condensed Balance Sheet -Parent company only information basedon TIFRSs
Units: NT$ 1,000 Year
Item
Financial information for the most recent year
2013 2014 (After
restatement)2015 2016 2017
Current assets 4,051,386 5,596,609 6,139,127 5,396,981 5,586,987Investment using the equity method
1,596,685 1,843,989 2,025,413 2,019,742 1,758,328
Property, plant and equipment (Note 2) 2,939,287 2,922,313 2,903,703 2,982,155 2,973,869
Intangible assets 35,772 40,513 29,417 19,758 11,247Other assets (Note 2) 1,117,047 1,289,527 2,015,354 2,133,776 1,986,274Total assets 9,740,177 11,692,951 13,113,014 12,552,412 12,316,705
Currentliabilities
Beforedistribution 2,755,834 3,439,507 3,955,913 3,885,946 3,848,394
Afterdistribution 1,445,090 1,966,423 2,062,990 2,495,117
To be resolved by the shareholders'
meetingNon-current liabilities 1,684,989 106,604 103,236 75,076 69,904
Totalliabilities
Beforedistribution 4,440,823 3,546,111 4,059,149 3,961,022 3,918,298
Afterdistribution 3,130,079 2,073,027 2,166,226 2,570,193
To be resolved by the shareholders'
meetingCapital stock 1,690,722 1,909,695 1,987,306 2,067,349 2,093,872Capital reserve 1,244,647 3,385,665 3,397,605 3,403,403 3,544,777
Retained earnings
Beforedistribution 2,366,578 2,700,563 3,388,679 2,980,720 2,874,359
Afterdistribution 1,055,834 1,227,479 1,495,756 1,589,891
To be resolved by the shareholders' meeting
Unrealized loss on market value decline of long-term equity investments
- - - - -
Cumulative translation adjustments
(2,593) 150,917 280,275 139,918 (114,601)
Totalshareholders' equity
Beforedistribution 5,299,354 8,146,840 9,053,865 8,591,390 8,398,407
Afterdistribution 3,988,610 6,673,756 7,160,942 7,200,561
To be resolved by the shareholders' meeting
* If the Company has prepared parent company only financial statements, condensed parentcompany only balance sheet and statement of comprehensive income for the most recent five years shall also be prepared.
* If less than five years have elapsed since the adoption of the IFRS for financial data, theCompany shall separately prepare a financial analysis in the format of Table 2 as follows for financial data that uses the ROC financial accounting standards.
Note 1: Financial statements not audited and attested by CPAs shall be noted. Note 2: When the asset revaluation was conducted in the year, the date and revaluation
increment shall be listed.
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Note 3: As of the publication date of this annual report, a company whose shares are listed on the stock exchange or traded over the counter shall disclose its most recent financial information that have been audited and attested or reviewed by CPAs.
Note 4: For "after distribution" figures, please fill the figures according to the resolution of the shareholders' meeting in the following year.
Note 5: If a company is notified by the competent authority that its financial information has to be corrected or restated, the financial information shall be presented with corrected or restated figures, and indicate the circumstances and reasons.
B. Information on Statement of Comprehensive Income
1. Condensed Statement of Comprehensive Income - Consolidatedinformation based on TIFRS
Units: NT$ 1,000 Year
Item
Financial information for the most recent year Current year up toup to March 31, 2018 (Note 1)
Financialinformation (Note
1)Audited by CPAs
2013 2014 (After
restatement)2015 2016 2017
Operating revenue 17,910,935 20,888,798 23,358,507 22,127,939 22,375,000 5,131,088Gross profit 3,567,337 4,527,071 5,511,521 4,517,435 4,324,055 1,016,719Operating income 1,624,290 2,087,175 2,650,179 1,949,040 1,767,253 416,451Non-operating income and expense 22,019 7,832 41,153 (39,717) (150,607) (9,799)
Net income before taxes 1,646,309 2,095,007 2,691,332 1,909,323 1,616,646 406,652
Net income from continuing operations for the period
1,342,254 1,705,587 2,176,954 1,542,631 1,296,616 314,901
Loss from discontinuedoperations
0 0 00 0
0
Net income (loss) for the period 1,342,254 1,705,587 2,176,954 1,542,631 1,296,616 314,901
Other comprehensive income for the period (net amount after taxes)
81,714 134,512 133,170 (180,762) (257,525) (74,023)
Total comprehensive income for the period 1,423,968 1,840,099 2,310,124 1,361,869 1,039,091 240,878
Net income attributable to owners of parent company
1,341,006 1,705,394 2,159,025 1,522,860 1,286,086 319,833
Net income attributable to non-controlling interests
1,248 193 17,929 19,771 10,530 (4,932)
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Year
Item
Financial information for the most recent year Current year up toup to March 31, 2018 (Note 1)
Financialinformation (Note
1)Audited by CPAs
2013 2014 (After
restatement)2015 2016 2017
Total comprehensive income attributable to owners of parent company
1,423,008 1,839,638 2,290,558 1,344,607 1,029,949 245,867
Total comprehensive income attributable to non-controlling interests
960 461 19,566 17,262 9,142 (4,989)
Earnings per share 8.02 9.29 10.53 7.39 6.18 1.53
2. Condensed Statement of Comprehensive Income - Parent companyonly information based on TIFRS
Units: NT$ 1,000 Year
Item
Financial information for the most recent year
2013 2014 (After
restatement)2015 2016 2017
Operating revenue 17,833,457 20,551,023 22,787,834 21,444,059 21,571,177Gross profit 2,898,217 3,617,148 4,422,028 3,338,173 3,148,967Operating income 1,601,338 1,945,093 2,474,594 1,775,002 1,566,908Non-operating income and expense 16,826 108,005 125,108 74,304 (18,111)
Net income before taxes 1,618,164 2,053,098 2,599,702 1,849,306 1,548,797
Net income from continuing operations for the period
1,341,006 1,705,394 2,159,025 1,522,860 1,286,086
Loss from discontinuedoperations
0 0 0 0 0
Net income (loss) for the period 1,341,006 1,705,394 2,159,025 1,522,860 1,286,086
Othercomprehensive income for the period (net amount after taxes)
82,002 134,244 131,533 (178,253) (256,137)
Totalcomprehensive income for the period
1,423,008 1,839,638 2,290,558 1,344,607 1,029,949
Earnings per share 8.02 9.29 10.53 7.39 6.18Note 1: Financial statements not audited and attested by CPAs shall be
noted. Note 2: As of the publication date of this annual report, a company whose
shares are listed on the stock exchange or traded over the counter
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shall disclose its most recent financial information that have been audited and attested or reviewed by CPAs.
Note 3: Losses from discontinued operations shall be presented as the net amount after deducting income tax.
Note 4: If a company is notified by the competent authority that its financial information has to be corrected or restated, the financial information shall be presented with corrected or restated figures, and indicate the circumstances and reasons.
(3) Names of CPAs and audit opinion for the most recent five years
Financial analysis in the most recent five years 1. Financial Analysis - Consolidated information based on TIFRS
Year (Note 1)
Analysis item (Note 3)
Financial analysis for the most recent year Current year
up to up to March
31, 2018 (Note 2)
Audited by CPAs
2013 2014 (After
restatement)2015 2016 2017
Financialstructure(%)
Debt-to-assets ratio 47.2 31.95 32.78 33.56 32.33 28.75Ratio of long-term capital to property, plant and equipment
171.9 191.8 202.1 180.4 184.4 193.0
Solvency (%)
Current ratio 184.4 197.2 192.3 178.9 189.8 214.1Quick ratio 87.1 120.4 115.8 108.8 121.6 147.2Interest coverage ratio 46.2 57.6 111.0 84.9 50.7 36.8
Operatingperformance
Receivables turnover (times) 56.7 25.9 27.5 49.1 36.6 31.4
Average Collection Days 6.4 14.1 13.3 7.4 10.0 11.6Inventory turnover (times) 5.5 5.8 6.1 5.8 6.6 7.0
Accounts payable turnover (times) 10.6 11.6 11.7 10.6 10.8 12.2
Average days in sales 67.0 62.7 60.4 62.5 55.0 52.1Property, plant and equipment turnover (times)
7.0 4.9 5.2 4.6 4.6 4.4
Total assets turnover (times) 2.0 1.9 1.8 1.7 1.7 1.6
Profitability (Note)
Return on assets (%) 15.0 15.7 17.2 11.7 10.3 10.4Return on equity (%) 26.8 25.3 25.2 17.3 15.1 14.6
Accounting Firm CPA Audit Opinion
102 KPMG Pei-Chi Chen and Heng-Sheng Lin Modified unqualified opinion
103 KPMG Heng-Sheng Lin and Chi-Lung Yu Modified unqualified opinion
104 KPMG Heng-Sheng Lin and Chi-Lung Yu Modified unqualified opinion
105 KPMG Pei-Chi Chen and Chi-Lung Yu Unqualified opinion
106 KPMG Pei-Chi Chen and Chi-Lung Yu Unqualified opinion
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Year (Note 1)
Analysis item (Note 3)
Financial analysis for the most recent year Current year
up to up to March
31, 2018 (Note 2)
Audited by CPAs
2013 2014 (After
restatement)2015 2016 2017
Ratio to paid-in capital (%)
Operatingprofit 96.1 109.3 133.4 94.3 84.4 114.7
Netincomebeforetaxes
97.4 109.7 135.4 92.4 77.2 77.7
Net income margin (%) 7.5 8.2 9.3 7.0 5.8 6.1Earnings per share (NT$) 8.02 9.29 10.53 7.39 6.18 1.53
Cash flow
Cash flow ratio (%) 33.0 38.5 83.4 25.0 45.6 54.3Cash flow adequacy ratio (%) 60.8 60.3 77.7 74.3 68.2 96.3
Cash reinvestment ratio (%) -0.4 0.8 18.3 -7.7 3.2 4.0
Leverage
Degree of operating leverage 1.2 1.2 1.2 1.3 1.3 0.9
Degree of financial leverage 1.0 1.0 1.0 1.0 1.0 1.0
Note: Financial ratios for the first quarter of 2018 are presented based on annualized figures.
2. Financial Analysis - Parent company only information based onTIFRSs
Year (Note 1)
Analysis item (Note 3)
Financial analysis for the most recent year
2013 2014 (After
restatement)2015 2016 2017
Financialstructure(%)
Debt-to-assets ratio 45.6 30.3 31.0 31.6 31.8Ratio of long-term capital to property, plant and equipment
237.6 282.4 315.4 290.6 284.8
Solvency (%)
Current ratio 147.0 162.7 155.2 138.9 145.2
Quick ratio 57.8 100.1 89.0 81.2 93.2
Interest coverage ratio 52.0 57.6 132.7 87.8 49.8
Operatingperformance
Receivables turnover (times) 59.2 26.3 29.4 60.8 42.2
Average Collection Days 6.2 13.9 12.4 6.0 8.7
Inventory turnover (times) 6.8 7.4 7.8 7.5 8.7
Accounts payable turnover (times) 16.3 16.7 17.1 16.3 18.4
Average days in sales 53.5 49.3 47.1 48.7 41.8
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Year (Note 1)
Analysis item (Note 3)
Financial analysis for the most recent year
2013 2014 (After
restatement)2015 2016 2017
Property, plant and equipment turnover (times)
6.1 7.0 7.9 7.2 7.3
Total assets turnover (times) 2.0 1.9 1.8 1.7 1.7
Profitability
Return on assets (%) 15.6 16.2 17.5 12.0 10.6Return on equity (%) 26.9 25.4 25.1 17.3 15.1Ratio to paid-incapital(%)
Operatingprofit 94.7 101.9 124.5 85.9 74.8
Net income before taxes 95.7 107.5 130.8 89.5 74.0
Net income margin (%) 7.5 8.3 9.5 7.1 6.0Earnings per share (NT$) 8.02 9.29 10.53 7.39 6.18
Cash flow
Cash flow ratio (%) 29.8 46.6 77.9 22.5 36.8Cash flow adequacy ratio (%) 63.4 50.0 62.7 61.8 66.7
Cash reinvestment ratio (%) -4.0 4.5 22.00 -15.0 0.3
Leverage
Degree of operating leverage 1.0 1.0 1.0 1.0 1.0
Degree of financial leverage 1.0 1.0 1.0 1.0 1.0
If the Company has prepared parent company only financial statements, parent company only financial ratio analysis shall also be prepared.
Note 1: Financial statements not audited and attested by CPAs shall be noted. Note 2: As of the publication date of the annual report, a company whose shares are listed on the
stock exchange or traded over the counter shall disclose its most recent financial information that have been audited and attested or reviewed by CPAs.
Note 3: The following formulas shall be indicated at the end of the annual report: 1. Financial structure
(1) Debt-to-asset ratio = Total liabilities / Total assets.(2) Ratio of long-term capital to property, plant and equipment = (Total equity + non-currentliabilities) / Net property, plant and equipment
2. Solvency(1) Current ratio = Current assets / Current liabilities(2) Quick ratio = (Current assets - inventory - prepaid expenses) / Current liabilities(3) Interest coverage ratio = Income before income tax and interest expense / Interest expensefor the current period
3. Operating performance(1) Accounts receivable (including accounts receivable and notes receivable due to business
operations) turnover = Net sales / Balance of average accounts receivable for various periods (including accounts receivable and notes receivable due to business operations)
(2) Average collection days = 365 / Receivables turnover (3) Inventory turnover = Cost of goods sold / Average inventory (4) Accounts payable (including accounts payable and notes payable due to business
operations) turnover = Cost of goods sold / Balance of average accounts payables of various periods (including accounts payable and notes payable due to business operations)
(5) Average days in sale = 365 / Inventory turnover (6) Property, plant and equipment turnover = Net sales / Average net property, plant and
equipment (7) Total asset turnover = Net sales / Average total assets
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4. Profitability(1) Return on assets = [Net income after taxes + interest expense x (1 - tax rate)] / Averagetotal assets(2) Return on equity = Net income after taxes / Average total equity(3) Net profit margin = Net income after taxes / Net sales(4) Earnings per share = (Net income attributable to owners of the parent company - preferredstock dividend) / Weighted average number of shares outstanding (Note 4)
5. Cash flow(1) Cash flow ratio = Net cash flow from operating activities / Current liabilities(2) Net cash flow adequacy ratio = Net cash flow from operating activities for the most recent
five years / (Capital expenditures + inventory increase + cash dividend) for the most recent five years.
(3) Cash flow reinvestment ratio = (Net cash flow from operating activities - cash dividends) / (Gross property, plant and equipment + long-term investments + other non-current assets + working capital) (Note 5)
6. Leverage:(1) Degree of operating leverage (DOL) = (Net operating revenue - variable operating cost andexpenses) / Operating profit (Note 6)(2) Degree of financial leverage (DFL) = Operating profit / (Operating profit - interest expense)
Note 4: The following items shall be noted for the calculation of earnings per share using the above-mentioned formula:
1. Use the weighted average number of common shares, not the number of shares outstanding atthe end of year.
2.In any case where there is a cash capital increase or treasury stock transaction, the period of time in circulation shall be considered in calculating the weighted average number of shares.
3. In the case of capital increase out of retained earnings or capital reserve, the calculation ofearnings per share for the past fiscal year and the fiscal half-year shall be retrospectivelyadjusted based on the capital increase ratio, without the need to consider the issuance periodfor the capital increase.
4. For preferred shares that are not non-convertible cumulative preferred shares, dividends for theyear (regardless of whether they are distributed) shall be deducted from net income or beincluded as net loss after taxes. If the preferred shares are non-cumulative in nature, where netincome is available, preferred share dividends shall be deducted from it. No adjustment isrequired if the Company generates loss after taxes.
Note 5: The following items shall be noted for the analysis of cash flow: 1. Net cash flow from operating activities refers to the net cash inflow from operating activities
on the statement of cash flow.2. Capital expenditure refers to the annual cash outflows for capital investments.3. The increase in inventory is included only if the balance at the end of period is greater than the
balance at the beginning of period. If it is the other way around, the number used shall be zero.4. Cash dividends include cash dividends from common and preferred shares.5. Gross property, plant and equipment refers to property, plant and equipment before
depreciation.Note 6: The issuer shall classify the operating costs and operating expenses as fixed or variable depending
on their nature. If the process involves estimates or subjective judgments, reasonableness and consistency shall be maintained.
Note 7: If the company s shares do not have a face value or the face value is not NT$10, the above-mentioned calculation involving as a percentage to paid-in capital shall be replaced by as a percentage to equity attributable to owners of the parent company on the balance sheet.
145
Audit Committee's review reports on financial statements in the most recent year
Audit Committee s Review Report
The Board of Directors has prepared and submitted the Company s2017 business report, financial statements and earnings distribution proposal, where the financial statements were audited by CPAs Pei-Chi Chen and Chi-Lung Yu from KPMG Taiwan. An audit report has also been issued. The aforementioned business report, financial statements and earnings distribution proposal have been audited by the Audit Committee, which has found no discrepancy. This report has been prepared in accordance with Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Act. Please review accordingly. Sincerely yours, 2018 Annual General Meeting
Makalot Industrial Co., Ltd. Convener of the Audit Committee: Yu-Hui Su March 27, 2018
4. For details regarding the 2017 financial statements, refer to Page149 to Page 215.
5. For details regarding the 2017 parent company only financialstatements that have been audited and attested by CPAs, refer toPage 216 to Page 286.
6. Any financial difficulties experienced by the company and itsaffiliated enterprises during the most recent year up to thepublication date of this annual report, as well as the impact ofthe said difficulties on the financial condition of the company:None.
146
7. Other Supplementary Information(1) Basis and Grounds for Assessing the Provision Method for
Balance Sheet Valuation Accounts Item Balance
SheetValuation Account
Basis of assessment Grounds of assessment
1 Allowancefor bad debts
Individual and portfolio assessment
If there is no impairment of accounts receivable after individual assessment, assessment can be carried out on accounts receivable portfolio. Evidence of objective impairment of accounts receivable portfolio includes the Company's fund collection experience, overdue payments above the average period, and observable changes in national or regional economic conditions related to accounts receivable arrears. Impairment loss of accounts receivable refers the carrying amount of accounts receivables less allowance for bad debts, while allowance for bad debts is calculated based on the aging of accounts receivable based on the accounting date.1. 1 to 90 days: 1% provision2. 91 to 120 days: 2% provision3. 121 to 180 days: 10% provision4. 181 to 270 days: 30% provision5. 271 to 365 days: 60% provision6. More than 365 days: 100%. provision
2
Allowancefor inventoryvaluationloss
Lower of cost or net realizable value
1. The item-by-item approach is adopted.2. Cost is calculated using the weighted average
method.3. Net realizable value refers to the estimated selling
price in the ordinary course of business less theestimated costs of completion and related sellingexpenses on the balance sheet date.
4. The difference between cost and market price islisted as allowance for valuation loss.
3
Allowancefor inventory obsolescenceloss
Full provision 100% provision for obsolete inventories
4Financialassets andliabilities
Fair value
Each level of the fair value hierarchy is defined as follows: Level 1: Level 1 inputs are public quoted (unadjusted) prices in active markets for identical assets or liabilities Level 2: Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly (i.e. price) or indirectly (i.e. derived from prices). Level 3: Level 3 inputs are inputs for the asset or
147
Item Balance SheetValuation Account
Basis of assessment Grounds of assessment
liability that are not based on observable market data (unobservable parameters). 1. Non-derivative financial assets available for
trading: Level 12. Derivative financial instruments: Fair value
calculated based on middle rates provided bybanks
3. Convertible corporate bonds - components ofliabilities: Level 2.
(2) Relevant certifications obtained by company personnel as specified by the competent authority
Title Name Certification
Audit Team Manager
Chen-ChuanYeh
Certified Internal Auditor (CIA)
148
Independent Auditors Report
To the Board of Directors of Makalot Industrial Co., Ltd.:
Opinion
We have audited the consolidated financial statements of Makalot Industrial Co., Ltd. and its subsidiaries ( the Group ), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, the consolidated statement of comprehensive income, changes in equity and cash flows for the year ended December 31, 2017 and 2016, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, based on our audits and the other auditors reports (please refer to Other Martter paragraph), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2017 and 2016, and its consolidated financial performance and consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the International Financial Reporting Standards ( IFRSs ), International Accounting Standards ( IASs ), interpretation as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China.
Basis for Opinion
We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China ( the Code ), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained and the report from other auditers is sufficient and appropriate to provide a basis of our opinion.
Other Matter
We did not audit the financial statements of certain subsidiaries of the Group. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the subsidiaries, is based solely on the report of other auditors. The book value of the total assets of the subsidiaries audited by other auditors constituted 5% and 6% of the total consolidated assets as of December 31, 2017 and 2016, respectively, and the net revenue both constituted 0% of the consolidated net revenue for the years then ended.
The financial statements of certain investments under equity method of the Group were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it related to the amounts included below, is based solely on the reports of the other auditors. The book value of the investments under equity method audited by other auditors both constituted 1% of the total consolidated assets as of December 31, 2017 and 2016, and the related share of income or loss from these investments under equity method both constituted (1)% of the profit before income tax for the years then ended December 31, 2017 and 2016.
149
Makalot Industrial Co., Ltd. has prepared its parent-company-only financial statements as of and for the years then ended December 31, 2017 and 2016, on which we have expressed an unqualified opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not express an opinion on these matters, separately.
1. Revenue recognition
Please refer to Note 4(o) Revenue to the consolidated financial statements.
Description of key audit matter
The Group is primarily involved in the manufacturing, processing, and wholesale of garment. Revenuerecognition is the main concern of the users of the financial statements. Therefore, we determined that therevenue recognition is a key audit matter.
How the matter was addressed in our audit
Our principal audit procedures included: understanding the design and effectiveness of the Group s internalcontrols on revenue recognition; assessing whether the revenue recognition was performed in accordancewith the Group's policy; performing trend and comparison analysis on revenue from major clients to assessthe significant exceptions; performing sales cut-off test of a period before and after the financial position dateby vouching relevant documents of sales transactions to determine whether sales transactions have beenappropriately recognized.
2. Inventory valuation
Please refer to Note 4(h) Inventories , Note 5 Significant accounting assumptions and judgments, andmajor sources of estimation uncertainty , and Note 6(d) Inventory of the consolidated financialstatements.
Description of key audit matter
The inventories of the Group are measured at the lower of cost and net realizable value. Since theenvironment in the industry changes rapidly, the cost of inventories might have a risk to exceed the netrealizable value. Therefore, we determined that the assessment of inventory valuation is a key audit matter.
How the matter was addressed in our audit
Our principal audit procedures included: understanding whether the rationality of the Group's accountingpolicies, such as the policy of management and valuation of inventories; assessing whether the inventoryvaluation was performed in accordance with the Group's policy; performing sampling procedures tounderstand the net realizable values used by management and the variation of the prices in a period after thereporting date to ensure the appropriateness of the valuation price; sampling and inspecting the accuracy ofthe inventory aging report and net realizable value of inventories; asssessing whether the disclosure ofprovision for inventory valuation and obsolescence was appropriate at the reporting date.
3. Derecognition of financial assets
Please refer to Note 4(g) Financial assets and Note 6(c) Factoring and derecognition of accountsreceivable to the consolidated financial statements.
150
Description of key audit matter
The Group factored its accounts receivable to certain financial institutions to manage its credit risk on accounts receivable. The judgments on derecognition of financial assets involved particular accounting treatments. Therefore, we determined that the derecognition of financial asset is a key audit matter.
How the matter was addressed in our audit
Our principal audit procedures included: understanding the internal controls of the Group applied in factoring its accounts receivable; reviewing the factoring agreements with banks; assessing whether the factoring of accounts receivable was performed in accordance with the Group's policy; asssessing whether the disclosure of factoring transactions was appropriate, including performing the confirmation procedure.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and with the IFRSs, IASs, interpretations as well as related guidance endorsed by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance (including audit committees) are responsible for overseeing the Group sfinancial reporting process.
Auditor s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theGroup s internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
151
Notes to Readers
The accompanying consolidated financial statements are intended only to present the consolidated statement of financial position, financial performance and its cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.
The auditors report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language auditors report and consolidated financial statements, the Chinese version shall prevail.
4. Conclude on the appropriateness of management s use of the going concern basis of accounting and, basedon the audit evidence obtained, whether a material uncertainty exists related to events or conditions that maycast significant doubt on the Group s ability to continue as a going concern. If we conclude that a materialuncertainty exists, we are required to draw attention in our auditors report to the related disclosures in theconsolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor s report. However, futureevents or conditions may cause the Group to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
6. Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We are responsiblefor the direction, supervision and performance of the group audit. We remain sololy resposible for our auditopinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partners on the audit resulting in this independent auditors report are Pei-Chi Chen and Chi-Lung Yu.
KPMG
Taipei, Taiwan (Republic of China) March 27, 2018
152
(Eng
lish
Tra
nsla
tion
of C
onso
lidat
ed F
inan
cial
Sta
tem
ents
and
Rep
ort O
rigi
nally
Issu
ed in
Chi
nese
) M
AK
AL
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IND
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RIA
L C
O.,
LT
D. A
ND
ITS
SUB
SID
IAR
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Con
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Bal
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Dec
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, 201
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Dec
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7 D
ecem
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31, 2
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Am
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,156
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note
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261,
126
2 24
9,23
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225,
364
57
7,45
8,76
4 57
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66,9
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100
13,1
35,7
77
100
153
See accompanying notes to financial statements.
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Comprehensive Income For the years ended December 31, 2017 and 2016
(expressed in thousands of New Taiwan Dollars , except earnings per share)
2017 2016
Amount % Amount %
4000 Operating revenue, net $ 22,375,000 100 22,127,939 1005000 Operating costs (notes 6(d)(k)(m), 7 and 12) 18,050,945 81 17,610,504 80
Gross profit from operations 4,324,055 19 4,517,435 20Operating expenses (notes 6(g)(k)(m)(q) and 12):
6100 Selling expenses 1,401,745 6 1,448,255 66200 Administrative expenses 1,155,057 5 1,120,140 5
Total operating expenses 2,556,802 11 2,568,395 11Net operating income 1,767,253 8 1,949,040 9Non-operating income and expenses:
7010 Other income (note 6(r)) 46,559 - 64,677 -7020 Other gains and losses (notes 6(j)(r)(s)) (126,334) (1) (28,715) -7050 Finance costs (notes 6(j)(r)) (57,687) - (52,024) -7070 Share of loss of investments under equity method (13,145) - (23,655) -7900 Profit before income tax 1,616,646 7 1,909,323 97950 Less: income tax expenses (note 6(n)) 320,030 1 366,692 2
Profit 1,296,616 6 1,542,631 78300 Other comprehensive income: 8310 Items that may not be reclassified subsequently to profit or loss8311 Remeasurements of net defined benefit plans (note 6(m)) (1,578) - (49,253) -8349 Income tax relating to items that may not be reclassified subsequently to profit or loss (note
6(n)) (52) - 9,891 -
(1,630) - (39,362) -8360 Items that may be reclassified subsequently to profit or loss 8361 Exchange difference on translation of foreign operations (255,895) (1) (141,400) (1)8399 Income tax relating to items that may be reclassified subsequently to profit or loss - - - -
(255,895) (1) (141,400) (1)8300 Other comprehensive income (257,525) (1) (180,762) (1)
Comprehensive income $ 1,039,091 5 1,361,869 6Porfit attributable to: Owners of parent $ 1,286,086 6 1,522,860 7 Non-controlling interests 10,530 - 19,771 -
$ 1,296,616 6 1,542,631 7Comprehensive income attributable to:
8710 Owners of parent $ 1,029,949 5 1,344,607 68720 Non-controlling interests 9,142 - 17,262 -
$ 1,039,091 5 1,361,869 6Earnings per share (note 6(p))
9750 Basic earnings per share (NT dollars) $ 6.18 7.399850 Diluted earnings per share (NT dollars) $ 6.12 7.26
154
See
acco
mpa
nyin
g no
tes t
o fin
anci
al st
atem
ents
.
(Eng
lish
Tra
nsla
tion
of C
onso
lidat
ed
and
Rep
ort O
rigi
nally
Issu
ed in
Chi
nese
) M
AK
AL
OT
IND
UST
RIA
L C
O.,
LT
D. A
ND
ITS
SUB
SID
IAR
IES
Con
solid
ated
Sta
tem
ents
of C
hang
es in
Equ
ity
For
the
year
s end
ed D
ecem
ber
31, 2
017
and
2016
(E
xpre
ssed
in th
ousa
nds o
f New
Tai
wan
Dol
lars
)
Equ
ity a
ttri
buta
ble
to o
wne
rs o
f par
ent
Ret
aine
d ea
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gs
Oth
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Leg
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(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES
Consolidated Statements of Cash Flows For the years ended December 31, 2017 and 2016 (expressed in thousands of New Taiwan Dollars)
2017 2016Cash flows from operating activities:
Profit before tax $ 1,616,646 1,909,323Adjustments:
Adjustments to reconcile profit: Depreciation expense 358,010 332,305 Amortization expense 30,629 28,053Net profit on financial assets or liabilities at fair value through profit or loss (12,937) (14,929) Interest expense 32,506 22,767Interest revenue (13,185) (16,744)Share of loss of investments under equity method 13,145 23,655 Loss from disposal of property, plan and equipment 24,513 21,535 Impairment loss on property, plan and equipment - 18,860 Loss (reversal) of receivables impairment 1,457 (3,692)
Total adjustments to reconcile profit (loss) 434,138 411,810Changes in operating assets and liabilities:
Changes in operating assets: Held-for-trading financial assets - 8,080 Notes receivable - 36Accounts receivable (179,942) (139,570)Inventories 316,169 284,544Other financial assets (71,340) (702,372)Other operating assets (1,296) 75,738
Total changes in operating assets 63,591 (473,544)Changes in operating liabilities:
Notes payable (4,748) (3,440)Accounts payable 5,107 23,883Accounts payable to related parties 31,560 (44,043)Other payables (18,956) (175,693)Other current liabilities (16,335) 5,608Accrued pension liabilities 12,361 (24,998)Other operating liabilities (65,967) 3,464
Total changes in operating liabilities (56,978) (215,219)Total changes in operating assets and liabilities 6,613 (688,763)Total adjustments 440,751 (276,953)
Cash inflow generated from operations 2,057,397 1,632,370Interest received 13,238 16,707Interest paid (30,762) (18,528)Income taxes paid (303,747) (589,248)
Net cash flows from operating activities 1,736,126 1,041,301Cash flows used in investing activities:
Acquisition of investments under equity method - (59,025) Acquisition of property, plant and equipment (266,686) (637,114) Increase in long-term prepayments (57,907) (6,256) Proceeds from disposal of property, plant and equipment 38,703 11,879 Decrease in refundable deposits 8,374 2,243 Acquisition of intangible assets (11,333) (13,486)
Net cash flows used in investing activities (288,849) (701,759)Cash flows used in financing activities:
Increase (decrease) in short-term borrowings (110,976) 385,520 Cash dividends paid (1,390,829) (1,892,923)Acquisition of ownership interests in subsidiaries (15,739) - Proceeds from issuing shares to non-controlling interests - 77,728 Dividends paid to non-controlling interests (23,930) (403)
Net cash flows used in financing activities (1,541,474) (1,430,078)Effect of exchange rate changes on cash and cash equivalents (96,286) (83,573)Net decrease in cash and cash equivalents (190,483) (1,174,109)Cash and cash equivalents at beginning of period 1,749,550 2,923,659Cash and cash equivalents at end of period $ 1,559,067 1,749,550
156
(Continued)
(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES
Notes to the Consolidated Financial Statements For the years ended December 31, 2017 and 2016
(expressed in thousands of New Taiwan Dollars, unless otherwise specified)
(1) Company history
Makalot Industrial Co., Ltd. (the Company) was incorporated in January 10, 1990 and registered with the Ministry of Economic Affairs, R.O.C. The address of the Company s registered office is 8F No.550 Sec. 4 Zhongxiao E. Rd., Taipei City. The Company s consolidated financial statements, as of December 31, 2017, comprise the Company, its subsidiaries (the Group) and the share of the associates equities. The Group is primarily involved in the manufacturing, processing, and wholesaling of garments.
(2) Approval date and procedures of the consolidated financial statements
The consolidated financial statements were authorized for issue by the board of directors on March 27, 2018.
(3) New standards, amendments and interpretations adopted:
(a) The impact of the International Financial Reporting Standards ( IFRSs ) endorsed by the Financial Supervisory Commission, R.O.C. ( FSC ) which have already been adopted.
The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2017:
New, Revised or Amended Standards and Interpretations Effective date
per IASB Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities: Applying the Consolidation Exception"
January 1, 2016
Amendments to IFRS 11 "Accounting for Acquisitions of Interests in Joint Operations"
January 1, 2016
IFRS 14 "Regulatory Deferral Accounts" January 1, 2016Amendment to IAS 1 " Presentation of Financial Statements-Disclosure Initiative January 1, 2016Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of Depreciation and Amortization"
January 1, 2016
Amendments to IAS 16 and IAS 41 "Agriculture: Bearer Plants" January 1, 2016Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014Amendment to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016Amendments to IAS 36 " Impairment of Non-Financial assets- Recoverable Amount Disclosures for Non Financial Assets"
January 1, 2014
Amendments to IAS 39 " Financial Instruments-Novation of Derivatives and Continuation of Hedge Accounting"
January 1, 2014
Annual Improvements to IFRSs 2010-2012 Cycle and 2011-2013 Cycle July 1, 2014Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016
157
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
New, Revised or Amended Standards and Interpretations Effective date
per IASB
(Continued)
IFRIC 21 "Levies" January 1, 2014
The Group assessed that the initial application of the above IFRSs would not have any material impact on the consolidated financial statements.
(b) The impact of IFRS endorsed by FSC but not yet effective
The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018 in accordance with Ruling No. 1060025773 issued by the FSC on July 14, 2017:
New, Revised or Amended Standards and Interpretations Effective date
per IASB Amendment to IFRS 2 "Clarifications of Classification and Measurement of Share-based Payment Transactions"
January 1, 2018
Amendments to IFRS 4 "Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts"
January 1, 2018
IFRS 9 "Financial Instruments" January 1, 2018 IFRS 15 "Revenue from Contracts with Customers" January 1, 2018 Amendment to IAS 7 "Statement of Cash Flows -Disclosure Initiative" January 1, 2017 Amendment to IAS 12 "Income Taxes- Recognition of Deferred Tax Assets for Unrealized Losses"
January 1, 2017
Amendments to IAS 40 "Transfers of Investment Property" January 1, 2018 Annual Improvements to IFRS Standards 2014 2016 Cycle:
Amendments to IFRS 12 January 1, 2017 Amendments to IFRS 1 and Amendments to IAS 28 January 1, 2018
IFRIC 22 "Foreign Currency Transactions and Advance Consideration" January 1, 2018
Except for the following items, the Group believes that the adoption of the above IFRSs would not have any material impact on the consolidated financial statements. The extent and impact of signification changes are as follows:
(i) IFRS 9 "Financial Instruments"
IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement" which contains classification and measurement of financial instruments, impairment and hedge accounting.
1) Classification- Financial assets
IFRS 9 contains a new classification and measurement approach for financial assets thatreflects the business model in which assets are managed and their cash flowcharacteristics. IFRS 9 contains three principal classification categories for financialassets: measured at amortized cost, fair value through other comprehensive income(FVOCI) and fair value through profit or loss (FVTPL). The standard eliminates the
158
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
existing IAS 39 categories of held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial assets in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification. In addition, IAS 39 has an exception to the measurement requirements for investments in unquoted equity instruments that do not have a quoted market price in an active market (and derivatives on such an instrument) and for which fair value cannot therefore be measured reliable. Such financial instruments are measured at cost. IFRS 9 removes this exception, requiring all equity investments (and derivatives on them) to be measured at fair value.
Based on its assessment, the Group believes that the new classification requirements would not have a material impact on its accounting for trade receivables and investments in debt securities investments in equity securities that are managed on a fair value basis.
2) Impairment-Financial assets and contact assets
IFRS 9 replaces the incurred loss model in IAS 39 with a forward-lookingexpected credit loss (ECL) model. This will require considerable judgment as to
how changes in economic factors affect ECLs, which will be determined on aprobability-weighted basis.
The new impairment model will apply to financial assets measured at amortized cost orFVOCI, except for investments in equity instruments, and to contract assets.
Under IFRS 9, loss allowances will be measured on either of the following bases:
12-month ECLs. These are ECLs that result from possible default events within the 12months after the reporting date; and
lifetime ECLs. These are ECLs that result from all possible default events over the expected life of a financial instrument.
Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset s credit risk has not increased significantly if the asset has low credit risk at the reporting date. However, lifetime ECL measurement always applies for trade receivables and contract assets without a significant financing component; the Group may choose to apply this policy also for trade receivables and contract assets with a significant financing component.
Based on its assessment, the Group believes that the application of IFRS 9 impairment requirments would not hav any material impact on its financial
statements.
3) Disclosures
IFRS 9 will require extensive new disclosures, in particular about hedge accounting,credit risk and expected credit losses. The Group s preliminary assessment included ananalysis to identify data gaps against current processes and the Group plans to implementthe system and controls changes that it believes will be necessary to capture the requireddata.
159
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
4) Transition
Changes in accounting policies resulting from the adoption of IFRS 9 will generally beapplied retrospectively, except as described below.
The Group plans to take advantage of the exemption allowing it not to restatecomparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 generally will be recognized in retained earnings and reserves as at January 1, 2018.
The following assessments have to be made on the basis of the facts and circumstances that exist at the date of initial application.
The determination of the business model within which a financial asset is held.
The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.
The designation of certain investments in equity instruments not held for trading as at FVOCI.
(ii) IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 "Revenue" and IAS 11 "Construction Contracts".
1) Sales of goods
For the sale of products, revenue is currently recognized when the related risks andrewards of ownership transfer. Revenus is recognized at this point provided that therevenue and costs can be measured reliably, the recovery of the consideration is probableand there is no continuing management involvement with the goods. Under IFRS 15,revenue will be recognized when a customer obtains control of the goods. Based on itsassessment according to the IFRS 15, the Group does not believe that its revenue andsome associated costs which have been recognized for these contracts would have hadany material differences.
2) Transition
The Group plans to adopt IFRS 15 in its consolidated financial statements using theretrospective approach. As a result, the Group will apply all of the requirements ofIFRS 15 to each comparative period presented and adjust its consolidated financialstatements. The Group plans to use the practical expendients for completed contracts.This means that completed contracts that began and ended in the same comparativereporting period , as well as the contracts that are completed contracts at the beginning ofthe earliest presented (January 1, 2017), are not restated.
However, the Group does not expect the above changes on accounting policy would havehad any significant impact on the amount for revenue.
160
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(iii) Amendments to IAS 7 "Disclosure Initiative"
The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes.
To satisfy the new disclosure requirements, the Group intends to present a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities.
(iv) Amendments to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Loss"
The amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value.
The actual impacts of adopting the standards may change depending on the economic conditions and events which may occur in the future.
(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC
As of the date the following IFRSs that have been issued by the IASB, but not yet endorsed by the FSC:
New, Revised or Amended Standards and Interpretations Effective date
per IASB Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"
Effective date to be determined by IASB
IFRS 16 "Leases" January 1, 2019 IFRS 17 "Insurance Contracts" January 1, 2021 IFRIC 23 "Uncertainty over Income Tax Treatments" January 1, 2019 Amendments to IFRS 9 "Prepayment features with negative compensation" January 1, 2019 Amendments to IAS 28 "Long-term interests in associates and joint ventures" January 1, 2019 Annual Improvements to IFRS Standards 2015 2017 Cycle January 1, 2019
Amendments to IAS 19 Plan Amendment, Curtailment or Settlement January 1, 2019
161
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
Those which may be relevant to The Group are set out below:
Issuance / Release Dates
Standards or Interpretations Content of amendment
January 13, 2016 IFRS 16 "Leases" The new standard of accounting for lease is amended as follows:
For a contract that is, or contains, a lease, the lessee shall recognize a right of use asset and a lease liability in the balance sheet. In the statement of profit or loss andother comprehensive income, a lessee shall present interest expense on the lease liability separately from the depreciation charge for the right of-use asset during the lease term.
A lessor classifies a lease as either afinance lease or an operating lease, andtherefore, the accounting remains similarto IAS 17.
The Group is evaluating the impact on its consolidated financial position and consolidated financial performance upon the initial adoption of the abovementioned standards or interpretations. The results thereof will be disclosed when the Group completes its evaluation.
(4) Summary of significant accounting policies
The consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language consolidated financial statements, the Chinese version shall prevail.
The significant accounting policies presented in the consolidated financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the consolidated financial statements.
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers (hereinafter referred to as the Regulations ) and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations endorsed by the Financial Supervisory Commission, ROC. (hereinafter referred to as the IFRSs endorsed by the FSC).
162
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(b) Basis of preparation
(i) Basis of measurement
Except for the following significant accounts, the consolidated financial statements have been prepared on a historical cost basis:
1) Financial instruments measured at fair value through profit or loss (including derivativefinancial instruments); and
2) The defined benefit liability (asset) is recognized as the fair value of the plan assets lessthe present value of the defined benefit obligation.
(ii) Functional and presentation currency
The functional currency of each Group entity is determined based on the primary economic environment in which the entity operates. The consolidated financial statements are presented in New Taiwan Dollars, which is the Company s functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.
(c) Basis of consolidation
(i) Principles of preparation of the consolidated financial statements
The consolidated financial statements comprise the Company and its subsidiaries.
The financial statements of subsidiaries are included in consolidated financial statements from the date that control commences until the date that control ceases. Profits or losses applicable to the non-controlling interests in a subsidiary are allocated to the owners of the parent and to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.
Changes in the Group s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
(ii) List of subsidiaries included in the consolidated financial statements
Main business Ownership %
Investor Subsidiary activity December 31, 2017
December 31, 2016 Note
The Company PT Crystal Garment (PT Crystal) Manufacture of garments 99.40% 99.40%
The Company Global Trading Int'l Corp. (Global) Sale of textiles 100.00% 100.00%
The Company Loyal Trading Int'l Co., Ltd. (Loyal) Sale of textiles 100.00% 100.00%
The Company Leader Garments Corp. (Leader PH) Manufacture of garments 99.99% 99.99%
The Company Diamond Apparel Mfg., Inc. (Diamond) Manufacture of garments 99.99% 99.99%
The Company Primeline Fashion, Inc. (Primeline) Manufacture of garments 99.99% 99.99%
The Company Fortune Star Investment Limited (Fortune Star) Investment holding 100.00% 100.00%
The Company Triple Int'1 Corp. (Triple) Investment holding 100.00% 100.00%
The Company Ecolot Textile Co., Ltd. (Ecolot) Trade services 61.65% 61.65% Note 1
The Company Great Time Global Co., Ltd. (Great Time) Trade services 100.00% 100.00%
163
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
Main business Ownership %
Investor Subsidiary activity December 31, 2017
December 31, 2016 Note
(Continued)
The Company Glida Arhleties Co., Ltd. (Glida) Manufacture and sales of garments
100.00% 100.00%
Global PT Glory Industrial Scmarang (PT Glory) Manufacture of garments 95.00% 95.00%
Global Makalot Garments (Cambodia) Co., Ltd. (Makalot Cambodia)
Manufacture of garments 100.00% 100.00%
Global Makalot Garments (Vietnam) Co., Ltd. (Makalot Vietnam)
Investment holding 100.00% 100.00%
Global PT Starlight Garment Semarang (PT Starlight) Manufacture of garments 5.00% - % Note 2
Fortune Star Fund Eagle International Limited (Fund Eagle) Investment holding 100.00 100.00% Note 4
Fortune Star Wintop Industrial Limited (Wintop) Investment holding 100.00% 100.00%
Fortune Star Crown Era Industrial Limited (Crown Era) Investment holding 100.00% 100.00%
Fortune Star Crownway International Development Limited (Crownway)
Investment holding 100.00% 100.00%
Fortune Star PT Starlight Garment Semarang (PT Starlight) Manufacture of garments 95.00% 95.00%
Fortune Star PT Glory Industrial Semarang (PT Glory) Manufacture of garments 5.00% - % Note 3
Triple Moha Garments Co., Ltd. (Moha) Manufacture of garments 100.00% 100.00%
Triple Triple Garment (Vietnam) Co., Limited (Triple Vietnam)
Manufacture of garments 100.00% 100.00%
Triple Top Trend Global Inc. (Top Trend) Investment holding 100.00% 100.00%
Top Trend Leader Garment (Vietnam) Co., Ltd. (Leader Vietnam)
Manufacture of garments 100.00% 100.00%
Fund Eagle Yangzhou Feng Yang Garments Co., Limited (CFY)
Manufacture of garments - % 100.00% Note 4
Crownway Jiaxing Ruiyang Garment Co., Limited (CJR) Manufacture of garments 100.00% 100.00%
Crownway Jiaxing Rising Garment Co., Limited (CJY) Manufacture of garments 100.00% 100.00%
Wintop Shanghai Makalot Garment Co., Limited (CMK) Manufacture of garments 100.00% 100.00%
Crown Era Jaxing Suntex Garment Co., Limited (CMZ) Manufacture of garments 100.00% 100.00%
Triple Top Shiny Industrial Limited (TOP Shiny) Investment holding 100.00% 100.00
Top Shiny Eco-Lot Textile Co., Ltd. (CBS) Trade services 100.00% 100.00
Note 1: Ecolot Textile Co., Ltd. increased its capital in June 2016. The Company did not proportionately subscribe for new shares; therefore, its ownership decreased to 61.65%.
Note 2: Global bought 5% shares of PT Starlight Co., Ltd., with the approval of the Company s board of directors on May 9, 2017.
Note 3: Fortune Star bought 5% shares of PT Glory Co., Ltd., with the approval of the Company s board of directors on May 9, 2017.
Note 4: For the purpose of integrating the managerial resources of the subsidiaries in China, the Company closed CFY, with the approval of the Company s board of directors on January 9, 2017, and reduced the capital of CFY and its investment holding company, Fund Eagle, by returning cash to the Company through Fortune Star on August 7, 2017. CFY had completed the process of its liquidation.
(iii) Subsidiaries not included in the consolidated financial statements: None.
164
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(d) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at the reporting date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the reporting date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Exchange differences arising on retranslation are included in profit or loss.
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the functional currency at average rate of the reporting periods. Exchange differences arising on retranslation are recognized in other comprehensive income.
When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Group disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such items are considered to form part of a net investment in the foreign operation and are recognized in other comprehensive income, and presented in the translation reserve in equity.
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(e) Classification of current and non-current assets and liabilities
An entity shall classify an asset as current when:
(i) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
(ii) It holds the asset primarily for the purpose of trading;
(iii) It expects to realize the asset within twelve months after the reporting date; or
(iv) The asset is cash or a cash equivalent, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
An entity shall classify all other assets as non-current.
An entity shall classify a liability as current when:
(i) It expects to settle the liability in its normal operating cycle;
(ii) It holds the liability primarily for the purpose of trading;
(iii) The liability is due to be settled within twelve months after the reporting period; or
(iv) It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
An entity shall classify all other liabilities as non-current.
(f) Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits. Cash equivalents that are readily convertible to known amounts of cash are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be classified as cash equivalents.
Bank overdrafts that are repayable on demand and form an integral part of the Group s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
(g) Financial instruments
Financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instruments.
166
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(i) Financial assets
The Group classifies financial assets into the following categories: financial assets at fair value through profit or loss, and loans and receivables.
1) Financial assets at fair value through profit or loss
Financial assets classified under this category are mainly the financial assets held fortrading or financial assets reported at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired principally for thepurpose of repurchasing or selling in the short term.
The Group designates financial assets, other than those classified as held for trading, as atfair value through profit or loss at initial recognition under one of the followingsituations:
a) Designation eliminates or significantly reduces a measurement or recognitioninconsistency that would otherwise arise from measuring the assets or liabilities orrecognizing the gains and losses on them on a different basis;
b) Performance of the financial asset is evaluated on a fair value basis;
c) A hybrid instrument contains one or more embedded derivatives.
Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent valuation is measured at fair value, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade-date accounting.
If this type of financial assets is classified as equity investment that does not have any quoted market price in an active market and the fair value cannot be measured reliably, this type of financial assets is measured at cost after deducting the impairment loss and is reported under financial assets measured at cost .
2) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that arenot quoted in an active market. Loans and receivables comprise trade receivables andother receivables. Such assets are recognized initially at fair value, plus any directlyrelated transaction costs. Subsequent to initial recognition, loans and receivables otherthan insignificant interest on short-term receivables are measured at amortized cost usingthe effective interest method, less any impairment losses. A regular way purchase orsale of financial assets shall be recognized and derecognized, as applicable, usingtrade-date accounting.
167
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
3) Impairment of financial assets
A financial asset which is not measured at fair value through profit or loss is evaluatedfor impairments at the reporting date.
A financial asset is impaired if, and only if, there is objective evidence of impairment as aresult of one or more events (a loss event) that occurred subsequent to the initialrecognition of the asset and that loss event (or events) has an impact on the future cashflows of the financial assets that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by adebtor, restructuring of an amount due to the Group on terms that the Group would notconsider otherwise, indications that a debtor or issuer will enter bankruptcy, adversechanges in the payment status of borrowers or issuers, economic conditions that correlatewith defaults, or the disappearance of an active market for a security.
All individually significant receivables are assessed for specific impairment. Receivablesthat are not individually significant are collectively assessed for impairment by groupingtogether assets with similar risk characteristics. In assessing collective impairment, theGroup uses historical trends of the probability of default, the timing of recoveries, and theamount of loss incurred, adjusted for management s judgment as to whether currentnational or regional economic conditions are such that actual losses are likely to begreater or less than those suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortized cost iscalculated as the difference between its carrying amount and the present value of itsestimated future cash flows discounted at the asset s original effective interest rate.
An impairment loss in respect of a financial asset is deducted from the carrying amountexcept for trade receivables, for which an impairment loss is reflected in an allowanceaccount against the receivables. When it is determined a receivable is uncollectible, it iswritten off against the allowance account. Any subsequent recovery of a receivablewritten off is recorded in the allowance account. Changes in the amount of the allowanceaccount are recognized in profit or loss.
If, in a subsequent period, the amount of impairment loss on a financial asset measured atamortized cost decreases and the decrease can be related objectively to an event occurringafter the impairment was recognized, the decrease in impairment loss is reversed throughprofit or loss to the extent that the carrying value of the asset does not exceed itsamortized cost before the impairment loss is recognized at the reversal date.
4) Derecognition of financial assets
The Group derecognizes financial assets only when the contractual rights of the cashinflow from the asset are terminated, or when the Group transfers substantially all therisks and rewards of ownership of the financial assets.
168
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable shall be recognized in profit or loss.
The Group separates the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the consideration received for the part derecognized shall be recognized in profit or loss.
(ii) Financial liabilities and equity instruments
1) Classification of liabilities or equity instruments
Debt or equity instruments issued by the Group are classified as financial liabilities orequity instruments in accordance with the substance of the contractual agreement.
An equity instrument is any contract that evidence residual interest in the assets of anentity after deducting all of its liabilities. Equity instruments issued by the Group arerecognized as the amount of consideration received, less the direct cost of issuing.
Compound financial instruments issued by the Group comprise convertible bondspayable that can be converted to share capital at the option of the holder when the numberof shares to be issued is fixed.
The liability component of a compound financial instrument is recognized initially at thefair value of a similar liability that does not have an equity conversion option. Theequity component is recognized initially at the difference between the fair value of thecompound financial instrument as a whole and the fair value of the liability component.Any directly attributable transaction costs are allocated to the liability and equitycomponents in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financialinstrument is measured at amortized cost using the effective interest method. The equitycomponent of a compound financial instrument is not re-measured subsequent to initialrecognition.
Interest, losses or gains related to the financial liability are recognized in profit or loss.
On conversion, the financial liability is reclassified to equity, and no gain or loss isrecognized.
2) Financial liabilities at fair value through profit or loss
Financial liabilities classified under this category are mainly the financial liabilities heldfor trading or financial liabilities reported at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired principally forthe purpose of repurchasing or selling in the short term.
169
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
The Group designates all other financial liabilities as at fair value through profit or loss at initial recognition under one of the following situations:
a) Designation eliminates or significantly reduces a measurement or recognitioninconsistency that would otherwise arise from measuring the assets or liabilities orrecognizing the gains and losses on them on a different basis;
b) Performance of the financial liabilities is evaluated on a fair value basis;
c) A hybrid instrument contains one or more embedded derivatives.
Financial liabilities classified under this category are measured at fair value at initial recognition. Related transaction costs are recognized in profit or loss as incurred. Subsequent valuation is measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss.
3) Other financial liabilities
Financial liabilities not classified as held for trading or designated as at fair value throughprofit or loss, which consist of loans and borrowings, and trade and other payables, aremeasured at fair value, plus any directly attributable transaction costs at initialrecognition. Subsequent to initial recognition, they are measured at amortized costcalculated using the effective interest method. Interest expense not capitalized as capitalcost is recognized in profit or loss.
4) Derecognition of financial liabilities
A financial liability is derecognized when its contractual obligation has been dischargedor cancelled, or has expired.
The difference between the carrying amount of a financial liability derecognized and theconsideration paid (including any non-cash assets transferred or liabilities assumed) isrecognized in profit or loss.
5) Offsetting of financial liabilities and assets
The Group presents financial assets and liabilities on a net basis when the Group has thelegally enforceable rights to offset and intends to settle such financial assets and liabilitieson a net basis or to realize the assets and settle the liabilities simultaneously.
(iii) Derivatives and hedge accounting
The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are recognized initially at fair value, and related transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss.
170
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(h) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method and includes expenditure incurred in acquiring the inventories, manufacturing and processing costs, and other costs incurred in bringing the inventories to a salable and useable condition and location. Cost includes an appropriate share of production overheads based on normal operating capacity and is allocated to finished goods and work-in-progress.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(i) Investment in associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.
Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of investment includes transaction costs. The carrying amount of investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.
The consolidated financial statements include the Group s share of the profit or loss and other comprehensive income of subsidiaries and affiliates under the equity method, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.
Unrealized profits resulting from transactions between the Group and an associate are eliminated to the extent of the Group s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.
When the Group s share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.
(j) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of a self-constructed asset comprises the material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost eligible for capitalization. The cost of software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.
171
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately unless the useful life and depreciation method of a significant part of an item of property, plant and equipment are the same as those of another significant part of that same item.
The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized in profit or loss.
(ii) Subsequent cost
Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure can be reasonably assessed, and will flow to the Group. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.
(iii) Depreciation
Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation charge. The remainder of the items may be depreciated separately.
If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use will be the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.
Land has an unlimited useful life, and therefore is not depreciated.
The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:
1) Buildings: 8 to 50 years.
2) Machinery and equipment: 5 to 16 years.
3) Office and other equipment: 3 to 20 years.
The depreciation methods, useful lives, and residual values are reviewed at each reportingdate. If expectation differs from previous estimates, the changes, are accounted for aschanges in accounting estimates.
172
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(k) Leased
All leases are classified as operating leases; the Group does not recognize them in the balance sheet.
Payments made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense over the term of the lease.
Contingent lease payable is recognized as an expense in the period when the lease adjustment is affirmed.
(l) Intangible assets
(i) Other intangible assets
Other intangible assets that are acquired by the Group are measured at cost, less accumulated amortization and any accumulated impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
(iii) Amortization:
The amortizable amount is the cost of an asset, less its residual value.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date when they are made available for use. The estimated useful lives for the current and comparative periods are 2 to 5 years.
The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as a change in accounting estimate.
(m) Impairment of non-financial assets
Non-derivative financial assets, except for inventories, deferred tax assets, and assets arising from employee benefits, are assessed at the reporting date for any indication that an asset may be impaired. If any such indication exists, the Group shall estimate the recoverable amount of the asset. If it is not possible to determine the recoverable amount (the higher of fair value, less costs to sell, and its value in use) for the individual asset, then the Group will have to determine the recoverable amount for the asset's cash-generating unit.
173
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell, and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. The reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.
The Group assesses at the reporting date whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset srecoverable amount since the last impairment loss was recognized. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Goodwill, intangible assets with indefinite useful lives, and unavailable intangible assets are required to be tested at least annually. Impairment loss is recognized if the recoverable amount is less than the carrying amount.
For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or group of units.
If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, impairment loss is recognized and is allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.
(n) Provision
A provision is recognized if, as a result of a past event, the Group has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized in profit or loss.
(o) Revenue recognition
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that a discount will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.
174
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(p) Employee benefits
(i) Defined contribution plan
Obligations for contributions to a defined contribution pension plan are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.
(ii) Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group s net obligation in respect of a defined benefit pension plan is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair values of any plan assets are deducted. The discount rate is the yield at the reporting date of government bonds that have maturity dates approximating the terms of the Group s obligations and that are denominated in the same currency in which the benefits are expected to be paid.
The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Group, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realizable during the life of the plan, or on settlement of the plan liabilities.
When the benefits of a plan are improved, the expense of the increased benefit relating to past service by employees is recognized immediately in profit or loss.
Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest), and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group reclassifies the amounts recognized from other comprehensive income to retained earnings.
The Group recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment or settlement comprises any resulting change in the fair value of plan assets and any change in the present value of the defined benefit obligation.
175
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(iii) Termination benefits
Termination benefits are recognized as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable for more than 12 months after the reporting period, then they are discounted to their present value.
(iv) Short-term employee benefits
Short-term employee benefits obligations are measured on an undiscounted basis and are expensed when related service are provided.
A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
(q) Income taxes
Income tax expenses include both current taxes and deferred taxes. Except for expenses related to a business combination or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.
Current taxes include tax payables and tax receivables on taxable income (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to tax payable in prior years.
Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:
(i) Assets and liabilities that are initially recognized but are not related to the business combination and have no the effect on net income or taxable gains (losses) arising from the transaction.
(ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.
(iii) Initial recognition of goodwill.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to be applied to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period.
176
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
Deferred tax assets and liabilities may be offset against each other if the following criteria are met:
(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and
(ii) The taxing of deferred tax assets and liabilities fulfils one of the scenarios below:
1) Levied by the same taxing authority; or
2) Levied by different taxing authorities, but where each such authority intends to settle taxassets and liabilities (where such amounts are significant) on a net basis every year of theperiod of expected asset realization or debt liquidation, or where the timing of assetrealization and debt liquidation is matched.
A deferred tax asset should be recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such deferred tax assets shall also be re-evaluated at each reporting date and adjusted based on the probability that the related tax benefit will be realized.
(r) Business combination
Goodwill is measured as the excess of the consideration transferred (which generally is measured at fair value at the acquisition date) and the amount of any non-controlling interest in the acquiree over net fair value at the acquisition date of the identifiable assets acquired and the liabilities assumed (generally at fair value). If the residual balance is negative, the Group shall reassess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter.
For each business combination, non-controlling interest in the acquiree is measured either at acquisition-date fair value or at the non-controlling interest s proportionate share of the acquiree sidentifiable net assets.
In a business combination achieved in stages, the Group re-measures its previously held equity interest in the acquiree at its acquisition-date fair value, and the resulting gain or loss, if any, is recognized in profit or loss. Changes in equity of investees recognized in other comprehensive income before the acquisition date should be settled in the same manner as the Group disposed directly of the previously held equity interest. If the disposal of the equity interest requires a reclassification to profit or loss, such amount shall be reclassified to profit or loss.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Group s consolidated financial statements. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect any new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period should not exceed one year from the acquisition date.
177
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
Except for the issuance of debt and equity instruments, all transaction costs related to the business combination should be recognized immediately as the Group s expenses when incurred.
(s) Earnings per share
The Group reports the basic earnings per share and the diluted earnings per share. The basic earnings per share are calculated as the profit attributable to the ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The diluted earnings per share are calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. The Group s dilutive potential ordinary shares comprise convertible bonds and accrued employee bonus.
(t) Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group). Operating results of the operating segment are regularly reviewed by the Group s chief operating decision maker to make decisions about the resources to be allocated to the segment and to assess its performance. Each operating segment consists of standalone financial information.
(u) Share-based payment
The grant-date fair value of share-based payment awards granted to employees is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards.
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty
The preparation of the financial statements in conformity with the Regulations and the IFRSs endorsed by the FSC requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The management continues to monitor the accounting estimates and assumptions. The management recognizes any changes in accouting estimated during the period and the impact of those changes in accounting estimates in the following period.
Information about judgments made in applying accounting policies that have the significant effects on the amounts recognized in the consolidated financial statements is disclosed in note 6(d) inventories.
178
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(6) Explanation of significant accounts
(a) Cash and cash equivalents
December 31, 2017
December 31, 2016
Cash $ 4,670 5,239Checking accounts and demand deposits 1,439,987 1,594,815Time deposits 114,410 149,496
$ 1,559,067 1,749,550
Please refer to note 6(s) for the sensitivity analysis and interest rate risk of the financial assets and liabilities of the Group.
(b) Financial assets and liabilities at fair value through profit or loss
(i) The details of the financial assets and liabilities at fair value through profit or loss were as follows:
December 31, 2017
December 31, 2016
Financial assets held for trading $ 62,748 51,156Financial liabilities held for trading $ - 1,345
(ii) Derivatives not applying hedge accounting
The Group entered into derivative contracts to manage exposures due to fluctuations of foreign exchange rates. For the year ended December 31, 2016, the details of derivatives held for trading which did not apply hedge accounting were as follows:
December 31, 2016 Amount
(in thousands) Currency Maturity dates Forward exchange contracts sold USD 2,000 USD to CNY 2017.1.12~2017.3.21
Forward exchange contracts sold USD 6,000 USD to TWD 2017.1.3~2017.1.19
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(c) Notes receivable, accounts receivable, and other receivables (including amount due from related parties)
(i) The details of notes receivable, accounts receivable, and other receivables were as follows:
December 31, 2017
December 31, 2016
Accounts receivable $ 707,386 527,444 Other financial assets current 2,083,238 2,011,951
Less: allowance for doubtful accounts (6,615) (5,158)$ 2,784,009 2,534,237
As of December 31, 2017 and 2016, other financial asset current comprised timed deposits, more than three months, amounting to $208,225 thousand and $323,869 thousand, respectively.
There was no overdue but unimpaired notes receivable, accounts receivable, and other receivables of the Group.
The movement in the allowance for doubtful accounts with respect to notes receivable, accounts receivable, and other receivables of the Group for 2017 and 2016 was as follows:
Individually assessed for impairment
Collectively assessed for impairment Total
Beginning balance as of January 1, 2017 $ - 5,158 5,158 Impairment loss recognized - 1,457 1,457Ending balance as of December 31, 2017 $ - 6,615 6,615
Individually assessed for impairment
Collectively assessed for impairment Total
Beginning balance January 1, 2016 $ 5,296 5,348 10,644 Impairment loss recognized - 1,604 1,604 Impairment loss reversed (5,296) - (5,296) Amounts written off - (1,794) (1,794)Ending balance as of December 31, 2016 $ - 5,158 5,158
None of the accounts receivable and notes receivable held by the Group were pledged or collateralized as of December 31, 2017 and 2016.
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(ii) The Group factored its accounts receivable to certain financial institutions without recourse, and under the agreements, the Group is not required to bear the risk of uncollectible accounts receivable within the factoring credit limit. The factored accounts receivable conform to the derecognition criteria when the ownership and the significant risks of the factored accounts receivable are transferred to the financial institutions. As of December 31, 2017 and 2016, the factored accounts receivable were $1,774,388 thousand and $1,620,267 thousand, respectively, and they were included in other financial assets current in the accompanying balance sheets.
(iii) As of December 31, 2017 and 2016, the relevant information on derecognized accounts receivable factored was as follows:
December 31, 2017 Factoring financial
institution Factoring
credit limit
Advance amount
credit limit
Factored amount (Derecognized
amount) Advance amount
interest rate
Important derecognized
provision Collateral HSBC Bank USD 113,000
thousand USD 101,700 thousand
$ 1,562,892 591,959 (Note 2) (Note 1) Promissory note USD87,850thous
and (Note 3)
Standard Chartered Bank USD 1,000 thousand
USD 1,000 thousand
- - None
CTBC Bank USD 26,800 thousand
USD 24,120 thousand
179,768 - None
E.SUN Commercial Bank USD 19,000 thousand
USD 17,100 thousand
3,407 - Promissory note USD21,600thous
and
Bank Mizuho USD 25,000 thousand
USD 22,500 thousand
373,774 168,404 None
Sumitomo Mitsui Bnak USD 56,000 thousand
USD 56,000 thousand
1,383,694 1,014,232 Promissory note USD6,030thousa
nd
Bank SinoPac USD 5,000 thousand
USD 4,500 thousand
45,448 -
Total $ 3,548,983 1,774,595
December 31, 2016Factoring financial
institution Factoring
credit limit
Advance amount
credit limit
Factored amount (Derecognized
amount) Advance amount
interest rate
Important derecognized
provision Collateral HSBC Bank USD 100,000
thousand USD 90,000 thousand
$ 1,130,941 624,407 (Note 2) (Note 1) Promissory note USD95,050thous
and (Note 3)
Standard Chartered Bank USD 5,500 thousand
USD 5,500 thousand
3,974 3,557 None
CTBC Bank USD 70,700 thousand
USD 63,630 thousand
821,463 147,099
E.SUN Commercial Bank USD 24,000 thousand
USD 21,600 thousand
684,136 411,097 Promissory note USD21,600thous
and
Bank Mizuho USD 20,000 thousand
TWD 18,000 thousand
144,911 61,544 None
Bank SinoPac USD 5,000 thousand
USD 4,500 thousand 82,546 -
Promissory note USD5,000thousa
nd
Total $ 2,867,971 1,247,704
Note 1: According to the accounts receivable purchase agreements or the approval letters issued by the factoring financial institutions, the accounts receivable were factored without recourse. The funds are transferred to the appointed reserve accounts or directly to the factoring financial institutions.
Note 2: For 2017 and 2016, the average interest rates on factored accounts receivable were 1.14%~2.30% and 0.82%~2.15%, respectively.
Note 3: The aggregate credit limit of the promissory note includes letters of credit, export bill negotiations, borrowings, derivatives, and accounts receivable factored.
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(d) Inventories
December 31, 2017
December 31, 2016
Raw materials $ 2,069,200 2,295,164
Work in progress 309,526 242,893
Finished goods (including Merchandise) 179,688 336,526
$ 2,558,414 2,874,583
In 2016, the write-downs of inventories to the net realizable value amounted to $24,697 thousand. In 2017, the reversal of write-downs amounted to $13,024 thousand. The write-downs and reversals were included in cost of goods sold.
None of the inventories held by the Group were pledged as collateral as of December 31, 2017 and 2016.
(e) Investment under equity method
A summary of the Group s financial information for equity-accounted investees at the reporting date is as follows:
December 31, 2017
December 31, 2016
Associates $ 177,696 204,947
The financial information on the Group s associates which was not adjusted proportionately to the ownership ratio of the Group and the proportional holding period was as follows:
December 31, 2017
December 31, 2016
Total assets $ 1,072,339 1,421,159Total liabilities $ 748,263 766,927
2017 2016 Revenue $ 1,134,639 1,104,040Net income $ (30,627) (58,055)
(i) Collateral
None of the investment under the equity method held by the Group was pledged as collateral as of December 31, 2017 and 2016.
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(f) Property, plant and equipment
The cost, depreciation and impairment loss of the property, plant and equipment of the Group for the years ended December 31, 2017 and 2016, were as follows:
Land Buildings Machinery Office and other
equipment Total Cost
Balance at January 1, 2017 $ 2,703,907 1,443,679 1,842,250 1,231,545 7,221,381 Additions 202 36,513 154,828 78,062 269,605 Disposals - - (116,609) (118,135) (234,744) Reclassification - 116,969 46,870 36,326 200,165 Exchange difference on translation (12,438) (172,387) (128,482) (103,268) (416,575) Balance at December 31, 2017 $ 2,691,671 1,424,774 1,798,857 1,124,530 7,039,832 Balance at January 1, 2016 $ 2,721,462 1,068,394 1,697,194 1,218,702 6,705,752 Additions 736 268,909 229,460 138,009 637,114 Disposals - - (35,092) (115,349) (150,441) Reclassification - 131,596 (29) 22,496 154,063 Exchange difference on translation (18,291) (25,220) (49,283) (32,313) (125,107) Balance at December 31, 2016 $ 2,703,907 1,443,679 1,842,250 1,231,545 7,221,381
Depreciation and impairment loss:Balance at January 1, 2017 $ - 267,192 1,151,644 830,345 2,249,181 Depreciation for the year - 69,005 176,424 112,581 358,010 Disposals - - (71,525) (100,003) (171,528) Reclassification - 4 49 (136) (83) Exchange difference on translation - (10,437) (82,757) (52,895) (146,089) Balance at December 31, 2017 $ - 325,764 1,173,835 789,892 2,289,491 Balance at January 1, 2016 $ - 221,673 1,039,916 831,234 2,092,823 Depreciation for the year - 55,630 160,984 115,691 332,305 Disposals - - (20,471) (96,556) (117,027) Reclassification - - (313) 256 (57) Exchange difference on translation - (10,111) (28,472) (20,280) (58,863) Balance at December 31,2016 $ - 267,192 1,151,644 830,345 2,249,181
Carrying amounts:Balance at December 31, 2017 $ 2,691,671 1,099,010 625,022 334,638 4,750,341 Balance at December 31, 2016 $ 2,703,907 1,176,487 690,606 401,200 4,972,200 Balance at January 1, 2016 $ 2,721,462 846,721 657,278 387,468 4,612,929
(i) Idle assets
As of December 31, 2017 and 2016, the carrying amount of idle assets in property, plant and equipment was $49,911 thousand and $56,217 thousand, respectively.
183
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(ii) Collateral
Please refer to note 8 for assets pledged as collateral for loans as of December 31, 2017 and 2016.
(g) Intangible assets
The movements of cost, amortization, and impairment losses of intangible assets in 2017 and 2016 were as follows:
Intangible assetsCost:
Balance at January 1, 2017 $ 198,169Purchases 11,333Exchange difference on translation (2,065)Balance at December 31, 2017 $ 207,437Balance at January 1, 2016 $ 185,886Purchase 13,486Disposals (1,240)Reclassification 810Exchange difference on translation (773)Balance at December 31, 2016 $ 198,169
Accumulated amortization and impairment losses: Balance at January 1, 2017 $ 159,815Amortization for the year 27,341Exchange difference on translation (1,036)Balance at December 31, 2017 $ 186,120Balance at January 1 ,2016 135,585Amortization for the year 25,029Disposals (1,257)Exchange difference on translation 458Balance at December 31, 2016 $ 159,815
Carrying value: Balance at December 31, 2017 $ 21,317Balance at December 31, 2016 $ 38,354Balance at January 1, 2016 $ 50,301
Amortization expenses for the years ended December 31, 2017 and 2016, were recognized as operating expenses in the comprehensive income statements.
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(h) Other current and noncurrent assets
The details of other current and noncurrent assets were as follows:
December 31,2017
December 31, 2016
Prepayments for land, equipment, and construction in progress $ 74,572 121,137Prepayments for inventory 17,694 20,102Prepaid sales tax 129,427 121,877Refundable deposits 83,744 92,118Prepaid rent 105,468 115,885Other 114,006 107,259
$ 524,911 578,378
(i) Short-term borrowings
December 31,2017
December 31, 2016
L/C $ - 207,799Unsecured bank loans 277,586 180,763
$ 277,586 388,562Unused facilities $ 5,076,685 3,189,710Range of interest rates 0.95%~2.30% 0.86%~1.54%
Please refer to note 8 for assets pledged as collateral for loans.
(j) Convertible bond payable
The details of convertible bond payable of the Group were as follows:
December 31, 2017
December 31, 2016
Amount of convertible bond issued $ 700,000 700,000
Unamortized bond discount - (1,845)
Cumulative converted amount (700,000) (531,900)
Balance of convertible bond - 166,255
Less: current portion - (166,255)
$ - -
Embedded derivative put and call options (accounted for as financial liabilities at fair value through profit or losscurrent $ - -
Equity component conversion options (accounted for as capital surplus) $ - 12,867
185
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
2017 2016Embedded derivative put and call options (accounted for
as evaluation loss (gain) on financial instruments) $ - (733)
Interest expense (accounted for as finance cost) $ 1,641 3,953
The Company issued the No. 4 five-years unsecured convertible bonds in Taiwan without coupon rate. These convertible bonds cover a period from August 24, 2012, to August 24, 2017.
At any time during the period from September 25, 2012, to July 15, 2017, the Company may redeem the bonds with cash at face value with certain circumstances.
At any time on or after August 24, 2015, the bondholders may request the Company to repurchase the convertible bond at 100.7519% of the face value. During the period from July 25, 2016, to August 25, 2016, the bondholders may request the Company to repurchase the convertible bond at 101.0038% of the face value.
The bondholders may request conversion of the bond to the Company s common stock at any time during the period from September 25, 2012, to August 14, 2017. The Company will pay the principal in cash when the bonds are not converted into common stock nor redeemed at the maturity date.
(k) Operating lease
Non-cancellable operating lease rentals were payable as follows:
December 31, 2017
December 31, 2016
Less than one year $ 69,319 86,181Between one and five years 83,400 153,382Over five years 9,489 80,211
$ 162,208 319,774
For the years ended December 31, 2017 and 2016, operating lease expenses were $156,018 thousand and $178,221 thousand, respectively.
186
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(l) Provisions
Provisions Balance at January 1,2017 $ 339,646 Provisions reversed during the year (69,597) Exchange difference on translation (7,928) Balance at December 31,2017 $ 262,121
Balance at January 1,2016 $ 339,772 Provisions make during the year 8,539 Exchange difference on translation (8,665) Balance at December 31,2016 $ 339,646
Provisions mainly are accrued for abnormal losses from operation and others.
(m) Employee benefits
(i) Defined benefit plans
The present value of defined benefit obligations and the fair value of plan assets were as follows:
December 31, 2017
December 31, 2016
Present value of the defined benefit obligations $ (287,515) (297,905)Fair value of plan assets 48,379 72,708Net defined benefit (liabilities) assets $ (239,136) (225,197)
The employee benefits liabilities of the Group was as follows:
December 31, 2017
December 31, 2016
Employee paid leave liabilities $ 35,762 33,546
The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. The plan (covered by the Labor Standards Law) entitles a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.
1) Composition of the plan assets
The Company allocates pension funds in accordance with the Regulations for Revenues,Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such fundsare managed by the Bureau of Labor Funds, Ministry of Labor. With regard to theutilization of the funds, minimum earnings shall be no less than the earnings attainablefrom two-year time deposits with interest rates offered by local banks.
187
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
The Company s Bank of Taiwan labor pension reserve account balance amounted to $47,216 thousand as of December 31, 2017. For information on the utilization of the labor pension fund assets, including the asset allocation and yield of the fund, please refer to the website of the Bureau of Labor Funds, Ministry of Labor.
2) Movements in present value of the defined benefit obligations were as follows
The moverments in present value of the defined benefit obligations for the Group were asfollows:
2017 2016 Defined benefit obligations on January 1 $ 297,905 233,560Current service costs and interest 45,921 47,864Remeasurement of net defined benefit obligations
(assets) 1,495 49,156
Benefits paid (43,784) (11,983)Exchange difference on translation and others (14,022) (20,692)Defined benefit obligations on December 31 $ 287,515 297,905
3) Movements in fair value of the plan asset
The moverments in the present value of the defined plan assets for the Group were asfollows:
2017 2016 Fair value of plan assets on January 1 $ 72,708 32,618
Remeasurement of net defined benefit (obligations) assets
(83) (97)
Contribution to the plan 3,466 48,269
Benefits paid by plan assets (28,295) (8,534)
Return of plan assets 666 541
Exchange difference on translation (83) (89)
Fair value of plan assets on December 31 $ 48,379 72,708
4) Expense recognized in profit or loss
Expense recognized in profit or loss for the years ended December 31, 2017 and 2016,were as follows:
2017 2016 Service cost $ 32,218 34,059Interest on net defined benefit obligations (assets) 12,838 13,264Others 179 (17,474)
$ 45,235 29,849
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
5) Remeasurement of net defined benefit liability (asset) recognized immediately in othercomprehensive income
The Group s remeasurement of the net defined benefit liability (asset) recognized inother comprehensive income for the years ended December 31, 2017 and 2016, was asfollows:
2017 2016Actuarial losses or (gains) $ 1,495 49,156
Return on plan assets 83 97
$ 1,578 49,253
6) Actuarial assumptions
The principal actuarial assumptions at the reporting date were as follows:
The rate applied in calculating the present value of defined benefit obligations for theyear ended December 31, 2017 and 2016.
December 31, 2017
December 31, 2016
Discount rate 1.375%~7.16% 1.125%~8.14%
Future salary changes 2.50%~10.00% 2.25%~10.00%
The expected allocation payment to be made by the Group to the defined benefit plans for the one-year period after the reporting date is $352 thousand.
7) Sensitivity analysis
When calculating the present value of defined benefit obligations, the Group usedjudgments and estimations to determine the actuarial assumptions, including the discountrates and future salary changes, as of the end of the reporting period. Any changes in theactuarial assumptions may significantly impact the amount of the defined benefitobligations.
189
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
Changes in the main actuarial assumptions that might have an impact on the present value of the defined benefit obligation for the year ended December 31, 2017 and 2016:
Effects on defined benefit obligationIncrease by 1% Decrease by 1%
December 31, 2017 Discount rate $ (35,980) 43,120 Future salary changes 37,434 (40,989) December 31, 2016 Discount rate (40,350) 42,777 Future salary changes 41,998 (40,270)
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.
(ii) Defined contribution plans
The Company and its subsidiaries in Taiwan allocate 6% of each employee s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company and its subsidiaries in Taiwan allocate a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.
The Group s pension costs under the defined contribution pension plans amounted to $47,190 thousand and $54,264 thousand in 2017 and 2016, respectively.
(n) Income tax
(i) Income tax expense
The details of income tax expense in 2017 and 2016 were as follows:
2017 2016 Current income tax expense $ 312,885 393,081Deferred income tax expense (benefit) 7,145 (26,389)Total income tax expense $ 320,030 366,692
Reconciliation of income tax expense and income before tax was as follows:
2017 2016 Income before tax $ 1,616,646 1,909,323Income tax based on the Company s domestic tax rate 274,830 324,585
Others 45,200 42,107$ 320,030 366,692
190
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(ii) Deferred tax liabilities and assets
1) Unrecognized deferred tax assets and liabilities
As of December 31, 2017 and 2016, the temporary differences associated with theinvestments in subsidiaries were not recognized as deferred income tax assets andliabilities as the Group was able to control the timing of reversal of these temporarydifferences, and management believed that it was probable that the temporary differenceswould not reverse in the foreseeable future. The related amounts were as follows:
Unrecognized deferred tax liabilities:
December 31, 2017
December 31, 2016
Temporary differences associated with investments in subsidiaries $ 43,795 64,523
Unrecognized deferred tax assets:
December 31, 2017
December 31, 2016
Temporary differences associated with investments in subsidiaries $ 19,918 42,821
Tax losses 8,384 14,490
$ 28,302 57,311
Net losses filed by the Group or approved by the tax authority could be used to reduce the taxable income in current and future years. As of December 31, 2017, the expiration years for the deferred tax assets arising from the carry forward of unused tax losses incurred by the Group were as follows:
Expiration year Remaining deductible losses 2019 $ 23,2792020 7282021 9,529
$ 33,536
191
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
2) Recognized deferred tax assets and liabilities
Defined benefit plan
Provision and others Total
Deferred tax assets January 1,2016 $ 30,384 59,593 89,977Credit to profit/loss 9,711 22,793 32,504Credit to other comprehensive
income 9,891 - 9,891December 31,2016 $ 49,986 82,386 132,372January 1,2017 $ 49,986 82,386 132,372Credit (debit) to profit/loss 11,995 (15,890) (3,895)Debit to other comprehensive
income (52) - (52) December 31,2017 $ 61,929 66,496 128,425
Unrealized exchange gain Others Total
Deferred tax liabilities:January 1,2016 $ 3,669 - 3,669Debit to profit/loss 4,846 1,269 6,115December 31,2016 $ 8,515 1,269 9,784January 1,2017 $ 8,515 1,269 9,784Debit (credit) to profit/loss (7,226) 10,476 3,250December 31,2017 $ 1,289 11,745 13,034
(iii) Income tax approval
The Company s income tax returns have been examined and approved by the ROC tax authorities through the years up to 2015.
(iv) Information related to the imputation credit account and creditable ratio is summarized below:
December 31, 2017
December 31, 2016
Unappropriated earnings of 1998 and after Note 1,586,709Balance of imputation credit account (ICA) Note 483,551
2017(Estimated) 2016(Actual)Tax creditable ratio for earnings distribution to ROC
residents Note 21.34%
192
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
The above information about the ICA was prepared in accordance with information letter No.10204562810 issued by the Ministry of Finance of the R.O.C. on October 17, 2013.
Note: According to the amendments to the "Income Tax Act enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, effective January 1, 2018, companies will no longer be required to establish, record, calculate, and distribute their ICA due to the abolishment of the imputation tax system.
(o) Capital and other equity
(i) Ordinary shares
As of June 16, 2016, the Company s shareholders approved making capital surplus transferred to capital for $69,593 thousand ($0.35 per share). The issuance above was approved by the FSC on August 8, 2016, as the date of the capital increase. The registration process has already been completed.
As of December 31, 2017 and 2016, the authorized capital of the Company both amounted to $2,500,000 thousand, consisting of $250,000 thousand shares, at a par value of 10 per share, and the issued capital consisted of 209,387 thousand shares and 206,735 thousand shares, respectively. All proceeds from the shares issued have been collected.
The movements in outstanding shares for the years ended December 31, 2017 and 2016, were as follows:
Common stock(thousand shares)
2017 2016 Beginning balance at January 1 $ 206,735 198,731Addition: Capitalizing of capital surplus - 6,959
Conversion of convertible bonds 2,652 1,045Ending balance at December 31 $ 209,387 206,735
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(ii) Capital surplus
The balances of capital surplus were as follows:
December 31, 2017
December 31, 2016
Surplus arising from bond conversion option $ 1,618,137 1,463,896Paid-in capital in excess of par value 1,879,354 1,879,354Capital surplus premium from combination 593 593
Equity components of convertible bonds - 12,867Capital surplus interest payable reimbursement 17,181 17,181
Expired stock options 307 307Gain or loss on disposal of subsidiaries shares 4,914 4,914
Adjustments to share of changes in equity of subsidiaries 24,291 24,291
$ 3,544,777 3,403,403
According to the ROC Company Act, realized capital surplus can be transferred to common stock or distributed as cash dividends after deducting the accumulated deficit, if any. Realized capital surplus includes the additional paid-in capital from issuance of common stock in excess of the common stock s par value and donation from others. Paid-in capital in excess of par value is transferrable to common stock but shall not exceed 10% of the total issued and outstanding common stock in each year according to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers.
(iii) Retained earnings
According to the Company s articles of incorporation, 10% of annual net earnings (net of income taxes), after deducting accumulated deficits, must be set aside as legal reserve. Unless and until the accumulated legal reserve equals the Company s total capital, the Company may set aside a special reserve in accordance with Article 41 of the Securities and Exchange Act. After the board of directors considers the Company s budget for funding needs, financial structure, current-period earnings, and steady profit distribution when proposing the distribution of earnings, the proposal should be resolved during the stockholders meeting.
The Company is now in the growth stage, and profits may be distributed by way of cash dividends and stock dividends. Cash dividends shall not be lower than 10% of the total distribution.
In accordance with the ROC Company Act amended in May 2015, the recipients of dividends and bonuses arising from earnings distributions are limited to shareholders and do not include employees. The Company plans to make consequential amendments to the Company sarticles of incorporation to coincide with the aforementioned change in the law.
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
a) Legal reserve
According to the amendment of the ROC Company Act announced in January 2012,the Company must retain 10% of its after-tax annual earnings as legal reserve untilsuch retention equals the amount of total capital. If the Company incurs no loss, itmay, pursuant to a resolution by a shareholders meeting, capitalize the amountof its reserve that exceeds 25% of common stock by issuing new shares or distributea cash dividend.
b) Special reserve
In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, aportion of current-period earnings and undistributed prior-period earnings shall bereclassified as special earnings reserve during earnings distribution. The amountto be reclassified should equal the current-period total net reduction of othershareholders equity. Similarly, a portion of undistributed prior-period earningsshall be reclassified as special earnings reserve (and does not qualify for earningsdistribution) to account for cumulative changes to other shareholders equitypertaining to prior periods. Amounts of subsequent reversals pertaining to the netreduction of other shareholders equity shall qualify for additional distributions.
c) Earnings appropriation and distribution
Earnings distributions for 2016 and 2015 were decided in the general meetings ofshareholders held on June 19, 2017, and June 16, 2016, respectively. The relevantdividend distributions to the shareholders were as follows:
2016 2015 Amount
per share (NT dollars)
Total amount
Amount per share
(NT dollars) Total
amount Cash $ 6.72 1,390,829 9.52 1,892,923
Information on the earnings appropriation proposed by the Company s board of directors and approved by the Company s shareholders is available on the Market Observation Post System website of the Taiwan Stock Exchange.
195
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(p) Earnings per share
(i) Basic earnings per share
The basic earnings per share for the years ended December 31, 2017 and 2016, were calculated on the basis of profit attributable to ordinary shareholders and the weighted-average number of outstanding ordinary shares. Calculations were as follows:
1) Profit attributable to ordinary shareholders
2017 2016 Continuingoperations
Continuing operations
Profit attributable to ordinary shareholders $ 1,286,086 1,522,860
2) Weighted-average number of outstanding ordinary shares
2017 2016 Number of outstanding ordinary shares on January 1 $ 206,735 198,731Effect of conversion of convertible bonds 1,212 420Effect of capitalizing capital surplus - 6,959Weighted-average number of outstanding ordinary
shares on December 31 $ 207,947 206,110
(ii) Diluted earnings per share
The diluted earnings per share for the years ended December 31, 2017 and 2016, were calculated on the basis of profit attributable to ordinary shareholders and the weighted-average number of outstanding ordinary shares, with all potential ordinary shares retroactively adjusted. Calculations were as follows:
1) Profit attributable to ordinary shareholders (diluted)
2017 2016 Continuingoperations
Continuing operations
Profit attributable to ordinary shareholders (basic) $ 1,286,086 1,522,860Interest on convertible bonds, other gains and losses 1,362 2,673Profit attributable to ordinary shareholders (diluted) $ 1,287,448 1,525,533
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
2) Weighted-average number of outstanding ordinary shares (diluted)
2017 2016 Weighted-average number of outstanding ordinary
shares (basic) 207,947 206,110
Effect of conversion of convertible bonds 1,440 3,176
Effect of employee stock dividends 937 943
Weighted-average number of outstanding ordinary shares on December 31 (diluted)
210,324 210,229
(q) Employees, directors and supervisors remuneration
In accordance with the Articles of incorporation , the Company should contribute at least 1% and not more than 8% of the profit as employee remuneration and not exceed 5% as directors an supervisors remuneration when there is profit for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit.
For the year ended December 31, 2017 and 2016, the Company estimated its employee remuneration amounting to $92,746 thousand $110,473 thousand, and directors and supervisorsremuneration amounting to $38,644 thousand and $46,112 thousand, respectively. The estimated amounts mentioned above were calculated based on the net profit before tax, excluding remuneration to employee, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as specified in the Company s articles. The remunerations were expensed under operating costs or operating expenses during 2017 and 2016.
Related information would be available on the Market Observation Post System website. The differences between the amounts approved by the board of directors and those recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in next year.
The amounts of employees remuneration, as estimated in consolidated financial statements, were identical to those amount approved for 2016 and 2015.
The differences between actual approved amount directors and supervisors remuneration and those estimated in the financial statements in 2016 and 2015 were as follows:
2016
Actual approved amount
Estimated amount in financial statement Difference
Directors' and supervisors' remuneration $ 37,500 46,112 (8,612)
2015
Actual approved amount
Estimated amount in financial statement Difference
Directors' and supervisors' remuneration $ 49,825 58,259 (8,434)
197
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
The difference between the actual remuneration to directors and supervisors and the recognized amount in 2016 and 2015 were not significant, therefore, were recognized as profit or loss in 2017 and 2016, respectively. Related information would be available on the Market Observation Post System website.
(r) Results of non-operating activities
(i) Other income
The Group s other income in 2017 and 2016 was as follows:
2017 2016 Rental income $ 17,472 17,333Interest income bank deposit 13,185 16,744
Dividend income 5,040 4,368Others 10,862 26,232
$ 46,559 64,677
(ii) Other gains and losses
The Group s other gains and losses in 2017 and 2016 were as follows:
2017 2016 Foreign exchange gain $ (92,647) (6,009)Net gain on financial assets and liabilities measured at
fair value-valuation 12,937 14,929
Net gain on financial assets and liabilities measured at fair value-realized 26,007 29,404
Loss on disposal of property, plant and equipment (24,513) (21,535)Impairment loss on property, plant and equipment (18,860)Others (48,118) (26,644)
$ (126,334) (28,715)
198
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(iii) Finance costs
The details of finance expenses in 2017 and 2016 were as follows:
2017 2016Interest expense bank borrowings $ (30,865) (18,814)
Interest expense convertible bonds (1,641) (3,953)
Expenses from accounts receivable factoring (25,181) (29,257)
$ (57,687) (52,024)
(s) Financial Instruments
(i) Credit risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum exposure to credit risk. The Group s credit risk is impacted by each customer. For the years ended December 31, 2017 and 2016, the sales to major customers accounted for 67% and 70%, respectively. In addition, for the years ended December 31, 2017 and 2016, the sales to American region accounted for 71% and 76%, respectively.
(ii) Liquidity risk
The following are the contractual maturities of financial liabilities, including the estimated interest payments and excluding the impact of netting agreements.
Carrying amount
Contractual cash flow
Within 6 months
6~12 months 1~2 years 2~5 years
Over 5 years
December 31, 2017
Non-derivative financial liabilities
Short-term borrowings $ 277,586 (278,352) (278,352) - - - -
Accounts payable and other payables 3,078,362 (3,078,362) (3,078,362) - - - -
$ 3,355,948 (3,356,714) (3,356,714) - - - - December 31, 2016
Non-derivative financial liabilities
Short-term borrowings $ 388,562 (391,016) (391,016) - - - -
Convertible bond payable 166,255 (168,100) - (168,100) - - -
Accounts payable and other payables 3,062,377 (3,062,377) (3,062,377) - - - -
Forward exchange contracts
Outflow 1,391 (258,232) (258,232) - - - -
Inflow (62) 257,597 257,597 - - - -
$ 3,618,523 (3,622,128) (3,454,028) (168,100) - - -
The Group does not expect the cash flows included in the maturity analysis would occur significantly earlier or at significantly different amounts.
199
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(iii) Exchange rate risk
1) Exposure to currency risk
The Group s significant exposure to foreign currency risk was as follows:
December 31, 2017 December 31, 2016 Foreign currency
Exchange rate TWD
Foreign currency
Exchange rate TWD
Financial assets
Monetary items
USD $ 164,538 29.848 4,911,130 144,433 32.279 4,662,159
CNY 146,573 4.5764 670,772 123,542 4.6284 571,802
INR 13,599,310 0.002203 29,961 24,790,426 0.002402 59,557
VND 11,442,314 0.001315 15,045 6,159,440 0.001421 8,750
No-monetary items
USD 5,953 29.848 177,696 6,349 32.279 204,947
Financial liabilities
Monetary items
USD 70,932 29.848 2,117,178 62,942 32.279 2,031,715
CNY 179,136 4.5764 819,793 157,160 4.6284 727,397
INR 62,089,049 0.002203 136,790 50,079,322 0.002402 120,312
VND 84,170,931 0.001315 110,676 46,252,708 0.001421 65,704
2) Sensitivity analysis
The Group s exposure to foreign currency risk arises from the translation of the foreigncurrency exchange gains and losses on cash and cash equivalents, accounts receivable,other receivables, loans, accounts payable, and other payables. A 1% depreciation orappreciation of the TWD against the USD and CNY as of December 31, 2017 and 2016,would have increased or decreased the net income after tax by $24,425 thousand and$23,571 thousand, respectively. The analysis assumes that all other variables remainconstant and ignores any impact of forecasted sales and purchases. The analysis isperformed on the same basis for both periods.
3) Exchanged gains or losses on monetary items
As the Company deals in diverse foreign currencies, gains or losses on foreign exchangewere summarized as a single amount. In 2017 and 2016, the foreign exchange gain(loss), including realized and unrealized, amounted to $(92,647) thousand and $(6,009)thousand, respectively.
(iv) Interest rate analysis
The Group s borrowings are mainly with fixed interest rates; thus, there is no significant interest rate risk.
200
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(v) Fair value
1) Fair value of financial instruments
The book value, fair value, and fair value hierarchy for the financial assets and financialliabilities of the Group were as followed (excluding the disclosure of financial assets andliabilities for which the book value is close to the fair value, or the fair value cannot bereliably measured).
December 31, 2017 Fair value
Book value Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss:
Non-derivative financial assets held for trading $ 62,748 62,748 - - 62,748
Loan and receivables:
Cash and cash equivalents 1,559,067 - - - -
Accounts receivable and notes receivable 700,771 - - - -
Other financial assets 2,083,238 - - - -
Subtotal 4,343,076 - - - -
Refundable deposit 83,744 - - - -
Financial liabilities at amortized cost:
Short-term borrowings 277,586 - - - -
Accounts payable and other payables 3,078,362 - - - -
Subtotal 3,355,948 - - - -
December 31, 2016 Fair value
Book value Level 1 Level 2 Level 2 Total Financial assets at fair value through profit or loss:
Non-derivative financial assets held for trading $ 51,156 51,156 - - 51,156
Loan and receivables:
Cash and cash equivalents 1,749,550 - - - -
Accounts receivable and notes receivable 522,286 - - - -
Other financial assets 2,011,951 - - - -
Subtotal 4,283,787 - - - -
Refundable deposit 92,118 - - - -
Financial liabilities at fair value through profit or loss:
Derivative financial liabilities 1,345 - 1,345 - 1,345
Financial liabilities at amortized cost:
Short-term borrowings 388,562 - - - -
Accounts payable and other payables 3,062,377 - - - -
Convertible bonds 166,255 - - - -
Subtotal 3,617,194 - - - -
201
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
2) Valuation techniques and assumptions used in fair value determination
Non-derivative financial instruments
A financial instrument is regarded as being quoted in an active market if quoted prices arereadily and regularly available from an exchange, dealer, broker, industry group, pricingservice or regulatory agency and those prices represent actual and regularly occurringmarket transactions on an arm s-length basis. Whether transactions are taking place
regularly is a matter of judgment and depends on the facts and circumstances of themarket for the instrument.
Quoted market prices may not be indicative of the fair value of an instrument if theactivity in the market is infrequent, the market is not well-established, only smallvolumes are traded, or bid-ask spreads are very wide. Determining whether a market isactive involves judgment.
Except for the aforementioned financial instruments, the fair value of other financialinstruments is determined by using valuation techniques or the quoted price from acounterparty. Fair value measured by a valuation technique can be extrapolated fromsimilar financial instruments, the discounted cash flow method, or other valuationtechniques including a model using observable market data at the reporting date.
Derivative financial instruments
Measurement of the fair value of derivative instruments is based on the valuationtechniques generally accepted by market participants. The fair value of a forwardexchange contract is usually determined by the forward exchange rate. Measurement ofthe fair value of an embedded derivative financial instrument is based on an optionpricing model or other valuation technique.
3) Transfer between fair value hierarchy
There were no transfers in either direction for the years ended December 31, 2017 and2016.
(t) Financial risk management
(i) Nature and extent
The Group is exposed to the following risks from its financial instruments:
1) Credit risk
2) Liquidity risk
3) Market risk
This note discloses information on exposure to each of the above risks and objectives,policies, and procedures for measuring and managing risk. For further quantitativeinformation, please refer to the relevant notes to the consolidated financial statements.
202
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(ii) Risk management framework
The board of directors of the Company is responsible for establishing and overseeing the risk management structure of the Group.
The Group s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The board of directors of the Company oversees how management monitors the risks, which should be in compliance with the Group s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation of the risks faced by the Group. The internal auditor undertakes regular reviews of the risk management controls and procedures and exception management, the results of which are reported to the board of directors.
(iii) Credit risk
Credit risk means the potential loss to the Group if the client or counterparty involved in that transaction defaults. The primary potential credit risk is from the accounts receivable and financial investments of the Group.
1) Accounts receivable and other receivables
The Group periodically reviews payment histories and financial positions of customers,and factors part of its accounts receivable to certain financial institutions without recourseto lower the credit risk. The Group also aggressively markets to Europe and Asia todiversify the risk of concentration of customers in a certain area.
The Group establishes an impairment allowance that represents its estimate of incurredlosses in respect of trade receivables, other receivables, and investment. Thecomponents of this impairment allowance are a specific loss component that relates toindividually significant exposures and a collective loss component established for groupsof similar assets in respect of losses that have been incurred but not yet identified.
2) Financial investments
The Group held its bank deposits in different financial institutions to manage theexposure to credit risk of each institution to prevent concentration risk.
As the Group deals with banks and other external parties with good credit standing, themanagement believes that there is no significant credit risk. In addition, the Groupinvests only in public companies to mitigate credit risk exposure.
203
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
3) Guarantee
The Group only provides guarantees to wholly owned subsidiaries. The Group did notprovide any guarantee to companies which were not in the Group as of December 31,2017 and 2016.
(iv) Liquidity risk
Liquidity risk is the risk that the Group is unable to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Groups approach to managing liquidity is to ensure, as much as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group s reputation.
The Group ensures it has sufficient cash to fund its expected operating expenditure for a 60-day period, including financial obligation fulfillment but excluding the unexpected potential impact of extreme cases such as natural disasters. For the Group s available credit limits, please refer to note 6(i).
(v) Market risk
Market risk is the risk that comes from changes in market prices such as changes of foreign exchange rates, interest rates, and equity prices impacting the Group s income or the value of financial instruments held by the Group. The objective of market risk management is to manage and control market risk exposures within an acceptable range and optimize the return on investments.
1) Exchange rate risk
The Group mainly uses the USD for its sales and purchases. The overall hedge ratio isover 80%. The net foreign currency position is still exposed to exchange rate risk. TheGroup takes advice from professionals in banks and periodically uses foreign currencyforward contracts to hedge the net foreign currency exposure, within the range of 50% to75%, for the next six months. The Group has effectively minimized the impact ofexchange gain and loss within an acceptable range.
2) Interest rate risk
The Group does not have any significant liability with a floating interest rate, andchanges in market interest rates do not have any significant impact on the future cashflow of the Group.
3) Other market risk
Except for purchase agreements to meet expected consumption and sales requirements,the Group does not enter into any other long-term purchase agreements.
204
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(u) Capital management
To maintain investor relationships, market confidence, and future operation, the board manages working capital by periodically reviewing the financial structure, and optimizes the liability and equity balance to lower the finance costs.
The Group s review comprises:
(i) The growth rate of its future sales and profit.
(ii) The dilution impact on EPS from the growth of capital stock.
(iii) Various types of finance costs and related risks.
The management may adjust the amounts and types of dividend payments or issue new shares or bonds in capital markets to maintain and adjust its capital structure.
The Group s equity-to-asset ratios at the end of the reporting periods were as follows:
December 31, 2017
December 31, 2016
Total equity $ 8,504,381 8,727,891Total assets $ 12,566,928 13,135,777Equity-to-asset ratio 68% 66%
There were no charges in the Group s approach to capital management as of December 31, 2017.
(v) Investing and financing activities not affecting current cash flow
The Group s investing and financing activities which did not affect the current cash flow were the conversion of convertible bonds. The sum of ordinary shares and capital surplus amounted to $180,764 thousand $74,900 thousand for the years ended December 31, 2017 and 2016, respectively.
(7) Related-party transactions
(a) Parent company and ultimate controlling Company
The Company is the ultimate controlling party of the Company and its subsidiaries.
(b) Names and relationship with related parties
The following are entities that have had transactions with the Group during the periods covered in the consolidated financial statements.
Name of related party Relationship with the Group Namtex Co., Ltd. (Namtex) An associate
Song Kuang Han Key management personnel
205
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(c) Significant transactions with related parties
(i) Purchasing
The amounts of significant purchases by the Group from related parties were as follows:
2017 2016 Associates $ 219,311 251,745
Purchasing prices and payment terms with associates are the same as those of general purchases.
(ii) Commission income
The amounts of commission income from related parties were as follows:
2017 2016 Associates $ - 61
(iii) Related-party payables
Account name Types of related
parties December 31,
2017 December 31,
2016 Accounts payable related parties Associates:
Namtex $ 53,921 22,361
(iv) Related-party receivables
Account name Types of related
parties December 31,
2017 December 31,
2016 Other financial assets current Associates $ 442 560
(v) Property transactions
The Group bought 5% shares of PT Glory and PT Straight from Mr. Song Kuang Han in the first half year of 2017 amounted to $12,094 thousand and $3,645 thousand, respectively.
(vi) Key management personnel compensation
Key management personnel compensation comprised:
2017 2016 Short-term employee benefits $ 83,557 117,733Post-employment benefits 69 119
$ 83,626 117,852
206
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(8) Pledged assets
The Group s assets pledged to secure loans were as follows:
Pledged assets Pledged to secure December 31,
2017 December 31,
2016 Land Security of borrowings $ 2,484,818 2,484,818
Property, plant and equipment Security of borrowings 271,588 287,642
Refundable deposits Lease deposit 83,744 92,118
$ 2,840,150 2,864,578
(9) Commitments and contingencies
Unrecognized significant commitments:
(a) Unused letters of credit
December 31, 2017
December 31, 2016
Unused letters of credit $ 153,840 442,977
(b) The Group issued promissory notes to the banks to apply for borrowings, export bills negotiation, derivatives, and factoring of accounts receivable. The issued promissory notes were as follows:
December 31, 2017
December 31, 2016
Issued promissory notes $ 9,313,210 8,822,085
(10) Losses Due to Major Disasters: None
(11) Subsequent Events:
According to the amendments to the "Income Tax Act enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing FY 2018. This increase does not affect the amounts of the current or deferred income taxes recognized on December 31, 2017. However, it will increase the Group s current tax charge accordingly in the future.
207
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(12) Other
A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:
2017 2016
Cost of sales
Operatingexpenses Total
Cost of sales
Operating expenses Total
Employee benefitsSalaries 3,463,405 1,221,008 4,684,413 3,533,472 1,138,670 4,672,142 Labor and health insurance 228,539 83,141 311,680 224,051 84,354 308,405 Pension 57,423 35,002 92,425 46,029 38,084 84,113 Others 166,683 103,615 270,298 176,867 115,502 292,369
Depreciation 285,155 72,855 358,010 271,364 60,941 332,305 Amortization 12,415 18,214 30,629 11,337 16,716 28,053
(13) Other disclosures
(a) Information on significant transactions:
The following is the information on significant transactions required by the Regulations Governing the Preparation of Financial Reports by Securities Issuers for the Group for the year ended December 31, 2017:
(i) Loans to other parties:
(In Thousands of New Taiwan Dollars/shares ) Highestbalance Collateral
Number Name of lender Name of borrower Account name
Related party
of financing to other parties during the
period Ending balance
Actual usage amount
during the period
Range of interest rates
during the period
Purposes of fund financing
for the borrower
Transaction amount of
business between two parties
Reasons for
short-term financing
Allowance for bad debt Item Value
Individual funding loan
limits
Maximum limit of fund
financing 0 The Company PT Crystal Other
receivable-related parties
Yes 108,367 50,742 50,742 2 - Operating capital
- None - 1,679,681 3,359,363
0 The Company PT Glory Other receivable-related parties
Yes 652,243 639,643 573,678 1 Processing
1,446,623
None - None - 1,446,623 3,359,363
0 The Company PTStarlight
Other receivable-related parties
Yes 197,870 182,968 178,789 1 Processing
554,005
None - None - 554,005 3,359,363
0 The Company Makalot Cambodia
Other receivable-related parties
Yes 273,080 252,514 207,419 3.0% 1 Processing
1,413,241
None - None - 1,413,241 3,359,363
0 The Company Moha Other receivable-related parties
Yes 282,118 260,872 260,872 3.0% 1 Processing
842,472
None - None - 842,472 3,359,363
0 The Company Makalot Vietnam
Other receivable-related parties
Yes 401,451 393,695 363,847 3.0% 1 Processing
1,137,287
None - None - 1,137,287 3,359,363
0 The Company Triple Vietnam
Other receivable-related parties
Yes 80,698 74,620 74,620 3.0% 1 Processing
709,723
None - None - 709,723 3,359,363
208
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
Highestbalance Collateral
Number Name of lender Name of borrower Account name
Related party
of financing to other parties during the
period Ending balance
Actual usage amount
during the period
Range of interest rates
during the period
Purposes of fund financing
for the borrower
Transaction amount of
business between two parties
Reasons for
short-term financing
Allowance for bad debt Item Value
Individual funding loan
limits
Maximum limit of fund
financing
(Continued)
0 The Company Leader Vietnam
Other receivable-related parties
Yes 721,438 631,285 220,875 2.8%~3% 2 - Operating capital
- None - 1,679,681 3,359,363
0 The Company Leader Vietnam
Other receivable-related parties
Yes 36,523 35,818 35,818 1 Processing
211,737
None - None - 211,737 3,359,363
0 The Company Triple Other receivable-related parties
Yes 174,307 - - 3.0% 2 - Operating capital
- None - 1,679,681 3,359,363
1 CMZ, CJY, CJR, CMK (Note 4)
CMZ, CJY, CJR, CMK (Note 4)
Other receivable
Yes 46,284 45,764 27,458 2.5% 2 - Operating capital
- None - 839,841 1,679,681
Note: The ceiling on total loans granted by the Company to all parties is 40% of its net assets in the financial statements; theceiling on the short-term financing for each entity s operating capital granted by the Company is 20% of its net assets in the financial statements; the ceiling on the loan granted by the Company to each entity which has business transactions with the Company is the transaction amount within a year. The policy for loans granted mutually between its overseas subsidiaries of which the Company directly or indirectly holds 100% of their voting shares is as follows:
The ceiling on total loans granted by an on overseas subsidiary to all overseas subsidiaries is 20% of the Company snet assets in the financial statements; the limit on loans granted by an overseas subsidiary to each overseas subsidiary is 10% of the Company s net assets in the financial statements.
Note 1: Nature of financing: 1. Business transaction purpose. 2. Short-term financing purpose. Note 2: Ending facility balance approved by BOD. Note 3:The trading companies purchase materials from the Company and sell the final products back to the Company after
processing. The Company provides the materials through Loyal Trading Int l Co., Ltd. to its subsidiaries for productions. According to the regulation, the Company only discloses the amount of processing; however, the ceiling on the loan to the above entities is the actual amount of the transactions involving the final products.
Note 4: The credit limit between subsidiaries in China. Note 5: The aforementioned transactions have been eliminated when preparing the consolidated financial statements.
(ii) Guarantees and endorsements for other parties: None
(iii) Securities held as of December 31, 2017 (excluding investment in subsidiaries, associates and joint ventures):
(In Thousands of New Taiwan Dollars/thousand shares) Category and Highest Highest ownership
Name of holder
name of security
Relationship with company
Account title
Shares/Units (thousands)
Carrying value
Percentage of ownership (%)
Fair value dutring the period Note
The Company
Dimerco Data System Corporation
(DDSC)
None Financial assets at fair value through profit or loss current
1,680 62,748 2.68% 62,748 2.68%
(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
209
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$300 million or 20% of the capital stock:
(In Thousands of New Taiwan Dollars)
Transaction details Transactions with terms
different from others Notes/Accounts receivable
(payable)
Name of company
Related party
Nature of relationship
Purchase/Sale Amount
Percentage of total
purchases/salesPayment
terms Unit pricePayment
terms Ending balance
Percentage of total notes/accounts
receivable (payable)Note
The Company Global Subsidiary Purchase 2,173,129 20% 30~60 days Note 1 - (482,224) 20% The Company Loyal Subsidiary Purchase 1,171,036 11% 30~60 days Note 1 - (278,259) 11% The Company Loyal Subsidiary Processing 64,725 1% 30~60 days - - - -% The Company Ecolot Subsidiary Purchase 453,138 4% 45~60 days - - (20,060) 1% The Company Namtex Subsidiary Purchase 219,311 2% 30~45 days - - (53,921) 2% The Company PT Glory Subsidiary Processing 1,446,623 21% 30~60 days - - (31,459) 1% The Company Makalot
Cambodia Subsidiary Processing 1,413,241 21% 30~60 days - - (159,708) 7%
The Company Makalot Vietnam
Subsidiary Processing 1,137,287 17% 30~90 days - - (243,641) 10%
The Company Moha Subsidiary Processing 842,472 12% 30~60 days - - (2,267) -% The Company Triple Vietnam Subsidiary Processing 709,723 10% 30~60 days - - (93,388) 4% The Company PT Starlight Subsidiary Processing 554,005 8% 30~60 days (67,157) 3% The Company Leader PH Subsidiary Processing 318,539 5% 30~90 days - - (6,429) -% The Company Leader Vietnam Subsidiary Processing 211,737 3% 30~60 days (18,498) 1% CJR Loyal Associates Sale 402,628 95% 30 days after
exportation - - 20,980 80%
CJY Loyal Associates Sale 350,685 85% - - 48,725 97%
CMZ Loyal Associates Sale 363,294 95% - - 32,369 87%
CBS Ecolot Associates Sale 291,140 91% 45~60 days - -%
Note: The aforementioned transactions have been eliminated when preparing the consolidated financial statements. Note 1: The mark-up price is based on the cost or re-sale price with a fixed ratio which is based on the cost and expense
that the subsidiary incurred.
(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:
(In thousands of New Taiwan Dollars) Name of Nature of Ending Turnover Overdue Amounts received in Allowancecompany Related party relationship balance days Amount Action taken subsequent period for bad debts
The Company PT Glory Subsidiary Other receivables577,551
- - - 3,872(Note 1) -
The Company Makalot Vietnam Subsidiary Other receivables367,081
- - - 3,233(Note 1) -
The Company Moha Subsidiary Other receivables262,554
- - - 1,683(Note 1) -
The Company Leader Vietnam Subsidiary Other receivables256,693
- - - -(Note 1) -
The Company Makalot Cambodia Subsidiary Other receivables208,757
- - - 1,338(Note 1) -
The Company PT Starlight Subsidiary Other receivables178,790
- - - -(Note 1) -
The Company Loyal Subsidiary Other receivables114,142
- - - 114,142 -
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MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
Name of Nature of Ending Turnover Overdue Amounts received in Allowancecompany Related party relationship balance days Amount Action taken subsequent period for bad debts
(Continued)
Global The Company Parent company 482,224 4.69 - - 482,153 - Loyal The Company Parent company 278,259 4.84 - - 161,738 - Makalot Vietnam
The Company Parent company 243,641 5.24 - - 242,657 -
Makalot Cambodia
The Company Parent company 159,708 28.40 - 159,708 -
Note: The aforementioned transactions have been eliminated when preparing the consolidated financial statements. Note 1: The uncollected accounts receivable primarily consisted of loans. Note 2: The amount was collected before February 26, 2018.
(ix) Trading in derivative instruments:None
(x) Business relationships and significant intercompany transactions: Nature of Intercompany transactions
No. Name of company Name of counter-party
relationship Account name Amount Trading terms Percentage of the
consolidated net revenue or total assets
0 The Company Global 1 Operating cost 2,173,129 Cost multiplied by a fixed ratio
10%
0 PT Glory 1 1,446,623 Processing cost based on the market price
6%
0 Makalot Cambodia 1 1,413,241 6% 0 Loyal 1 1,235,761 Purchase order
price multiplied by a fixed ratio
6%
0 Makalot Vietnam 1 1,137,287 5% 0 Moha 1 842,472 4% 0 Triple Vietnam 1 709,723 3% 0 PT Starlight 1 554,005 2% 0 Ecolot 1 453,138 2% 0 Leader PH 318,539 1% 0 Namtex 1 219,311 Cost multiplied by
a fixed ratio -%
0 Leader Vietnam 1 211,737 -% 0 Global 1 Accounts
payable 482,224 30 60 days 4%
0 Loyal 1 278,259 2% 0 Makalot Vietnam 1 243,641 30 90 days 2% 0 Makalot Cambodia 1 159,708 30 90 days -% 0 PT Glory 1 Other
non-current receivables
573,678 Financing 5%
0 Makalot Vietnam 1 363,847 3% 0 Moha 1 260,872 2% 0 Leader Vietnam 1 256,693 2% 0 Makalot Cambodia 1 207,419 2% 0 PT Starlight 1 178,789 1% 3 CJR Loyal 3 Revenue 402,628 Based on the
market price 2%
4 CJY Loyal 3 350,685 2% 5 CMZ Loyal 3 363,294 2% 2 CBS Ecolot 3 291,140 1%
Note 1: 0 represents the parent company. The subsidiaries start sequentially from 1 in Arabic numerals. Note 2: The relationships between transaction parties are as follows:
1.parent to subsidiary 2.subsidiary to parent 3.subsidiary to subsidiary
Note 3: The aforementioned transactions have been eliminated when preparing the interim consolidated financial statements.
211
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(b) Information on investees:
The following is the information on investees for the year 2017 (excluding information on investees in Mainland China):
(In Thousands of New Taiwan Dollars/share) Main Original investment amount Balance as of December 31, 2017 Highest Net income Share of
Name of investor
Name of investee Location
businesses and products
December 31, 2017
December 31, 2016
Shares Percentage of ownership
Carrying value
ownership during the period
(losses) of investee
profits/losses of investee Note
The Company
Global British Virgin Islands
Sale of textiles 15,740 100.00% 602,870 100.00% (19,454) (14,773) Subsidiary
The Company
Loyal British Virgin Islands
Sale of textiles 10,000 100.00% 171,741 100.00% 17,875 17,875 Subsidiary
The Company
PT Crystal Indonesia Manufacture of garments
993,191 99.40% (41,465) 99.90% (1,480) (1,471) Subsidiary
The Company
Leader PH Philippines Manufacture of garments
249,995 99.99% 41,090 99.90% 839 839 Subsidiary
The Company
Diamond Philippines Manufacture of garments
- - 149,995 99.99% 3,159 99.90% - - Subsidiary
The Company
Primeline Philippines Manufacture of garments
99,995 99.99% 60 99.90% - - Subsidiary
The Company
Fortune Star Samoa Investment holding 21,603,591 100.00% 589,229 100.00% 5,898 4,221 Subsidiary
The Company
Triple Samoa Investment holding 10,800,000 100.00% 169,277 100.00% (14,730) (16,935) Subsidiary
The Company
Eclot Taiwan Sale of garments 9,864,000 61.65% 170,755 61.65% 70,552 14,936 Subsidiary
The Company
Great Time Taiwan Sale of garments 500,000 100.00% 5,165 100.00% (292) (292) Subsidiary
The Company
Glida Taiwan Sale of garments 500,000 100.00% 4,982 100.00% - - Subsidiary
Global PT Glory Indonesia Manufacture of garments
60,895 95.00% 204,601 95.00% (196) (186) Subsidiary
Global PT Starlight Indonesia Manufacture of garments
- 1,050 5.00% 3,519 5.00% 392 (182) Subsidiary
Global Makalot Cambodia
Vietnam Manufacture of garments
1,000 100.00% (27,151) 100.00% (48,452) (48,452) Subsidiary
Global Makalot Vietnam
Vietnam Manufacture of garments
- 100.00% 290,761 100.00% 18,315 18,315 Subsidiary
Triple Moha Cambodia Manufacture of garments
1,000 100.00% (4,166) 100.00% 3,095 3,095 Subsidiary
Triple Triple Vietnam
Vietnam Manufacture of garments
- 100.00% 107,335 100.00% 12,360 12,360 Subsidiary
Triple Top Trend Samoa Investment holding 5,200,000 100.00% 67,234 100.00% (29,909) (29,909) Subsidiary
Top Trend Leader Garment
Vietnam Manufacture of garments
- 100.00% 67,234 100.00% (29,909) (29,909) Subsidiary
Fortune Star Fund Eagle Hong Kong Investment holding - - 100.00% - 100.00% 12,122 12,122 Subsidiary
Fortune Star Wintop Hong Kong Investment holding 10,370,000 100.00% 248,665 100.00% (9,386) (9,386) Subsidiary
Fortune Star Crown Era Hong Kong Investment holding 3,580,000 100.00% 159,675 100.00% 2,873 2,873 Subsidiary
Fortune Star Crownway Hong Kong Investment holding 4,560,000 100.00% 105,134 100.00% 1,172 1,172 Subsidiary
Fortune Star PT Starlight Indonesia Manufacture of garments
19,950 95.00% 66,867 95.00% 392 372 Subsidiary
Fortune Star PT Glory Indonesia Manufacture of garments
- 3,205 5.00% 10,768 5.00% (196) (1,038) Subsidiary
212
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
Main Original investment amount Balance as of December 31, 2017 Highest Net income Share of Name of investor
Name of investee Location
businesses and products
December 31, 2017
December 31, 2016
Shares Percentage of ownership
Carrying value
ownership during the period
(losses) of investee
profits/losses of investee Note
(Continued)
Wintop Namtex Vietnam Wearing - 50.00% 157,830 50.00% (14,587) (12,045) The Company indirectly holds 50% of ownership
Ecolot Top Shiny Hong Kong Investment holding 1,200,000 100.00% 42,238 100.00% 1,084 1,084 Subsidiary
Top Shiny Texlot Company Limited (Texlot)
British Virgin Islands
Investment holding 1,500 6.88% 19,866 6.88% (16,040) (1,100) Associate
Note: The aforementioned transactions between the Company and subsidiaries have been eliminated when preparing the consolidatedfinancial statements.
Note: Investment gain or loss recognized in the current period included sales from subsidiaries to parent company.
(c) Information on overseas branches and representative offices:
(i) The names of investees in Mainland China, the main businesses and products, and other information:
(In thousands of New Taiwan Dollars) Main Total Accumulated Investment flows Accumulated Net income Accumu lated
Name of investee
businesses and
products
amount of paid-in
capital
Method of
investment
investment paid by Taiwan as ofJanuary 1, 2017 Outflow Inflow
investment paid by Taiwan as of
December 31, 2017
(losses) of the investee
for 2016
Percentage of owership
Percentage of highest ownership
Investment income (losses) Book
value
remittance of earnings as of
this year CFY Manufacture of
garments - 2 98,360 - 31,132 67,228
(Note 1)
2,205 -% 100% 2,205 - -
CMK Manufacture ofgarments
65,448 2 65,448 - - 65,448 1,507 100.00% 100% 1,507 89,621 -
CMZ Manufacture ofgarments
117,740 2 117,740 - - 117,740 2,873 100.00% 100% 2,873 159,666 7,304
CJY Manufacture ofgarments
68,120 2 155,700 - 87,580 68,120 4,518 100.00% 100% 4,518 61,431 -
CJR Manufacture ofgarments
94,302 2 94,302 - - 94,302 (3,347) 100.00% 100% (3,347) 43,689 -
CBS Trade service 11,039 2 11,039 - - 11,039 2,228 100.00% 100% 2,228 22,371 -
Note 1: There are three kinds of investments 1.Invest directly in Mainland China companies. 2.Invest in Mainland China by remitting through a third region. 3.Others.
Note 2: CFY was liquidated on August 9, 2017, the accumulated outflow of investment from Taiwan as of December 31, 2017 is including the amount of capital reduction for cover accumulated deficits.
(ii) Limitation on investment in Mainland China:
Accumulated Investment in Mainland China as of December 31, 2017
Investment Amounts Authorized by Investment Commission, MOEA
Upper Limit on Investment
423,877 591,677 5,039,044
213
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(Continued)
(iii) Significant transactions:
The significant inter-company transactions with the subsidiaries in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in
Information on significant transactions .
(14) Segment information
(a) General information
The Group s reportable operating segment is the selling and manufacturing of garments.
The other segments of the Group are mainly information collecting and procurement. The segments did not reach the quantitative disclosure threshold in 2017 and 2016.
(b) Information on measurement basis and reconciliation of reportable segments income or loss, assets, and liabilities
The Group has one reportable segment, which is one of the strategic business units of the Group. Each of the Group s strategic business units provides different products and services. For management purposes, the Group manages its strategic business units separately according to their technologies and marketing strategies. The chief operating decision maker of the Group periodically reviews the internal management report of each strategic business unit. The Group ssegments were as follows:
2017
Selling and manufacturing of
garments Other segmentsAdjustments
and cancellation Total Revenue
Revenue from third parties $ 21,614,955 760,045 - 22,375,000
Total revenue $ 21,614,955 760,045 - 22,375,000
Segment income or loss (Note 1) (Note 1) (Note 1) (Note 1)
Segment total asset (Note 1) (Note 1) (Note 1) (Note 1)
2016
Selling and manufacturing of
garments Other segmentsAdjustments
and cancellation Total Revenue
Revenue from third parties $ 21,489,396 638,543 - 22,127,939
Total revenue $ 21,489,396 638,543 - 22,127,939
Segment income or loss (Note 1) (Note 1) (Note 1) (Note 1)
Segment total asset (Note 1) (Note 1) (Note 1) (Note 1)
Note 1: The Group discloses the amounts as zero due to the fact that the amounts of its segment income or loss and total assets were not provided to the chief operating decision maker.
214
MAKALOT INDUSTRIAL CO., LTD. AND ITS SUBSIDIARIES Notes to the Consolidated Financial Statements
(c) Products and services information
2017 2016 Revenue from garments $ 21,614,955 21,489,396
Revenue from services and others 760,045 638,543
$ 22,375,000 22,127,939
(d) Graphical information
Revenue is based on the customer s location. However, the non-current assets are based on their location.
(i) Revenue from third parties
Geographic Area 2017 2016 American region $ 15,989,930 16,899,519
Others 6,385,070 5,228,420
Total $ 22,375,000 22,127,939
(ii) Other non-current assets
Geographic Area December 31, 2017
December 31, 2016
Taiwan $ 2,997,412 3,017,652
Indonesia 851,316 995,430
Vietnam 764,317 764,817
Cambodia 178,176 171,123
China 142,672 280,515
Philippines 17,805 18,039
$ 4,951,698 5,247,576
(e) Major customers
Major customers that represented at least 10% of the net revenue of the Group
2017 2016 Customer name Amount % Amount %
A $ 5,534,752 25 5,195,979 24
B 3,496,450 16 3,176,246 15
C 2,908,015 13 2,880,777 13
D 2,882,768 13 3,816,854 18
$ 14,821,985 67 15,069,856 70
215
Independent Auditors’ Report
To the Board of Directors of Makalot Industrial Co., Ltd.:
Opinion
We have audited the financial statements of Makalot Industrial Co., Ltd. (“the Company”), which comprise the balance sheets as of December 31, 2017 and 2016, the statements of comprehensive income, changes in equity and cash flows for the years ended December 31, 2017 and 2016, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, based on our audits and the other auditors reports (please refer to Other Matter paragraph), the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2017 and 2016, and its financial performance and cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
Basis for Opinion
We conducted our audit in accordance with the Regulations Governing Auditing and Certification of Financial Statements by Certified Public Accountants and the auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Certified Public Accountants Code of Professional Ethics in Republic of China (“the Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtaine and the report from other auditors, is sufficient and appropriate to provide a basis of our opinion.
Other Matter
We did not audit the financial statements of certain investments, with represented investment under equity method of the Company. The financial statements of certain investments under equity method of the Company were audited by other auditors, whose reports have been furnished to us, and our opinion, insofar as it related to the amounts included below, is based solely on the reports of the other auditors. The book value of the investments under equity method audited by other auditors constituted 1% and 2% of the total assets as of December 31, 2017 and 2016, respectively, and the related share of income or loss from these investments under equity method constituted (4)% and (2)% of the profit before income tax for the years then ended as of December 31, 2017 and 2016, respectively.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not express an opinion on these matters, separately.
216
1. Revenue recognition
Please refer to Note 4(o) “Revenue” to the financial statements.
Description of key audit matter
The Company is primarily involved in the manufacturing, processing, and wholesale of garment. Revenuerecognition is the main concern of the users of the financial statements. Therefore, we determined that therevenue recognition is a key audit matter.
How the matter was addressed in our audit
Our principal audit procedures included: understanding the design and effectiveness of the Company'sinternal controls on revenue recognition; assessing whether the revenue recognition was performed inaccordance with the Company's policy; performing trend and comparison analysis on revenue from majorclients to assess the significant exceptions; performing sales cut-off test of a period before and after thefinancial position date by vouching relevant documents of sales transactions to determine whether salestransactions have been appropriately recognized.
2. Inventory valuation
Please refer to Note 4(g) “Inventories”, Note 5 “Significant accounting assumptions and judgments, andmajor sources of estimation uncertainty” and Note 6(d) “Inventories” of the financial statements.
Description of key audit matter
The inventories of the Company are measured at the lower of cost and net realizable value. Since theenvironment in the industry changes rapidly, the cost of inventories might have a risk to exceed the netrealizable value. Therefore, we determined that the assessment of inventory valuation is a key audit matter.
How the matter was addressed in our audit
Our principal audit procedures included: understanding the rationality of the Company's accounting policies,such as the policy of management and valuation of inventories; assessing whether the inventory valuationwas performed in accordance with the Company's policy; performing sampling procedures to understand thenet realizable values used by management and the variation of the prices in a period after the reporting date toensure the appropriateness of the valuation price; sampling and inspecting the accuracy of the inventory agingreport and net realizable value of inventories; asssessing whether the disclosure of provision for inventoryvaluation and obsolescence was appropriate at the reporting date.
3. Derecognition of financial assets
Please refer to Note 4(f) “Financial assets” and Note 6(c) “Factoring and derecognition of accounts receivable”to the financial statements.
Description of key audit matter
The Company factored its accounts receivable to certain financial institutions to manage its credit risk onaccounts receivable. The judgments on derecognition of financial assets involved particular accountingtreatments. Therefore, we determined that the derecognition of financial asset is a key audit matter.
How the matter was addressed in our audit
Our principal audit procedures included: understanding the internal controls of the Company applied infactoring its accounts receivable; reviewing the factoring agreements with banks; assessing whether thefactoring of accounts receivable was performed in accordance with the Company's policy; asssessing whetherthe disclosure of factoring transactions was appropriate, including performing the confirmation procedure.
217
4. Investment under equity method
Please refer to Note 4 (h) and (i) “Investment under equity method” and Note 6 (e) “Details of Investmentunder equity method” to the financial statements.
Description of key audit matter
The investments of the Company under equity method are mainly its subsidiaries all across the globe,wherein amounts of the investments has significant impact on the assets of the Company. Therefore, wedetermined that the investment under equity method is a key audit matter.
How the matter was addressed in our audit
Our principal audit procedures included: understanding the internal controls of the Company applied in theinvestment under equity method; acquiring the detail movements of the investment under equity method andexamining their transaction records and related documents; assessing whether the investment under equitymethod was performed in accordance with the Company's policy; acquiring the detailed calculation of theinvestment under equity method and evaluating whether the Compnay recognizes the share of profit or loss ofits subsidiaries and associates under equity method and the exchange difference on translation of foreignoperations according to the appropriate percentage of the investment; understanding whether the differencebetween the cost of the investment under equity method and the net equity held by the Compnay wasaddressed appropriately by the nature of their differences.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance (including audit committees) are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
1. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud orerror, design and perform audit procedures responsive to those risks, and obtain audit evidence that issufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,intentional omissions, misrepresentations, or the override of internal control.
218
Notes to Readers
The accompanying financial statements are intended only to present the statement of financial position, financial performance and its cash flows in accordance with the accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.
The auditors report and the accompanying financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language auditors report and financial statements, the Chinese version shall prevail.
2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control.
3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by management.
4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based onthe audit evidence obtained, whether a material uncertainty exists related to events or conditions that may castsignificant doubt on the Company’s ability to continue as a going concern. If we conclude that a materialuncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in thefinancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are basedon the audit evidence obtained up to the date of our auditors’ report. However, future events or conditionsmay cause the Company to cease to continue as a going concern.
5. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures,and whether the financial statements represent the underlying transactions and events in a manner thatachieves fair presentation.
6. Obtain sufficient and appropriate audit evidence regarding the financial information of the investment inother entities under equity method to express an opinion on the this financial statements. We are responsiblefor the direction, supervision and performance of the audit. We remain solely responsible for our auditopinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partners on the audit resulting in this independent auditors’ report are Pei-Chi Chen and Chi-Lung Yu.
KPMG
Taipei, Taiwan (Republic of China) March 27, 2018
219
(Eng
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Cur
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ass
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Cas
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Dec
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918,
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32
3,96
1,02
2 32
E
quity
(not
es 6
(j)(n
)(o)
(p)(
u))(
v):
3100
Ord
inar
y sh
ares
2,
093,
872
17
2,06
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9 16
32
00C
apita
l sur
plus
3,
544,
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29
3,40
3,40
3 27
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00R
etai
ned
earn
ings
2,
874,
359
23
2,98
0,72
0 24
34
10Ex
chan
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s on
trans
latio
n of
fina
ncia
l sta
tem
ents
of f
orei
gn
oper
atio
ns
(11
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(1)
139
,918
1T
otal
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ity
8,
398,
407
68
8,59
1,39
0 68
T
otal
liab
ilitie
s and
equ
ity
$ 12
,316
,705
10
0 12
,552
,412
10
0
220
See accompanying notes to financial statements.
(English Translation of Financial Statements and Report Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD. Statements of Comprehensive Income
For the years ended December 31, 2017 and 2016 (expressed in thousands of New Taiwan Dollars , except earnings per share)
2017 2016
Amount % Amount %
4000 Operating revenue, net (note 7) $ 21,571,177 100 21,444,059 1005000 Operating costs (notes 6(d)(k)(m) and 7) 18,422,210 85 18,105,886 84
Gross profit 3,148,967 15 3,338,173 16Operating expenses (notes 6(g)(k)(m)(q) and 12):
6100 Selling expenses 1,001,627 5 1,023,626 56200 Administrative expenses 580,432 3 539,545 3
Total operating expenses 1,582,059 8 1,563,171 8Net operating income 1,566,908 7 1,775,002 8Non-operating income and expenses:
7010 Other income (notes 6(r) and 7) 96,525 - 116,694 17020 Other gains and losses (notes 6(j)(r)(s)) (62,099) - 32,179 -7050 Finance costs (notes 6(j)(r)) (56,935) - (50,569) -7070 Share of profit (loss) of investments under equity method 4,398 - (24,000) -
Total non-operating income and expenses (18,111) - 74,304 17900 Profit before income tax 1,548,797 7 1,849,306 97950 Less: income tax expenses (note 6(n)) 262,711 1 326,446 2
Profit 1,286,086 6 1,522,860 78300 Other comprehensive income: 8310 Items that may not be reclassified subsequently to profit or loss8311 Remeasurements of net defined benefit plans (note 6(m)) (4,010) - (11,924) -8330 Share of other comprehensive income of subsidiaries and associated under equity method,
components of other comprehensive income that may not be reclassified to profit or loss 1,711 - (25,972) -8349 Income tax relating to items that may not be reclassified subsequently to profit or loss (note 6(n)) 681 - - -
(1,618) - (37,896) -8360 Items that may be reclassified subsequently to profit or loss 8361 Exchange difference on translation of foreign operations (254,519) (1) (140,357) (1)8399 Income tax relating to iterns that may be reclassified subsequently to profit or loss - - - -
(254,519) (1) (140,357) (1)8300 Other comprehensive income (256,137) (1) (178,253) (1)
Comprehensive income $ 1,029,949 5 1,344,607 6Earnings per share (note 6(p))
9750 Basic earnings per share (NT dollars) $ 6.18 7.399850 Diluted earnings per share (NT dollars) $ 6.12 7.26
221
See
acco
mpa
n yin
g no
tes t
o fin
anci
al st
atem
ents
.
(Eng
lish
Tra
nsla
tion
of
and
Rep
ort O
rigi
nally
Issu
ed in
Chi
nese
) M
AK
AL
OT
IND
UST
RIA
L C
O.,
LT
D.
Stat
emen
ts o
f Cha
nges
in E
quity
Fo
r th
e ye
ars e
nded
Dec
embe
r 31
, 201
7 an
d 20
16
(Exp
ress
ed in
thou
sand
s of N
ew T
aiw
an D
olla
rs)
Ret
aine
d ea
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gs
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er e
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rest
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y sh
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apita
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plus
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al r
eser
ve
Una
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ted
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otal
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aine
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ence
s on
tran
slat
ion
of fo
reig
n fin
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al st
atem
ents
T
otal
equ
ity
Bal
ance
on
Janu
ary
1, 2
016
$ 1,
987,
306
3,39
7,60
5 1,
178,
109
2,21
0,57
0 3,
388,
679
280,
275
9,05
3,86
5 Pr
ofit
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1,
522,
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$ 2,
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he d
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and
supe
rvis
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rem
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ount
ing
to $
38,6
44 th
ousa
nd a
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and
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s exp
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the
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com
e fo
r the
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nded
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r 31,
201
7 an
d 20
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espe
ctiv
ely.
222
See accompanying notes to financial statements.
(English Translation of Financial Statements and Report Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD.
Statements of Cash Flows For the years ended December 31, 2017 and 2016 (expressed in thousands of New Taiwan Dollars)
2017 2016Cash flows from operating activities:
Profit before tax $ 1,548,797 1,849,306Adjustments:
Adjustments to reconcile profit: Depreciation expense 40,359 32,933Amortization expense 11,093 11,199Net profit on financial assets or liabilities at fair value through profit or loss (12,921) (14,946) Interest expense 31,754 21,312Interest revenue (62,812) (66,838)Share of loss or (profit) of investments under equity method (4,398) 24,000 Loss from disposal of property, plan and equipment - 19,047 Loss (reversal) of receivables impairment 1,422 (4,056)
Total adjustments to reconcile profit 4,497 22,651Changes in operating assets and liabilities:
Changes in operating assets: Held-for-trading financial assets - 8,080Notes receivable - 36Accounts receivable (150,025) (164,789)Accounts receivable due from related parties - 48,891Other receivable due from related parties (79,890) (27,030)Inventories 240,089 370,837Other financial assets (147,313) (663,812)Other operating assets 17,628 112,902
Total changes in operating assets (119,511) (314,885)Changes in operating liabilities:
Notes payable (4,748) (3,312)Accounts payable (58,373) (144,153)Accounts payable to related parties 316,391 230,198Other payable (39,581) (194,741)Other payable to related parties 14,311 (50,366)Other current liabilities (10,188) 2,922Accrued pension liabilities (12,602) (44,351)Other operating liabilities (21,026) 2,814
Total changes in and operating liabilities 184,184 (200,989)Total changes in operating assets or liabilities 64,673 (515,874)Total adjustments 69,170 (493,223)
Cash inflow generated from operations 1,617,967 1,356,083 Interest received 62,767 66,898Interest paid (29,980) (17,103)Income taxes paid (236,623) (529,992)
Net cash flows from operating activities 1,414,131 875,886Cash flows from (used in) investing activities:
Acquisition of investments under equity method (12,020) (146,012) Disposal of investments under equity method 120,159 31,296 Acquisition of property, plant and equipment (32,073) (119,050) Increase in long-term prepayments 2,064 (5,094) Proceeds from disposal of property, plant and equipment - 270 Decrease in refundable deposits - 5,823 Increase in other receivables due from related parties (9,973) (180,407) Acquisition of intangible assets (2,582) (1,210) Dividends received 45,774 5,937
Net cash flows from (used in) investing activities 111,349 (408,447)Cash flows used in financing activities:
Increase (decrease) in short-term borrowings (74,372) 348,916 Cash dividends paid (1,390,829) (1,892,923)
Net cash used in financing activities (1,465,201) (1,544,007)Net increase (decrease) in cash and cash equivalents 60,279 (1,076,568)Cash and cash equivalents at beginning of period 888,830 1,965,398Cash and cash equivalents at end of period $ 949,109 888,830
223
(Continued)
(English Translation of Financial Statements and Report Originally Issued in Chinese) MAKALOT INDUSTRIAL CO., LTD.
Notes to the Financial Statements For the years ended December 31, 2017 and 2016
(expressed in thousands of New Taiwan Dollars, unless otherwise specified)
(1) Company history
Makalot Industrial Co., Ltd. (the Company) was incorporated in January 10, 1990 and registered with the Ministry of Economic Affairs, R.O.C. The address of the Company’s registered office is 8F No.550 Sec. 4 Zhongxiao E. Rd., Taipei City. The Company is primarily involved in the manufacturing, processing, and wholesaling of garments.
(2) Approval date and procedures of the financial statements
The parent-company-only financial statements were authorized for issue by the board of directors on March 27, 2018.
(3) New standards, amendments and interpretations adopted
(a) The impact of the International Financial Reporting Standards (“IFRSs”) endorsed by the Financial Supervisory Commission, R.O.C. (“FSC”) which have already been adopted.
The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2017:
New, Revised or Amended Standards and Interpretations Effective date
per IASB Amendments to IFRS 10, IFRS 12 and IAS 28 "Investment Entities: Applying the Consolidation Exception"
January 1, 2016
Amendments to IFRS 11 "Accounting for Acquisitions of Interests in Joint Operations"
January 1, 2016
IFRS 14 "Regulatory Deferral Accounts" January 1, 2016Amendment to IAS 1 " Presentation of Financial Statements-Disclosure Initiative January 1, 2016Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of Depreciation and Amortization"
January 1, 2016
Amendments to IAS 16 and IAS 41 "Agriculture: Bearer Plants" January 1, 2016Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014Amendment to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016Amendments to IAS 36 " Impairment of Non-Financial assets- Recoverable Amount Disclosures for Non Financial Assets"
January 1, 2014
Amendments to IAS 39 " Financial Instruments-Novation of Derivatives and Continuation of Hedge Accounting"
January 1, 2014
Annual Improvements to IFRSs 2010-2012 Cycle and 2011-2013 Cycle July 1, 2014Annual Improvements to IFRSs 2012-2014 Cycle January 1, 2016IFRIC 21 "Levies" January 1, 2014
224
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements.
(b) The impact of IFRS endorsed by FSC but not yet effective
The following new standards, interpretations and amendments have been endorsed by the FSC and are effective for annual periods beginning on or after January 1, 2018 in accordance with Ruling No. 1060025773 issued by the FSC on July 14, 2017. :
New, Revised or Amended Standards and Interpretations Effective date
per IASB Amendment to IFRS 2 "Clarifications of Classification and Measurement of Share-based Payment Transactions"
January 1, 2018
Amendments to IFRS 4 "Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts"
January 1, 2018
IFRS 9 "Financial Instruments" January 1, 2018 IFRS 15 "Revenue from Contracts with Customers" January 1, 2018 Amendment to IAS 7 "Statement of Cash Flows -Disclosure Initiative" January 1, 2017 Amendment to IAS 12 "Income Taxes- Recognition of Deferred Tax Assets for Unrealized Losses"
January 1, 2017
Amendments to IAS 40 "Transfers of Investment Property" January 1, 2018 Annual Improvements to IFRS Standards 2014–2016 Cycle:
Amendments to IFRS 12 January 1, 2017 Amendments to IFRS 1 and Amendments to IAS 28 January 1, 2018
IFRIC 22 "Foreign Currency Transactions and Advance Consideration" January 1, 2018
Except for the following items, the Company believes that the adoption of the above IFRSs would not have any material impact on its financial statements. The extent and impact of signification changes are as follows:
(i) IFRS 9 "Financial Instruments"
IFRS 9 replaces IAS 39 "Financial Instruments: Recognition and Measurement" which contains classification and measurement of financial instruments, impairment and hedge accounting.
1) Classification- Financial assets
IFRS 9 contains a new classification and measurement approach for financial assets thatreflects the business model in which assets are managed and their cash flowcharacteristics. IFRS 9 contains three principal classification categories for financialassets: measured at amortized cost, fair value through other comprehensive income(FVOCI) and fair value through profit or loss (FVTPL). The standard eliminates theexisting IAS 39 categories of held to maturity, loans and receivables and available forsale. Under IFRS 9, derivatives embedded in contracts where the host is a financial assetsin the scope of the standard are never bifurcated. Instead, the hybrid financial instrumentas a whole is assessed for classification. In addition, IAS 39 has an exception to the
225
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
measurement requirements for investments in unquoted equity instruments that do not have a quoted market price in an active market (and derivatives on such an instrument) and for which fair value cannot therefore be measured reliable. Such financial instruments are measured at cost. IFRS 9 removes this exception, requiring all equity investments (and derivatives on them) to be measured at fair value.
Based on its assessment, the Company believes that the new classification requirements would not have a material impact on its accounting for trade receivables, and investments in equity securities that are managed on a fair value basis.
2) Impairment-Financial assets and contact assets
IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expectedcredit loss’ (ECL) model. This will require considerable judgment as to how changes ineconomic factors affect ECLs, which will be determined on a probability-weighted basis.
The new impairment model will apply to financial assets measured at amortized cost orFVOCI, except for investments in equity instruments, and to contract assets.
Under IFRS 9, loss allowances will be measured on either of the following bases:
12-month ECLs. These are ECLs that result from possible default events within the 12months after the reporting date; and
lifetime ECLs. These are ECLs that result from all possible default events over the expected life of a financial instrument.
Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset’s credit risk has not increased significantly if the asset has low credit risk at the reporting date. However, lifetime ECL measurement always applies for trade receivables and contract assets without a significant financing component; an entity may choose to apply this policy also for trade receivables and contract assets with a significant financing component.
The Company believes that the application of IFRS 9 “ impairment requirements” would not have any material impact on its financial statements.
3) Disclosures
IFRS 9 will require extensive new disclosures, in particular about hedge accounting,credit risk and expected credit losses. The Company’s assessment included an analysis toidentify data gaps against current processes and the Company plans to implement thesystem and controls changes that it believes will be necessary to capture the requireddata.
226
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
4) Transition
Changes in accounting policies resulting from the adoption of IFRS 9 will generally beapplied retrospectively, except as described below.
The Company plan to take advantage of the exemption allowing it not to restatecomparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 generally will be recognized in retained earnings and reserves as at January 1, 2018.
The following assessments have to be made on the basis of the facts and circumstances that exist at the date of initial application.
– The determination of the business model within which a financial asset is held.
– The designation and revocation of previous designations of certain financialassets and financial liabilities as measured at FVTPL.
– The designation of certain investments in equity instruments not held for tradingas at FVOCI.
(ii) IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 "Revenue" and IAS 11 "Construction Contracts".
1) Sales of goods
For the sale of products, revenue is currently recognized when the related risks andrewards of ownership transfer. Revenus is recognized at this point provided that therevenue and costs can be measured reliably, the recovery of the consideration is probableand there is no continuing management involvement with the goods. Under IFRS 15,revenue will be recognized when a customer obtains control of the goods. Based on itsassessment according to the IFRS 15, the Group does not believe that its revenue andsome associated costs which have been recognized for these contracts would have hadany material differences.
2) Transition
The Company plans to adopt IFRS 15 in its financial statments using the retrospectiveapproach. As a result, the Company will apply all of the requirements of IFRS 15 toeach comparative period presented and adjust its financial statements. The Companyplans to use the practical expedients for completed contracts. This means that completedcontracts that began and ended in the same comparative reporting period, as well as thecomtracts that are completed contracts at the beginning of the earliest period presented(January 1, 2017) are not restated.
However, the Company does not expect the above changes on accounting policy wouldhave had any significant impact on the amount for revenue.
227
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(iii) Amendments to IAS 7 "Disclosure Initiative"
The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow and non-cash changes.
To satisfy the new disclosure requirements, the Company intends to present a reconciliation between the opening and closing balances for liabilities with changes arising from financing activities.
(iv) Amendments to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Loss"
The amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value.
The actual impacts of adopting the standards may change depending on the economic conditions and events which may occur in the future.
(c) The impact of IFRS issued by IASB but not yet endorsed by the FSC
As of the date the following IFRSs that have been issued by the IASB, but not yet endorsed by the FSC:
New, Revised or Amended Standards and Interpretations Effective date
per IASB Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets Between an Investor and Its Associate or Joint Venture"
Effective date to be determined by IASB
IFRS 16 "Leases" January 1, 2019 IFRS 17 "Insurance Contracts" January 1, 2021 IFRIC 23 "Uncertainty over Income Tax Treatments" January 1, 2019 Amendments to IFRS 9 "Prepayment features with negative compensation" January 1, 2019 Amendments to IAS 28 "Long-term interests in associates and joint ventures" January 1, 2019 Annual Improvements to IFRS Standards 2015–2017 Cycle January 1, 2019 Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” January 1, 2019
228
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
Those which may be relevant to The Company are set out below:
Issuance / Release Dates
Standards or Interpretations Content of amendment
January 13, 2016 IFRS 16 "Leases" The new standard of accounting for lease is amended as follows:
For a contract that is, or contains, a lease, the lessee shall recognize a right of use asset and a lease liability in the balance sheet. In the statement of profit or loss andother comprehensive income, a lessee shall present interest expense on the lease liability separately from the depreciation charge for the right of-use asset during the lease term.
A lessor classifies a lease as either afinance lease or an operating lease, andtherefore, the accounting remains similarto IAS 17.
The Company is evaluating the impact on its financial position and financial performance upon the initial adoption of the abovementioned standards or interpretations. The results thereof will be disclosed when the Company completes its evaluation.
(4) Summary of significant accounting policies
The parent-company-only financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language parent-company-only financial statements, the Chinese version shall prevail.
The significant accounting policies presented in the parent-company-only financial statements are summarized below. Except for those specifically indicated, the following accounting policies were applied consistently throughout the periods presented in the parent-company-only financial statements.
(a) Statement of compliance
The parent-company-only financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.
(b) Basis of preparation
(i) Basis of measurement
Except for the following significant accounts, the financial statements have been prepared on a historical cost basis:
1) Financial instruments measured at fair value through profit or loss (including derivativefinancial instruments); and
229
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
2) The defined benefit liability (asset) is recognized as the fair value of the plan assets lessthe present value of the defined benefit obligation.
(ii) Functional and presentation currency
The functional currency of the Company is determined based on the primary economic environment in which the Company operate. The financial statements are presented in New Taiwan Dollars, which is the Company’s functional currency. All financial information presented in New Taiwan Dollars has been rounded to the nearest thousand.
(c) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of the Company at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at the reporting date. The foreign currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the beginning of the year adjusted for the effective interest and payments during the year, and the amortized cost in foreign currency translated at the exchange rate at the reporting date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Exchange differences arising on retranslation are included in profit or loss.
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to the functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the functional currency at average rate of the reporting periods. Exchange differences arising on retranslation are recognized in other comprehensive income.
When a foreign operation is disposed of such that control, significant influence, or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Company disposes of any part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interest. When the Company disposes of only part of investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
230
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
When the settlement of a monetary receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such such a monetary item that are considered to form part of the net investment in the foreign operation and are recognized in other comprehensive income.
(d) Classification of current and non-current assets and liabilities
An entity shall classify an asset as current when:
(i) It expects to realize the asset, or intends to sell or consume it, in its normal operating cycle;
(ii) It holds the asset primarily for the purpose of trading;
(iii) It expects to realize the asset within twelve months after the reporting date; or
(iv) The asset is cash or a cash equivalent, unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
An entity shall classify all other assets as non-current.
An entity shall classify a liability as current when:
(i) It expects to settle the liability in its normal operating cycle;
(ii) It holds the liability primarily for the purpose of trading;
(iii) The liability is due to be settled within twelve months after the reporting period; or
(iv) It does not have an unconditional right to defer settlement of the liability for at least twelve months after the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.
(e) Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand deposits. Cash equivalents that are readily convertible to known amounts of cash are subject to an insignificant risk of changes in value. Time deposits which meet the above definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes should be classified as cash equivalents.
Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
(f) Financial instruments
Financial assets and financial liabilities are initially recognized when the Company becomes a party to the contractual provisions of the instruments.
231
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(i) Financial assets
The Company classifies financial assets into the following categories: financial assets at fair value through profit or loss, and loans and receivables.
1) Financial assets at fair value through profit or loss
Financial assets classified under this category are mainly the financial assets held fortrading or financial assets reported at fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired principally for thepurpose of repurchasing or selling in the short term.
The Company designates financial assets, other than those classified as held for trading,as at fair value through profit or loss at initial recognition under one of the followingsituations:
a) Designation eliminates or significantly reduces a measurement or recognitioninconsistency that would otherwise arise from measuring the assets or liabilities orrecognizing the gains and losses on them on a different basis;
b) Performance of the financial asset is evaluated on a fair value basis;
c) A hybrid instrument contains one or more embedded derivatives.
Financial assets in this category are measured at fair value at initial recognition. Attributable transaction costs are recognized in profit or loss as incurred. Subsequent valuation is measured at fair value, and changes therein, which take into account any dividend and interest income, are recognized in profit or loss. A regular way purchase or sale of financial assets is recognized and derecognized, as applicable, using trade-date accounting.
If this type of financial assets is classified as equity investment that does not have any quoted market price in an active market and the fair value cannot be measured reliably, this type of financial assets is measured at cost after deducting the impairment loss and is reported under “financial assets measured at cost”.
2) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that arenot quoted in an active market. Loans and receivables comprise trade receivables andother receivables. Such assets are recognized initially at fair value, plus any directlyrelated transaction costs. Subsequent to initial recognition, loans and receivables otherthan insignificant interest on short-term receivables are measured at amortized cost usingthe effective interest method, less any impairment losses. A regular way purchase orsale of financial assets shall be recognized and derecognized, as applicable, usingtrade-date accounting.
232
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
3) Impairment of financial assets
A financial asset which is not measured at fair value through profit or loss is evaluatedfor impairments at the reporting date.
A financial asset is impaired if, and only if, there is objective evidence of impairment as aresult of one or more events (a loss event) that occurred subsequent to the initialrecognition of the asset and that loss event (or events) has an impact on the future cashflows of the financial assets that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by adebtor, restructuring of an amount due to the Company on terms that the Company wouldnot consider otherwise, indications that a debtor or issuer will enter bankruptcy, adversechanges in the payment status of borrowers or issuers, economic conditions that correlatewith defaults, or the disappearance of an active market for a security.
All individually significant receivables are assessed for specific impairment. Receivablesthat are not individually significant are collectively assessed for impairment by groupingtogether assets with similar risk characteristics. In assessing collective impairment, theCompany uses historical trends of the probability of default, the timing of recoveries, andthe amount of loss incurred, adjusted for management’s judgment as to whether currentnational or regional economic conditions are such that actual losses are likely to begreater or less than those suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortized cost iscalculated as the difference between its carrying amount and the present value of itsestimated future cash flows discounted at the asset’s original effective interest rate.
An impairment loss in respect of a financial asset is deducted from the carrying amountexcept for trade receivables, for which an impairment loss is reflected in an allowanceaccount against the receivables. When it is determined a receivable is uncollectible, it iswritten off against the allowance account. Any subsequent recovery of a receivablewritten off is recorded in the allowance account. Changes in the amount of the allowanceaccount are recognized in profit or loss.
If, in a subsequent period, the amount of impairment loss on a financial asset measured atamortized cost decreases and the decrease can be related objectively to an event occurringafter the impairment was recognized, the decrease in impairment loss is reversed throughprofit or loss to the extent that the carrying value of the asset does not exceed itsamortized cost before the impairment loss is recognized at the reversal date.
4) Derecognition of financial assets
The Company derecognizes financial assets only when the contractual rights of the cashinflow from the asset are terminated, or when the Company transfers substantially all therisks and rewards of ownership of the financial assets.
233
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
On derecognition of a financial asset in its entirety, the difference between the carrying amount and the consideration received or receivable shall be recognized in profit or loss.
The Company separates the part that continues to be recognized and the part that is derecognized based on the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part derecognized and the consideration received for the part derecognized shall be recognized in profit or loss.
(ii) Financial liabilities and equity instruments
1) Classification of liabilities or equity instruments
Debt or equity instruments issued by the Company are classified as financial liabilities orequity instruments in accordance with the substance of the contractual agreement.
An equity instrument is any contract that evidence residual interest in the assets of anentity after deducting all of its liabilities. Equity instruments issued by the Company arerecognized as the amount of consideration received, less the direct cost of issuing.
Compound financial instruments issued by the Company comprise convertible bondspayable that can be converted to share capital at the option of the holder when the numberof shares to be issued is fixed.
The liability component of a compound financial instrument is recognized initially at thefair value of a similar liability that does not have an equity conversion option. Theequity component is recognized initially at the difference between the fair value of thecompound financial instrument as a whole and the fair value of the liability component.Any directly attributable transaction costs are allocated to the liability and equitycomponents in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of a compound financialinstrument is measured at amortized cost using the effective interest method. The equitycomponent of a compound financial instrument is not re-measured subsequent to initialrecognition.
Interest, losses or gains related to the financial liability are recognized in profit or loss.
On conversion, the financial liability is reclassified to equity, and no gain or loss isrecognized.
2) Financial liabilities at fair value through profit or loss
Financial liabilities classified under this category are mainly the financial liabilities heldfor trading or financial liabilities reported at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired principally forthe purpose of repurchasing or selling in the short term.
234
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The Company designates all other financial liabilities as at fair value through profit or loss at initial recognition under one of the following situations:
a) Designation eliminates or significantly reduces a measurement or recognitioninconsistency that would otherwise arise from measuring the assets or liabilities orrecognizing the gains and losses on them on a different basis;
b) Performance of the financial liabilities is evaluated on a fair value basis;
c) A hybrid instrument contains one or more embedded derivatives.
Financial liabilities classified under this category are measured at fair value at initial recognition. Related transaction costs are recognized in profit or loss as incurred. Subsequent valuation is measured at fair value, and changes therein, which take into account any interest expense, are recognized in profit or loss.
3) Other financial liabilities
Financial liabilities not classified as held for trading or designated as at fair value throughprofit or loss, which consist of loans and borrowings, and trade and other payables, aremeasured at fair value, plus any directly attributable transaction costs at initialrecognition. Subsequent to initial recognition, they are measured at amortized costcalculated using the effective interest method. Interest expense not capitalized as capitalcost is recognized in profit or loss.
4) Derecognition of financial liabilities
A financial liability is derecognized when its contractual obligation has been dischargedor cancelled, or has expired.
The difference between the carrying amount of a financial liability derecognized and theconsideration paid (including any non-cash assets transferred or liabilities assumed) isrecognized in profit or loss.
5) Offsetting of financial liabilities and assets
The Company presents financial assets and liabilities on a net basis when the Companyhas the legally enforceable rights to offset and intends to settle such financial assets andliabilities on a net basis or to realize the assets and settle the liabilities simultaneously.
(iii) Derivatives and hedge accounting
The Company holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Derivatives are recognized initially at fair value, and related transaction costs are recognized in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are recognized in profit or loss.
235
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(g) Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method and includes expenditure incurred in acquiring the inventories, manufacturing and processing costs, and other costs incurred in bringing the inventories to a salable and useable condition and location. Cost includes an appropriate share of production overheads based on normal operating capacity and is allocated to finished goods and work-in-progress.
Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
(h) Investment in associates
Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20% and 50% of the voting power of another entity.
Investments in associates are accounted for using the equity method and are recognized initially at cost. The cost of investment includes transaction costs. The carrying amount of investment in associates includes goodwill arising from the acquisition, less any accumulated impairment losses.
The parent-company-only financial statements include the Company’s share of the profit or loss and other comprehensive income of subsidiaries and affiliates under the equity method, after adjustments to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence ceases.
Unrealized profits resulting from transactions between the Company and an associate are eliminated to the extent of the Company’s interest in the associate. Unrealized losses on transactions with associates are eliminated in the same way, except to the extent that the underlying asset is impaired.
When the Company’s share of losses exceeds its interest in associates, the carrying amount of the investment, including any long-term interests that form part thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Company has an obligation or has made payments on behalf of the investee.
(i) Investment in subsidiaries
The Company uses the equity method on investees over which the Company has control when preparing the parent-company-only financial statements. The profit or loss for the period and other comprehensive income presented in individual financial statements shall be the same as the allocations of profit or loss for the period and of other comprehensive income attributable to owners of the parent presented in the financial reports prepared on a consolidated basis, and the owners’ equity presented in the individual financial statements shall be the same as the equity attributable to owners of the parent presented in the financial reports prepared on a consolidated basis.
Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions.
236
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(j) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost, less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributed to the acquisition of the asset. The cost of a self-constructed asset comprises the material, labor, any cost directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, and any borrowing cost eligible for capitalization. The cost of software is capitalized as part of the property, plant and equipment if the purchase of the software is necessary for the property, plant and equipment to be capable of operating.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item shall be depreciated separately unless the useful life and depreciation method of a significant part of an item of property, plant and equipment are the same as those of another significant part of that same item.
The gain or loss arising from the derecognition of an item of property, plant and equipment shall be determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item, and it shall be recognized in profit or loss.
(ii) Subsequent cost
Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure can be reasonably assessed, and will flow to the Company. The carrying amount of those parts that are replaced is derecognized. Ongoing repairs and maintenance are expensed as incurred.
(iii) Depreciation
Depreciation is calculated on the cost of an asset less its residual value and is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Items of property, plant and equipment with the same useful life may be grouped in determining the depreciation change. The remainder of the items may be depreciated separately.
If there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, the period of expected use will be the useful life of the asset; otherwise, the asset is depreciated over the shorter of the lease term and its useful life.
Land has an unlimited useful life, and therefore is not depreciated.
237
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The estimated useful lives for the current and comparative years of significant items of property, plant and equipment are as follows:
1) Buildings: 15 to 50 years.
2) Machinery and equipment: 5 years.
3) Office and other equipment: 3 to 5 years.
The depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectation differs from previous estimates, the changes are accounted for as changes in accounting estimates.
(k) Leased
All leases are classified as operating leases; the Company does not recognize them in the balance sheet.
Payments made under an operating lease (excluding insurance and maintenance expenses) are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense over the term of the lease.
Contingent lease payable is recognized as an expense in the period when the lease adjustment is affirmed.
(l) Intangible assets
(i) Other intangible assets
Other intangible assets that are acquired by the Company are measured at cost, less accumulated amortization and any accumulated impairment losses.
(ii) Subsequent expenditure
Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.
(iii) Amortization:
The amortizable amount is the cost of an asset, less its residual value.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date when they are made available for use. The estimated useful lives for the current and comparative periods are 3 to 5 years.
The residual value, amortization period, and amortization method for an intangible asset with a finite useful life shall be reviewed at least annually at each fiscal year-end. Any change shall be accounted for as a change in accounting estimate.
238
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(m) Impairment of non-financial assets
Non-derivative financial assets, except for inventories, deferred tax assets, and assets arising from employee benefits, are assessed at the reporting date for any indication that an asset may be impaired. If any such indication exists, the Company shall estimate the recoverable amount of the asset. If it is not possible to determine the recoverable amount (the higher of fair value, less costs to sell, and its value in use) for the individual asset, then the Company will have to determine the recoverable amount for the asset's cash-generating unit.
The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell, and its value in use. If, and only if, the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset shall be reduced to its recoverable amount. The reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.
The Company assesses at the reporting date whether there is any indication that an impairment loss recognized in prior periods for an asset other than goodwill may no longer exist or may have decreased. An impairment loss recognized in prior periods for an asset other than goodwill shall be reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
Goodwill, intangible assets with indefinite useful lives, and unavailable intangible assets are required to be tested at least annually. Impairment loss is recognized if the recoverable amount is less than the carrying amount.
For the purpose of impairment testing, goodwill acquired in a business combination shall, from the acquisition date, be allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or group of units.
If the carrying amount of the cash-generating units exceeds the recoverable amount of the unit, impairment loss is recognized and is allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.
(n) Provision
A provision is recognized if, as a result of a past event, the Company has a present obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized in profit or loss.
239
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(o) Revenue recognition
(i) Goods sold
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that a discount will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue as the sales are recognized.
(ii) Service
The Company provides consulting services to customers. Revenue from services rendered is recognized in profit or loss in proportion to the stage of completion of the transaction at the reporting date.
(p) Employee benefits
(i) Defined contribution plan
Obligations for contributions to a defined contribution pension plan are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.
(ii) Defined benefit plan
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of a defined benefit pension plan is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair values of any plan assets are deducted. The discount rate is the yield at the reporting date of government bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid.
The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the total of the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the Company. An economic benefit is available to the Company if it is realizable during the life of the plan, or on settlement of the plan liabilities.
When the benefits of a plan are improved, the expense of the increased benefit relating to past service by employees is recognized immediately in profit or loss.
240
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
Remeasurements of the net defined benefit liability (asset), which comprise (1) actuarial gains and losses, (2) the return on plan assets (excluding interest), and (3) the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company reclassifies the amounts recognized from other comprehensive income to retained earnings.
The Company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gain or loss on curtailment or settlement comprises any resulting change in the fair value of plan assets and any change in the present value of the defined benefit obligation.
(iii) Termination benefits
Termination benefits are recognized as an expense when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if the Company has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. If benefits are payable for more than 12 months after the reporting period, then they are discounted to their present value.
(iv) Short-term employee benefits
Short-term employee benefits obligations are measured on an undiscounted basis and are expensed when related service are provided.
A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
(q) Income taxes
Income tax expenses include both current taxes and deferred taxes. Except for expenses related to a business combination or recognized directly in equity or other comprehensive income, all current and deferred taxes shall be recognized in profit or loss.
Current taxes include tax payables and tax receivables on taxable income (losses) for the year calculated using the statutory tax rate on the reporting date or the actual legislative tax rate, as well as tax adjustments related to tax payable in prior years.
Deferred taxes arise due to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases. Deferred taxes are recognized except for the following:
(i) Assets and liabilities that are initially recognized but are not related to the business combination and have no the effect on net income or taxable gains (losses) arising from the transaction.
241
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(ii) Temporary differences arising from equity investments in subsidiaries or joint ventures where there is a high probability that such temporary differences will not reverse.
(iii) Initial recognition of goodwill.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to be applied to the period when the asset is realized or the liability is settled based on tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities may be offset against each other if the following criteria are met:
(i) The entity has the legal right to settle tax assets and liabilities on a net basis; and
(ii) The taxing of deferred tax assets and liabilities fulfils one of the scenarios below:
1) Levied by the same taxing authority; or
2) Levied by different taxing authorities, but where each such authority intends to settle taxassets and liabilities (where such amounts are significant) on a net basis every year of theperiod of expected asset realization or debt liquidation, or where the timing of assetrealization and debt liquidation is matched.
A deferred tax asset should be recognized for the carry forward of unused tax losses, unused tax credits, and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, unused tax credits, and deductible temporary differences can be utilized. Such deferred tax assets shall also be re-evaluated at each reporting date and adjusted based on the probability that the related tax benefit will be realized.
(r) Business combination
Goodwill is measured as the excess of the consideration transferred (which generally is measured at fair value at the acquisition date) and the amount of any non-controlling interest in the acquiree over net fair value at the acquisition date of the identifiable assets acquired and the liabilities assumed (generally at fair value). If the residual balance is negative, the Company shall reassess whether it has correctly identified all of the assets acquired and liabilities assumed, and recognize a gain on the bargain purchase thereafter.
For each business combination, non-controlling interest in the acquiree is measured either at acquisition-date fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.
In a business combination achieved in stages, the Company re-measures its previously held equity interest in the acquiree at its acquisition-date fair value, and the resulting gain or loss, if any, is recognized in profit or loss. Changes in equity of investees recognized in other comprehensive income before the acquisition date should be settled in the same manner as the Company disposed directly of the previously held equity interest. If the disposal of the equity interest requires a reclassification to profit or loss, such amount shall be reclassified to profit or loss.
242
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, provisional amounts for the items for which the accounting is incomplete are reported in the Company’s financial statements. During the measurement period, the provisional amounts recognized at the acquisition date are retrospectively adjusted, or additional assets or liabilities are recognized to reflect any new information obtained about facts and circumstances that existed as of the acquisition date. The measurement period should not exceed one year from the acquisition date.
Except for the issuance of debt and equity instruments, all transaction costs related to the business combination should be recognized immediately as the Company’s expenses when incurred.
(s) Earnings per share
The Company reports the basic earnings per share and the diluted earnings per share. The basic earnings per share are calculated as the profit attributable to the ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The diluted earnings per share are calculated as the profit attributable to ordinary shareholders of the Company divided by the weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares. The Company’s dilutive potential ordinary shares comprise convertible bonds and accrued employee bonus.
(t) Operating segments
The Company has already disclosed the segment information in the consolidated financial statements; therefore, the Company will not disclose the segment information again in the separate financial statements.
(u) Share-based payment
The grant-date fair value of share-based payment awards granted to employees is recognized as employee expenses, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards.
(5) Significant accounting assumptions and judgments, and major sources of estimation uncertainty
The preparation of the financial statements in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issurers requires management to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.
The management continues to monitor the accounting estimates and basic assumptions. The management recognizes any changes in accoutning estimated during the period and the impact of those changes in accounting estimates in the following period.
Information about judgments made in applying accounting policies that have the significant effects on the amounts recognized in the individual financial statements is disclosed in note 6(d) inventories.
243
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(6) Explanation of significant accounts
(a) Cash and cash equivalents
December 31, 2017
December 31, 2016
Cash $ 913 1,047Checking accounts and demand deposits 833,786 792,901Time deposits 114,410 94,882
$ 949,109 888,830
Please refer to note 6(s) for the sensitivity analysis and interest rate risk of the financial assets and liabilities of the Company.
(b) Financial assets and liabilities at fair value through profit or loss
(i) The details of the financial assets and liabilities at fair value through profit or loss were as follows:
December 31, 2017
December 31, 2016
Financial assets held for trading $ 62,748 51,156Financial liabilities held for trading $ - 1,329
(ii) Derivatives not applying hedge accounting
The Company entered into derivative contracts to manage exposures due to fluctuations of foreign exchange rates. For the year ended December 31, 2016, the details of derivatives held for trading which did not apply hedge accounting were as follows:
December 31, 2016 Amount
(in thousands) Currency Maturity dates Forward exchange contracts sold USD 2,000 USD to CNY 2017.1.12~2017.3.21 Forward exchange contracts sold USD 6,000 USD to TWD 2017.1.3~2017.1.19
244
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(c) Notes receivable, accounts receivable, and other receivables (including amount due from related parties)
(i) The details of notes receivable, accounts receivable, and other receivales were as follows:
December 31, 2017
December 31, 2016
Accounts receivable $ 591,862 441,837 Other receivalbe 125,053 45,163 Other financial assets current 1,776,851 1,629,473
Less: allowance for doubtful accounts (5,918) (4,496)$ 2,487,848 2,111,977
There was no overdue but unimpaired notes receivable, accounts receivable, and other receivables of the Company.
The movement in the allowance for doubtful accounts with respect to notes receivable, accounts receivable, and other receivables of the Company for 2017 and 2016 was as follows:
Individually assessed for impairment
Collectively assessed for impairment Total
Beginning balance as of January 1, 2017 $ - 4,496 4,496 Impairment loss recognized - 1,422 1,422Ending balance as of December 31, 2017 $ - 5,918 5,918
Individually assessed for impairment
Collectively assessed for impairment Total
Beginning balance January 1, 2016 $ 5,296 5,050 10,346 Impairment loss recognized - 1,240 1,240 Impairment loss reversed (5,296) - (5,296) Amounts written off - (1,794) (1,794)Ending balance as of December 31, 2016 $ - 4,496 4,496
None of the accounts receivable and notes receivable held by the Company were pledged or collateralized as of December 31, 2017 and 2016.
245
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(ii) The Company factored its accounts receivable to certain financial institutions without recourse, and under the agreements, the Company is not required to bear the risk of uncollectible accounts receivable within the factoring credit limit. The factored accounts receivable conform to the derecognition criteria when the ownership and the significant risks of the factored accounts receivable are transferred to the financial institutions. As of December 31, 2017 and 2016, the factored accounts receivable were $1,774,388 thousand and $1,620,267 thousand, respectively, and they were included in “other financial assets current” in the accompanying balance sheets.
(iii) As of December 31, 2017 and 2016, the relevant information on derecognized accounts receivable factored was as follows:
December 31, 2017 Factoring financial
institution Factoring
credit limit
Advance amount
credit limit
Factored amount (Derecognized
amount) Advance amount
nterest rate
Important derecognized
provision Collateral HSBC Bank USD 113,000
thousand USD 101,700 thousand
$ 1,562,892 591,959 (Note 2) (Note 1) Promissory note USD87,850thousand
(Note 3)
Standard Chartered Bank USD 1,000 thousand
USD 1,000 thousand
- - None
CTBC Bank USD 26,800 thousand
USD 24,120 thousand
179,768 - None
E.SUN Commercial Bank USD 19,000 thousand
USD 17,100 thousand
3,407 - Promissory note USD21,600thousand
Mizuho Bank USD 25,000 thousand
USD 22,500 thousand
373,774 168,404 None
Sumitomo Mitsui Bank USD 56,000 thousand
USD 56,000 thousand
1,383,694 1,014,232 Promissory note USD6,030 thousand
Bank SinoPac USD 5,000 thousand
USD 4,500 thousand
45,448 -
Total $ 3,548,983 1,774,595
December 31, 2016Factoring financial
institution Factoring
credit limit
Advance amount
credit limit
Factored amount (Derecognized
amount) Advance amount
nterest rate
Important derecognized
provision Collateral HSBC Bank USD 100,000
thousand USD 90,000 thousand
$ 1,130,941 624,407 (Note 2) (Note 1) Promissory note USD95,050thousand
(Note 3)
Standard Chartered Bank USD 5,500 thousand
USD 5,500 thousand
3,974 3,557 None
CTBC Bank USD 70,700 thousand
USD 63,630 thousand
821,463 147,099 None
E.SUN Commercial Bank USD 24,000 thousand
USD 21,600 thousand
684,136 411,097 Promissory note USD21,600thousand
Mizuho Bank USD 20,000 thousand
USD 18,000 thousand
144,911 61,544 None
Bank SinoPac USD 5,000 thousand
USD 4,500 thousand
82,546 - Promissory note USD5,000thousand
Total $ 2,867,971 1,247,704
Note 1:According to the accounts receivable purchase agreements or the approval letters issued by the factoring financial institutions, the accounts receivable were factored without recourse. The funds are transferred to the appointed reserve accounts or directly to the factoring financial institutions.
Note 2:For 2017 and 2016, the average interest rates on factored accounts receivable were 1.14%~2.30% and 0.82%~2.15%, respectively.
Note 3:The aggregate credit limit of the promissory note includes letters of credit, export bill negotiations, borrowings, derivatives, and accounts receivable factored.
246
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(d) Inventories
December 31, 2017
December 31, 2016
Raw materials $ 1,952,430 2,195,111Finished goods 34,894 32,302
$ 1,987,324 2,227,413
In 2016, the write-downs of inventories to the net realizable value amounted to $27,615 thousand. In 2017, the reversal of write-downs amounted to $12,719 thousand. The write-downs and reversals were included in cost of goods sold.
None of the inventories held by the Company were pledged as collateral as of December 31, 2017 and 2016.
(e) Investment under equity method
A summary of the Company’s financial information for equity-accounted investees at the reporting date is as follows:
December 31, 2017
December 31, 2016
Subsidiaries $ 1,758,328 2,019,742
(i) Subsidiaries
Please refer to the consolidated financial statements.
(ii) Collateral
None of the investment under the equity method held by the Company was pledged as collateral as of December 31, 2017 and 2016.
(f) Property, plant and equipment
The cost, depreciation and impairment loss of the property, plant and equipment of the Company for the years ended December 31, 2017 and 2016, were as follows:
Land Buildings Machinery Office and other
equipment Total Cost
Balance at January 1, 2017 $ 2,538,791 447,755 34,433 80,470 3,101,449 Additions - 5,376 5,196 21,501 32,073 Reclassification - 255 219 (474) - Balance at December 31, 2017 $ 2,538,791 453,386 39,848 101,497 3,133,522
247
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
Land Buildings Machinery Office and other
equipment Total
(Continued)
Balance at January 1, 2016 $ 2,538,791 344,535 50,266 151,489 3,085,081 Additions - 91,508 1,402 26,140 119,050 Disposals - - (17,324) (96,779) (114,103) Reclassification - 11,712 89 (380) 11,421Balance at December 31, 2016 $ 2,538,791 447,755 34,433 80,470 3,101,449
Depreciation and impairment loss:Balance at January 1, 2017 $ - 54,933 24,403 39,958 119,294 Depreciation for the year - 26,870 2,150 11,339 40,359 Reclassification - 4 152 (156) - Balance at December 31, 2017 $ - 81,807 26,705 51,141 159,653 Balance at January 1, 2016 $ - 33,825 37,249 110,304 181,378 Depreciation for the year - 21,108 1,591 10,234 32,933 Disposals - - (14,437) (80,349) (94,786) Reclassification - - - (231) (231)Balance at December 31,2016 $ - 54,933 24,403 39,958 119,294
Carrying amounts:Balance at December 31, 2017 $ 2,538,791 371,579 13,143 50,356 2,973,869 Balance at December 31, 2016 $ 2,538,791 392,822 10,030 40,512 2,982,155 Balance at January 1, 2016 $ 2,538,791 310,710 13,017 41,185 2,903,703
Please refer to note 8 for assets pledged as collateral for loans as of December 31, 2017 and 2016.
(g) Intangible assets
The movements of cost, amortization, and impairment losses of intangible assets in 2017 and 2016 were as follows:
Intangible assetsCost:
Balance at January 1, 2017 $ 164,945Purchases 2,582Balance at December 31, 2017 $ 167,527Balance at January 1, 2016 $ 163,405Purchase 1,210Reclassification 330Balance at December 31, 2016 $ 164,945
248
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
Intangible assets
(Continued)
Accumulated amortization and impairment losses: Balance at January 1, 2017 $ 145,187Amortization for the year 11,093Balance at December 31, 2017 $ 156,280Balance at January 1 ,2016 133,988Amortization for the year 11,199Balance at December 31, 2016 $ 145,187
Carrying value: Balance at December 31, 2017 $ 11,247Balance at December 31, 2016 $ 19,758Balance at January 1, 2016 $ 29,417
Amortization expenses for the years ended December 31, 2017 and 2016, were recognized as operating expenses in the comprehensive income statements, amounting to $11,093 thousand and $11,199 thousand, respectively.
(h) Other current and noncurrent assets
The details of other current and noncurrent assets were as follows:
December 31,2017
December 31, 2016
Prepayments for land, equipment, and construction in progress $ 3,656 5,720Prepayments for inventory 2,919 3,934Prepaid for inventory- related parties 20,093 80,257Refundable deposits 3,778 3,778Other 76,946 33,414
$ 107,392 127,103
(i) Short-term borrowings
December 31,2017
December 31, 2016
L/C $ - 171,195Unsecured bank loans 277,586 180,763
$ 277,586 351,958Unused facilities $ 4,270,743 2,725,062Range of interest rates 1.14%~2.30% 0.86%~1.54%
249
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(j) Convertible bond payable
The details of convertible bond payable of the Company were as follows:
December 31, 2017
December 31, 2016
Amount of convertible bond issued $ 700,000 700,000Unamortized bond discount - (1,845)Cumulative converted amount (700,000) (531,900)Balance of convertible bond - 166,255Less: current portion - (166,255)
$ - -Embedded derivative put and call options (accounted for as
financial liabilities at fair value through profit or losscurrent $ - -
Equity component conversion options (accounted for as capital surplus) $ - 12,867
2017 2016 Embedded derivative put and call options (accounted for
as evaluation loss (gain) on financial instruments) $ - (733)
Interest expense (accounted for as finance cost) $ 1,641 3,953
The Company issued the No. 4 five-years unsecured convertible bonds in Taiwan without coupon rate. These convertible bonds cover a period from August 24, 2012, to August 24, 2017.
At any time during the period from September 25, 2012, to July 15, 2017, the Company may redeem the bonds with cash at face value with certain circumstances.
At any time on or after August 24, 2015, the bondholders may request the Company to repurchase the convertible bond at 100.7519% of the face value. During the period from July 25, 2016, to August 25, 2016, the bondholders may request the Company to repurchase the convertible bond at 101.0038% of the face value.
The bondholders may request conversion of the bond to the Company’s common stock at any time during the period from September 25, 2012, to August 14, 2017. The Company will pay the principal in cash when the bonds are not converted into common stock nor redeemed at the maturity date.
250
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(k) Operating lease
Non-cancellable operating lease rentals were payable as follows:
December 31, 2017
December 31, 2016
Less than one year $ 11,381 11,381Between one and five years - 11,381
$ 11,381 22,762
For the years ended December 31, 2017 and 2016, operating lease expenses were $13,046 thousand and $23,867 thousand, respectively.
(l) Provisions
Provisions Balance at January 1,2017 $ 161,490 Provisions used during the year (24,144) Balance at December 31,2017 $ 137,346
Balance at January 1,2016 $ 162,562 Provisions used during the year (1,072) Balance at December 31,2016 $ 161,490
Provisions mainly are accrued for abnormal losses from operation and others.
(m) Employee benefits
(i) Defined benefit plans
The present value of defined benefit obligations and the fair value of plan assets were as follows:
December 31, 2017
December 31, 2016
Present value of the defined benefit obligations $ (101,490) (134,340)Fair value of plan assets 47,398 71,656Net defined benefit (liabilities) assets $ (54,092) (62,684)
The employee benefits liabilities of the Company was as follows:
December 31, 2017
December 31, 2016
Employee paid leave liabilities $ 17,588 14,470
251
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The Company makes defined benefit plan contributions to the pension fund account with Bank of Taiwan that provides pensions for employees upon retirement. The plan (covered by the Labor Standards Law) entitles a retired employee to receive retirement benefits based on years of service and average monthly salary for the six months prior to retirement.
1) Composition of the plan assets
The Company allocates pension funds in accordance with the Regulations for Revenues,Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such fundsare managed by the Bureau of Labor Funds, Ministry of Labor. With regard to theutilization of the funds, minimum earnings shall be no less than the earnings attainablefrom two-year time deposits with interest rates offered by local banks.
The Company’s Bank of Taiwan labor pension reserve account balance amounted to$47,216 thousand as of December 31, 2017. For information on the utilization of thelabor pension fund assets, including the asset allocation and yield of the fund, please referto the website of the Bureau of Labor Funds, Ministry of Labor.
2) Movements in present value of the defined benefit obligations
The moverments in present value of the defined benefit obligations for the Companywere as follows:
2017 2016 Defined benefit obligations on January 1 $ 134,340 126,375 Current service costs and interest costs 3,266 4,421 Remeasurement of net defined benefit
obligations (assets) 3,821 11,865 Benefits paid (39,937) (8,321)Defined benefit obligations on December 31 $ 101,490 134,340
3) Movements in fair value of the plan assets
The moverments in the present value of the defined plan assets for the Company wereas follows:
2017 2016 Fair value of plan assets on January 1 $ 71,656 31,264 Return of plan assets 760 503 Remeasurement of net defined benefit
(obligations assets) (189) (59) Contribution to the plan 3,466 48,269 Benefits paid by plan assets (28,295) (8,321)Fair value of plan assets on December 31 $ 47,398 71,656
252
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
4) Expense recognized in profit or loss
Expense recognized in profit or loss for the years ended December 31, 2017 and 2016,were as follows:
2017 2016 Service cost $ 1,805 2,382Interest on net defined benefit obligations (assets) 701 1,541
$ 2,506 3,923
Above pension expenses were recognized as operating expenses.
5) Remeasurement of net defined benefit liability (asset) recognized immediately in othercomprehensive income
The Company’s remeasurement of the net defined benefit liability (asset) recognized inother comprehensive income for the years ended December 31, 2017 and 2016, was asfollows:
2017 2016 Actuarial losses or (gains) $ 3,821 11,865Return on plan assets 189 59
$ 4,010 11,924
6) Actuarial assumptions
The principal actuarial assumptions at the reporting date were as follows:
The rate applied in calculating the present value of defined benefit obligations for theyear ended December 31, 2017 and 2016:
December 31, 2017
December 31, 2016
Discount rate 1.375% 1.125%Future salary changes 2.50% 2.25%
The expected allocation payment to be made by the Company to the defined benefit plans for the one-year period after the reporting date is $352 thousand.
253
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
7) Sensitivity analysis
When calculating the present value of defined benefit obligations, the Company usedjudgments and estimations to determine the actuarial assumptions, including the discountrates and future salary changes, as of the end of the reporting period. Any changes in theactuarial assumptions may significantly impact the amount of the defined benefitobligations.
Changes in the main actuarial assumptions that might have an impact on the present valueof the defined benefit obligation for the year ended December 31, 2017 and 2016:
Effects on defined benefit obligationIncrease by 1% Decrease by 1%
December 31, 2017 Discount rate $ (10,607) 12,552 Future salary changes 12,061 (10,421) December 31, 2016 Discount rate (12,958) 15,220 Future salary changes 14,606 (12,713)
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligations by the amounts shown above. The method used in the sensitivity analysis is consistent with the calculation of pension liabilities in the balance sheets.
(ii) Defined contribution plans
The Company allocates 6% of each employee’s monthly wages to the labor pension personal account at the Bureau of Labor Insurance in accordance with the provisions of the Labor Pension Act. Under these defined contribution plans, the Company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.
The Company’s pension costs under the defined contribution pension plans amounted to $26,043 thousand and $25,264 thousand in 2017 and 2016, respectively.
(n) Income tax
(i) Income tax expense
The details of income tax expense in 2017 and 2016 were as follows:
2017 2016 Current income tax expense $ 244,108 331,844Deferred income tax expense (benefit) 18,603 (5,398)Total income tax expense $ 262,711 326,446
254
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The amount of income tax recognized in other comprehensive income for 2017 and 2016 was as follows:
2017 2016Items that will not be reclassified subsequently to
profit of loss:
Remeasurement from defined benefit plans $ 681 -
Reconciliation of income tax expense and income before tax was as follows:
2017 2016 Income before tax $ 1,548,797 1,849,306Income tax based on the Company’s domestic tax rate 263,295 314,382Non-deductible expense (578) (516)Change in unrecognized temporary differences 2,175 359Others (2,181) 12,221
$ 262,711 326,446
(ii) Deferred tax liabilities and assets
1) Unrecognized deferred tax assets and liabilities
As of December 31, 2017 and 2016, the temporary differences associated with theinvestments in subsidiaries were not recognized as deferred income tax assets andliabilities as the Company was able to control the timing of reversal of these temporarydifferences, and management believed that it was probable that the temporary differenceswould not reverse in the foreseeable future. The related amounts were as follows:
Unrecognized deferred tax liabilities:
December 31, 2017
December 31, 2016
Unrecognized deferred tax liabilities $ 43,795 64,523Unrecognized deferred tax assets $ 19,918 42,821
255
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
2) Recognized deferred tax assets and liabilities
Defined benefit plan Provision
Loss on valuation of inventories Others Total
Deferred tax assets
January 1, 2016 $ 6,514 28,536 6,060 16,793 57,903
Debit (credit) to profit / loss 560 (1,083) 4,694 6,073 10,244
December 31, 2016 $ 7,074 27,453 10,754 22,866 68,147
January 1, 2017 $ 7,074 27,453 10,754 22,866 68,147
Debit to profit / loss (7,755) (4,105) (2,162) (1,161) (15,183)
Credit to other comprehensive income 681 - - - 681
December 31, 2017 $ - 23,348 8,592 21,705 53,645
Unrealized exchange gain Others Total
Deferred tax liabilities:January 1, 2016 $ 3,669 - 3,669Debit to profit / loss 3,294 1,552 4,846December 31, 2016 $ 6,963 1,552 8,515January 1, 2017 $ 6,963 1,552 8,515Debit (credit) to profit / loss (5,674) 9,094 3,420December 31, 2017 $ 1,289 10,646 11,935
(iii) Income tax approval
The Company’s income tax returns have been examined and approved by the ROC tax authorities through the years up to 2015.
(iv) Information related to the imputation credit account and creditable ratio is summarized below:
December 31, 2017
December 31, 2016
Unappropriated earnings of 1998 and after Note 1,586,709Balance of imputation credit account (ICA) Note 483,551
2017(Estimated) 2016(Actual)
Tax creditable ratio for earnings distribution to ROC residents Note 21.34%
256
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The above information about the ICA was prepared in accordance with information letter No.10204562810 issued by the Ministry of Finance of the R.O.C. on October 17, 2013.
Note: According to the amendments to the "Income Tax Act” enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, effective January 1, 2018, companies will no longer be required to establish, record, calculate, and distribute their ICA due to the abolishment of the imputation tax system.
(o) Capital and other equity
(i) Ordinary shares
As of June 16, 2016, the Company’s shareholders approved making capital surplus transferred to capital for $69,593 thousand ($0.35 per share). The issuance above was approved by the FSC on August 8, 2016, as the date of the capital increase. The registration process has already been completed.
As of December 31, 2017 and 2016, the authorized capital of the Company both amounted to $2,500,000 thousand, consisting of 250,000 thousand, at a par value of $10 per share, and the issued capital consisted of 209,387 thousand shares and 206,735 thousand shares, respectively. All proceeds from the shares issued have been collected.
The movements in outstanding shares for the years ended December 31, 2017 and 2016, were as follows:
Common stock(thousand shares)
2017 2016 Beginning balance at January 1 $ 206,735 198,731Addition: Capitalizing of capital surplus - 6,959
Conversion of convertible bonds 2,652 1,045Ending balance at December 31 $ 209,387 206,735
257
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(ii) Capital surplus
The balances of capital surplus were as follows:
December 31, 2017
December 31, 2016
Surplus arising from bond conversion option $ 1,618,137 1,463,896Paid-in capital in excess of par value 1,879,354 1,879,354Capital surplus premium from combination 593 593
Equity components of convertible bonds - 12,867Capital surplus interest payable reimbursement 17,181 17,181
Expired stock options 307 307Gain or loss on disposal of subsidiaries’ shares 4,914 4,914Adjustments to share of changes in equity of
subsidiaries 24,291 24,291 $ 3,544,777 3,403,403
According to the ROC Company Act, realized capital surplus can be transferred to common stock or distributed as cash dividends after deducting the accumulated deficit, if any. Realized capital surplus includes the additional paid-in capital from issuance of common stock in excess of the common stock’s par value and donation from others. Paid-in capital in excess of par value is transferrable to common stock but shall not exceed 10% of the total issued and outstanding common stock in each year according to the Regulations Governing the Offering and Issuance of Securities by Securities Issuers.
(iii) Retained earnings
According to the Company’s articles of incorporation, 10% of annual net earnings (net of income taxes), after deducting accumulated deficits, must be set aside as legal reserve. Unless and until the accumulated legal reserve equals the Company’s total capital, the Company may set aside a special reserve in accordance with Article 41 of the Securities and Exchange Act. After the board of directors considers the Company’s budget for funding needs, financial structure, current-period earnings, and steady profit distribution when proposing the distribution of earnings, the proposal should be resolved during the stockholders’ meeting.
The Company is now in the growth stage, and profits may be distributed by way of cash dividends and stock dividends. Cash dividends shall not be lower than 10% of the total distribution.
In accordance with the ROC Company Act amended in May 2015, the recipients of dividends and bonuses arising from earnings distributions are limited to shareholders and do not include employees. The Company plans to make consequential amendments to the Company’s articles of incorporation to coincide with the aforementioned change in the law.
258
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
1) Legal reserve
According to the amendment of the ROC Company Act announced in January 2012, theCompany must retain 10% of its after-tax annual earnings as legal reserve until suchretention equals the amount of total capital. If the Company incurs no loss, it may,pursuant to a resolution by a shareholders’ meeting, capitalize the amount of its reservethat exceeds 25% of common stock by issuing new shares or distribute a cash dividend.
2) Special reserve
In accordance with Ruling No. 1010012865 issued by the FSC on April 6, 2012, a portionof current-period earnings and undistributed prior-period earnings shall be reclassified asspecial earnings reserve during earnings distribution. The amount to be reclassifiedshould equal the current-period total net reduction of other shareholders’ equity.Similarly, a portion of undistributed prior-period earnings shall be reclassified as specialearnings reserve (and does not qualify for earnings distribution) to account for cumulativechanges to other shareholders’ equity pertaining to prior periods. Amounts of subsequentreversals pertaining to the net reduction of other shareholders’ equity shall qualify foradditional distributions.
3) Earnings appropriation and distribution
Earnings distributions for 2016 and 2015 were decided in the general meetings ofshareholders held on June 19, 2017, and June 16, 2016, respectively. The relevantdividend distributions to the shareholders were as follows:
2016 2015 Amount
per share (NT dollars)
Total amount
Amount per share
(NT dollars) Total
amount Cash $ 6.72 1,390,829 9.52 1,892,923
Information on the earnings appropriation proposed by the Company’s board of directors and approved by the Company’s shareholders is available on the Market Observation Post System website of the Taiwan Stock Exchange.
(p) Earnings per share
(i) Basic earnings per share
The basic earnings per share for the years ended December 31, 2017 and 2016, were calculated on the basis of profit attributable to ordinary shareholders and the weighted-average number of outstanding ordinary shares. Calculations were as follows:
1) Profit attributable to ordinary shareholders
2017 2016 Continuingoperations
Continuing operations
Profit attributable to ordinary shareholders $ 1,286,086 1,522,860
259
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
2) Weighted-average number of outstanding ordinary shares
2017 2016 Number of outstanding ordinary shares on January 1 $ 206,735 198,731Effect of conversion of convertible bonds 1,212 420Effect of capitalizing Capital surplus - 6,959Weighted-average number of outstanding ordingary
shares on December 31 $ 207,947 206,110
(ii) Diluted earnings per share
The diluted earnings per share for the years ended December 31, 2017 and 2016, were calculated on the basis of profit attributable to ordinary shareholders and the weighted-average number of outstanding ordinary shares, with all potential ordinary shares retroactively adjusted. Calculations were as follows:
1) Profit attributable to ordinary shareholders (diluted)
2017 2016 Continuingoperations
Continuing operations
Profit attributable to ordinary shareholders (basic) $ 1,286,086 1,522,860Interest on convertible bonds, other gains and losses 1,362 2,673Profit attributable to ordinary shareholders (diluted) $ 1,287,448 1,525,533
2) Weighted-average number of outstanding ordinary shares (diluted)
2017 2016 Weighted-average number of outstanding ordinary
shares (basic) 207,947 206,110
Effect of conversion of convertible bonds 1,440 3,176Effect of employee stock dividends 937 943Weighted-average number of outstanding ordinary
shares on December 31 (diluted) 210,324 210,229
(q) Employees, directors’ and supervisors’ remuneration
In accordance with the Articles of incorporation , the Company should contribute at least 1% and not more than 8% of the profir as employee compensation and not exceed 5% as directors’ an supervisors’ remuneration when there is profir for the year. However, if the Company has accumulated deficits, the profit should be reserved to offset the deficit.
260
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
For the year ended December 31, 2017 and 2016, the Company estimated its employee remuneration amounting to $92,746 thousand $110,473 thousand, and directors’ and supervisors’ remuneration amounting to $38,644 thousand and $46,112 thousand, respectively. The eatimated amounts mentioned above were calculated based on the net profit before tax, excluding remuneration to employee, directors and supervisors of each period, multiplied by the percentage of remuneration to employees, directors and supervisors as spectified in the Company’s articles. The remunerations were expensed under operating costs or operating expenses during 2017 and 2016.
Related information would be available at the Market Observation Post System website. The differences between the amounts approved by the board of directors and those recognized in the financial statements, if any, are accounted for as changes in accounting estimates and recognized as profit or loss in next year.
The amounts of employees’ remuneration, as estimated in parent-company-only financial statements, were identical to those amount approved for 2016 and 2015.
The differences between actual approved amount directors’ and supervisors’ remuneration and those estimated in the financial statements in 2016 and 2015 were as follows:
2016 2015
Actual approved amount
Estimated amount in financial statement Difference
Actual approved amount
Estimated amount in financial statement Difference
Directors' and supervisors'
remuneration $ 37,500 46,112 (8,612) 49,825 58,259 (8,434)
The difference between the actual remuneration to directors and supervisors and the recognized amount in 2016 and 2015 were not significant, therefore, were recognized as profit or loss in 2017 and 2016, respectively. Related information would be available at the Market Observation Post System website.
(r) Results of non-operating activities
(i) Other income
The Company’s other income in 2017 and 2016 was as follows:
2017 2016 Interest income bank deposit $ 4,110 5,453
Interest income loan 58,702 61,385
Rental income 17,472 17,333Dividend income and others 16,241 32,523
$ 96,525 116,694
261
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(ii) Other gains and losses
The Company’s other gains and losses in 2017 and 2016 were as follows:
2017 2016 Foreign exchange gain (loss) $ (94,552) 8,481Net gain on financial assets and liabilities measured at
fair value-valuation 12,921 14,946
Net gain on financial assets and liabilites measured at fair value-realized 23,316 25,911
Impairment loss on property, plant and equipment - (19,047)Others (3,784) 1,888
$ (62,099) 32,179
(iii) Finance costs
The details of finance expenses in 2017 and 2016 were as follows:
2017 2016 Interest expense bank borrowings $ (30,113) (17,359)Interest expense convertible bonds (1,641) (3,953)Expenses from accounts receivable factoring (25,181) (29,257)
$ (56,935) (50,569)
(s) Financial Instruments
(i) Credit risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum exposure to credit risk. The Company’s credit risk is impacted by each customer. For the years ended December 31, 2017 and 2016, the sales to major customers accounted for 69% and 70%, respectively. In addition, for the years ended December 31, 2017 and 2016, the sales to American region both accounted for 79%.
262
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(ii) Liquidity risk
The following are the contractual maturities of financial liabilities, including the estimated interest payments and excluding the impact of netting agreements.
Carrying amount
Contractual cash flow
Within 6 months
6~12 months 1~2 years 2~5 years
Over 5 years
December 31, 2017
Non-derivative financial liabilities
Short-term borrowings $ 277,586 (278,352) (278,352) - - - -
Accounts payable and other payables 3,299,437 (3,299,437) (3,299,437) - - - -
$ 3,577,023 (3,577,789) (3,577,789) - - - - December 31, 2016
Non-derivative financial liabilities
Short-term borrowings $ 351,958 (352,664) (352,664) - - - -
Convertible bond payable 166,255 (168,100) - (168,100) - - -
Accounts payable and other payables 3,071,304 (3,071,304) (3,071,304) - - - -
Forward exchange contracts
Outflow 1,391 258,232 258,232 - - - -
Inflow 62 257,597 257,597 - - - -
$ 3,590,970 (3,076,239) (2,908,139) (168,100) - - -
The Company does not expect the cash flows included in the maturity analysis would occur significantly earlier or at significantly different amounts.
(iii) Exchange rate risk
1) Exposure to currency risk
The Company’s significant exposure to foreign currency risk was as follows:
December 31, 2017 December 31, 2016 Foreign currency
Exchange rate TWD
Foreign currency
Exchange rate TWD
Financial assets
Monetary items
USD $ 159,327 29.848 4,755,592 135,004 32.279 4,357,786
CNY 32,966 4.5764 150,866 23,235 4.6280 107,543
Nno-monetary itmes
USD 5,953 29.848 177,696 6,349 32.279 204,947
Financial liabilities
Monetary items
USD 69,541 29.848 2,075,660 60,082 32.279 1,939,401
CNY 109,411 4.5764 500,709 101,073 4.6280 467,808
263
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
2) Sensitivity analysis
The Company’s exposure to foreign currency risk arises from the translation of theforeign currency exchange gains and losses on cash and cash equivalents, accountsreceivable, other receivables, loans, accounts payable, and other payables. A 1%depreciation or appreciation of the TWD against the USD and CNY as of December 31,2017 and 2016, would have increased or decreased the net income after tax by $23,301thousand and $20,581 thousand, respectively. The analysis assumes that all othervariables remain constant and ignores any impact of forecasted sales and purchases.The analysis is performed on the same basis for both periods.
3) Exchanged gains or losses on monetary items
As the Company deals in diverse foreign currencies, gains or losses on foreign exchangewere summarized as a single amount. In 2017 and 2016, the foreign exchange gain(loss), including realized and unrealized, amounted to $(94,552) thousand and $8,481thousand, respectively.
(iv) Interest rate analysis
There is no significant interest rate risk.
(v) Fair value
1) Fair value of financial instruments
The book value, fair value, and fair value hierarchy for the financial assets and financialliabilities of the Company were as followed (excluding the disclosure of financial assetsand liabilities for which the book value is close to the fair value, or the fair value cannotbe reliably measured).
December 31, 2017 Fair value
Book value Level 1 Level 2 Level 3 Total Financial assets at fair value through profit or loss:
Non-derivative financial assets held for trading $ 62,748 62,748 - - 62,748
Loan and receivables:
Cash and cash equivalents 949,109 - - - -
Accounts receivable and notes receivable 585,944 - - - -
Other financial assets 1,901,904 - - - -
Subtotal 3,436,957 - - - -
Refundable deposit 3,778 - - - -
Financial liabilities at amortized cost:
Short-term borrowings 277,586 - - - -
Accounts payable and other payables 3,299,437 - - - -
Subtotal 3,577,023 - - - -
264
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
December 31, 2016 Fair value
Book value Level 1 Level 2 Level 2 Total Financial assets at fair value through profit or loss:
Non-derivative financial assets held for trading $ 51,156 51,156 - - 51,156
Loan and receivables:
Cash and cash equivalents 888,830 - - - -
Accounts receivable and notes receivable 437,341 - - - -
Other financial assets 1,674,636 - - - -
Subtotal 3,000,807 - - - -
Refundable deposit 3,778 - - - -
Financial liabilities at fair value through profit or loss:
Derivative financial liabilities 1,329 - 1,329 - 1,329
Financial liabilities at amortized cost:
Short-term borrowings 351,958 - - - -
Accounts payable and other payables 3,071,304 - - - -
Convertible bonds 166,255 - - - -
Subtotal 3,589,517 - - - -
2) Valuation techniques and assumptions used in fair value determination
Non-derivative financial instruments
A financial instrument is regarded as being quoted in an active market if quoted prices arereadily and regularly available from an exchange, dealer, broker, industry group, pricingservice or regulatory agency and those prices represent actual and regularly occurringmarket transactions on an arm’s-length basis. Whether transactions are taking place‘regularly’ is a matter of judgment and depends on the facts and circumstances of themarket for the instrument.
Quoted market prices may not be indicative of the fair value of an instrument if theactivity in the market is infrequent, the market is not well-established, only smallvolumes are traded, or bid-ask spreads are very wide. Determining whether a market isactive involves judgment.
Except for the aforementioned financial instruments, the fair value of other financialinstruments is determined by using valuation techniques or the quoted price from acounterparty. Fair value measured by a valuation technique can be extrapolated fromsimilar financial instruments, the discounted cash flow method, or other valuationtechniques including a model using observable market data at the reporting date.
Derivative financial instruments
Measurement of the fair value of derivative instruments is based on the valuationtechniques generally accepted by market participants. The fair value of a forwardexchange contract is usually determined by the forward exchange rate. Measurement ofthe fair value of an embedded derivative financial instrument is based on an optionpricing model or other valuation technique.
265
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
There were no transfers in either direction for the years ended December 31, 2017 and 2016.
(t) Financial risk management
(i) Nature and extent
The Company is exposed to the following risks from its financial instruments:
1) Credit risk
2) Liquidity risk
3) Market risk
This note discloses information on exposure to each of the above risks and objectives,policies, and procedures for measuring and managing risk. For further quantitativeinformation, please refer to the relevant notes to the consolidated financial statements.
(ii) Risk management framework
The board of directors of the Company is responsible for establishing and overseeing the risk management structure of the Company.
The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The board of directors of the Company oversees how management monitors the risks, which should be in compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation of the risks faced by the Company. The internal auditor undertakes regular reviews of the risk management controls and procedures and exception management, the results of which are reported to the board of directors.
(iii) Credit risk
Credit risk means the potential loss to the Company if the client or counterparty involved in that transaction defaults. The primary potential credit risk is from the accounts receivable and financial investments of the Company.
1) Accounts receivable and other receivables
The Company periodically reviews payment histories and financial positions ofcustomers, and factors part of its accounts receivable to certain financial institutionswithout recourse to lower the credit risk. The Company also aggressively markets toEurope and Asia to diversify the risk of concentration of customers in a certain area.
266
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The Company establishes an impairment allowance that represents its estimate of incurred losses in respect of trade receivables, other receivables, and investment. The components of this impairment allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
2) Financial investments
The Company held its bank deposits in different financial institutions to manage theexposure to credit risk of each institution to prevent concentration risk.
As the Company deals with banks and other external parties with good credit standing,the management believes that there is no significant credit risk. In addition, theCompany invests only in public companies to mitigate credit risk exposure.
3) Guarantee
The Company only provides guarantees to wholly owned subsidiaries. The Companydid not provide any guarantee to companies which were not in the Company as ofDecember 31, 2017 and 2016.
(iv) Liquidity risk
Liquidity risk is the risk that the Company is unable to meet the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as much as possible, that it always has sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
The Company ensures it has sufficient cash to fund its expected operating expenditure for a 60-day period, including financial obligation fulfillment but excluding the unexpected potential impact of extreme cases such as natural disasters. For the Company’s available credit limits, please refer to note 6(i).
(v) Market risk
Market risk is the risk that comes from changes in market prices such as changes of foreign exchange rates, interest rates, and equity prices impacting the Company’s income or the value of financial instruments held by the Company. The objective of market risk management is to manage and control market risk exposures within an acceptable range and optimize the return on investments.
1) Exchange rate risk
The Company mainly uses the USD for its sales and purchases. The overall hedge ratio isover 80%. The net foreign currency position is still exposed to exchange rate risk. TheCompany takes advice from professionals in banks and periodically uses foreign currencyforward contracts to hedge the net foreign currency exposure, within the range of 50% to75%, for the next six months. The Company has effectively minimized the impact ofexchange gain and loss within an acceptable range.
267
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
2) Interest rate risk
The Company does not have any significant liability with a floating interest rate, andchanges in market interest rates do not have any significant impact on the future cashflow of the Company.
3) Other market risk
Except for purchase agreements to meet expected consumption and sales requirements,the Company does not enter into any other long-term purchase agreements.
(u) Capital management
To maintain investor relationships, market confidence, and future operation, the board manages working capital by periodically reviewing the financial structure, and optimizes the liability and equity balance to lower the finance costs.
The Company’s review comprises:
(i) The growth rate of its future sales and profit.
(ii) The dilution impact on EPS from the growth of capital stock.
(iii) Various types of finance costs and related risks.
The management may adjust the amounts and types of dividend payments or issue new shares or bonds in capital markets to maintain and adjust its capital structure.
The Company’s equity-to-asset ratios at the end of the reporting periods were as follows:
December 31, 2017
December 31, 2016
Total equity $ 8,398,407 8,591,390Total assets $ 12,316,705 12,552,412Equity-to-asset ratio 68% 68%
There were no charges in the Company’s approach to capital management as of December 31, 2017.
(v) Investing and financing activities not affecting current cash flow
The Company’s investing and financing activities which did not affect the current cash flow were the conversion of convertible bonds. The sum of ordinary shares and capital surplus amounted to $180,764 thousand and $74,900 thousand for the years ended December 31, 2017 and 2016, respectively.
268
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(7) Related-party transactions
(a) Parent company and ultimate controlling company
The Company is the ultimate controlling party of the Company and its subsidiaries.
(b) Names and relationship with related parties
The followings are entities that have had transactions with the Company during the periods covered in the consolidated financial statements.
Name of related parties Relationship with the
Company PT Crystal Garment (PT Crystal) A subsidiary Global Trading Int'l Corp. (Global) A subsidiary Loyal Trading Int'l Co., Ltd. (Loyal) A subsidiary Leader Garments Corp. (Leader PH) A subsidiary Diamond Apparel Mfg., Inc. (Diamond) A subsidiary Primeline Fashion, Inc. (Primeline) A subsidiary Fortune Star Investment Limited (Fortune Star) A subsidiary Triple Int'1 Corp. (Triple) A subsidiary Ecolot Textile Co., Ltd. (Ecolot) A subsidiary Great Time Global Co., Ltd. (Great Time) A subsidiary Glida Athleties Co., Ltd. (Glida) A subsidiary PT Glory Industrial Semarang (PT Glory) A subsidiary Makalot Garments (Cambodia) Co., Ltd. (Makalot Cambodia) A subsidiary Makalot Garments (Vietnam) Co., Ltd. (Makalot Vietnam) A subsidiary Fund Eagle International Limited (Fund Eagle) A subsidiary Wintop Industrial Limited (Wintop) A subsidiary Crown Era Industrial Limited (Crown Era) A subsidiary Crownway International Development Limited (Crownway) A subsidiary PT Starlight Garment Semarang (PT Starlight) A subsidiary Moha Garments Co., Ltd. (Moha) A subsidiary Triple Garment (Vietnam) Co., Limited (Triple Vietnam) A subsidiary Top Trend Global Inc. (Top Trend) A subsidiary Leader Garment (Vietnam) Co., Ltd. (Leader Vietnam) A subsidiary Yangzhou Feng Yang Garments Co., Limited (CFY) A subsidiary Jiaxing Ruiyang Garment Co., Limited (CJR) A subsidiary Jiaxing Rising Garment Co., Limited (CJY) A subsidiary Shanghai Makalot Garment Co., Limited (CMK) A subsidiary Eco-Lot Textile Co., Ltd. (CBS) A subsidiary Jiaxing Suntex Garment Co., Limited (CMZ) A subsidiary Top Shiny Industrial Limited (Top Shiny) A subsidiary Namtex Co., Ltd. (Namtex) An associate
269
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(c) Significant transactions with related parties
(i) Sales revenue
The amounts of significant sales to related parties were as follows:
2017 2016 Subsidiaries $ - 63,971
The payment terms provided to subsidiaries are the same as those of general sales.
(ii) Purchasing and processing
The amounts of the materials purchased from related parties were as follows:
2017 2016 Subsidiaries:
Global $ 2,173,129 1,649,703
Other subsidiaries 453,138 767,027 Associates 219,311 251,179
$ 2,845,578 2,667,909
The terms for payables for purchasing materials from subsidiaries are O/A 30 to 60 days, or depending on funding needs. Payment is made to third-party suppliers by L/C and T/T, with payment terms of O/A 45 to 60 days. The purchasing price is calculated as the material cost, plus a certain percentage of margin. The percentage of margin is determined by considering the costs and expenses incurred by the subsidiaries.
Purchasing prices and payment terms with associates are the same as those of general purchases.
The amounts of goods purchased from related parties were as follows:
2017 2016 Subsidiaries:
Loyal $ 1,171,036 1,095,499
The terms for payables with related parties are O/A 30 to 60 days, or depending on funding needs. The purchasing price for related parties is calculated as the order price, plus a certain percentage of margin, considering the costs and expenses incurred by the related parties.
270
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
The transaction amounts of the processing consigned to related parties were as follows:
2017 2016 Subsidiaries:
PT Glory $ 1,446,623 1,387,351Makalot Cambodia 1,413,241 1,310,008Makalot Vietnam 1,137,287 1,146,009Moha 842,472 845,343Triple Vietnam 709,723 793,958
Other subsidiaries 1,149,006 1,032,587$ 6,698,352 6,515,256
The Company sets the processing fee by considering the cost incurred by the related parties.
Payment terms of the processing fee are O/A 30 to 90 days or in advance, depending on funding needs.
(iii) Financing provided to related parties
Balances of financing provided by the Company to related parties were as follows:
2017 2016 Subsidiaries:
PT Glory $ 573,678 620,402 Makalot Vietnam 363,847 393,481 Moha 260,872 282,118 Leader Vientnam 256,693 277,599 Makalot Cambodia 207,419 224,312 Other subsidiaries 304,151 301,487
$ 1,966,660 2,099,399
The Company provides unsecured financing with interest, and after evaluation, the Company believes there is no bad debt that should be accounted for.
The interest on the financing is accrued, and amounts for the years ended December 31, 2017 and 2016, were $58,702 thousand and $61,385 thousand, respectively.
As of December 31, 2017 and 2016, the balances of financing provided by the Company to related parties, less the credit balance of investment under equity method, were $1,925,195 thousand and $2,056,131 thousand, respectively, recognized in long-term receivables related parties.
271
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(iv) Related-party receivables
Details of related party receivable, were as follows:
Account name Types of related
parties December 31,
2017 December 31,
2016 Other receivables related parties
Subsidiaries:
Loyal 114,142 32,776
Other subsidiaries 10,469 11,827Other receivables related parties
Associates 442 560
Long-term receivables related parties
Subsidiaries (Note) 1,925,195 2,056,131
$ 2,050,248 2,101,294
Note: please refer to “(iii) Financial provided to related parties” for subsidiaries list.
(v) Related-party payable
Details of related party payables were as follows:
Account name Types of related
parties December 31,
2017 December 31,
2016 Accounts payable related parties
Subsidiaries:
Global 482,224 445,188Loyal 278,259 236,275Makalot Vietnam 243,641 191,258Makalot Cambodia 159,708 29,492Other subsidiaries 239,195 215,983
Accounts payable related parties Associates 53,921 22,361Other payable related parties Subsidiaries:
PT Glory 11,799 -Makalot Cambodia 2,128 479Other subsidiaries 1,381 518
$ 1,472,256 1,141,554
272
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(vi) Advances to related parties
Details of advances to relaterd parties were as follows:
Account name Types of related
parties December 31,
2017 December 31,
2016 Other current assets Subsidiaries:
Moha $ 20,093 80,257
The above balances were prepayment of processing fees.
(vii) The amounts of research and development expense the Company commissions its related parties in 2017 and 2016 were included in administrative expenses. The details were as follows:
2017 2016Subsidiaries $ 11,800 11,800
(viii) Key management personnel compensation
Key management personnel compensation comprised:
2017 2016 Short-term employee benefits $ 79,253 117,733 Post-employment benefits 69 119
$ 79,322 117,852
(8) Pledged assets
The Company’s assets pledged to secure loans were as follows:
Pledged assets Pledged to secure December 31,
2017 December 31,
2016 Land Security of borrowings $ 2,484,818 2,484,818Property, plant and equipment Security of borrowings 271,588 287,642Refundable deposits Lease deposit 3,778 3,778
$ 2,760,184 2,776,238
(9) Commitments and contingencies
Unrecognized significant commitments:
(a) Unused letters of credit
December 31, 2017
December 31, 2016
Unused letters of credit $ 118,506 395,487
273
MAKALOT INDUSTRIAL CO., LTD. Notes to the Financial Statements
(Continued)
(b) The Company issued promissory notes to the banks to apply for borrowings, export bills negotiation, derivatives, and factoring of accounts receivable. The issued promissory notes were as follows:
December 31, 2017
December 31, 2016
Issued promissory notes $ 8,374,652 7,869,755
(10) Losses Due to Major Disasters: None
(11) Subsequent Events:
According to the amendments to the "Income Tax Act” enacted by the office of the President of the Republic of China (Taiwan) on February 7, 2018, an increase in the corporate income tax rate from 17% to 20% is applicable upon filing the corporate income tax return commencing FY 2018. This increase does not affect the amounts of the current or deferred income taxes recognized on December 31, 2017. However, it will increase the Company’s current tax charge accordingly in the future.
(12) Other
A summary of current-period employee benefits, depreciation, and amortization, by function, is as follows:
2017 2016
Cost of sales
Operatingexpenses Total
Cost of sales
Operating expenses Total
Employee benefitsSalaries - 902,497 902,497 - 782,350 782,350 Labor and health insurance - 59,281 59,281 - 57,496 57,496 Pension - 28,549 28,549 - 29,187 29,187 Others - 64,521 64,521 - 66,120 66,120
Depreciation - 40,359 40,359 - 32,933 32,933 Amortization - 11,093 11,093 - 11,199 11,199
As of December 31, 2017 and 2016, the Company’s employee headcounts were 777 and 767, respectively.
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MAKALOT INDUSTRIAL CO., LTD.
Notes to the Financial Statements
(Continued)
(13) Other disclosures
(a) Information on significant transactions
The following is the information on significant transactions required by the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” for the Company for the year ended December 31, 2017:
(i) Loans to other parties:
(In Thousands of New Taiwan Dollars) Highestbalance Collateral
Number Name of lender
Name of borrower Account name
Related party
of financing to other parties
during the period
Ending balance
Actual usage amount
during the period
Range of interest rates
during the period
Purposes of fund financing
for the borrower
Transaction amount of
business between two parties
Reasons for
short-term financing
Allowancefor bad debt Item Value
Individual funding loan
limits
Maximumlimit of fund
financing 0 The Company PT Crystal Other
receivable-related parties
Yes 108,367 50,742 50,742 3.0% 2 - Operating capital
- None - 1,679,681 3,359,363
0 The Company PT Glory Other receivable-related parties
Yes 652,243 639,643 573,678 3.0% 1 Processing 1,446,623
None - None - 1,446,623 3,359,363
0 The Company PT Starlight Other receivable-related parties
Yes 197,870 182,968 178,789 3.0% 1 Processing 554,005
None - None - 554,005 3,359,363
0 The Company Makalot Cambodia
Other receivable-related parties
Yes 273,080 252,514 207,419 3.0% 1 Processing 1,413,241
None - None - 1,413,241 3,359,363
0 The Company Moha Other receivable-related parties
Yes 282,118 260,872 260,872 3.0% 1 Processing 842,472
None - None - 842,472 3,359,363
0 The Company Makalot Vietnam
Other receivable-related parties
Yes 401,451 393,695 363,847 3.0% 1 Processing 1,137,287
None - None - 1,137,287 3,359,363
0 The Company Triple Vietnam
Other receivable-related parties
Yes 80,698 74,620 74,620 3.0% 1 Processing 709,723
None - None - 709,723 3,359,363
0 The Company Leader Vietnam
Other receivable-related parties
Yes 721,438 631,285 220,875 2.8%~3% 2 - Operating capital
- None - 1,679,681 3,359,363
0 The Company Leader Vietnam
Other receivable-related parties
Yes 36,523 35,818 35,818 1 Processing 211,737
None - None - 211,737 3,359,363
0 The Company Triple Other receivable-related parties
Yes 174,307 - - 2 - Operating capital
- None - 1,679,681 3,359,363
1 CMZ, CJY, CJR, CMK (Note 4)
CMZ, CJY, CJR, CMK (Note 4)
Other receivables Yes 46,284 45,764 27,458 2 - Operating capital
- None - 839,841 1,679,681
Note: The ceiling on total loans granted by the Company to all parties is 40% of its net assets in the financial statements; theceiling on the short-term financing for each entity’s operating capital granted by the Company is 20% of its net assets in the financial statements; the ceiling on the loan granted by the Company to each entity which has business transactions with the Company is the transaction amount within a year. The policy for loans granted mutually between its overseas subsidiaries of which the Company directly or indirectly holds 100% of their voting shares is as follows: The ceiling on total loans granted by an on overseas subsidiary to all overseas subsidiaries is 20% of the Company’s net assets in the financial statements; the limit on loans granted by an overseas subsidiary to each overseas subsidiary is 10% of the Company’s net assets in the financial statements.
Note 1: Nature of financing: 1. Business transaction purpose. 2. Short-term financing purpose. Note 2: Ending facility balance approved by BOD. Note 3:The trading companies purchase materials from the Company and sell the final products back to the Company after
processing. The Company provides the materials through Loyal Trading Int’l Co., Ltd. to its subsidiaries for productions. According to the regulation, the Company only discloses the amount of processing; however, the ceiling on the loan to the above entities is the actual amount of the transactions involving the final products.
Note 4: The credit limit between subsidiaries in China.
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MAKALOT INDUSTRIAL CO., LTD.
Notes to the Financial Statements
(Continued)
(ii) Guarantees and endorsements for other parties: None
(iii) Securities held as of December 31, 2017 (excluding investment in subsidiaries, associates and joint ventures):
(In Thousands of New Taiwan Dollars) Category and Ending balance
Name of holder
name of security
Relationshipwith company
Accounttitle
Shares/Units (thousands) Carrying value
Percentage of ownership (%) Fair value Note
The Company Dimerco Data System Corporation (DDSC)
None Financial assets at fair value through profit or loss current
1,680 62,748 2.68% 62,748
(iv) Individual securities acquired or disposed of with accumulated amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(v) Acquisition of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vi) Disposal of individual real estate with amount exceeding the lower of NT$300 million or 20% of the capital stock: None
(vii) Related-party transactions for purchases and sales with amounts exceeding the lower of NT$300 million or 20% of the capital stock:
(In thousands of New Taiwan Dollars / share)
Transaction details Transactions with terms
different from others Notes/Accounts receivable
(payable)
Name of company
Related party
Nature of relationship
Purchase/Sale Amount
Percentage of total
purchases/salesPayment
terms Unit pricePayment
terms Ending balance
Percentage of total notes/accounts
receivable (payable)Note
The Company Global Subsidiary Purchase 2,173,129 20% 30~60 days Note 1 - (482,224) 20% The Company Loyal Subsidiary Purchase 1,171,036 11% 30~60 days Note 1 - (278,259) 11% The Company Loyal Subsidiary Processing 64,725 1% 30~60 days - - - -% The Company Ecolot Subsidiary Purchase 453,138 4% 45~60 days - - (20,060) 1% The Company Namtex Subsidiary Purchase 219,311 2% 30~45 days - - (53,921) 2% The Company PT Glory Subsidiary Processing 1,446,623 21% 30~60 days - - (31,459) 1% The Company Makalot
Cambodia Subsidiary Processing 1,413,241 21% 30~60 days - - (159,708) 7%
The Company Makalot Vietnam
Subsidiary Processing 1,137,287 17% 30~90 days - - (243,641) 10%
The Company Moha Subsidiary Processing 842,472 12% 30~60 days - - (2,267) -% The Company Triple Vietnam Subsidiary Processing 709,723 10% 30~60 days - - (93,388) 4% The Company PT Starlight Subsidiary Processing 554,005 8% 30~60 days (67,157) 3% The Company Leader PH Subsidiary Processing 318,539 5% 30~90 days - - (6,429) -% The Company Leader Vietnam Subsidiary Processing 211,737 3% 30~60 days (18,498) 1% CJR Loyal Associates Sale 402,628 95% 30 days after
exportation - - 20,980 80%
CJY Loyal Associates Sale 350,685 85% - - 48,725 97% CMZ Loyal Associates Sale 363,294 95% - - 32,369 87% CBS Ecolot Associates Sale 291,140 91% 45~60 days - -%
Note 1: The mark-up price is based on the cost or re-sale price with a fixed ratio which is based on the cost and expense that the subsidiary incurred.
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MAKALOT INDUSTRIAL CO., LTD.
Notes to the Financial Statements
(Continued)
(viii) Receivables from related parties with amounts exceeding the lower of NT$100 million or 20% of the capital stock:
(In thousands of New Taiwan Dollars) Name of Nature of Ending Turnover Overdue Amounts received in Allowancecompany Related party relationship balance days Amount Action taken subsequent period for bad debts
The Company PT Glory Subsidiary Other receivables577,551
- - - 3,872(Note 1) -
The Company Makalot Vietnam Subsidiary Other receivables367,081
- - - 3,233(Note 1) -
The Company Moha Subsidiary Other receivables262,554
- - - 1,683(Note 1) -
The Company Leader Vietnam Subsidiary Other receivables256,693
- - - -(Note 1) -
The Company Makalot Cambodia Subsidiary Other receivables208,757
- - - 1,338(Note 1) -
The Company PT Starlight Subsidiary Other receivables178,790
- - - -(Note 2) -
The Company Loyal Subsidiary Other receivables114,142
- - - 114,142 -
Global The Company Parent company 482,224 4.69 - - 482,153 - Loyal The Company Parent company 278,259 4.84 - - 161,738 - Makalot Vietnam
The Company Parent company 243,641 5.24 - - 242,657 -
Makalot Cambodia
The Company Parent company 159,708 28.40 - 159,708 -
Note 1: The uncollected accounts receivable primarily consisted of loans. Note 2: The amount was collected before February 26, 2018.
(ix) Trading in derivative instruments: None.
(b) Information on investees:
The following is the information on investees for the year 2017 (excluding information on investees in Mainland China):
(In thousands of New Taiwan Dollars) Main Original investment amount Balance as of December 31, 2017 Net income Share of
Name of investor
Name of investee Location
businesses and products
December 31, 2017
December 31, 2016
Shares Percentage of ownership
Carrying amount
(losses) of investee
profits/losses of investee Note
The Company
Global British Virgin Islands
Sale of textiles 15,740 100.00% 602,870 (19,454) (14,773) Subsidiariy
The Company
Loyal British Virgin Islands
Sale of textiles 10,000 100.00% 171,741 17,875 17,875 Subsidiariy
The Company
PT Crystal Indonesia Manufacture ofgarments
993,191 99.40% (41,465) (1,480) (1,471) Subsidiariy
The Company
Leader PH Philippines Manufacture ofgarments
249,995 99.99% 41,090 839 839 Subsidiariy
The Company
Diamond Philippines Manufacture ofgarments
- - 149,995 99.99% 3,159 - - Subsidiariy
TheCompany
Primeline Philippines Manufacture ofgarments
99,995 99.99% 60 - - Subsidiariy
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MAKALOT INDUSTRIAL CO., LTD.
Notes to the Financial Statements
Main Original investment amount Balance as of December 31, 2017 Net income Share of Name of investor
Name of investee Location
businesses and products
December 31, 2017
December 31, 2016
Shares Percentage of ownership
Carrying amount
(losses) of investee
profits/losses of investee Note
(Continued)
The Company
Fortune Star Samoa Investment holding 21,603,591 100.00% 589,229 5,898 4,221 Subsidiariy
The Company
Triple Samoa Investment holding 10,800,000 100.00% 169,277 (14,730) (16,935) Subsidiariy
The Company
Eclot Taiwan Sale of garments 9,864,000 61.65% 170,755 70,552 14,936 Subsidiariy
The Company
Great Time Taiwan Sale of garments 500,000 100.00% 5,165 (292) (292) Subsidiariy
The Company
Glida Taiwan Sale of garments 500,000 100.00% 4,982 - - Subsidiariy
Global PT Glory Indonesia Manufacture ofgarments
60,895 95.00% 204,601 (196) (186) Subsidiariy
Global PT Starlight Indonesia Manufacture ofgarments
- 1,050 5.00% 3,519 392 (182) Subsidiariy
Global Makalot Cambodia
Cambodia Manufacture ofgarments
1,000 100.00% (27,151) (48,452) (48,452) Subsidiariy
Global Makalot Vietnam
Vietnam Manufacture ofgarments
- 100.00% 290,761 18,315 18,315 Subsidiariy
Triple Moha Cambodia Manufacture ofgarments
1,000 100.00% (4,166) 3,095 3,095 Subsidiariy
Triple Triple Vietnam
Vietnam Manufacture ofgarments
- 100.00% 107,335 12,360 12,360 Subsidiariy
Triple Top Trend Samoa Investment holding 5,200,000 100.00% 67,234 (29,909) (29,909) Subsidiariy
Top Trend LeaderGarment
Vietnam Manufacture ofgarments
- 100.00% 67,234 (29,909) (29,909) Subsidiariy
Fortune Star Fund Eagle Hong Kong Investment holding - - 100.00% - 12,122 12,122 Subsidiariy
Fortune Star Wintop Hong Kong Investment holding 10,370,000 100.00% 248,665 (9,386) (9,386) Subsidiariy
Fortune Star Crown Era Hong Kong Investment holding 3,580,000 100.00% 159,675 2,873 2,873 Subsidiariy
Fortune Star Crownway Hong Kong Investment holding 4,560,000 100.00% 105,134 1,172 1,172 Subsidiariy
Fortune Star PT Starlight Indonesia Manufacture ofgarments
19,950 95.00% 66,867 392 372 Subsidiariy
Fortune Star PT Glory Indonesia Manufacture ofgarments
- 3,205 5.00% 10,768 (196) (1,038) Subsidiariy
Wintop Namtex Vietnam Wearing - 50.00% 157,830 (14,587) (12,045) The Companyindirectly holds
50% ofownership
Ecolot Top Shiny Hong Kong Investment holding 1,200,000 100.00% 42,238 1,084 1,084 Subsidiariy
Top Shiny Texlot Company
Limited(Texlot)
British Virgin Islands
Investment holding 1,500 6.88% 19,866 (16,040) (1,100) Associate
Note: Investment gain or loss recognized in the current period included sales from subsidiaries to parent company.
278
(English Translation of Financial Report Originally Issued in Chinese)
MAKALOT INDUSTRIAL CO., LTD.
Notes to the Financial Statements
(c) Information on investment in mainland China:
(i) The names of investees in Mainland China, the main businesses and products, and other information:
(In Thousands of New Taiwan Dollars)
Main Total Accumulated investment Investment flows Accumulated
Net income Accumulated
Name of investee
businesses and
products
amount of paid-in
capital
Method of
investment
paid by Taiwan as of
January 1, 2017 Outflow Inflow
investment paid byTaiwan as of
December 31, 2017
(losses) of the investee
Investment income (losses) Book value
remittance of earnings as of this year
CFY Manufacture ofgarments
- 2 98,360 - 31,132 67,228
(Note 1)
2,205 2,205 - -
CMK Manufacture ofgarments
65,448 2 65,448 - - 65,448 1,507 1,507 89,621 -
CMZ Manufacture ofgarments
117,740 2 117,740 - - 117,740 2,873 2,873 159,666 7,304
CJY Manufacture ofgarments
68,120 2 155,700 - 87,580 68,120 4,518 4,518 61,431 -
CJR Manufacture ofgarments
94,302 2 94,302 - - 94,302 (3,347) (3,347) 43,689 -
CBS Trade service 11,039 2 11,039 - - 11,039 2,228 2,228 22,371 -
Note : There are three kinds of investments 1.Invest directly in Mainland China companies.2.Invest in Mainland China by remitting through a third region. 3.Others.
Note 1: CFY was liquidated on August 9, 2017, the accumulated outflow of investment from Taiwan as of December 31, 2017 is including the amount of capital reduction for cover accumulated deficits.
(ii) Limitation on investment in Mainland China:
Name of investor
Accumulated Investment in Mainland China as of December 31, 2017
Investment Amounts Authorized by Investment Commission,
MOEA
Upper Limit on Investment
The Company 423,877 591,677 5,039,044
(iii) Significant transactions:
The significant inter-company transactions with the subsidiaries in Mainland China, which were eliminated in the preparation of consolidated financial statements, are disclosed in “Information on significant transactions”.
(14) Segment information
Please refer to the consolidated financial statements of the Company and its subsidiaries as of December 31, 2017 and 2016, and for the years then ended.
279
MAKALOT INDUSTRIAL CO., LTD.
Statement of Cash and Cash Equivalents
December 31, 2017
(Expressed in thousands of New Taiwan Dollars)
Items Description Amount
Cash Petty cash and cash on hand $ 913
Checking accounts and demand deposits 444,776
Foreign currency deposits USD 351,255
CNY 36,382
HKD 1,342
EUR 1
GBP 30
Time deposits CNY 114,410
Total $ 949,109
Note: The aforementioned foreign currency was valuated in the rate at reporting date.
Statement of Notes and Accounts Receivable
Client name Amount
Walmart Global Logistics $ 396,514
Oakley Inc. 72,684
President Chain Store Corp. 54,562
SanMar Corporation 35,187
Others (Note) 32,915
Subtotal 591,862
Less: Allowance for doubtful accounts (5,918)
Total $ 585,944
Note: Amounts less than 5% of the account balance are not disclosed individually.
280
MAKALOT INDUSTRIAL CO., LTD.
Statement of Financial Assets at Fair Value through Profit or Loss – Current
December 31, 2017
(Expressed in thousands of New Taiwan Dollars)
Items Amount
Listed stock $ 62,748
Details of listed stock:
Fair Value
Financial
asset item Description
Shares
(in thousand shares)
Par value
(in TWD)
Total
amount
Acquisition
cost Price per unit
Total
amount Notes
DDSC Ordinary Shares 1,680 $ 10 62,748 40,695 37.35 62,748 -
Statement of Inventories
Amount
Items Cost Market price Market price basis
Materials (including materials in transit) $ 1,997,358 2,288,373 Net realizable value
Merchandise inventory 34,894 39,978
Less: Allowance for inventory impairment (44,928)
Total $ 1,987,324
281
MAKALOT INDUSTRIAL CO., LTD.
Statement of Other Financial Assets Current
December 31, 2017
(Expressed in thousands of New Taiwan Dollars)
Items6 Amount
Factoring of accounts receivable $ 1,774,388
Others (Note) 2,463
$ 1,776,851
Note: Amounts less than 5% of the account balance are not disclosed individually.
282
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283
MAKALOT INDUSTRIAL CO., LTD.
Statement of Accounts Payable and Notes Payable
December 31, 2017
(Expressed in thousands of New Taiwan Dollars)
Items Amount Chin Chyun Industrial Co., Ltd. $ 108,620 HSBC Bank 106,085 Fountain Set Ltd. 61,088 Kam Hing Piece Works Ltd. 37,763 Others (Note) 657,461 Total $ 971,017
Note: Amounts less than 5% of the account balance are not disclosed individually.
Statement of Other Payables
Items Amount
Salaries payable $ 739,859
Remuneration payable to board of directors 42,882
Others (Note) 73,423
Total $ 856,164
Note: Amounts less than 5% of the account balance are not disclosed individually.
284
MAKALOT INDUSTRIAL CO., LTD.
Statement of Net Revenue
For the year ended December 31, 2017
(Expressed in thousands of New Taiwan Dollars)
Items Quantity (thousand dozens) Amount
Garments 11,655 $ 21,571,177
Statement of Cost of Revenue
Items Amount Raw materials, beginning of year $ 1,962,504 Add: Raw materials purchased 8,635,452 Less: Raw materials, end of year 1,755,503 Raw materials consumed 8,842,453 Accessories, beginning of year 290,254 Add: Accessories purchased 1,288,664 Less: Accessories, end of year 241,855 Accessories consumed 1,337,063 Processing cost 6,886,298 Manufacturing overhead 188,224 Manufacturing cost 17,254,038 Add: Work in process, beginning of year - Less: Work in process, end of year - Cost of finished goods 17,254,038 Less: Finished goods, end of year - Cost of production 17,254,038 Merchandise inventory, beginning of year 32,302 Add: Merchandise inventory purchased 1,183,483 Less: Merchandise inventory, end of year 34,894 Cost of merchandise inventory 1,180,891 Allowance for inventory obsolescence and market price decline (12,719) Cost of revenue $ 18,422,210
285
MAKALOT INDUSTRIAL CO., LTD.
Statement of Operating Expenses
December 31, 2017
(Expressed in thousands of New Taiwan Dollars)
Item Selling expense
Administrative and
general expenses
Payroll and bonus $ 502,533 399,964
Exporting expense 203,496 -
Sampling expense 64,047 -
Others (note) 231,551 180,468
Total $ 1,001,627 580,432
Note: Amounts less than 5% of the account balance are not disclosed individually
Property, plant and equipment, please refer to Note 6(f).
Accumulated depreciation of property, plant and equipment, please refer to Note 6(f).
Intangible assets, please refer to Note 6(g).
Deferred tax assets, please refer to Note 6(n).
Other assets current and non-current, please refer to Note 6(h).
Provision, please refer to Note 6(l).
Deferred tax liabilities, please refer to Note 6(n).
Other gains and losses, please refer to Note 6(r).
Finance costs, please refer to Note 6(r).
286
VII. Review and Analysis of Financial Conditions And
Performance And Risk Items 1. Financial Conditions
Units: NT$ 1,000
YearItem
2016 2017Difference
Amount %Current assets 7,458,764 7,225,364 (233,400) -3.13%Investment using the equity method 204,947 177,696 (27,251) -13.30%
Property, plant, and equipment 4,972,200 4,750,341 (221,859) -4.46%
Other assets 499,866 413,527 (86,339) -17.27%Total assets 13,135,777 12,566,928 (568,849) -4.33%Current liabilities 4,169,028 3,806,500 (362,528) -8.70%Non-current liabilities 238,858 256,047 17,189 7.20%Total liabilities 4,407,886 4,062,547 (345,339) -7.83%Capital 2,067,349 2,093,872 26,523 1.28%Capital reserve 3,403,403 3,544,777 141,374 4.15%Retained earnings 2,980,720 2,874,359 (106,361) -3.57%Exchange difference on translation of foreign operations' financial statements
139,918 (114,601) (254,519) -181.91%
Non-controlling interests 136,501 105,974 (30,527) -22.36%Total Stockholders’ Equity 8,727,891 8,504,381 (223,510) -2.56%
Description of major changes: 1. The decrease in exchange differences on translation of financial statements of foreign
operations compared with the last period was mainly due to the change in foreign exchange rates.
2. The decrease in non-controlling interests over this period compared with the last periodwas mainly due to the adjustment in the shareholding percentage of invested companies.
2. Financial Performance
(1) Main causes and impact of any major changes in operating revenue, gross profit, and net profit before taxes in the most recent two years
287
Units: NT$ 1,000
Year Item
2016 2017 Sum of thechanges
Change in proportion
Subtotal Total Subtotal Total (%) Total operating income 22,470,776 22,759,973 289,197 1.29% Less: Sales returns, discounts and allowances
342,837 384,973 42,136 12.29%
Net revenue 22,127,939 22,375,000 247,061 1.12% Operating cost 17,610,504 18,050,945 440,441 2.50% Gross Profit 4,517,435 4,324,055 (193,380) -4.28%Operating expenses 2,568,395 2,556,802 (11,593) -0.45% Operating profit 1,949,040 1,767,253 (181,787) -9.33% Non-operating income and expense
(39,717) (150,607) (110,890) 279.20%
Net income before taxes 1,909,323 1,616,646 (292,677) -15.33% Less: Income tax expenses 366,692 320,030 (46,662) -12.73% Net income 1,542,631 1,296,616 (246,015) -15.95%
1. Change in operating income, operating cost and gross profit: refer to theanalysis of changes in gross profit below.
2. Decrease in non-operating income and expenses: The decrease was mainly dueto the increase in foreign currency exchange losses.
Analysis of Changes in Gross Profit Units: NT$ 1,000
Change between the beginning and the end of
the period
Cause for Difference
PriceDifference
CostDifference
Sales Mix Difference
QuantityDifference
Gross Profit (193,380) (556,901) 208,153 (12,998) 168,366
The unit price decreased due to the decrease in both retail prices and purchase prices and the appreciation of NTD in 2017. Although the Company strived to improve labor costs and production efficiency, gross profit was reduced compared to 2016.
(2) Expected sales volume and basis, possible effect on future corporate finance and business, and response measures
The Company has not disclosed its financial forecast for 2018, so the expected sales volume is not disclosed.
288
3. Analysis of Cash Flow
(1) Analysis of liquidity in the most recent two years Year 2016 2017 Change in ratios
(%)Item Cash Flow Ratio 24.98% 45.61% 82.59%Cash Flow Adequacy Ratio 74.25% 68.16% -8.20%
Cash Reinvestment Ratio -7.73% 3.18% -141.14%
Description of changes in ratios: The increases in cash flow ratio and cash reinvestment ratio compared with the last period were mainly due to the increase in net cash flow from operating activities YoY. The decrease in cash flow adequacy ratio compared with the last period was mainly due to the decrease in net cash flow from operating activities in the most recent five years YoY.
(2) Analysis of cash liquidity for the coming year Units: NT$ 1,000
Cash Balance at the Beginning of Year
Annual Net Cash Flow from OperatingActivities
Annual Net Cash Flow
from Investing and Financing
Activities
Cash Surplus (Deficit)
Remedial Measure for Cash Deficit
Investing Plan Financing Plan1,559,067 1,629,143 (1,658,553) 1,529,657 - -
Analysis of changes in cash flow:
A. Operating activities: Annual net cash inflow from operating activities is expected to be NT$1,629,143,000 due to the business development in 2018.
B. Investing activities: Capital expenditures are expected to be NT$402,230,000 due to investments in production areas in Indonesia and Vietnam in 2018.
C. Financing activities: Net cash outflow from financing activities is expected to be NT$1,256,323,000 due to cash dividends to be distributed in 2018.
4. Major capital expenditures in the most recent year and its impacton the financial status and business
289
(1) The use of major capital expenditures and source of capital Units: NT$ 1,000
Project
Actual or ExpectedSource of Capital
Actual or Expected Date of Completion
Totalcapitalneeded
Use of Actual or Expected Capital
2016 2017 2018
DEMARK, Indonesia
Operatingrevenue
2010.05~2018.12 822,597 88,167 114,610 101,500
Makalot Vin, North Vietnam
Operatingrevenue
2015.06~2018.12 530,881 214,892 29,454 72,500
Leader,South Vietnam
Operatingrevenue
2015.05~2018.12 933,406 110,749 9,698 228,230
PT Starlight, Indonesia
Operatingrevenue
2013.04~2017.12 124,333 19,403 10,980 0
MOHA,Cambodia
Operatingrevenue
2014.08~2017.12 132,691 38,958 27,487 0
Makalot Cam, Cambodia
Operatingrevenue
2015.11~2017.12 62,589 32,923 15,164 0
(2) Expected potential benefits Investments in Indonesia and Vietnam are expected to expand the production capacity of garment, adjust production and meet customers' needs, enhancing competitiveness.
5. Policy on investment in the most recent year, main reasons forprofit/loss resulting therefrom, improvement plan, and investmentplans for the coming year
(1) Investment policy, main causes for profits or losses, and improvement plans
The Company's investment policy is to build the overseas production capacity; based on a strategy for international division of labor, the Company expects to move production bases to overseas areas where costs are low. In response to the international trend of environmental protection and reduce the purchase cost of fabrics, the Company adopts a strategy for vertical integration to develop business opportunities. The Company is now integrating its supply chain up to the upstream.
The gains on investments in subsidiaries and affiliated companies recognized in the Company's parent company only financial statements for 2017 using the equity method was NT$4,398,000. Compared to the investment loss of NT$24,000,000 in 2016, the main cause was that the Company strived for product transformation, improvement in production efficiency, and cost control. The fabric manufacturer invested by the
290
Company was in the process of product transformation, so the capacity utilization could not be improved effectively. The loss has been improved from the previous period and is expected to be improved continuously in the future.
(2) Investment plans for the coming year
The investment plans for 2018 are to expand the Company's own production capacity. The expected investment amount is NT$402,230,000.
6. Risks Item
(1) Impact of changes in interest rates, foreign exchange rates and inflation on the Company’s profits or losses and future response measures
A. Interest rate With financial strengths, the Company strengthens the business relationships with major banks and monitors interest rate movements to minimize the cost of capital. Currently, the changes in interest rates do not have a significant impact on the Company’s operating cash flow.
Future response measures (mid-term and long-term):
The Company's mid-term and long-term capital is mainly from the issuance of convertible bonds and capital increase by cash, which saves interest expenses, improves the financial structure, and reduces demand for USD loans at floating interest rates in order to hedge interest risk.
B. Foreign exchange rate The Company's income and expenses are mainly in USD, and natural hedging accounts for 80% or more. The Company performs the routine hedging for the net foreign currency positions after natural hedging and controls exposure according to the hedging policy. For example, NTD appreciates (depreciates) by NT$0.1, which generates the foreign currency exchange loss (gain) of NT$3,000,000.
Future response measures:
The Company analyzes changes in foreign exchange rates at any time, maintains close relationships with banks, and fully monitors movements of foreign exchange rate and foreign currency exposures. For net foreign currency positions held and expected trading positions on the account, the Company performs the routine hedging by selling forward exchange to control the foreign currency exchange loss (gain) within a range.
C. Inflation rateThe annual inflation in Taiwan was less than 2% in 2017 and relatively moderate. The raw materials of the Company are mainly imported, and the prices of raw materials, such as cotton, have increased moderately; therefore, the impact of inflation on the Company was small.
(2) Policies, main causes for profits or losses, and future response measures with respect to high-risk, highly
291
leveraged investments, loans to other parties, endorsements/guarantees, and derivatives trading
The Company did not engage in high-risk, highly leveraged investments in the most recent year.
The Company made endorsements/guarantees or loans to other parties in accordance with the "Regulations for Endorsements/Guarantees" and the "Procedures for Loans to Other Parties", which had no adverse affect on the financial conditions of the Company.
Last year, the derivatives transactions were forward exchange transactions, which aimed to prevent foreign currency denominated net assets or liabilities from risks caused by fluctuations in foreign exchange rates. The Company engaged in derivatives trading and assessed risks in accordance with the Procedures for Acquisition or Disposal of Assets; therefore, the foreign currency exchange loss (gain) had no significant adverse affect on the Company's profits or losses, showing that the Company engaged in derivatives trading in a conservative and stable fashion.
(3) R&D plans and schedule, future R&D projects and expected invested R&D expense
A. Functional product Based on the experience in R&D of medical protective clothing, the
Company has applied related technologies and resources to professional and general functional apparel. In response to the market trend of functional sports and casual wear, the Company has worked with upstream fabric manufacturers having the advantage of R&D to develop new styles and sewing skills by projects in hopes of offering sports and casual wear that are both trendy and functional, and have competitive advantage for more collaboration opportunities with international brands.
B. New products In addition to abovementioned products, the Company continues to
strengthen its ability to offer a diversity of products, such as Silk, Swimwear, Rashguard, ActiveWear, Polo, DanceWear, and Performance in functional apparel, based on the market trends and customers' needs, including technology development and transfer, R&D in seamless bonding, and evaluation and introduction of production line structure and specialized equipment, in the hope of providing customers with one-stop services.
C. Designer brands For designer brands featuring small quantity, diversity, and high
quality, our R&D team has made great efforts to develop various patterns and sewing techniques that can be produced in large quantities.
D. Capacity building for production of specially processed garment (garment washing, printing and embroidery) and R&D of high-end special processing
Special processing of garment includes washing, trendy and functional printing, embroidery, and manual beading, accounting for 27% of the Company's orders, while high-end special processing accounts for 5%. The Company always strived for specialized and diversified production. In one
292
hand, the Company specializes in garment production and manufacturing procedure; on the other hand, the Company invests in building one-stop self-manufacturing production capacity with various special processing, providing R&D ability and forming strategic alliances with various manufacturers, so as to improve the added value of products and expand the scope of product development.
(1) Professional team The Company has invested greatly in the R&D of various special
processing technologies and established a special processing R&D center to introduce special processing technicians and build a special processing professional team; the Company also forms strategic alliances with various professional manufacturers to keep in line with the latest market trends and technologies. Our design team provides the design, styles and samples of the latest special processing for customers every quarter to increase orders and business value.
(2) One-stop special processing In addition to strategic alliances with various professional
manufacturers, the Company has built its self-manufacturing production capacity and ability with special processing to strengthen corporate competitiveness, enhance production capacity stability of special processing, stabilize quality of specially processed products, and streamline production processes and efficiency.
The self-manufacturing production capacity with complete special processing has been built in Cambodia. In 2017, the washing capacity of 7.5 million pieces, the printing capacity of 5.8 million pieces, and the embroidery capacity of 11.7 million pieces were reported. In Indonesia, the washing capacity of 7.6 million pieces and the embroidery capacity of 0.7 million pieces were reported in 2017. The self-manufacturing washing capacity was also built in South Vietnam/the Philippines/China, with 7 million pieces reported in 2017. Self-manufacturing special processing is combined with front-end R&D to enable one-stop production.
c. R&D projects
A. Garment washingThe Company has continuously developed various types of
garment washing, in terms of technology, material and process, including burn-out washing, rinsing, snow washing, and special dyeing, based on customers' needs, market trends, and the spirit of environmental protection in the hope of applying them to a diversity of materials and styles.
B. Printing and embroidery The special processing of printed images and embroidery can
clearly show more designs for the products, giving more added value and variability. At present, the following has been developed by the Company, widely recognized and also ordered by our customers: sublimation printing, picture (photo) effect print, fireproof print, burn-out/flocking/gold foil/glitter/foam/discoloration print.
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E. Equipment improvement (1) The Company continuously improves equipment by investing R&D in
auxiliary components and combines the sewing effect to add applications and variations of special machines, broadening the use scope of machines and develop new styles and designs.
(2) In response to the global trend of energy conservation and carbon reduction, the Company improves the existing machines by replacing general motors with servomotors to reduce power consumption and carbon emissions.
F. Evaluation and introduction of automation equipment The Company has strived for software/hardware technology innovation
to improve the efficiency and production capacity, reduce costs, and stabilize quality, which serves as an important foundation not only for this moment but also for the future development.
In terms of software, the Company has introduced softwares such as V stitcher, OptiTex, and CLO to fully demonstrate virtual fitting; in addition, Body Scan and fabric testing equipment have also been introduced to scan the size and the shape of a human body accurately and present the combination of human figures and the fabric in 3D images, which is conducive to virtual fitting. In the future, the Company will continue to promote this software to customers, which will reduce sample making and improve efficiency.
In terms of hardware, the Company has introduced automation equipment to the processes of cutting, sewing, and finishing. In terms of cutting, automated marking systems, automated fabric stretchers, and automated cutting equipment have been long used. In terms of sewing, the Company has invested in the R&D of digitally controlled template sewing equipment/cutting equipment and introduced specialized equipment to improve production efficiency. In terms of finishing, in addition to introduced automated labeling equipment, the Company plans to introduce suspension/conveyor systems and automated storage systems for special equipment to offer correct and fast logistics services beyond customers' expectations. The Company has extended full process automation to all production bases from several factories, and aim to achieve intelligent production.
G. Technical talent recruitment and training a. TD team building
The Company continues to train TD talents. From 2008 to 2017, our technology has been certified by customers, such as Target, Kohl’s and Jcpenney, OLD NAVY, GAP, Walmart, Hanesbrands, and Cabelas. In addition, we are in the process of TD certification with KOHL’S. From 2014 to 2017, the factories in Indonesia, Vietnam, and Philippine were certified, making the Company the most certified garment supplier in Asia. In addition, our outstanding technicians were recognized by TARGET in 2009; in both 2012 and 2013, we were awarded KOHL’S TD PACTS (Partners with Others +Accurate Information +Clear Communication +Timely Comments +Solves Problems).
b. Industry-academia cooperation
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To develop talents in apparel technology, the Company has worked with National Taiwan University, National Cheng Kung University, National Taiwan University of Science and Technology, Feng Chiia University, Fu Jen Catholic University, Shih Chien University, Tainan University of Technology, National Pingtung University of Science and Technology, etc., to organize workshops and provide internship opportunities, with software and hardware courses and scholarships as incentives to train and strengthen students industry expertise, in the hope of attracting more students to engage in the garment industry.
c. The Company has worked with Taipei City Vocational DevelopmentInstitute to organize apparel programs to train talents in garmentproduction and patterning.
d. Technological successionTechnical advisers pass down their experience to help improve production issues and key product technologies (e.g. outdoor brand) in production bases, solve problems during the production and further enhance technologies/quality and production capacity.
H. Digital R&D The Company engaged in the technology development program approved
by the Department of Industrial Technology (DoIT), Ministry of Economic Affairs (MOEA) in March 2009. The program was closed in May 2011, and systems with respect to business information service management, material development management, style development management, product development management, production planning and control management, and feed planning management have gone online.
In response to the International Financial Reporting Standards (IFRS), the Company introduced Hyperion system at the end of 2012 to consolidate financial statements. According to the domestic Personal Information Protection Act (the Act), the Company's Information Department has discussed the application of the Act with Human Resources Department and legal officers, established the policies concerning personal information protection and the guidelines on safe use of documents, and installed key personal information control systems.
I. Integration of value chain for trendy and functional textile fabrics Based on the A+ Industrial Innovative R&D Program hosted by DoIT of
MOEA, the Company has initiated the 2-year plan for "Functional Fashion Textile Value Chain Integration Project in Thermal and Cooling Wear" since 2016. The Company has integrated gauze, fabric, and dyeing manufacturers and paid close attention to the Lifestyle market trend to develop trendy and functional clothes using functional materials in response to climate change.
J. Factors affecting success in future R&D a. Establishment of technology integration ability and strategic partnership with
fabric and equipment suppliers.
b. Recruitment of technical talents and establishment of technical teams thatsupport technology transfer and replication in production bases.
c. Acquisition of key technologies and resources: work with Taiwan Textile
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Federation and Taiwan Textile Research Institute to acquire international information and technologies for the R&D of new products/technologies.
d. Suitability of styles in orders.
e. Maturity of joint business plan.
f. Capability of trend forecast.
g. Constitution of supply chain.
h. Capability of fast production.
i. Capability of logistics.
j. Outstanding trading platform.
K. Future R&D projects and expected invested R&D expense The Company continues to conduct R&D in equipment and systems that are conducive to business development in response to future development. a. Digital platform: The Company integrates all technical information to the
platform and designs graphic inquiries to prevent users from languagebarriers and facilitate inquiries. In terms of production bases, users maysearch for related technical information in each factory through the platformbefore production. The platform may also provide training for largeproduction bases to improve production efficiency; in addition, employeesmay learn various technical information from the platform and improve theirknowledge of related technologies.
b. Establishment of R&D centers: Since April 2014, the Company hasestablished R&D centers in South Vietnam and Indonesia. Combined withthe development of self-manufacturing special processing and largeproduction, the Company has shortened delivery and approval time, whilemaintaining the consistence of quality. At present, the Company has 5 R&Dcenters in 4 production bases. The Company reviews the production capacityadequacy ratio of each R&D center every quarter and makes the adjustmentplan.
c. Development of self-manufacturing special processing: In addition towashing in Indonesia, Cambodia, South Vietnam, Philippines, and China, theCompany also develops embroidery in Cambodia and Indonesia and printingin Cambodia to quickly respond to markets, stabilize quality and reduce costsas well as maintain one-stop production and strengthen competitiveness.
d. Hyperion Financial Report Management: After introducing Hyperion, theCompany is able to integrate financial management data with significantlyreduced manual works and make decisions quickly with multi-facetedanalyses.
e. Mobile production information platform: The introduction of mobile devicesaccelerates the access and use of information and management efficiency.
f. Operating information management platform: The platform may provide themanagement with overall operating information, assisting them in adjustingfuture development strategies and operation policies.
g. Mobile office: Employees may access company resources externally at anytime to respond to customers more quickly and work efficiently.
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h. Fabric inspection system: The Company detects defects on fabric andcollection information quickly using tablets to control the quality of fabric inan effective way.
i. Approval APP: Employees are provided with real-time work reminderswithout being subject to time and space. Employees may apply for approvalat any time, achieving efficient mobile services.
j. Apparel patterning system: In response to the need for developingprofessional functional sportswear, the Company has developed a flexible fabric and pattern system to accelerate the development of functional product and efficiency.
k. Sample management system: The Company introduces 2D/3D QRcode toachieve transparency and fast management of information.
l. Digital laboratory inspection process: The Company has set up procedures foranalyzing and testing fabric shrinkage, torsion after washing, weight, color difference, friction, color fastness, and pH value, and provides testing data collection and computing to ensure the stable quality of main material and provide high-efficient procedure control.
m. Budgeting system: The Company has introduced Hyperion Planning, abudgeting system to solve the bottlenecks and efficacy of the originalbudgeting system. Hyperion Planning provides integration structure, whichcan be integrated with Hyperion Financial Report Management to providedynamic planning, rolling forecast, and driver basic planning on a detailedmodel, accelerating the efficiency.
n. Business intelligence system: The Company introduces Qlink, a businessintelligence software, which collects, processes, and analyzes procedures quickly, to help the management with qualitative strategy analysis and decision-making, reducing corporate risks and operating cost efficiently.
o. 3D sample display platform: The Company has built a 3D database thatcollects all style information of 3D sample preparation, including photos of 3D sample clothing from three dimensions, and videos. The platform allows customers to display style pictures and sample clothing in a 3D fashion show videos by smart phone or tablet, which making the display more convincing by presenting the combination of fabric and style. The purchase rate will increase; in addition, it will accelerate sample clothing development before production and reduce sample clothing making.
Annual Project/System Current Progress Time of Completion
Expected R&D Expense
Digital Platform (Formerly Digital Working
Hour Analysis System)
Continuousoptimization 2018/Q4 NT$1 million
(Internal R&D)
Development of Self-manufacturing Special
Processing
Continuousoptimization 2018/Q3 US$222,000
Hyperion Financial Report Management
Continuousoptimization 2018/Q3 (Internal R&D)
Mobile Production Information Platform
Continuousconstruction 2018/Q4 (Internal R&D)
Operating Information Management Platform
Continuousoptimization 2018/Q2 (Internal R&D)
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Annual Project/System Current Progress Time of Completion
Expected R&D Expense
Mobile Office Continuousdevelopment 2018/Q4 (Internal R&D)
Fabric Inspection System Continuousoptimization 2018/Q3 (Internal R&D)
Apparel patterning system Continuousoptimization 2018/Q4 NT$300,000
(Internal R&D)
Sample Management System Continuousoptimization 2018/Q2 NT$500,000
(Internal R&D)
Approval APP Continuousdevelopment 2018/Q4 (Internal R&D)
Budgeting System Underconstruction 2018/Q3 NT$5.1 million
Business Intelligence System Underconstruction 2018/Q3 NT$1.1 million
3D Mobile Platform Underconstruction 2018/Q4 (Internal R&D)
(4) Effect of changes in policies and regulations at home and abroad on the Corporate Finance and Business and response measures
The Company's CEO Office and Marketing Development Department have dedicated employees who are responsible to regularly collect and analyze foreign/domestic industry news including global economy predicts, market trends, changes in policies, FTAs progress, retailers and competitor movements. The Company has set up a sound database for the management to refer to when making decisions. Regular strategy meetings are convened to discuss impacts of external information on the Company, and resolutions are provided for the management to plan future development strategies.
The Company's main target markets are the United States, Europe and Japan, and the production bases are across Asian countries; therefore, the Company pays close attention to the political and economic situations and markets in the United States and Asia at any time, and simulates possible scenarios and proposes countermeasures.
The signing of ECFA opened the door to the China market for Taiwanese textile companies. ASEAN+1 (China) and ASEAN+3 (China, Japan and South Korea) implement zero tariff on goods at different stages. In 2013, the United States lifted the embargo on Myanmar, and EU suspended the economic sanctions imposed on Myanmar. Burmese garments can be exported to the United States and Europe to enjoy tariff preferences, making Myanmar receive attention.
Donald Trump, President of the United States has signed an administrative order to withdraw from the TPP on January 23, 2017; however, other 11 members of the TPP finalized the amended protocol, called CPTPP, in January 2018, expecting to eliminate over 98% of the tariffs among the CPTPP member states.
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Based on the policy of America First declared by Donald Trump, Taiwan will continue to promote the signing of the Bilateral Investment Agreement (BIA) and the Free Trade Agreement (FTA) with the United States under the Trade and Investment Framework Agreement (TIFA) and strengthen economic and industrial cooperation with the United States, including strengthening communication with the industry, the government, and the academic institutions of the United States using existing cooperation platforms.
EU and Vietnam signed the FTA in 2015. Both parties are now requesting for approval of European Parliament and National Assembly of Vietnam. The FTA is expected to be effective in 2018 and bring business opportunities to Vietnam.
On the other hand, the Regional Comprehensive Economic Partnership (RCEP) led by China is now ongoing. Member states, namely ASEAN+6 (China, Japan, South Korea, New Zealand, Australia, and India), account for 50% of the world's population and 33% of global economy. In 2013, the negotiation was initiated, proposing completing the negotiation in 2018. It is the future focus of all industries. Under the WTO, each country actively negotiates trade cooperation with neighboring countries and emerging markets; however, Trump's policy of America First has prompted the rise of trade protectionism. The trade agreements that have been affected shall be paid close attention to.
The Company has operations in China, Indonesia, Vietnam, Cambodia and the Philippines. When serving customers in different markets, the Company will provide production services with the advantages of tariffs, geography and costs to meet needs of customers from different markets.
EU intends to establish the place of origin mark; the United States announces that adult clothing requires the proof of fireproof inspection. The Company works with qualified inspection institutions to inspects fabric and garments, so as to comply with the regulators' requirements for inspection of importing countries, and customers' demands for quality and safety.
(5) Impact of changes in technology and industry on corporate finance and how the Company responses
The garment industry is labor-intensive. The sewing process still requires a lot of labor. The Company's product mix is various and the production processes are different by style. Therefore, it is hard to fully automated production completely. However, the Company continues to invest in automated equipment, such as automated cutting equipment, automated thread cutting/collecting equipment, automated bag making machine, buttoning equipment, and various auxiliary devices, to improve production reliability, production efficiency and product quality.
The Company's main products are trendy women's apparel. The biggest variation is mastery and demand of materials; therefore, the development and the application of new materials are the core of the Company's development. The Company's Design Department and Procurement Department cooperate with customers and suppliers at any time to develop and apply raw materials. In recent years, the Company has
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worked with suppliers to develop organic cotton fabric and recyclable Recycle-Poly in addition to basic functional materials (such as environmentally-friendly materials, thermal, cool, anti-UV, wind-resistant, waterproof, deodorant, and moisture-wicking). Through the development of the aforesaid fabric, the Company aims to improve customer satisfaction while fulfilling corporate citizenship in terms of environment protection.
To strengthen the depth and the efficacy of management and build a knowledge platform, information tools have become indispensable. Since 1997, the Company has promoted computerized operations by introducing Oracle's ERP and WebPDM. The Company also participated in the global logistics plan promoted by the DoIT, MOEA to introduce the multilingual E-Learning system, and was awarded Initial Enterprise Application Implementation.
The basis of informationization is the improvement in operating procedures. The Company has established the information promotion task force to review the internal operating procedures and used information tools to shorten operating time and improve operating quality and integration, transparency, and correctness of information.
In addition to internal information development, the Company also works with the industry and the government to develop Big Data and block chain and apply technology to corporate operations, such as risk order management and production performance in data, based on the future trend of technology development.
(6) Impact of changes in corporate image on corporate risk management and response measures
The Company continues to improve customer service, strengthen cooperation with suppliers, and achieve transparency and disclosure of information. The Company has long complied with laws and regulations, enhanced corporate governance, and upheld the corporate philosophy, "integrity, teamwork, and sharing" with employees and external related parties, having long left good impression on customers, investors, and suppliers.
In addition, the Company has departments in charge of investor relations, employee relations, risk management, occupational safety, internal control, and education funds, which strive to improve the corporate image. In case of emergencies or disasters, the Company will set up a task force to relieve the crisis and minimize damage and notify the public relations unit at the first time. The public relations unit is responsible to speak on behalf of the Company to maintain the corporate image.
The Company upholds the spirit of creating value for customers. The corporate image is good, and there is no change in corporate image that causes any business crisis. From 2013 to 2017, the Company has received positive feedback from customers as follows:
Year Awards
20131. Macy's: Five-Star Award2. Gap: Outstanding Performance in Delivery3. Common Wealth Magazine: 2nd Place in the Textile and Garment
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Year AwardsIndustry in 2013 "Most Reputable Benchmark Enterprises"
4. Common Wealth Magazine: 210th Place in the ManufacturingIndustry and 7th Place in the Textile and Garment Industry in 2013"Top 2000 Enterprises"
5. Ministry of Economic Affairs: "Potential Mittelstand"6. Securities & Futures Institute: A+ in 10th Listed Company
Information Disclosure Ranking
2014
1. Macy’s: 2014 Five Star Award2. WAL-MART: Exceptional Gains in Productivity and Improvement in
Efficiency3. GAP: Outstanding Performance in Delivery4. Common Wealth Magazine: 198th Place in the Manufacturing
Industry and 7th Place in the Textile and Garment Industry in Top2000 Enterprises
5. Taiwan Stock Exchange: Constituent stock of "Taiwan HighCompensation 100 Index"
6. Securities & Futures Institute: A+ in 11th Listed CompanyInformation Disclosure Ranking
2015
1. Walmart: Men’s Apparel Item of the Year2. GU: GU Best Partner Award3. Kohl's: DANA Best NO 1 Partner4. GAP Inc.: Outstanding Vendor Performance For Social
Responsibility (Wovens)5. Common Wealth Magazine: 169th Place in the Manufacturing
Industry and 5th Place in the Textile and Garment Industry in Top2000 Enterprises
6. Securities & Futures Institute: A+ in 12th Listed CompanyInformation Disclosure Ranking
7. Top 20% in 1st Corporate Governance Evaluation
2016
1. GAP Inc.: Outstanding Vendor for Shipping On-Time2. Walmart: Supplier of the Year3. Taiwan Garment Industry Association: Garment Benchmark Award4. Harvard Business Review: 27th Place in 50 Best Performing CEOs in
Taiwan5. Common Wealth Magazine: 138th Place in the Manufacturing
Industry and 4th Place in the Textile and Garment Industry in Top2000 Enterprises
6. Top 20% in 2nd Corporate Governance Evaluation
2017
1. Ministry of Health and Welfare: Health Promotion Badge in HealthyWorkplace Self-certification
2. Ministry of Economic Affairs: Potential Mittelstand and ExcellentMittelstand with Friendly Workplace
3. Common Wealth Magazine: 150th Place in the ManufacturingIndustry in Top 2000 Enterprises
4. VF: 2017 Vendor Score #1 (for tops)
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(7) Expected benefits from merger and acquisition (M&A), and possible risks
To achieve the long-term business objectives, the Company has made a verity of development plans. In addition to various innovative business models and strategic alliances, the Company intends to achieve the business objectives through M&A whenever necessary. The Company has developed strategies for M&A and set up a dedicated M&A team to contact M&A or investment subjects that meet the Company's strategy objectives through various channels; rigorous evaluation procedures are also established to ensure the benefits of M&A and avoid possible risks. The explanation is as following:
Expected Benefits
1. Business expansion1.1 Create complementary effect, including different markets,
customers, products, production bases, and core competencies, which accelerates the Company's development of new customers, products and business.
1.2 Implement vertical integration, such as investment in upstream raw material suppliers (fabric traders or manufacturers with special expertise or R&D capacity), which make the Company's products and services more competitive.
2. Recruitment of international professionals: Facing globalization,enterprises have to recruit more international professionals. As itis not easy to develop a mature business team, the Company caninclude new professional teams at a faster speed and expandsbusiness and contacts through M&A to improve itscompetitiveness.
3. Development of future new business: With limited corporateresources (including talent, technology and funds), enterprisesmay find it not appropriate or even contradictory to developdiversification through internal organization; therefore, theCompany finds potential companies with good businessperformance and potential development through strategicalliances and provides support to create a win-win situation.
PotentialRisks
1. Incorrect evaluation due to lack of information, experience, andexpertise.2. Talent loss due to the barrier of corporate cultures.3. Business performance below expectations.
ResponseMeasures
1. Possible risks for incorrect evaluation due to lack of information,experience, and expertise: Explanation: The Company has set up a designated dedicated M&A team and abundant external resources (such as financial consultants, CPAs, and lawyers). In addition to selecting investment subjects carefully, the Company also, carefully collects sufficient information during the investment evaluation stage, conducts various professional evaluation on benefits and risks of investments, and commissions external professional units to conduct financial and legal audits. The Company has the complete operating procedures for every scale of investment and a rigorous review system and makes good use of contract signing to minimize investment risks.
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2. Possible risks for talent loss due to the barrier of corporatecultures: Explanation: In M&A of new companies, business entities, or talent teams, both companies must integrate their corporate cultures. In view of this, the Company includes "corporate culture" as a key investment assessment item and persists in forming business cooperation before M&A in order to understand each other more, so that both companies are able to have more opportunities to have business collaborations and know each other well before M&A, effectively reducing possible conflicts in the future and the time of post-M&A integration. In terms of organization, the Company may allow the merged companies to have independent operating space, while the Company controls important business information and decision-making (such as financial and personnel affairs); in addition, the Company makes good use of contract signing to minimize risks of cultural integration.
3. Possible risks for business performance below expectations:Explanation: The Company will request the merged companies to regularly report their operating status and financial statements to have close control over them. To develop the benefits of M&A, the Company will set clear business objectives and an incentive system with various performance bonus to encourage professional managers to achieve the objectives (also an important management model is adopted by many successful M&A cases at present). If there is a significant discrepancy due to poor business performance, the Company will review it in the business management meetings and request improvement according to the Company's Investment Management Regulations. If business performance continues to be below expectations, the dedicated team will evaluate the "stop-loss and withdraw mechanism" according to the investment policy and report to the management and the Board of Directors for resolution; in addition, the Company makes good use of contract signing to minimize risks of business performance below expectations.
(8) Expected benefits from factory expansion, and possible risks The expected benefits from production capacity expansion, possible risks, and response measures are as follows:
ExpectedBenefits
1. Replace the existing production capacity and expand the scale;gradually replace old factories (with smaller production line scale)and high-cost factories and move the production capacity to morecompetitive production bases.
2. Adjust and move production bases based on the quantity of orders,customers' needs, and production costs.
3. In addition to gradual movements of production bases (areas), theCompany starts to develop the layout of large production bases toexpand the production scale and cost competitiveness.
4. In response to the market strategy with large and continuous ordersand special processing product development trend, the Companyhas developed its own production capacity with special processing
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(washing and printing). The technology, cost, and product competitiveness is expected to grow with the existing cost advantage combined with vertical integration of special processing.
PotentialRisks
1. Large investment amounts affect the application of funds.2. Capacity utilization is below expectations.
ResponseMeasures
Production capacity is gradually replaced and moved. Some of production equipment with a higher investment amount (such as sewing equipment) may be replaced, while some with better performance may be moved to minimize overall investment risks. The Company focuses on building overseas production bases with competitive advantages, while in terms of order planning, meeting its own capacity utilization and controlling production cost will be prioritized. The development policy of each production base (gradual relocation from high-cost production bases and evaluation and development of new production bases) is discussed and resolved based on local political and economic situations, industry policies, major trade agreements, and cost trends; in addition, the Company maintains long-term relationships with qualified contract manufacturing partners to adjust the capacity in response to fluctuations in orders and seasons.
(9) Risks relating to concentration of purchasing sources and customer A. Purchasing sources
The Company's main products are trendy garments, and the fabric required for production will change with fashion trends; therefore, there are a wide range of scattered purchasing targets (fabric manufacturers have their own expertise), and the types of materials are also quite diverse. The main purchase areas are scattered in China, Vietnam, Indonesia, Cambodia, Taiwan, and South Korea, and are not concentrated in a single country or region. According to the purchase ratio in recent years, there has been no concentration of purchasing sources in the Company; in addition, the Company starts producing upon receiving orders, so raw materials are purchased per customers' requirements, when orders are received; therefore, the Company does not sign large supply contracts with any supplier. There was no supply shortage or disruption in the most recent year.
The changes in the Company’s supplier rankings and the proportion of major raw material purchases are mainly due to the diversification of products, the suppliers' material development and supply capabilities, or the change in supply from suppliers due to orders of customers designating cloth manufacturers; therefore, there has been no excessive concentration of purchasing sources.
B. Customers
The Company’s main sales market is the United States, and the market share of shipments in the United States as a whole is still low; in addition, customers are scattered, so the Company is not easily affected by
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the fluctuation in a single customer. The U.S. market accounts for a significant proportion of the Company’s revenue, so the Company will be affected inevitably in the case of low consumption in the United States. In recent years, the Company has developed other brands and distributors in the global market to diversify risks and expand overseas markets. The Company has also developed customers in Japan and Europe, and achieved outstanding performance in risk control over the market concentration. At present, the Company’s top ten customers are the first tier brands in the global retail industry. The customers are composed of well-known apparel companies and distributors with marketing channels or brands, including apparel chains (such as GAP and GU), discount chains (such as Target and Wal-Mart), and department stores (such as Kohl’s, Macy’s, and J.C Penney); in addition, the Company maintains good relationships with brand agents (such as L&F) to develop new customers at any time.
As a whole, the Company’s sales policy focuses on customers with stable operations and large and stable quantity of orders and pays attention to the balanced development of multiple customers to avoid the risk of customer concentration. In terms of customer structure, the strategy for balanced development protects the Company from being affected by customers' business performance. In recent years, due to changes in customers' revenue and market integration trend, the sales amounts from customers have changed, but the top ten customers have accounted for a stable percentage of the Company's revenue; in addition, the growth of medium-sized customers and new customers is still promising; therefore, there has been no risk of business growth caused by customer concentration.
(10) Impact and risks relating to large share transfers or changes in shareholdings by directors, supervisors, or shareholders with shareholdings of over 10% In 2017 and as of the publication date of this annual report in 2018, there is no large share transfer or change in shareholdings by directors, supervisors, or shareholders with shareholdings of over 10%.
(11) Impact and risks relating to changes in management rights: Not applicable.
(12) Litigation and non-litigation matters: None. (13) Other important risk: None.
7. Other Important Items: None.
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2. Basic information on affiliates
Company Name AcquisitionDate
Address Paid-in Capital Main Business
Leader June 2001 1606B/ PSE Center West Exchange Road, Ortigas Center Pasig City Philippines1607A
PHP 25,000,000 Manufacture of garments
Diamond (Note 1) June 2001 1606B/ PSE Center West Exchange Road, Ortigas Center Pasig City Philippines1607A
PHP 15,000,000 Manufacture of garments
Primeline (Note 1) June 2001 1607B PSE Center West Exchange Road, Ortigas Center Pasig City Philippines
PHP 10,000,000 Manufacture of garments
PT Crystal January 2002
Jl. Pemda Tigaraksa, Kp. Ciapus, Rt 003/03 Budimulya, Cikupa, Tangerang Indonesia
US$999,191 Manufacture of garments
Global January 2000
Simmonds Building, Wickhams Cay 1, P.O. Box 961, Road Town Tortola, British Virgin Islands
US$15,739,500 Trade services
Loyal December 2001
Simmonds Building, Wickhams Cay 1, P.O. Box 961, Road Town Tortola, British Virgin Islands
US$500,000 Trade services
Fortune Star April 2005 Portcullis TrustNet Chambers, P. O. Box 1225, Apia, Samoa US$21,603,591 Investment
holding
Triple July 2006 Offshore Chambers, P. O. Box 217, Apia Samoa US$10,800,000 Investment
holding
Ecolot Textile Co., Ltd. March 2011
6F., No.106-2, Sec. 2, Zhongshan N. Rd., Zhongshan Dist., Taipei City 104, Taiwan (R.O.C.)
NT$160,000,000 Trade services
Great Time Global Co., Ltd. August 2012
4F., No. 550, Sec. 4, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)
NT$5,000,000 Trade services
Glida Arhleties Co., Ltd. March 2016
7F., No. 550, Sec. 4, Zhongxiao E. Rd., Xinyi Dist., Taipei City 110, Taiwan (R.O.C.)
NT$5,000,000 Trade services
PT Glory July 2003 Jl. Soekarno Hatta Km. 9. Rt. 001 Rw. 001 Ds. Samban Bawen District Smarang Regency
US$6,410,000 Manufacture of garments
Makalot Cam December 2003
Building B, Soun Ouksahakam Vattanac, Sangkat Stung Meanchey, Khan Meanchey, Phnom Penh
US$3,200,000 Manufacture of garments
Makalot Vietnam January 2006
Ngo Quyen Street, Thanh Binh Ward, Hai Duong City, Hai Duong Province, Vietnam
US$7,500,000 Manufacture of garments
Moha Garments January 2007
Soun Ouksahahakam Vattanac II No.3 Sangkat Krang Pongror, Khan Dangkor, Phnom Penh
US$2,900,000 Manufacture of garments
Triple Vin May 2007 Hamlet 12-Tan Thanh Dong Ward-Cu Chi Dist-HCMC US$2,500,000 Manufacture of
garments
Top Trend December 2015
Offshore Chambers, P.O. Box 217, Apia, Samoa US$5,200,000 Investment
holding
Leader Vin March 2015 Lot II-7, Hoa Phu Industrial Park (Stage 2), Hoa Phu Commune, Long Ho Dist., Vinh Long Province
US$5,400,000 Manufacture of garments
Fund Eagle May 2007 Flat B, 6F., Teda Building, 87 Wing Lok St., Sheung Wan, Hong Kong US$0 Investment
holdingWintop May 2007 Flat B, 6F., Teda Building, 87 Wing US$10,370,000 Investment
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Company Name AcquisitionDate
Address Paid-in Capital Main Business
Lok St., Sheung Wan, Hong Kong holding
Crown Era May 2007 Flat B, 6F., Teda Building, 87 Wing Lok St., Sheung Wan, Hong Kong US$3,580,000 Investment
holding
Crownway May 2007 Flat B, 6F., Teda Building, 87 Wing Lok St., Sheung Wan, Hong Kong US$4,560,000 Investment
holding
PT Starlight August 2007 Jl. Tegal Panas – Jimbaran Km. 01 Dusun Secang Desa Samban Rt. 001 Rw. 001, Bawen Kab. Semarang 50661 - Indonesia
US$2,100,000 Manufacture of garments
Namtex Co., Ltd. October2013
Nhon Trach II Industrial Park, Nhon Trach Dist., Dong Nai Province, Vietnam
US$20,242,631
Various fabric knitting,dyeing,printing, etc.
Top Shiny September 2014
Flat B, 6F., Teda Building, 87 WingLok St., Sheung Wan, Hong Kong US$1,200,000 Investment
holding
Texlot October2015
Jipfa Building, 3F., Mani Street, Road Town, Tortola, British Virgin Islands
US$10,900,000 Investment holding
Jiaxing Ruiyang Garment Co., Ltd. June 2007
Group 5, Huayuan Vil., Pinghu Economic Development Zone, Zhejiang Province, China
US$2,880,000 Manufacture of garments
Shanghai Makalot Garment Co., Ltd. August 2007
4F., No. 273, Siping Rd., Hongkou Dist., Shanghai, Jiangsu Province, China
US$2,150,000 Manufacture of garments
Jiaxing Suntex Garment Co., Ltd August 2007
Xuyouche Vil., Qinshan Township, Haiyan County, Zhejiang Province, China
US$5,176,445 Manufacture of garments
Jiaxing Rising Garment Co., Ltd. August 2007 Guangchen Township, Pinghu City,
Zhejiang Province, China US$2,100,000 Manufacture of garments
Eco-Lot Textile Co., Ltd. March 2010 Rm. 201-11, Building 4, No. 799,
Hutai Rd., Shanghai, China US$350,000 Trade services
3. Information of Directors, Supervisors, and General Managers of the affiliates
Company Name Title Name or RepresentativeShares Held
Number of Shares Held
Shareholding Percentage (%)
Leader
Director cum General Manager
Kuo-Lung Chen 1 -
Director Li-Ping Chou 1 -Director Hung-Jen Huang 1 -
Diamond (Note 1)
Director cum General Manager
Kuo-Lung Chen 1 -
Director Li-Ping Chou 1 -Director Hung-Jen Huang 1 -
Primeline (Note 1) Director cum General Manager
Kuo-Lung Chen 1 -
Director Hung-Jen Huang 1 -PT Crystal Director Yu-Chiu Kao 6,000 0.6%
Global Representative of corporate director
Li-Ping Chou, Makalot Industrial Co., Ltd. 15,740 100%
Loyal Representative of corporate director
Li-Ping Chou, Makalot Industrial Co., Ltd. 10,000 100%
308
Company Name Title Name or RepresentativeShares Held
Number of Shares Held
Shareholding Percentage (%)
Fortune Star Representative of corporate director
Li-Ping Chou, Makalot Industrial Co., Ltd. 21,603,591 100%
Triple Representative of corporate director
Li-Ping Chou, Makalot Industrial Co., Ltd. 10,800,000 100%
Ecolot
Chairman Li-Ping Chou 636,533 3.98%Director Kuo-Chu Ma 524,999 3.28%Representative of corporate director cum General Manager
Makalot Industrial Co., Ltd. Ching-Sung Chiu
9,864,000 61.65%Representative of corporate director
Yu-Hsin Lin, Makalot Industrial Co., Ltd.
Representative of corporate director
Hsin-Hao Chou, Makalot Industrial Co., Ltd.
Representative of corporate director
Cho-Li Lin, BiYi International Co., Ltd. 1,540,000 9.63%
Supervisor Yu-Ya Lin 38,500 0.24%
PT Glory Director Kuang-Han Sung 0 0%Director Shu-Ying Chen 0 0%
Makalot Cam General Manager Kuo-Lung Chen 0 0%
Makalot Vietnam Director Kuo-Lung Chen 0 0%General Manager Hung-Lin Tsai 0 0%
Moha Garments General Manager Kuo-Lung Chen 0 0%
Triple Vin Director Li-Ping Chou 0 0%General Manager Kuo-Lung Chen 0 0%
Fund Eagle Director Li-Ping Chou 0 0% Wintop Director Li-Ping Chou 0 0%Crown Era Director Li-Ping Chou 0 0%Crownway Director Li-Ping Chou 0 0%
PT Starlight Director Kuang-Han Sung 0 0%Director Shu-Ying Chen 0 0%
Jiaxing Ruiyang
Chairman Yu-Ching Huang
0 0%Director Shu-Ying ChenDirector Yu-Tsen WenSupervisor Yu-Ya Lin
Shanghai Makalot
Chairman Yu-Ching Huang
0 0%Director Shu-Ying ChenDirector Yu-Tsen WenSupervisor Yu-Ya Lin
Jiaxing Suntex
Chairman Yu-Ching Huang
0 0%Director Shu-Ying ChenDirector Yu-Tsen WenSupervisor Yu-Ya Lin
Jiaxing Rising.
Chairman Yu-Ching Huang
0 0%Director Shu-Ying ChenDirector Yu-Tsen WenSupervisor Yu-Ya Lin
Eco-Lot Executive Director Ching-Sung Chiu 0 0%Supervisor Yu-Ya Lin
309
Company Name Title Name or RepresentativeShares Held
Number of Shares Held
Shareholding Percentage (%)
Great Time
Representative of corporate director cum Chairman
Makalot Industrial Co., Ltd. Chien Wang
500,000 100%
Representative of corporate director
Tai-Chang Wang, Makalot Industrial Co., Ltd.
Representative of corporate director
Pai-Jung Liao, Makalot Industrial Co., Ltd.
Representative of corporate supervisor
Yu-Ya Lin, Makalot Industrial Co., Ltd.
Namtex.
Representative of corporate director
Hung-Jen Huang, Wintop
0 50%
Representative of corporate director
Ching-Kuang Huang, Wintop
Representative of corporate director
United Investment Yao-Tang Lo
Representative of corporate director
United Investment Chun-I Hu
Top Shiny Representative of corporate director
Li-Ping Chou, Ecolot Textile Co., Ltd. 1,200,000 100%
Leader Vin Director Li-Ping Chou 0 0%Director cum General Manager Kuo-Lung Chen 0 0%
Texlot Representative of corporate director
Kuo-Chu Ma, Top Shiny 1,500 6.88%
Glida Arhleties
Representative of corporate director cum Chairman
Makalot Industrial Co., Ltd. Li-Ping Chou
500,000 100%
Representative of corporate director
Shu-Ying Chen, Makalot Industrial Co., Ltd.
Representative of corporate director
Hsin-Peng Chou, Makalot Industrial Co., Ltd.
Representative of corporate supervisor
Yu-Ya Lin, Makalot Industrial Co., Ltd.
Top Trend Representative of corporate director
Li-Ping Chou, Triple 5,200,000 100%
Note 1: The company is in the liquidation process.
310
4.O
pera
tiona
l hig
hlig
hts o
f aff
iliat
esU
nits
: NT$
1,0
00
()(
)M
akal
ot2,
093,
872
12,3
16,7
053,
918,
298
8,39
8,40
721
,571
,177
1,56
6,90
81,
286,
086
6.18
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al46
9,79
395
7,75
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244,
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171,
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191,
326
1,07
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(27,
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ne S
tar
644,
824
591,
172
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1,17
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(24)
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akal
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8,95
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8,19
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0,76
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35,1
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2,35
817
1,03
10
171,
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0(5
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a86
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328,
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332,
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(4,1
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106,
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159,
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9,67
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WN
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00
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85,9
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6,86
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8942
6,87
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,995
)(3
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)N
ASh
angh
ai M
akal
ot64
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111,
731
22,1
1089
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148,
304
820
1,50
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Sunt
ex15
4,50
723
8,43
378
,767
159,
666
384,
498
1,38
52,
873
NA
Jiaxin
g Ri
sing
62,6
8115
6,54
995
,118
61,4
3141
4,55
22,
131
4,51
8N
ATr
iple
Vin
74,6
2024
8,82
814
1,49
310
7,33
570
6,91
420
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12,3
60N
ALe
ader
(Vin
)16
1,17
934
7,05
127
9,81
767
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232,
619
(15,
546)
(29,
909)
NA
Top
Tren
d15
5,21
067
,234
067
,234
00
(29,
909)
(5.7
5)PT
Sta
rligh
t62
,681
350,
449
280,
063
70,3
8756
7,19
317
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392
18.6
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o-Lo
t Tex
tile
10,4
4729
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7,51
322
,371
322,
070
3,21
42,
228
NA
Ecol
ot T
extil
e16
0,00
038
4,63
210
7,94
627
6,68
61,
207,
879
18,2
8570
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4.41
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t Tim
e5,
000
5,16
61
5,16
50
(67)
(292
)(0
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y35
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42,2
380
42,2
380
01,
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0.90
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tex
604,
202
1,07
3,43
174
6,94
532
6,48
51,
135,
591
(7,8
11)
(14,
587)
NA
Glid
a A
rhle
ties
5,00
04,
981
04,
981
0(1
)0
0.00
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t22
6,84
520
6,17
716
,501
189,
676
45,1
11(1
1,42
7)(1
6,04
0)(2
.11)
()
311
(2) Consolidated Financial Statements of Affiliates and Affiliation Reports
Representation Letter
The entities that are required to be included in the combined financial statements of MAKALOT INDUSTRIAL CO., LTD. as of and for the year ended December 31, 2017 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 endorsed by the Financial Supervisory Commission. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, MAKALOT INDUSTRIAL CO., LTD. and its Subsidiaries do not prepare a separate set of combined financial staetments.
Company name: MAKALOT INDUSTRIAL CO., LTD. Chairman: Frank Chou Date: March 27, 2018
2. Private placement of securities in the most recent year up to the dateof publication of this report: None.
3. Securities of the Company held by or disposed of by subsidiariesin the most recent year up to the date of publication of this report:None.
4. Other Necessary Disclosures: None.5. Any event that results in substantial impact upon the shareholders’
equity or security price as prescribed in Subparagraph 2, Paragraph2, Article 36 of the Securities and Exchange Act in the most recentyear up to the date of publication of this report: None.
312
Makalot Industrial Co., Ltd.
Li-Ping Chou, Chairman
