Pacific Hospital Supply Co., Ltd. Minutes of Regular Meeting of Shareholders 2017

Transcription

1 Pacific Hospital Supply Co., Ltd. Minutes of Regular Meeting of Shareholders 2017 Date and time: June 14, 2017 (Wednesday) 9:00 a.m. Location: Tungluowan Hall (No. 78, Hsinhsing Road, Tungluo Village, Tungluo Township, Miaoli County) Chaired by: Jin Chung Minute taker: Sing Yue Chen I. Promulgate the number of shares represented in person or by proxy, and call the the meeting to order: The number of shares represented in person or by proxy is 50,975,619 shares, which constitutes 77.21% of the total 66,015,216 shares issued. The number of shares has constituted the quorum at the time scheduled for the meeting. The chairman called the meeting to order. II. Opening Speech by the Chairman (omitted) III. Presentation of Key Issues: Issue No.I Report on the Company s 2016 business performance and financial standing. (Attachment I) Issue No.II Supervisors Review Report on Final Accounts (Attachment II) Issue No.III Report on the distribution of 2016 employees', directors and supervisors' compensation. Descriptions: 1. The distribution is in accordance with the Articles of Incorporation. 2. In care of overall company operation and peer wage payout levels, there are plans to distribute employees compensation at NT$19,000,000 and directors and superviors compensation at NT$2,120,000, with both to be distributed in cash. IV. Issues to Be Acknowledged: Issue No. I Proposed by the Board of Directors Subject of Issue: Acknowledgement of the Company s 2016 Business Report and Financial Statements, please kindly acknowledge this issue as prudent. Descriptions: 1. The Company s Financial Statements of Year 2016 have been duly audited by Certified Public Accountants Chiang-Pao Liu and Yi-Lung Chou of Deloitte & Touche with Audit Report duly issued. 2. The aforementioned final accounts were already approved by the Board of Directors and already duly audited by the Supervisors. Please kindly refer to Attachment I and Attachment III. 3. Please kindly acknowledge this issue as prudent. Decision resolved:shares represented at the time of voting: 50,975,619 1

2 Voting Results % of the total represented share present Approval votes: 46,497, % Disapproval votes: 2, % Invalid votes: % Abstention votes/no votes: 4,475, % RESOLVED, that the above proposal be and hereby was approved as proposed. Issue No. II Proposed by the Board of Directors Subject of Issue:Acknowledgement of the Company s earnings allocation for Year 2016, please kindly acknowledge this issue as prudent. Descriptions: 1. Earnings Appropriation Table of 2016 is drafted in accordance with the Company Act and the Articles of Incorporation of the Company. Please kindly refer to Attachment IV. 2. The total of bonus for allocation is NT$165,038,040 and will all be distributed in cash for NT$2.5 per share pursuant to the register of shareholder on ex-dividend date. The dividend distribution should be rounded down to the nearest integer, and total amount of the fracture numbers will be transferred to the employee welfare committee of the Company. 3. The issue is proposed for adoption by Regular Meeting of Shareholders and for authorization to the Board of Directors to fix the date for ex-divident date. When the dividend yield ratio is affected and should be adjusted, given that shares outstanding varies as a result of relevant laws or regulations or buyback of treasury stock by the Company before the ex-dividend date,the Board of Directors should be discretionally authorized to this matter. 4. Please kindly acknowledge this issue as prudent. Decision resolved: Shares represented at the time of voting: 50,975,619 Voting Results % of the total represented share present Approval votes: 46,489, % Disapproval votes: 10, % Invalid votes: % Abstention votes/no votes: 4,475, % RESOLVED, that the above proposal be and hereby was approved as proposed. V. Issues Proposed for Discussion: Issue No. I Proposed by the Board of Directors Subject of Issue: Amendment to the Operational Procedures for Acquisition and Disposal of Assets of the Company is proposed to be resolved. Descriptions: 1. In order to conform to the amendmends to Regulations Governing the Acquisition 2

3 and Disposal of Assets by Public Companies, the Company hereby proposes to amend the Operational Procedures for Acquisition and Disposal of Assets. The comparison of amendments, please kindly refer to Attachment V. 2. Please resolve. Decision resolved: Shares represented at the time of voting: 50,975,619 Voting Results % of the total represented share present Approval votes: 46,497, % Disapproval votes: 2, % Invalid votes: % Abstention votes/no votes: 4,475, % RESOLVED, that the above proposal be and hereby was approved as proposed. VI. Extempore Motions: None VII. Adjourment 3

4 Pacific Hospital Supply Co., Ltd Business Report The global economic growth had slowed down in 2016; however, the management of PACIFIC HOSPITAL SUPPLY CO. LTD. had managed to secure stable growth in operating income. The business performance and financial status in 2016 is summarized as follows: Operating policy The Company actively carried out product research and development and expansion of production lines; also, actively expanded the brand marketing and targeted international manufacturers for cooperation in order to accelerate the expansion of global market network and to enhance the Company s revenues. The operating policy is outlined as follows: (I) Innovative research by introducing new technology, developing value-added products, and strengthening competitiveness (II) Reinforcing quality management to meet customer needs (III) Expanding marketing channels to improve market share (IV) Strengthening the integration of resources, enhancing the process improvement, and pursuing of excellence (V) Promoting corporate governance, fulfilling corporate social responsibility, and committing to a sustainable development goal Achievement and implementation of business plan The Company has been incorporated for over 40 years with diversified product lines and complete specifications offered. The Company has the products sold under its own brands and the brands of the customers in over 70 countries, including European countries, the United States, Japan and so on with a good reputation earned in market. In recent years, due to the dramatic growth of business and production lines at nearly full capacity, the Company has new manufacturing facilities constructed in Tongluo Science Park. In addition to introducing of automated production lines and R&D equipment in the future, the Company will develop high value-added products and continuous improve production technology and product autonomy in order to meet customer needs, to effectively strengthen the core competitiveness, to have the production lines integrated vertically, to reduce operating costs, and to improve production efficiency for the purpose of building up the Company as one of the major international manufacturers. The consolidated business performance of the Company for the year 2016 is as follows: (Unit: NT$ Thousand) Year Item Growth rate Operating income 1,689,664 1,621, % Gross profit 617, , % Operating expense 211, , % Operating income - net 406, , % Net income 332, , % 4 Attachment I

5 Operating income and expense and budget implementation The budget implemented in 2016 is found not significantly different or deviated from the budget of the year, which meets the expectation. The Company will continue to implement the controls and improve the business performance and also strive to maximum the shareholders equity. Profitability analysis The total consolidated assets amounted to NT$3,321,068 thousand, the total consolidated liabilities amounted to NT$1,131,093 thousand, and the total consolidated shareholders equity amounted to NT$2,189,975 thousand as of the end of The annual debt ratio was 34.06%, the return on assets was 11.13%, the return on equity was 15.80%, the net profit ratio was 19.69%, the basic earnings per share was NT$5.04, and the profitability was good in Research and development The consolidated research and development expense amounted to NT$40,046 thousand in The Company has set up an innovative R&D team with talents actively cultivated for the pursuit of R&D innovation. The Company will continue to develop automation equipment and value-added products in order to reduce cost, improve production efficiency, and enhance overall revenue and profitability. Because the global aging population demands the medical-related products as well as China and emerging countries begin to improve the infrastructure and medical environment, the global output of medical products is continuing to grow, and thus the medical equipment industry will be spurred to upgrade. Furthermore, the policy of the government in promoting the biotechnology industry helps make the future prospects of the medical industry generally optimistic. The Company asks for the support and recognition of the shareholders, and the continuing encouragements and suggestions from the shareholders. The Company is committed to work hard for the best interests of the shareholders. Last but not least, we would like to extend our most sincere appreciation and blessing to our shareholders taking as a whole. Chairman Jin Chung General Manager Jin Chung Accounting Head Yu-Shiu Huang February 23,

6 Attachment II Supervisors Review Report To: The Regular Meeting of Shareholders 2017 The Board of Directors compiled the Company s 2016 business report, financial statements (including consolidated and individual financial statements), and proposal of earnings distribution. The CPAs of Deloitte & Touche, Chiang-Pao Liu and Yi-Lung Chou, have audited the financial statements and issued an audit report relating to the financial statements. The aforementioned business report, financial statements and proposal of earnings distribution have been audited by supervisors and there is no misrepresentation. As such, supervisors issued this report in accordance with Article 219 of the Company Act. Please examine. Pacific Hospital Supply Co., Ltd. Supervisor Min-Chih Chang (Signed or affixed with seal) Supervisor Po-Hao Pan (Signed or affixed with seal) Supervisor Tsu-Kang Yu (Signed or affixed with seal) February 23,

7 7 Attachment III

8 Revenue Recognition The revenue of the Group mainly comes from the sales of medical equipment for hospitals. The net sales in 2016 is NT$1,689,664 thousand. Due to differing sales terms subject to the customer orders and contracts, we determined that the timing for the transfer of the risks and rewards of ownership for revenue recognition and the amounts of revenue recognized were significant. Therefore, revenue recognition is selected as one of the key audit matters. For the related accounting policies of revenue recognition, refer to Note 4 to the accompanying consolidated financial statements. The main audit procedures that we conducted are following. For these procedures, we: 1. Understand and test the design of the internal controls surrounding revenue recognition and the effectiveness of the revenue recognition process. 2. Select samples from sales records and check the corresponding shipping documents and contract to verify the timing of the transfer of ownership risks for revenue recognition and verify the authenticity of the sales transactions. Allowance for Impairment Loss for Overdue Accounts Receivable Management is required to make judgments about the recoverability of overdue accounts receivable. Estimates and assumptions about the allowance for impairment loss for overdue accounts receivable are based on historical experience and consideration of the creditworthiness of customers. Therefore, the recoverability of overdue accounts receivable is one of the key audit matters. For the policies on receivables and other relevant information, refer to Notes 4, 5 and 7 of the accompanying consolidated financial statements. The main audit procedures that we conducted are following. For these procedures, we: 1. Understand and test the design of the internal controls surrounding receivable recovery and the effectiveness of the procedures for receivable recovery. 2. Understand and assess the rationality of the assumptions and methods conducted by management to estimate the impairment loss on overdue receivables. 3. Test the correctness of aging analysis of receivables, compare the current and previous years accounts receivable aging reports, review the current and previous years actual bad-debt situation, assess the after-period-end collection of receivables to confirm the recoverability of outstanding receivables and verify the balance of the amount of bad debts. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers, and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 8

9 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 supervisors, are responsible for overseeing the Group s financial reporting process. Auditors Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. 3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Group to cease to continue as a going concern. 5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 9

10 6. Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2016 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 Chiang-Pao Liu and Yi-Lung Chou. Deloitte & Touche Taipei, Taiwan Republic of China February 23, 2017 Notice to Readers The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent auditors report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language independent auditors report and consolidated financial statements shall prevail. 10

11 PACIFIC HOSPITAL SUPPLY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars) ASSETS Amount % Amount % CURRENT ASSETS Cash and cash equivalents (Note 6) $ 456, $ 654, Notes receivable (Notes 4 and 7) 11,882-12,009 1 Accounts receivable (Notes 4, 5 and 7) 146, ,387 6 Other receivables (Notes 4 and 7) 8,513-10,472 - Inventories (Notes 4 and 8) 303, ,047 9 Prepayments and other current assets (Notes 13 and 21) 179, ,684 2 Total current assets 1,106, ,157, NON-CURRENT ASSETS Property, plant and equipment (Notes 4, 10, 21 and 26) 2,081, ,389, Investment properties (Notes 4, 11, 22 and 26) 93, ,723 4 Other intangible assets (Notes 4 and 12) 7,832-11,187 - Deferred tax assets (Notes 4 and 19) 11,042-9,533 - Refundable deposits (Note 13) 21, ,613 1 Total non-current assets 2,214, ,518, TOTAL $ 3,321, $ 2,676, LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 14 and 26) $ 345, $ - - Notes payable 9,285-9,879 - Accounts payable 135, ,392 5 Other payables (Notes 15 and 21) 154, ,699 7 Current tax liabilities (Notes 4 and 19) 55, ,850 2 Current portion of long-term borrowings (Notes 14 and 26) 19, Advances and other current liabilities (Note 15) 43, ,524 1 Total current liabilities 761, , NON-CURRENT LIABILITIES Long-term borrowings (Notes 14 and 26) 335, ,700 8 Net defined benefit liabilities - non-current (Notes 4 and 16) 33, ,344 1 Guarantee deposits (Note 15) Total non-current liabilities 369, ,625 9 Total liabilities 1,131, , EQUITY (Note 17) Share capital Ordinary shares 660, , Capital surplus from shares issued in excess of par value 410, , Retained earnings Legal reserve 253, ,799 8 Unappropriated earnings 865, , Total retained earnings 1,119, , Total equity 2,189, ,022, TOTAL $ 3,321, $ 2,676,

12 PACIFIC HOSPITAL SUPPLY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) Amount % Amount % OPERATING REVENUE (Note 4) Sales $ 1,697, $ 1,629, Less: Sales returns and allowances (8,145) - (7,532) - Net operating revenue 1,689, ,621, OPERATING COSTS (Notes 4, 8 and 18) Cost of goods sold 1,072, ,022, GROSS PROFIT 617, , OPERATING EXPENSES (Notes 16, 18 and 25) Selling and marketing expense 64, ,981 4 General and administrative expense 106, ,192 6 Research and development expense 40, ,210 2 Total operating expenses 211, , OPERATING INCOME 406, , NON-OPERATING INCOME AND EXPENSES Other income (Notes 18 and 25) 16, ,403 1 Other gains and losses (Note 18) (6,749) - 10,995 - Finance costs (Note 18) (1,315) - (879) - Total non-operating income and expenses 8, ,519 1 PROFIT BEFORE INCOME TAX 414, , INCOME TAX EXPENSE (Notes 4 and 19) 82, ,722 4 NET PROFIT FOR THE YEAR 332, , (Continued) 12

13 PACIFIC HOSPITAL SUPPLY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars, Except Earnings Per Share) Amount % Amount % OTHER COMPREHENSIVE INCOME (Note 16) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans $ $ (8,374) (1) Items that may be reclassified subsequently to profit or loss: Income tax relating to items that may be reclassified subsequently to profit or loss 23 - (1,424) - Other comprehensive income for the year, net of income tax (6,950) (1) TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 332, $ 344, EARNINGS PER SHARE (Note 20) Basic $ 5.04 $ 5.32 Diluted $ 5.02 $ 5.29 (Concluded) 13

14 PACIFIC HOSPITAL SUPPLY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars) Capital Surplus - Share Capital Issue of Shares in Retained Earnings (Notes 4, 17, 18 and 19) Ordinary Shares Excess of Par Unappropriated (Note 17) Value (Note 17) Legal Reserve Special Reserve Earnings Total Total Equity BALANCE AT JANUARY 1, 2015 $ 660,152 $ 410,354 $ 186,100 $ - $ 586,307 $ 772,407 $ 1,842,913 Appropriation of 2014 earnings Legal reserve ,699 - (32,699) - - Cash dividends distributed (165,038) (165,038) (165,038) Net profit for the year ended December 31, , , ,306 Other comprehensive income for the year ended December 31, 2015, net of income tax (6,950) (6,950) (6,950) Total comprehensive income for the year ended December 31, , , ,356 BALANCE AT DECEMBER 31, , , , , ,725 2,022,231 Appropriation of 2015 earnings Legal reserve ,130 - (35,130) - - Cash dividends distributed (165,038) (165,038) (165,038) Net profit for the year ended December 31, , , ,668 Other comprehensive loss for the year ended December 31, 2016, net of income tax Total comprehensive income for the year ended December 31, , , ,782 BALANCE AT DECEMBER 31, 2016 $ 660,152 $ 410,354 $ 253,929 $ - $ 865,540 $ 1,119,469 $ 2,189,975 14

15 PACIFIC HOSPITAL SUPPLY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars) CASH FLOWS FROM OPERATING ACTIVITIES Profit before income tax $ 414,717 $ 422,028 Adjustments for: Depreciation expenses 65,915 57,679 Amortization expenses 8,213 9,401 Recognized (reversed) impairment losses on accounts receivable 156 (436) Finance costs 5,991 1,719 Interest income (667) (1,029) Gain on disposal of property, plant and equipment 2,278 (36) Inventory write-downs 1,188 - Reversal of inventory write-downs - (2,888) Net loss (gain) on foreign currency exchange 456 (1,597) Loss on disposal of inventories 2,495 4,454 Decrease in net defined benefit liabilities (4,916) (3,987) Changes in operating assets and liabilities Notes receivable 127 7,013 Accounts receivable 20,529 (22,732) Other receivables 1, Inventories (57,747) (62,986) Prepayments and other current assets (49,378) (18,433) Notes payable (594) 151 Accounts payable (10,103) 15,022 Other payables 4,123 3,370 Advances and other current liabilities 13,827 (445) Cash generated from operations 418, ,702 Interest paid (5,695) (1,719) Interest received 667 1,029 Income tax paid (73,971) (64,858) Net cash generated from operating activities 339, ,154 CASH FLOWS FROM INVESTING ACTIVITIES (Increase) decrease in prepayments for equipment (65,891) (2,565) Acquisition of property, plant and equipment (792,086) (386,519) Acquisition of investment properties - (93,903) Proceeds from disposal of property, plant and equipment 2,535 2,617 Increase in refundable deposits (6,415) - Decrease in refundable deposits - 1,628 Acquisition of intangible assets (4,858) (1,822) Net cash used in investing activities (866,715) (480,564) (Continued) -15-

16 PACIFIC HOSPITAL SUPPLY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (In Thousands of New Taiwan Dollars) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short-term borrowings $ 345,000 $ - Repayments of short-term borrowings - (26,989) Proceeds from long-term borrowings 150, ,700 Proceeds from guarantee deposits received Cash dividends distributed (165,038) (165,038) Net cash generated from financing activities 329,962 13,254 NET DECREASE IN CASH AND CASH EQUIVALENTS (197,183) (126,156) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 654, ,329 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 456,990 $ 654,173. (Concluded) -16-

17 Pacific Hospital Supply Co., Ltd Earnings Appropriation Attachment IV Unit: NT$ Item Amount Remarks Opening undistributed earnings 532,757,017 Add: After-tax net profit for the current period 332,668,230 Less: 10% provision for legal reserve (33,266,823) Add: Remeasurement of defined benefit plans of the current year 113,447 Distributable earnings for the period 832,271,871 Shareholders dividends NT$ 2.5 per share (Cash dividends NT$ 2.5 per share) (165,038,040) Closing undistributed earnings 667,233,831 Remark: *1.The company has plans to allocate, per Articles of Incorporation, the legal reserve at NT$33,266,823, and has proposed to distribute shareholders bonus at NT$165,038,040, to be distributed in cash; the foresaid shareholders bonus is compliant with Articles of Incorporation of not lower than twenty percent of the total dividend amount. *2.The 2016 earnings are to be distributed with priority at the current earnings distribution. Representative: Jin Chung Manager: Jin Chung Accounting Head: Yu-Shiu Huang -17-

18 Pacific Hospital Supply Co., Ltd. The Operational Procedures for Acquisition and Disposal of Assets Contents Before & After Amendment in Comparison Before amendment After amendment Description Article 7: Procedures for the acquisition and disposal of real estate or equipment IV. Real estate or equipment appraisal report The acquisition or disposal of real estate or equipment by the Company, except for the transactions conducted with the government institutions, proprietary land construction, leased land construction, or the acquisition or disposal of equipment for business operation, for an amount over 20% of the paid-in capital or NT$300 million should be with the appraisal report obtained from a professional appraiser before the event date in conformity with the following requirements: (I) When a conditional price, specific price, or special price is needed for reference in determining the transaction price due to special reasons, such transaction must be presented to the Board of Directors for resolutions in advance. Also, any changes in the trade terms and conditions in the future should be processed in accordance with the aforementioned procedures. (II) A transaction for an amount over NT$1 billion must be with a price appraisal obtained from more than two appraisers. (III) If the appraisal result of a professional appraiser is with one of the following conditions, unless the appraisal result of an asset acquired is higher than the transaction amount or the Article 7: Procedures for the acquisition and disposal of real estate or equipment IV. Real estate or equipment appraisal report The acquisition or disposal of real estate or equipment by the Company, except for the transactions conducted with the government agencies institutions, proprietary land construction, leased land construction, or the acquisition or disposal of equipment for business operation, for an amount over 20% of the paid-in capital or NT$300 million should be with the appraisal report obtained from a professional appraiser before the event date in conformity with the following requirements: (I) When a conditional price, specific price, or special price is needed for reference in determining the transaction price due to special reasons, such transaction must be presented to the Board of Directors for resolutions in advance. Also, any changes in the trade terms and conditions in the future should be processed in accordance with the aforementioned procedures. (II) A transaction for an amount over NT$1 billion must be with a price appraisal obtained from more than two appraisers. (III) If the appraisal result of a professional appraiser is with one of the following conditions, unless the appraisal result of an asset acquired is higher than the -18- Attachment V The amendment is processed in accordance with FSC. Document No of the Financial Supervisory Commission dated February 9, 2017.

19 Before amendment After amendment Description appraisal result of an asset transaction amount or the disposed is lower than the appraisal result of an asset transaction amount, the disposed is lower than the independent auditor should be transaction amount, the contacted to have it processed in independent auditor should be accordance with Generally contacted to have it processed in Accepted Auditing Standards No. accordance with Generally 20 of the Accounting Research Accepted Auditing Standards No. and Development Foundation, 20 of the Accounting Research and and to express a specific opinion Development Foundation, and to on the reasons for the express a specific opinion on the differences and the adequacy of reasons for the differences and the transaction price: the adequacy of the transaction 1. The difference between the price: appraisal result and the 1. The difference between the transaction amount is more appraisal result and the than 20% of the transaction transaction amount is more amount. than 20% of the transaction 2. The difference between the amount. appraisal results of over two 2. The difference between the appraisers is more than 10% appraisal results of over two of the transaction amount. appraisers is more than 10% of (IV) The date of the appraisal report the transaction amount. issued by the professional (IV) The date of the appraisal report appraiser may not be more than issued by the professional three months away from the appraiser may not be more than contract date. If it is subject to three months away from the the present value announced in contract date. If it is subject to the the same period and it is for a present value announced in the period not more than six months, same period and it is for a period a written opinion can be issued not more than six months, a by the original professional written opinion can be issued by appraiser. the original professional appraiser. (V) For the Company s acquisition or (V) For the Company s acquisition or disposal of assets through the disposal of assets through the court auction process, the court auction process, the supporting document issued by supporting document issued by the court is sufficient enough the court is sufficient enough without the need of obtaining an without the need of obtaining an appraisal report or an opinion of appraisal report or an opinion of the independent auditor. the independent auditor. -19-

20 Before amendment After amendment Description Article 9: Procedures for acquisition of disposal of assets with the related party II. Assessment and operating procedures For the acquisition or disposal of assets with the related party by the Company for an amount over 20% of the paid-in capital of the Company, 10% of the total assets, or NT$300 million, except for the purchase and sale of the bonds, repurchase / reverse repurchase bonds, and subscription or redemption of domestic money market fund, the following information should be submitted to the Board of Directors for resolution and supervisors for acknowledgement in order to have the trade contract signed and payment made. However, when it is reported to the Board of Directors for discussion, the opinions of the independent directors shall be fully taken into account. The objection or reservation, if any, of the independent directors should be documented in the minutes of the board meeting. (I) The purpose, necessity, and expected benefits of the acquisition or disposal of assets (II) The reasons for selecting the related party as the counterparty (III) Assessing the reasonableness of the expected trade terms for the acquisition of real estate from the related party in accordance with Item (I) and (IV) of Paragraph III of this Article (IV) The original acquisition date and price of the related party, the counterparty, and the relationship between the Company and the related party Article 9: Procedures for acquisition of disposal of assets with the related party II. Assessment and operating procedures For the acquisition or disposal of assets with the related party by the Company for an amount over 20% of the paid-in capital of the Company, 10% of the total assets, or NT$300 million, except for the purchase and sale of the bonds, repurchase / reverse repurchase bonds, and subscription or repurchase redemption of domestic money market fund issued by domestic securities investment trust enterprise, the following information should be submitted to the Board of Directors for resolution and supervisors for acknowledgement in order to have the trade contract signed and payment made. However, when it is reported to the Board of Directors for discussion, the opinions of the independent directors shall be fully taken into account. The objection or reservation, if any, of the independent directors should be documented in the minutes of the board meeting. (I) The purpose, necessity, and expected benefits of the acquisition or disposal of assets (II) The reasons for selecting the related party as the counterparty (III) Assessing the reasonableness of the expected trade terms for the acquisition of real estate from the related party in accordance with Item (I) and (IV) of Paragraph III of this Article (IV) The original acquisition date and price of the related party, the -20- The amendment is processed in accordance with FSC. Document No of the Financial Supervisory Commission dated February 9, 2017.

21 Before amendment After amendment Description (V) The monthly cash income and expense forecast within one year from the expected contracting month, and assessing the necessity of the transaction and the reasonableness of the fund application (VI) The appraisal report issued by the professional appraiser or the opinion of the independent auditor obtained (VII) The restrictions on the transaction and other important contractual matters Article 10: Procedures for the acquisition or disposal of membership card or intangible assets IV. If the acquisition or disposal of membership card or intangible assets by the Company, except for the transactions conducted with the government institutions, for an amount over 20% of the paid-in capital or NT$300 million, the Company shall engage a certified public accountant prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the CPA shall comply with the provisions of Statement of Auditing Standards No. 20 published by the ARDF. counterparty, and the relationship between the Company and the related party (V) The monthly cash income and expense forecast within one year from the expected contracting month, and assessing the necessity of the transaction and the reasonableness of the fund application (VI) The appraisal report issued by the professional appraiser or the opinion of the independent auditor obtained (VII) The restrictions on the transaction and other important contractual matters Article 10: Procedures for the acquisition or disposal of membership card or intangible assets IV. If the acquisition or disposal of membership card or intangible assets by the Company, except for the transactions conducted with the government agencies institutions, for an amount over 20% of the paid-in capital or NT$300 million, the Company shall engage a certified public accountant prior to the date of occurrence of the event to render an opinion on the reasonableness of the transaction price; the CPA shall comply with the provisions of Statement of Auditing Standards No. 20 published by the ARDF. The amendment is processed in accordance with FSC. Document No of the Financial Supervisory Commission dated February 9,

22 Before amendment After amendment Description Article 12: Procedures for merger, settlement, acquisition, or share transfer I. Assessment and operating procedures (I) The Company shall appoint attorneys, CPAs, and securities underwriters to jointly discuss the expected timetable for statutory procedures and to organize a project team to carry out the procedures in accordance with the statutory procedures when processing merger, settlement, acquisition, or share transfer. The Company shall appoint an accountant, attorney, or securities underwriter to express an opinion on the reasonableness of the stock conversion ratio, the purchase price, or the allotment of the cash dividend or other properties to shareholders before convening the board meeting and then presented in the board meeting for discussion and approval. Article 12: Procedures for merger, settlement, acquisition, or share transfer I. Assessment and operating procedures (I) The Company shall appoint attorneys, CPAs, and securities underwriters to jointly discuss the expected timetable for statutory procedures and to organize a project team to carry out the procedures in accordance with the statutory procedures when processing merger, settlement, acquisition, or share transfer. The Company shall appoint an accountant, attorney, or securities underwriter to express an opinion on the reasonableness of the stock conversion ratio, the purchase price, or the allotment of the cash dividend or other properties to shareholders before convening the board meeting and then presented in the board meeting for discussion and approval. However, the requirement of obtaining an aforesaid opinion on reasonableness issued by an expert may be exempted in the case of a merger by the Company of a subsidiary in which it directly or indirectly holds 100 percent of the issued shares or authorized capital, and in the case of a merger between subsidiaries in which the Company directly or indirectly holds 100 percent of the respective subsidiaries issued shares or authorized capital. The amendment is processed in accordance with FSC. Document No of the Financial Supervisory Commission dated February 9,

23 Before amendment After amendment Description Article 13: Information disclosure procedures I. Information disclosure and announcement standards (I) For the acquisition or disposal of real estate with the related party by the Company, or, for the acquisition or disposal of assets other than the real estate with the related party by the Company for an amount over 20% of the paid-in capital of the Company, 10% of the total assets, or NT$300 million Except for the purchase and sale of the bonds, repurchase / reverse repurchase bonds, and subscription or redemption of domestic money market fund. (II) Processing merge, settlement, acquisition, or share transfer. (III) The trading loss of the financial derivatives reached the ceiling amount defined for the consolidated contracts or separated contract in the operating procedures. (IV) Where an asset transaction other than any of those referred to in the preceding three subparagraphs or an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances: 1. Bonds trade 2. Specialized in investment, the securities traded at the places of business and facilities of domestic and foreign securities firms, or the securities subscribed by the securities firms in the primary market in accordance with the regulations. Article 13: Information disclosure procedures I. Information disclosure and announcement standards (I) For the acquisition or disposal of real estate with the related party by the Company, or, for the acquisition or disposal of assets other than the real estate with the related party by the Company for an amount over 20% of the paid-in capital of the Company, 10% of the total assets, or NT$300 million Except for the purchase and sale of the bonds, repurchase / reverse repurchase bonds, and subscription or repurchase redemption of domestic money market fund issued by domestic securities investment trust enterprise. (II) Processing merge, settlement, acquisition, or share transfer. (III) The trading loss of the financial derivatives reached the ceiling amount defined for the consolidated contracts or separated contract in the operating procedures. (VI) Where an asset transaction other than any of those referred to in the preceding three subparagraphs or an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances: 1. Bonds trade 2. Specialized in investment, the securities traded at the places of business and facilities of domestic and foreign securities firms, or the -23- The amendment is processed in accordance with FSC. Document No dated February 9, 2017 and FSC. Document No dated February 13, 2017 of the Financial Supervisory Commission.

24 Before amendment After amendment Description 3. The repurchase / reverse repurchase bonds, and requisition or repurchase of the domestic money market fund 4. The acquisition or disposal of assets that refers to equipment used for business operation, traded with a non-related party for an amount not over NT$500 million 5. Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the transaction is less than NT$500 million. (V) The aforementioned transaction amount in Item IV is computed as follows. Also, the aforementioned in one year shall be within one year in principle prior to this transaction date and the portion announced is excluded from the computation. 1. Amount of each transaction 2. The cumulative amount of the same subject matter acquired or disposed with the same counterparty within one year 3. The cumulative amount of the real estate in the same development plan acquired or disposed (the amount of acquisition or disposition accumulated separately) securities subscribed by the securities firms in the primary market in accordance with the regulations. 3. The repurchase / reverse repurchase bonds, and requisition or repurchase of the domestic money market fund 4. The acquisition or disposal of assets that refers to equipment used for business operation, traded with a non-related party for an amount not over NT$500 million 5. Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the transaction is less than NT$500 million. (V) Where land is acquired under an arrangement on engaging others to build on the company's own land, engaging others to build on rented land, joint construction and allocation of housing units, joint construction and allocation of ownership percentages, or joint construction and separate sale, and the amount the company expects to invest in the transaction reaches NT$500 million. The aforementioned transaction amount in Item IV is computed as follows. Also, the aforementioned in one year -24-

25 Before amendment After amendment Description within one year 4. The cumulative amount of the same security acquired or disposed (the amount of acquisition or disposition accumulated separately) within one year III. Announcement reporting procedures (III) When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety. shall be within one year in principle prior to this transaction date and the portion announced is excluded from the computation. 1. Amount of each transaction 2. The cumulative amount of the same subject matter acquired or disposed with the same counterparty within one year 3. The cumulative amount of the real estate in the same development plan acquired or disposed (the amount of acquisition or disposition accumulated separately) within one year 4. The cumulative amount of the same security acquired or disposed (the amount of acquisition or disposition accumulated separately) within one year (VI) Where an asset transaction other than any of those referred to in the preceding five subparagraphs or an investment in the mainland China area reaches 20 percent or more of paid-in capital or NT$300 million; provided, this shall not apply to the following circumstances: 1. Bonds trade 2. Specialized in investment, the securities traded at the places of business and facilities of domestic and foreign securities firms, the common corporate bond subscribed, offered, or issued in the domestic primary market and general financial bonds not involving equity 3. The repurchase / reverse repurchase bonds, and requisition or repurchase of money market fund issued by -25-

26 Before amendment After amendment Description domestic securities investment and trust industry. (VII) The aforementioned transaction amount in Item VI should be calculated as follows. Also, the aforementioned in one year shall be within one year in principle prior to this transaction date and items duly announced in accordance with regulations need not be counted toward the transaction amount. 1. Amount of each transaction 2. The cumulative amount of the same subject matter acquired or disposed with the same counterparty within one year 3. The cumulative amount of the real estate in the same development plan acquired or disposed (the amount of acquisition or disposition accumulated separately) within one year 4. The cumulative amount of the same security acquired or disposed (the amount of acquisition or disposition accumulated separately) within one year III. Announcement reporting procedures (III) When the Company at the time of public announcement makes an error or omission in an item required by regulations to be publicly announced and so is required to correct it, all the items shall be again publicly announced and reported in their entirety within two days counting inclusively from the date of knowing of such error or omission. -26-