namchow chemical industrial co., ltd. 2016 annual report · 1 i. letter to shareholders (i) 2015...
TRANSCRIPT
Stock Code : 1702
Namchow Chemical Industrial Co., Ltd.
2016 Annual Report
Notice to readers
This English version annual report is a summary translation of the Chinese version and is not an
official document of the shareholders’ meeting. If there is any discrepancy between the English
version and Chinese version, the Chinese version shall prevail.
Website to Search for the Annual Report:http://mops.twse.com.tw
Company website: www.namchow.com.tw
Printed on March 29, 2016
1.Spokesperson Information:
Name Zhou-Jing Chen Jung-Chang Lien (Agent)
Title Assistant Manager Assistant Manager
Telephone (02) 2535-1251#320 (02)2535-1251#270
Email [email protected] [email protected]
2.Addresses and Telephone Numbers of the Main Office and Factory:
Address of Main Office No. 100, Sec. 4 Yenping Road, Taipei City
Telephone (02)2535-1251
Factory Address No. 35, Xingbang Road, Guishan District,
Taoyuan City
Telephone (03)361-5571
3.Stock Transfer Information:
Name of Stock Transfer
Agency
Agency Department of Chinatrust Commerical Bank
Address 5F, No. 83, Sec. 1, Chongqing South Road, Taipei City
Telephone (02)6636-5566
Website http://ecorp.ctbcbank.com/cts/index.jsp
4.Certified Public Accountant for the Most Recent Year:
Name of Firm KPMG Taiwan
Name of CPA An-Tian Yu, Xiu-Yu Lin
Address 68F, No. 7, Section 5, Xinyi Road, Taipei City
Telephone (02)8101-6666
Website www.kpmg.com.tw
5.Name of Trading Site for Listed Securities Overseas and Inquiry Information: None
6.Company Website: www.namchow.com.tw
Table of Contents
I. Letter to Shareholders ……………………………………………………………… 1
II. Company Profile ……………………………………………………………………. 5
(I) Date of Establishment………………………………………………………. 5
(II) Company History……………………………………………………………. 5
III. Corporate Governance Report……………………………………………………... 12
(I) Organizational System……………………………………………………… 12
(II) Background Information of Directors, Supervisors, General Managers,
Vice General Managers, Assistant Managers, and Heads of Various
Departments and Branches………………………………………………….
14
(III) Remunerations paid to directors, supervisors, general managers, and vice
general managers in the last years…………………………………………..
31
(IV) Status of Corporate Governance……………………………………………. 45
(V) Public Expenditure on CPAs………………………………………………... 102
(VI) Information on Replacement of Accountants……………………………….. 103
(VII) Disclosure of Name, Position, and Duration of Service at Firms or Their
Associated Enterprises within Past Year of Chairman, General Manager,
and Managers in Charge of Financial or Accounting Affairs……………….
103
(VIII) Transfer of Stock Options and Changes in Equity Pledge of Directors,
Supervisors, Managers, and Shareholders Holding More Than 10% of
Shares in the Latest Year and as of the Date of Printing of Annual Report…
104
(IX) Information of Relationship among Top 10 Shareholders Who Are Related,
Spouses, or Relatives Within the Second Degree of Kinship……………….
106
(X) Shares Held by Company, Directors, Supervisors, Managers of Company,
and Businesses Controlled Directly or Indirectly by Company of Same
Reinvestment Business and Consolidated Calculation of Comprehensive
Shareholding Ratio………………………………………………………….
108
IV. Fundraising………………………………………………………………………….. 109
(I) Capital and Shares ………………………………………………………….. 109
(II) Corporate Debts, Special Shares, Global Depositary Receipt, Employee
Stock Option Certificate, Restricted Employee Shares and M&A (Including
Merger, Acquisition, and Segmentation)…………………………………….
115
(III) Implementation of Capital Utilization Plan…………………………………. 115
V. Operational Status ………………………………………………………………….. 116
(I) Business Content……………………………………………………………. 116
(II) Overview of Marketing and Production/Distribution………………………. 122
(III) Information of Employees………………………………………………….. 160
(IV) Information of Environmental Protection Expenditure……………………... 161
(V) Employer-employee Relations……………………………………………… 162
(VI) Important Contract…………………………………………………………... 165
VI. Financial Status ……………………………………………………………………... 166
(I) Brief Balance Sheet and Income Statement for the Past Five Years………... 166
(II) Financial Analysis for the Past Five Years…………………………………. 176
(III) Supervisor Report on Reviewing the Latest Annual Financial Report…...… 188
(IV) Latest Financial Report……………………………………………………… 189
(V) Latest Corporate Entity Financial Reports Audited and Certified by CPA…. 189
(VI) Impacts of Latest Financial Difficulties Encountered by Company and Its
Associated Enterprises on Company's Financial Standing as of Date of
Printing of Annual Report…………………………………………………...
189
VII. Discussion and Analysis of Financial Standing and Financial Performance and
Risks…………………………………………………………………………………..
190
(I) Financial Standing ……………………………………………………….…. 190
(II) Financial Performance ……………………………………………………… 192
(III) Cash Flow…………………………………………………………………… 193
(IV) Impacts of Latest Major Capital Expenditure on Financial Business………. 195
(V) Main Reasons for Profits or Losses of Latest Reinvestment Policy,
Improvement Plan, and Investment Plan for the Coming Year……………..
196
(VI) Analysis and Assessment of Risks…………………………………………. 200
(VII) Other Important Matters……………………………………………………. 201
VIII. Special Notes………………………………………………………………………… 202
(I) Related Materials of Associated Enterprises……………………………….. 202
(II) Organization of Latest Private Placement Securities as of the Date of
Printing of Annual Report …………………………………………………..
214
(III) Latest Holding or Disposal of Company's Shares by Subsidiaries as of the
Date of Printing of Annual Report…………………………………………..
214
(IV) Other Required Supplementary Matters…………………………………….. 214
※ Latest Matters with Important Impacts on Shareholder Rights or Security
Prices Indicated in Article 36 Paragraph 2 Subparagraph 2 of the Securities
Exchange Act as of the Date of Printing of Annual Report…………………..
214
1
I. Letter to Shareholders
(I) 2015 Business Report
The Company has an annual revenue of NTD 2,780,173 thousand throughout 2015, an
increase of NTD 202,137 thousand (7.8%) from NTD 2,578,036 thousand in 2014. The
Company's consolidated revenue was NTD 15,479,543 thousand in 2015, an increase of
NTD 647,697 thousand (4.4%) from NTD 14,831,846 thousand in 2014. The profits
amounted to NTD 1,112,850 thousand in 2015, an increase of NTD 164,216 thousand
(17.3%) from NTD 948,634 thousand in 2014. Both the revenue and profits set historical
records in 2015, continuing the growth momentum of respective affiliated businesses in
2014 from 2013. With every employee within the group working hard in 2015, most
businesses accomplished growths from 2014. Taiwan's Oil & Fat, Frozen Dough, Frozen
Noodle, Namchow (Thailand) Ltd., in particular, showed relatively high growths. Our
company has always been known for its quality, safe, and healthy products. We have an
internal food safety committee consisting of experts with exclusive responsibilities to
carefully control, monitor, and effectively manage the source of raw materials supplied. We
physically visit the facilities of our overseas suppliers and pursue the highest testing criteria.
Our efforts have gained confidence and support from consumers. All businesses have
continued to perform and grow well.
Financially, the company's debts totaled NTD 5,578,132 thousand in 2015; the debt
ratio was 50.4%, an increase of 0.6% and NTD 531,492 thousand from 49.8% in 2014 when
the overall debts were 5,046,640 thousand. In terms of the consolidated statement, the
company's debts totaled NTD 12,755,258 thousand in 2015; the debt ratio was 69.3%, an
increase of 0.4% and NTD 1,093,522 thousand from 68.9% in 2014 when the overall debts
were 11,661,736 thousand. Cash inflow as a result of business activities totaled NTD
2,710,224 thousand; the current ratio was 136.7%, which was comparable to 137.5% in
2014, indicating that the overall financial outlook was relatively desirable.
As far as research and development is concerned, crystal detergent soaps and grapefruit
seed antiseptic products have been recognized by consumers and the public since a long
time ago because they are made with natural fats and feature no additives. The fat and oil
business continues to research and develop healthy and special-purpose oils such as oil for
making pineapple cakes and that for deep-fry purpose in the food and beverage industry.
Meanwhile, two types of premium fresh cream are introduced from Japan to suit the needs
2
for making various salty or sweet pastries. When used in combination with Namchow's
butter, they give rise to all kinds of cakes. The frozen dough business continues to focus on
researching and developing novel options to attract consumers and can tailor-make products
for customers. It is a long-term trustworthy partner in the baking industry. The ice cream
business introduces new products each year, which are always well accepted by consumers.
To meet the needs of respective customers, different flavors of soft-serve ice cream are
introduced to the market on a quarterly basis. The ambient-temperature rice business
produces ready-to-serve cooked fiber-rich rice with a health-preserving appeal. It is claimed
to be able to regulate blood sugar and lipid and the first healthy rice certified with health
claims in the country. In February this year, it was selected by the Council of Agriculture
under the Executive Yuan to be a proactively developed seed player in an effort to reinforce
distribution of domestic agricultural products around the world. It is indeed an elite
processed food with exportation potential.
3
(II) Summary of 2016 Business Plan
The fat and oil business adopts a consultation-based marketing strategy that has
significantly helped grow the revenue for the past six years. In response to the increase in
sales, the third production line for oils and fats newly built at the Guangzhou facility was
commissioned in June two years ago ;and the ground was broken for the construction of
the Jinshan Plant in Shanghai on March 9 last year; the investment is expected to total
around NTD 2.1 billion. ,For Stage 1, production of oils and fats and frozen noodles will
be commissioned in October this year and the production lines for frozen dough and fresh
cream will be expanded for Stage 2.
Namchow insists quality for its oil and fat products. Thanks to the replacement of
orders on the market, the sales climbed significantly. Expansion of the fat and oil refining
equipment with an investment of NTD 60 million at the Taoyuan facility was completed at
the end of last year, contributing to an increase in the throughput of around 30%. In terms of
the catering business in Taiwan, Dian Shui Lou restaurants use mostly local food ingredients
that are carefully prepared to win the hearts of consumers of different generations and are
widely accepted and spoken well of. A new store was opened at Big City in Hsinchu two
years ago. The seventh Dian Shui Lou Restaurant and Duroyal Cafe opened at Mitsui Outlet
Park this year. The business has been doing well with outstanding sales since they were
opened.
Namchow has invested in Thailand for 25 years. Exportation has grown quickly since
2010 and the throughput utilization rate has reached the high level. For the next two to three
years, it is expected that NTD 500 million will be invested to constantly advance the
production efficacy. Attempts such as baby rice crackers, cooked rice, and cooked porridge
for the past few years have continued to bring about favorable results. The Southeast Asian
market has a promising future. Namchow Thailand is the springboard for the group to take
part in ASEAN markets.
To meet regulatory requirements and the high corporate standards, additional NTD 37
million will be invested in the main food safety laboratory to be set up at the Taoyuan Plan.
The laboratory will be devoted to autonomous tests and autonomous management. The
Guangzhou Plant was certified as a high-tech enterprise for its agricultural products fine
processing technology and green process last year and also designated as an "Guangdong
Province Baking Oil and Fat Engineering Technical Research Center enterprise" by the
4
Guangdong Provincial Department of Science and Technology in December. The Jinshan
Plant in Shanghai received subsidies totaling RMB 18.76 million for industrial
transformation and upgrade from Shanghai City Government for its energy-saving,
carbon-reduction, and food safety-related investments at the end of last year. All of the said
accomplishments are possible because of the endless effort of Namchow in food safety and
the reinforced investment in environmental protection. Since it was first established in 1952,
64 years have passed. What remains unchanged is the integrity and emphasis on the rights of
consumers and the pursuit of being number one in respective business fields. Namchow
serves as the best example by consolidating corporate social responsibilities in its
management.
Under the effort, belief, and determination of all staff, I believe that we will continue to
reach new heights in business performance and create even greater investment benefits.
Please continue to support and encourage us to the best extent possible.
To
Namchow General Shareholders Meeting
Chen Fei Lung
Chairman
5
II. Company Profile
(I) Date of Establishment: March 29, 1952
(II) Company History:
Namchow Chemical Industrial Co., Ltd. was established in 1952 by Mr. Qizhi Chen, an
overseas Chinese in the Philippines. He took over Namchow Industrial Co., Ltd. and reorganized it.
Sixty-four years have passed. The Company has been focusing on six major fields, namely oils and
fats/dairy products, flour, rice, dining, daily detergent supplies, and biotechnology, with products
sold around the world. The Company's sustainable management goal is to be "based in Taiwan" and
to "deploy around the globe."
1. Businesses of Namchow in Taiwan
1) Detergents -- Namchow soaps were produced for the first time in 1952, followed by the
production of glycerin in 1956. The most advanced equipment in the world was introduced in 1963.
Namchow Crystal Soap that is completely different from its counterparts on the market was
developed and has remained a leading brand among laundry soaps to this date. The soap
manufacturing facility was added in Taoyuan in 1980 to diversify the Company's management of
the cleaning supplies field consisting of soap and shampoo. As people get more and more aware of
environmental protection, natural cleaning daily supplies started to gain prominence again.
Namchow is known for being active in its devotion to the research and development of new product
series. It introduced the liquid crystal soap exclusively for laundry (2010) and introduced again the
natural and septic laundry liquid crystal soap in 2012 as well as cleaning solutions for food
containers of the same grade as those for cleaning vegetables and fruits. The Company also
researched and developed the Crystal Grapefruit Seed Spray Dry Hand Wash. The "Antrodia
cinnamomea Bath Soap" developed with Alishan Antrodia cinnamomea extract solution in 2014 is a
star product in the future.
Namchow cleaners have won countless awards in recent years: Featuring purity and free of
additives, the Namchow liquid crystal soap won in the best product category of the "Jade Mount
Award of the Ninth National Brands" of 2012 and Namchow became the first and the only one
cleaner manufacturer that has won this Award since its inception. In 2013, the Namchow Crystal
Grapefruit Seed Antiseptic Series won in the two categories, namely best product and first national
place, of the Jade Mount Award of the Tenth National Brands. Products in this series including
spray dry hand wash, hand wash solution, and hand wash soap were reviewed by the Centers for
Disease Control of the Ministry of Health and Welfare and were recommended by the Centers for
6
Disease Control in the prevention against diseases. The Namchow Crystal Grapefruit Seed Liquid
Laundry Soap was approved and recommended under the "Infectious Disease Prevention-Related
Products Referral Program" organized by the Institute for Biotechnology and Medicine Industry as
authorized by the Centers for Disease Control of the Ministry of Health and Welfare and won the
SQM National Quality Symbol.
2) Oils and fats -- Namchow started technical collaboration with ミヨシ, one of the Top 10
oils and fats enterprises in Japan in 1971 in the production of baking oils and fats to supply bread,
pastry, cookies, ice cream, and instant noodles manufacturers. Namchow butter oil substitute,
Yufeng Brand, and Weijia series of edible oils and fats have been deeply trusted and supported by
customers for the past nearly half century. Namchow is devoted to becoming the most trustworthy
partner of the baking industry and carefully practices consultation-based marketing and one-stop
service.
As consumers become more and more concerned about food safety, Namchow is reinforcing
its management of raw materials of oils and fats at the source. It has an internal Food Safety
Committee convened by the Deputy Executive President of the Group to careful monitor, control
and physically visit overseas oil and fat suppliers and to ensure that sources of the raw materials for
oils and fats meet national requirements.
3) Ice cream -- International Royal Dairy Products Company was established in 1988. (In
December 1997), Royal and Lucky merged to be Lucky Royal Co., Ltd., using Duroyal as its brand
to develop unique and high value-added products and become one of the largest ice cream
production and distribution company throughout Taiwan. The premium ice cream brand "Kabisuo"
developed in 2004 entered the Mainland Chinese market in 2013. The soft-serve ice cream was
supplied to convenience stores in 2013 and triggered a sales spree. One production line was added
to the Tainan facility in the same year. New production lines for ice cream and crusts were built for
the Taoyuan facility in 2014. The ice cream business is a huge addition to the momentum of the
overall operation. The first Duroyal Cafe opened in January 2016 to serve North European coffee,
ice cream, sweets, light food, and there is a "to go" area that sells soft-serve ice cream and Chinese
delicacy.
Lucky Royal Co., Ltd. took part in the "The Project of Traceability Cloud Application on Safe
Food" of the Department of Industrial Technology under the Ministry of Economic Affairs. The
Project began in November 2012, was officially operative at the end of November 2013, and was
closed out at the end of March 2014. The accomplishments were certified and approved by the
Government. The raw materials and shipping process of all ice cream products can be controlled
7
and found through the QR Code at present to provide consumers with assured protection.
4) Frozen dough-- Seeing in advance the demand of bread/pastry makers for frozen dough and
in order to provide even higher value-added products that help strengthen customers' competitive
advantages, the frozen dough facility was set up at the Zhongli site in 1991. As the market
developed and grew, the second production line was added in 1995 and the third and fourth ones
were added in 1998.
Namchow is known for its powerful capability in the research and development of frozen
dough. Featuring desirable quality, safety, health, time-effectiveness, cost-effectiveness,
manpower-saving, and easy-operation in addition to constant research and development of new
products, Namchow has been able to create its own product features and become an indispensable
best partner of the baking industry. Its products have been sold to Japan, Hong Kong, Shanghai, the
US, Canada, Australia, and Dubai.
5) Frozen noodles -- The frozen noodles technical collaborative contract was signed with
Katoji Co., Ltd. in Japan in 1998. Namchow became the first enterprise producing frozen noodles in
Taiwan. Premium Frozen Noodles were introduced to the market in January 1999 and the second
production line was added in 2012.
Frozen noodles feature tastiness, convenience, fastness, safety, and health. Best quality
products are provided to dining businesses and chained noodle stores. There are around 10,000 plus
customers in the nation. For the past few years, many flour-based foods that are popular among
Chinese, such as Chinese noodles, northern sliced noodles, northern ramen, have been developed
and sold to overseas markets such as the US, Canada, Hong Kong, Australia, Switzerland, Austria,
and Indonesia.
6) Aseptic cooked rice -- NTD 300 million was invested in 2004 in the Zhongli site for the
production of ambient temperature ready-to-serve rice. The rice is meant mainly for exportation and
has successfully entered markets in the US, Australia, Norway, and the UK, among others so far.
Namchow Dietary Fiber Cooked Rice has been certified, reviewed, and approved by the
Department of Health for being able to help bring down the fasting blood sugar level as is proven in
the animal laboratory and been honored as Health Food and Certified Quality Rice (2008). The
Dietary Fiber Cooked Rice took part in the first Demonstrative Screening Campaign of Cooked
Quality Convenience Foods and was honored as "Cooked Quality Convenience Food" by the
Department of Industrial Development of the Ministry of Economic Affairs (2012). The Dietary
Fiber Cooked Rice - Healthy Double-Wheat Rice received the Health Food Permit issued by the
8
Ministry of Health and Welfare for having been proven "through animal experiments" to be
"capable of bringing down total cholesterol in the serum (2014). Dietary Fiber Cooked Rice series
was awarded best product in the Jade Mount Award of National Brands (2015) and was chosen to
be seed players (Healthy Double-Wheat Rice, Healthy Grain-Rich Rice, White Chrysanthemum
Cooked Rice) through the screening campaign of processed food producers and their products with
potential of exportation organized for the first time by the Council of Agriculture in February this
year to become the pioneers of Taiwan rice to enter markets around the world.
7) Dining --
A. Chow Ho Benchangliu Professional Noodles Stores --- Chow Ho Enterprise was
established in 1999 and the demonstrative noodles store Benchangliu was opened to be the antenna
for collecting market information on frozen noodles and serve as the platform for exchange with
customers. The store is located in the tourism factory in Taoyuan.
B. Dian Shui Lou Restaurant --- The Nanjing flagship store opened in 2005. The classic and
elegant Jiangnan design style and authentic Jiang-Zhe flavor is widely well received. Presence was
established in the Fuxing Branch of Pacific SOGO in 2006. Huaining Store opened in 2009. The
Nankan Flagship Store was opened at the Decor House Shopping Mall in 2011 with the "cooked
food to go" area. Presence was established in the Taoyuan Tourism Factory of Namchow in 2012
and the first overseas location opened in the same year on Yishan Road of Shanghai. The Big City
Hsinchu branch became operative in 2014 and there was the invitation in 2016 to establish presence
at Mitsui Outlet Park. A building has been purchased in Shinjuku, Tokyo, Japan for the plan of
opening Dian Shui Lou in Japan and a hotel for high-end women.
Dian Shui Lou, known for its pursuit of advancement at all times and attentive services, has
been recognized in various ratings: a five-star in the 2010 Northern Taiwan Restaurant Survey,
Symbol of Taiwan Delicacy from the Ministry of Economic Affairs in 2011, a five-star in the 2012
Taiwan Restaurant Survey, and the five-star restaurant in Asia Pacific - Asia Pacific Golden Award
of 2015. In various voting contests, it is on the list of Ten Most Famous Chinese Dishes jointly
elected among experts across the Taiwan Strait, the 2012 Popular Restaurant of the Delicacy Month
of Taiwan, a five-star in the Taiwan Beef Noodles Accreditation, and the first place in the Popular
Steamed Dumplings PK of Taiwan.
C. Chaojiangyan Chaoguang Seafood Restaurant --- Chaojiangyan Restaurant opened in
2010. Since it was first opened, "Culture-based Food" has been its management belief. Entrees such
as seafood, sliced duck, Chaoguang dim sum, and Kungfu tea have been well reputed among
connoisseurs by word of mouth. On the rating list of Hong Kong-style restaurants released on the
9
yam website in 2013, Chaojiangyan secured the first place.
D. Taipei Paulaner Restaurant --- Paulaner is famous in Shanghai and returned to Taiwan in
2009 to open stores. The first store was located on the campus of Taipei National University of the
Arts in Guandu and the Taoyuan Tourism Factory was chosen for the establishment of the brewery.
Both equipment and raw materials are imported from Germany and the brewer is German, too.
Presence was established at Urban 1 on No. 1, Qingcheng Street in 2010. The Filipino live band
from New Palace Restaurant Shanghai is a great place for office workers to visit and relax
themselves.
8) Taoyuan Tourism Factory of Namchow -- Certified by the Government to be a tourism
factory, the Taoyuan facility of Namchow opened in 2012. The factory has a footage of 3,300
square meters and covers seven major areas: (1) Namchow Founder Memorial Park; (2) Oil & Fat
Visitor Hallway; (3) Crystal Soap Experience; (4) Dian Shui Lou Cultural Dining; (5) Benchangliu
Demonstrative Noodles Store, Paulaner Brewery, and Dining Demonstrative Center; (6) Thailand
Erawan Shrine Worship Area; and (7) Thailand Cultural House & Thai Food Restaurant. Most of
the visitors represent schools and government agencies. The Taoyuan Tourism Factory has
developed a new look for it is closely related to tourism, education, people-to-people diplomacy,
and local clusters, demonstrating the management by an enterprise of its social responsibilities and
the devotion to promoting local industrial developments.
(II) Overseas Businesses of Namchow
1) Namchow Thailand-- Established in 1989, Namchow Thailand is the first overseas base of
Namchow. The facility in Ban Pong became operative in 1991 to produce instant noodles, rice
crackers, among other products. With settlement-oriented management, multiple food certificates
have been obtained for many years to be the most powerful cornerstone for exportation to Europe
and America. Namchow Thailand is even recognized as a benchmark enterprise by the local
government and is often the first-choice enterprise where the Thai Government receives foreign
representatives or ambassadors. Thin rice crackers produced by Namchow Thailand feature low in
oil, health, and tastiness and received the Golden Award following the screening process by the
German Agricultural Society. The product is sold to major continents such as Europe, Asia, and
America. Efforts have been devoted to the research and development of products such as rice
crackers for babies, cooked rice, and cooked porridge for the past years. These products are sold to
places around the world with fruitful results.
10
The "Little Chef" instant noodles officially returned to Taiwan to be sold locally in November
2015. The high-end three flavors "Bodhi Gingko Mushroom Noodles", "Fuling Pickled Mustard
Pork Noodles", and "Thai Green Curry Chicken Noodles"; they are defined as "slow noodle". The
unique marketing strategy and virtual reality distribution channels have been a hot topic.
2) Oils, fats, and bakery businesses in China-- Tianjin Namchow Oils and Fats Company
was established in 1996. The name was changed to Tianjin Namchow Food Co., Ltd. in 2013.
Various types of banking oils are produced. It is a leading brand on the market of quality oils and
fats. Associated enterprises were established later, namely Shanghai Namchow Food Co., Ltd.,
Guangzhou Namchow Food Co., Ltd., Shanghai Qiaoxing Co., Ltd., and Shanghai Quahog Trading
Co., Ltd.
Tianjin Yoshiyoshi Food Co., Ltd. was established in 2003 to be devoted to the production of
fresh cream and to meet the business demand of high-end customers. In order to supply customers
in the southern part of China, the oil and fat manufacturing facility of Namchow in Guangzhou was
completed in 2007 and expanded in 2015. The production line for frozen dough was set up in the
Tianjin facility in 2011. The third production base was built in the Jinshan area of Shanghai in 2015
and production is expected to begin in the fourth quarter of 2016.
After Namchow established its presence in China, customer service centers were set up in
various areas of China one after another in order to better meet customers' demand. The customer
service center is like the R&D center for customers. Tianjin Namchow Food Co., Ltd. and
Guangzhou Namchow Food Co., Ltd. were both approved and certified by the highest food safety
regulations, the AIB Food Safety Comprehensive Standards, in 2009; the first of its kind in the
baking oil and fat industry of mainland China. The Guangzhou facility was certified as a high-tech
enterprise for its agricultural products fine processing technology and green process. The income
tax rate may be reduced from 25% to 15% for a period of three years, that is, from 2014 to 2016.
The Jinshan Plant in Shanghai received subsidies totaling RMB 18.76 million because it was rated
"2015 Shanghai City Industrial Transformation and Upgrade Development Project" enterprise for
its energy-saving, carbon-reduction, and food safety-related investments, the one and only food
enterprise and Taiwan capital-based enterprise to get the honor. Guangzhou Namchow Food Co.,
Ltd. was designated as a "Guangdong Province Baking Oil and Fat Engineering Technical Research
Center enterprise" by the Guangdong Provincial Department of Science and Technology (2015).
3) Shanghai Paulaner Dining Business - Shanghai Baolaina Co., Ltd. was established in
1996 with technical authorization from the Germany Paulaner Group. The first Paulaner Restaurant
was opened on Fenyang Road, Shanghai, in 1997; it is a garden and beer restaurant that combines
11
high-end beer brewed right on the spot and orthodox Bavaria cuisine. The dining industry has been
flourishing in Shanghai for the past 20 years. Shanghai Paulaner remains steady and is widely loved
and recognized; it is obviously popular among consumers.
Shanghai Baolaina Co., Ltd. currently has four Paulaner Restaurants (Fenyang, New Palace,
Binjiang, Shibo), one Restaurant Ambrosia Japanese & Yakiniku, two Ambrosia Teppanyakis
(Fengyang, Shibo), one Deli & Bakery, and the western premium cuisine - Binjiang No. 1
(collaborative with the German dining group Kafar to provide premium European delicacies).
As the industrial environment changes, corporate social responsibilities (CSRs) have become a
pre-requisite for a company to exist. Namchow started to prepare its CSR Report in 2015 and
promote related policies through its committee in order to fulfill its corporate social responsibilities
in terms of corporate governance, food safety, and environmental sustainability. In other words,
Namchow is devoted to business management and has spared no efforts in upgrading the industry.
With sole sponsorship, it organized the World Market Namchow global partners platform exhibition
in 2014 to display complete product lines of Namchow, including cleaners, oils and fats, baking, ice
cream, rice, noodles, frozen foods, and dining and to explain to customers that Namchow can
provide best quality and high value-added products as well as one-stop service. At the end of the
same year, the "Happy New Year of the Goat - Baking Handy Gift Carnival" exhibition was
organized also with sole sponsorship where 62 bakeries throughout Taiwan were invited to take part;
it helped bring about new hope for the sluggish baking industry in Taiwan and rebuild confidence at
that time.
The stocks of Namchow were traded publicly in 1973. The diversified developments had to do
with raw materials, the technology, the distribution channel, and the culture. Pulses and trends in
the industrial setting have been kept track of following the principles of "knowing how to change,
seeking to change, responding to change, and remaining unchanged." In the future, Namchow will
continue to honor the spirit: As Heaven's movement is ever vigorous, so must a gentleman
ceaselessly strive along and to seek advancements on a daily basis to catch up with time and to
march on the path to sustainable development.
12
III. Corporate Governance Report
(I) Organizational System
1. Organizational structure
董事會董事長副董事長董事
獨立董事
總經理
股東會
稽核室
風險控制
薪資報酬委員會
監察人
總裁
董事長室
功能單位 國內事業
油脂/冷凍麵糰事業部
海外事業
冰淇淋事業部
國際貿易事業部
虛擬系統與電子商務事業部
家品事業部
急凍熟麵事業部
觀光工廠
餐飲事業
泰南僑
上海餐飲
南僑中國
日本南僑
法務
總務
企業社會責任委員會 食品安全辦公室
桃園廠
中壢廠
常溫米飯事業部
工程部
人力資源處
財務處
行政管理處
資訊處
會計處
Shareholders' Meeting
Supervisor
Board of Directors
Chairman
Vice Chairman
Director
Independent
Director Chairman's Office Chairman
Vice Chairman
Director Independent Director Compensation Committee Auditor's Office
Risk Control President
Functional Unit General Manager Domestic Business Overseas Business
Corporate Social Responsibility
Office Food Safety Office
Human
Resources
Office
Zhongli Plant
Taoyuan Plant Aseptic Cooked
Rice Department
Engineering
Department
Financial Affairs
Office
Administration
Office
Legal Affairs
General Affairs
Department
Information
Office
Accounting
Office
Oils and
Fats/Frozen Dough
Department
Oils and
Fats/Frozen Dough
Department
Ice Cream
Department
International Trade
Department
Department of
Virtual Reality
System and
E-Commerce
Home Supplies
Department
Frozen Noodles
Department
Tourism Factory
Dining Business
Namchow
Thailand
Namchow
China
Shanghai
Dining
Namchow
Japan
13
2. Major Departments and Their Scope of Operation
Department Scope of Operation
Oils and Fats/Frozen Dough
Department
Research and development, production, and
distribution of professional oils and fats and frozen
dough products
Home Supplies Department+ Research and development, production, and
distribution of daily cleaners
International Trade Department
Importation and exportation of goods, exportation
affairs and procurement of raw materials, packing
materials, and equipment
Frozen Noodles Department Research and development, production, and
domestic distribution of frozen noodles
Aseptic Cooked Rice
Department
Research and development, production, and
domestic distribution of aseptic cooked rice
Department of Virtual Reality
System and E-Commerce
Planning and operation of e-commerce within the
Group
(platform-based, cross-border, and social
media-based e-commerce)
Joint Logistics Office for the
Dining Business
Planning, implementation, and service windows
for Namchow and reinvested dining businesses
Administrative function Management of legal affairs and general affairs
Information Development, construction, and management of
the information system
Financial Affairs Financial management and capital utilization plan
Accounting Bookkeeping and taxes processing and
management
Engineering Department Assistance in, implementation, and management of
engineering-related affairs
Human Resources Management of human resources and
organizational development
14
(II) Background Information of Directors, Supervisors, General Managers, Vice General Managers, Assistant Managers, and Heads of
Various Departments and Branches
Director and Supervisor Information (I)
Title
Natio
nality
Nam
e
Date of Election
(Inauguration)
Tenure
Initial date of inaugur
ation
Shares held upon
inauguration
Current shares held
Current shares held by spouse
and minors
Shares held in someone else's
name Major
experience/ education
Positions served at the Company and other
companies at present
Other supervisors, directors, or supervisors that are a spouse
or within two degrees of kinship
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Name Relationship
Chairm
an
RO
C
Fei-L
ung
Chen
6/10/2015 3
years 48/04/04 33,874,974 11.52% 33,814,934 11.50% 7,577,413 2.57% 0 0.00%
Masters of
Public
Administratio
n, University
of San
Francisco
Chairman of Lucky Royal Co.,
Ltd.
Chairman of Chow Ho
Enterprise Co., Ltd.
Chairman of Qizhi Business
Administration Cultural Co.,
Ltd.
Chairman of Hwa Zhin Co.,
Ltd.
Chairman of Namchow (BVI)
Ltd.
Chairman of Nacia
International Corporation
Chairman of Ting Hao
(Cayman Islands) Holdings
Corporation
Director of Namchow
(Thailand) Ltd.
Director of Yongju (Thailand)
Ltd.
Director of Namchow
International Corporation
Director of Dian Shui Lou
Restaurant Business Co., Ltd.
Director
Supervisor
Director
Vice General
Manager/Vice
President
Fei-Peng
Chen
Namchow
Chemical
Industrial
CO., LTD.
Employee
Welfare
Committee
Representat
ive
Yi-Wen
Chen
Hwa Zhin
Co., Ltd.
Representat
ive
Cheng-Wen
Chen
Cheng-Wen
Chen
Brother
Father
and
Daughter
Father
and Son
Father
and Son
15
Title
Natio
nality
Nam
e
Date of Election
(Inauguration)
Tenure
Initial date of inaugur
ation
Shares held upon
inauguration
Current shares held
Current shares held by spouse
and minors
Shares held in someone else's
name Major
experience/ education
Positions served at the Company and other
companies at present
Other supervisors, directors, or supervisors that are a spouse
or within two degrees of kinship
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Name Relationship
Vice C
hairm
an
RO
C
Fei-P
eng C
hen
6/10/2015 3
years 55/03/25 35,792,995 12.17% 36,097,995 12.27% 0 0.00% 0 0.00%
Department of
Economics,
Soochow
University
Director of Lucky Royal Co.,
Ltd.
Director of Chow Ho Enterprise
Co., Ltd.
Director of Qizhi Business
Administration Cultural Co.,
Ltd.
Director of Hwa Zhin Co., Ltd.
Director of Namchow (BVI)
Ltd.
Director of Ting Hao (Cayman
Islands) Holdings Corporation
Director of Nacia International
Corporation
Director of Namchow
(Thailand) Ltd.
Director of Yongju (Thailand)
Ltd.
Director of Namchow
International Corporation
Director of Dian Shui Lou
Restaurant Business Co., Ltd.
Chairman Fei-Lung
Chen
Brother
16
Title
Natio
nality
Nam
e
Date of Election
(Inauguration)
Tenure
Initial date of inaugur
ation
Shares held upon
inauguration
Current shares held
Current shares held by spouse
and minors
Shares held in someone else's
name Major
experience/ education
Positions served at the Company and other
companies at present
Other supervisors, directors, or supervisors that are a spouse
or within two degrees of kinship
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Name Relationship
Directo
r
RO
C
Rep
rese
ntati
ve
of
Luc
ky
Roy
al
Co.,
Ltd.
Kan-
Wen
Lee
6/10/2015 3
years
95/06/09
95/06/09
46,041,259
26,583
15.65%
0.01%
46,041,259
26,583
15.65%
0.01%
0 0.00% 0 0.00%
Masters of
Business
Administratio
n, National
Chung Hsing
University
Director of Lucky Royal Co.,
Ltd.
Director of Ting Hao (Cayman
Islands) Holdings Corporation
None None None
17
Title
Natio
nality
Nam
e
Date of Election
(Inauguration)
Tenure
Initial date of inaugur
ation
Shares held upon
inauguration
Current shares held
Current shares held by spouse
and minors
Shares held in someone else's
name Major
experience/ education
Positions served at the Company and other
companies at present
Other supervisors, directors, or supervisors that are a spouse
or within two degrees of kinship
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Name Relationship
Directo
r
RO
C
&
US
Rep
rese
ntati
ve
of
Hw
a
Zhi
n
Co.,
Ltd.
Chen
g-W
en
Chen
6/10/2015 3
years
95/06/09
6/10/2015
646,884
0
0.22%
0.00%
646,884
0
0.22%
0.00%
0 0.00% 0 0.00%
Masters,
Graduate
Institute of Financial
Affairs,
Golden Gate University
Executive Director of Shanghai
Qizhi Business Consultation
Co. Ltd.
Director of Shanghai Namchow
Food Co., Ltd.
Executive Director of Shanghai
Quahog Business
Administration Co., Ltd.
Executive Director of Shanghai
Quahog Food Co., Ltd.
Chairman of Shanghai Quahog
Trading Co., Ltd.
Executive Director of Shanghai
Qiaoxing Co., Ltd.
Director/Vice Chairman of
Shanghai Baolaina Co., Ltd.
Director of Tianjin Yoshiyoshi
Food Co., Ltd.
Director/General Manager of
Tianjin Namchow Food Co.,
Ltd.
Director of Nacia International
Corporation
Director of Namchow
International Corporation
Director of Ting Hao (Cayman
Islands) Holdings Corporation
Director of Guangzhou
Namchow Food Co., Ltd.
Chairman
Supervisor
Fei-Lung
Chen
Namchow
Chemical
Industrial
CO., LTD.
Employee
Welfare
Committee
Representat
ive
Yi-Wen
Chen
Father
and Son
Sister and
Brother
18
Title
Natio
nality
Nam
e
Date of Election
(Inauguration)
Tenure
Initial date of inaugur
ation
Shares held upon
inauguration
Current shares held
Current shares held by spouse
and minors
Shares held in someone else's
name Major
experience/ education
Positions served at the Company and other
companies at present
Other supervisors, directors, or supervisors that are a spouse
or within two degrees of kinship
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Name Relationship
Directo
r
RO
C
Chin
-Tsai C
hen
6/10/2015 3
years 90/05/25 507,312 0.17% 520,312 0.18% 0 0.00% 0 0.00%
Masters of
Accounting,
Tamkang
University
Supervisor of Shanghai
Namchow Food Co., Ltd.
Director of Shanghai Quahog
Trading Co., Ltd.
Director of Shanghai Baolaina
Co., Ltd.
Vice Chairman of Shangyin
Technology Co., Ltd.
Director of Tianjin Yoshiyoshi
Food Co., Ltd.
Director of Tianjin Namchow
Food Co., Ltd.
Supervisor of Taipei Financial
Building Co., Ltd.
Independent Director of Tong
Hsing Electronic Industries,
Ltd.
Director of Qizhi Business
Administration Cultural Co.,
Ltd.
Director of Nacia International
Corporation
Director of Namchow (BVI)
Ltd.
Supervisor of Yingfutong
Network
Director of Inventec Solar
Energy Corporation
Director of Yongju (Thailand)
Ltd.
Director of Namchow
(Thailand) Ltd.
Director of Ting Hao (Cayman
Islands) Holdings Corporation
Independent Director of Kinsus
Interconnect Technology Corp.
Director of Shin Sheng San
Venture Co., Ltd.
Director of Guangzhou
Namchow Food Co., Ltd.
Supervisor of Dian Shui Lou
Restaurant Business Co., Ltd.
None None None
19
Title
Natio
nality
Nam
e
Date of Election
(Inauguration)
Tenure
Initial date of inaugur
ation
Shares held upon
inauguration
Current shares held
Current shares held by spouse
and minors
Shares held in someone else's
name Major
experience/ education
Positions served at the Company and other
companies at present
Other supervisors, directors, or supervisors that are a spouse
or within two degrees of kinship
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Name Relationship
Ind
epe
nde
nt
Dir
ect
or
RO
C
Din
g-G
uo
Chen
6/10/2015 3
years 6/10/2015 0 0 0 0 0 0 0 0
PhD in
Business
Administratio
n, University
of Michigan
Lecturer, Business
Management, College of
Business and Management,
Tamkang University
Chairman of the Chinese
Academy of Business
General Counsel of Ruentex
Group
Consultant and professor at
Shanghai Fudan University,
Shandong University, Zhejiang
University, and Leadership
Academy at the headquarters of
China Petroleum and Chemical
Corporation
Director, consultant, and
professor at the Antai
Management College of
Shanghai Jiaotong University
Emeritus professor at the
School of Management,
Chinese University of Hong
Kong
None None None
Ind
epe
nde
nt
Dir
ect
or
RO
C
Jin-S
hih
Lin
6/10/2015 3
years 6/10/2015 0 0 0 0 0 0 0 0
Department of
Accounting,
Tamkang
University
CPA at Jin-Shih Lin
Accounting Firm
Supervisor of Prolific
Technology Inc. None None None
20
Title
Natio
nality
Nam
e
Date of Election
(Inauguration)
Tenure
Initial date of inaugur
ation
Shares held upon
inauguration
Current shares held
Current shares held by spouse
and minors
Shares held in someone else's
name Major
experience/ education
Positions served at the Company and other
companies at present
Other supervisors, directors, or supervisors that are a spouse
or within two degrees of kinship
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Name Relationship
Su
perv
isor
RO
C
&
US
Oh
-Ku
an C
han
g
6/10/2013 3
years 6/8/2007 237,136 0.08% 187,136 0.06% 0 0.00% 0 0.00%
Department of
English,
Tamkang
University
Director of Tong Hwa
Enterprises Co., Ltd. None None None
Su
perv
isor
RO
C
&
US
Rep
rese
ntati
ve
of
Na
mch
ow
Che
mic
al
Ind
ustri
al
CO.
,
LT
D.
Em
ploy
ee
Wel
fare
Co
mm
ittee
Yi-
Wen
Chen
6/10/2013 3
years 6/10/2013
4,908,960
0
1.67%
0
4,908,960
0
1.67%
0
0
686,635
0
0.23%
0 0.00%
Master of
Arts,
University of
San Francisco
Chairman of Tianjin Namchow
Food Co., Ltd.
Chairman of Tianjin
Yoshiyoshi Food Co., Ltd.
Chairman of Guangzhou
Namchow Food Co., Ltd.
Chairman of Dian Shui Lou
Restaurant Business Co., Ltd.
Supervisor of Chow Ho
Enterprise Co., Ltd.
Supervisor of Namchow Food
and Dining Consultation Co.,
Ltd.
Supervisor of Qizhi Business
Administration Cultural Co.,
Ltd.
Chairman of Shanghai
Namchow Food Co., Ltd.
Supervisor of Shanghai
Qiaoxing Co., Ltd.
Supervisor of Shanghai
Qiaohao Food Co., Ltd.
Supervisor of Shanghai
Qiaohao Business
Administration Co., Ltd.
Chairman
Director
Vice General
Manager/Vice
President
Fei-Lung
Chen
Representat
ive of Hwa
Zhin Co.,
Ltd. Cheng-Wen
Chen
Cheng-Wen
Chen
Father
and
Daughter
Sister and
Brother
Sister and
Brother
21
Table 1: Major shareholders of institutional shareholders
Name of institutional shareholder Major shareholders of institutional shareholders
Lucky Royal Co., Ltd. Namchow Chemical Industrial CO., LTD. (99.65%)
Hwa Zhin Co., Ltd. Fei-Lung Chen (45%), Fei-Peng Chen (45%)
Namchow Chemical Industrial CO., LTD. Employee Welfare Committee
Not applicable
Table 2: Major shareholders of major shareholders who are institutions
Name of institution Serial No.
Name of major shareholder of the institution Shareholding ratio
Namchow Chemical Industrial
CO., LTD.
1 Lucky Royal Co., Ltd. 15.65%
2 Fei-Peng Chen 12.27%
3 Fei-Lung Chen 11.50%
4 Cathay Life Insurance Company, Ltd. 5.05%
5 Bank SinoPac as Custodian for Reva Spring Ltd. Investment Account
3.94%
6 Bank SinoPac as Custodian for Ever Cosmos Ltd. Investment Account
3.40%
7 Shiao-Chuan Chen-Huang 2.58%
8 Public Service Pension Fund Management Board 1.91%
9 Cathay United Bank 1.90%
10 Namchow Chemical Industrial CO., LTD. Employee Welfare Committee
1.67%
22
Director and Supervisor Information (II)
Name
Title
Requirement
More than five years of work experience and the following
professional eligibility
Compliance with the independence
requirement (Note)
Number of other public
offering companies where the position of part-time
independent director is
held
Lecturer or higher
ranking at the
business, legal
affairs, financial affairs, or accounting department,
or other departments relating to corporate
operation of public and
private colleges
and universities
Judge, prosecutor,
lawyer, CPA, or
other professionals
and technicians that have taken and
been approved in
national exams
required for corporate operation
Work experience required
for business,
legal affairs,
financial affairs,
accounting, or
corporate operation
1 2 3 4 5 6 7 8 9 10
Chairman Fei-Lung Chen 0
Director Fei-Peng Chen 0
Director Chin-Tsai Chen 2
Director
Lucky Royal Co., Ltd.
0 Representative: Kan-Wen Lee
Director
Hwa Zhin Co., Ltd.
0 Representative: Cheng-Wen Lee
Independent Director
Ding-Guo Chen 0
Independent Director
Jin-Shih Lin 0
Supervisor
Namchow Chemical Industrial CO., LTD. Employee Welfare Committee
0
Representative: Yi-Wen Lee
Supervisor Oh-Kuan Chang
0
23
Note: When any of the following conditions is met for each director or supervisor during the two years prior to and during their tenure, please check "" in the box underneath each conditional code.
(1) Not an employee of the company or its associated enterprise. (2) Not a director or supervisor of the company or its associated enterprise (this, however,
does not include an independent director at the company or its parent company or the subsidiary where the company holds more than 50% of voting shares directly and indirectly.)
(3) Not a natural person shareholder that holds by himself/herself or by his/her spouse or minor child in someone else's name more than 1% of all circulating shares of the company or is on the Top 10 shareholding list.
(4) Not the spouse, a relative within the second degree of kinship, or a direct blood relative within the fifth degree of kinship of the said people indicated in the foregoing three subparagraphs
(5) Not a director, supervisor, or employee of an institutional shareholder directly holding more than 5% of all circulating shares of the company or a director, supervisor, or employee of an institutional shareholder on the Top 5 shareholding list.
(6) Not a director, supervisor, manager, or a shareholder holding more than 5% of shares of a specific company or institution with financial or business activities with the company
(7) Not a professional providing services or consultations on business, legal affairs, financial affairs, and accounting at the company or its associated enterprise or the owner, partner, director, supervisor, manager, and his/her spouse of a sole proprietorship or collaborative company or institution. This does not include members of compensation committee who exercise power in accordance with Article 7 of the Regulations Governing the Appointment and Exercise of Powers by the Compensation committee of a Company Whose Stock is Listed on the Stock Exchange or Traded Over the Counter.
(8) Not the spouse or a relative within the second degree of kinship to any other director of the Company.
(9) None of the conditions indicated under Article 30 of the Company Act (10) Not a government agency, juristic person, or its representative set forth in Article 27 of
the Company Act.
24
2. Background Information of General Managers, Vice General Managers, Assistant Managers, and Heads of Various Departments and
Branches
Title
(Note
1)
Nation
ality Name
Date of
Election/Inau
guration
inauguration
Current shares
held by spouse
and minors
Shares held in
someone else's
name
inauguration
Main
experience/educati
on
(Note 2)
Positions at other companies held at
present
Managers who are
a spouse or a
relative
within the second
degree of kinship
Quantity
of shares
Shareh
olding
ratio
Quantity
of shares
Sharehol
ding
ratio
Quantity
of shares
Shareh
olding
ratio
Title Nam
e
Relat
ionsh
ip
General
Manager
/
Executiv
e Vice
President
Year Kan-We
n Lee 09/09/1997 26,583 0.01% 0 0.00% 0 0.00%
Business
Administration,
National Chung
Tsing University
Master
Director of Lucky Royal Co., Ltd.
Director of Ting Hao (Cayman Islands)
Holdings Corporation
None None None
25
Title
(Note
1)
Nation
ality Name
Date of
Election/Inau
guration
inauguration
Current shares
held by spouse
and minors
Shares held in
someone else's
name
inauguration
Main
experience/educati
on
(Note 2)
Positions at other companies held at
present
Managers who are
a spouse or a
relative
within the second
degree of kinship
Quantity
of shares
Shareh
olding
ratio
Quantity
of shares
Sharehol
ding
ratio
Quantity
of shares
Shareh
olding
ratio
Title Nam
e
Relat
ionsh
ip
Vice
General
Manager
/
Vice
President
Year
&
US
Cheng-
Wen
Chen
03/21/2013 0 0.00% 0 0.00% 0 0.00%
Golden Gate
University
Master, Graduate
School of Finance
Executive Director of Shanghai Qizhi
Business Consultation Co. Ltd.
Director of Shanghai Namchow Food Co.,
Ltd.
Executive Director of Shanghai Quahog
Business Administration Co., Ltd.
Executive Director of Shanghai Quahog
Food Co., Ltd.
Chairman of Shanghai Quahog Trading
Co., Ltd.
Executive Director of Shanghai Qiaoxing
Co., Ltd.
Director/Vice Chairman of Shanghai
Baolaina Co., Ltd.
Director of Tianjin Yoshiyoshi Food Co.,
Ltd.
Director/General Manager of Tianjin
Namchow Food Co., Ltd.
Director of Nacia International
Corporation
Director of Namchow International
None None None
26
Title
(Note
1)
Nation
ality Name
Date of
Election/Inau
guration
inauguration
Current shares
held by spouse
and minors
Shares held in
someone else's
name
inauguration
Main
experience/educati
on
(Note 2)
Positions at other companies held at
present
Managers who are
a spouse or a
relative
within the second
degree of kinship
Quantity
of shares
Shareh
olding
ratio
Quantity
of shares
Sharehol
ding
ratio
Quantity
of shares
Shareh
olding
ratio
Title Nam
e
Relat
ionsh
ip
Corporation
Director of Ting Hao (Cayman Islands)
Holdings Corporation
Director of Guangzhou Namchow Food
Co., Ltd.
Chief
Financial
Officer
Year
&
Austra
lia
Dongbia
o Bai 07/01/1991 0 0.00% 397 0.00% 0 0.00%
Department of
Banking and
Insurance,
Overseas Chinese
University
Director of Shanghai Quahog Trading Co.,
Ltd.
Director of Tianjin Yoshiyoshi Food Co.,
Ltd.
Director of Knowledge Flow Publishing
Co., Ltd.
Director of Nacia International
Corporation
None None None
27
Title
(Note
1)
Nation
ality Name
Date of
Election/Inau
guration
inauguration
Current shares
held by spouse
and minors
Shares held in
someone else's
name
inauguration
Main
experience/educati
on
(Note 2)
Positions at other companies held at
present
Managers who are
a spouse or a
relative
within the second
degree of kinship
Quantity
of shares
Shareh
olding
ratio
Quantity
of shares
Sharehol
ding
ratio
Quantity
of shares
Shareh
olding
ratio
Title Nam
e
Relat
ionsh
ip
Director of Namchow (BVI) Ltd.
Supervisor of Lucky Royal Co., Ltd.
Chief
Human
Resource
s Officer
Year
Wan-Jin
g Zhou 8/19/2013 0 0.00% 30,000 0.01% 0 0.00%
Ottawa University
MBA None None None None
Special
Assistant
of the
Chairma
n and
Chief
Risk
Control
Officer
Year
Mei-Hui
Liao 10/12/2015 0 0.00% 0 0.00% 0 0.00%
Saginaw Valley
State University of
Michigan
MBA
None None None None
Vice
President
Year
Ming-Fe
n Zhou 03/21/2013 0 0.00% 0 0.00% 0 0.00%
Texas A&M
University
Educational
General Manager of Lucky Royal Co.,
Ltd. Chaojiangyan Qingcheng Branch
General Manager of Lucky Royal Co.,
None None None
28
Title
(Note
1)
Nation
ality Name
Date of
Election/Inau
guration
inauguration
Current shares
held by spouse
and minors
Shares held in
someone else's
name
inauguration
Main
experience/educati
on
(Note 2)
Positions at other companies held at
present
Managers who are
a spouse or a
relative
within the second
degree of kinship
Quantity
of shares
Shareh
olding
ratio
Quantity
of shares
Sharehol
ding
ratio
Quantity
of shares
Shareh
olding
ratio
Title Nam
e
Relat
ionsh
ip
Technology
Master
Graduated from the
Entrepreneurship
Class of National
Chengchi
University
Ltd.
General Manager of Chow Ho Enterprise
Co., Ltd.
General Manager of Dian Shui Lou
Restaurant Business Co., Ltd.
Vice
President
Year
Shu-We
n Dai 01/01/2015 2,136 0.00% 0 0.00% 0 0.00%
Department of
Mass
Communication,
Fu Jen Catholic
University
None None None None
Departm
ent
Vice
General
Manager
Year
Ming-Ch
uan Lin 05/01/2013 0 0.00% 0 0.00% 0 0.00%
Yilan Senior High
School None None None None
Assistant
Manager
Year
Rong-Zh
ang Lian 06/22/1996 10,069
0.003
% 2,396 0.00% 0 0.00%
Department of
Accounting and
Statistics, Tamkang
University
Director of Tianjin Yoshiyoshi Food Co.,
Ltd.
Supervisor of Knowledge Flow Publishing
Co., Ltd.
Director of Namchow Consultation Co.,
None None None
29
Title
(Note
1)
Nation
ality Name
Date of
Election/Inau
guration
inauguration
Current shares
held by spouse
and minors
Shares held in
someone else's
name
inauguration
Main
experience/educati
on
(Note 2)
Positions at other companies held at
present
Managers who are
a spouse or a
relative
within the second
degree of kinship
Quantity
of shares
Shareh
olding
ratio
Quantity
of shares
Sharehol
ding
ratio
Quantity
of shares
Shareh
olding
ratio
Title Nam
e
Relat
ionsh
ip
Ltd.
Supervisor of Lucky Royal Co., Ltd.
Assistant
Manager
Year
Zhou-Jin
g Chen 05/01/1996 314 0.00% 0 0.00% 0 0.00%
Department of
Law, Soochow
University
Director of Shanghai Namchow Food Co.,
Ltd.
Director of Tianjin Yoshiyoshi Food Co.,
Ltd.
Director of Tianjin Namchow Food Co.,
Ltd.
Director of Knowledge Flow Publishing
Co., Ltd.
Director of Namchow Food and Dining
Consultation Co., Ltd.
Director of Namchow Consultation Co.,
Ltd.
Director of Guangzhou Namchow Food
Co., Ltd.
None None None
Assistant
Manager
Year
Yi-Feng
Huang 06/21/2012 2,000 0.00% 0 0.00% 0 0.00%
Graduate Institute
of Civil
Engineering,
National Taiwan
University
None None None None
30
Title
(Note
1)
Nation
ality Name
Date of
Election/Inau
guration
inauguration
Current shares
held by spouse
and minors
Shares held in
someone else's
name
inauguration
Main
experience/educati
on
(Note 2)
Positions at other companies held at
present
Managers who are
a spouse or a
relative
within the second
degree of kinship
Quantity
of shares
Shareh
olding
ratio
Quantity
of shares
Sharehol
ding
ratio
Quantity
of shares
Shareh
olding
ratio
Title Nam
e
Relat
ionsh
ip
Master
Assistant
Manager
Year
Rui-Zi
Zhu 01/01/2015 0 0.00% 0 0.00% 0 0.00%
Master of Food and
Nutrition,
Providence
University
None None None None
Assistant
Manager
Year
Hai-Li
Qi 11/06/2015 0 0.00% 0 0.00% 0 0.00%
Graduate Institute
of Labor Relations,
Chinese Culture
University
Master
None None None None
Note 1: It shall include the information of general managers, vice general managers, assistant managers, and heads of respective departments and
branches; regardless of their title, the information has to be disclosed as long as their ranking is equivalent to that of a general manager,
vice general manager, or assistant manager.
Note 2: For the experience relevant to the current position, such as employment at an audit and certification accounting firm or an associated
enterprise during the said period, the title and responsibilities shall be specified.
31
(III) Remunerations paid to directors, supervisors, general managers, and vice general managers in the last years
(1) (1-1) Remunerations for directors (including independent directors) (Disclose the individual's name and how the remuneration is paid)
Unit: NTD
Title Name
Remuneration for directors
Sum of A, B, C, and D
and its after-tax
earnings ratio
(Note 11)
Remunerations for part-time employees Sum of A, B,
C, D E, F, and G
its after-tax
earnings ratio
(Note 11)
Claim of
remunerations from re-inve
sted busine
sses other than
subsidiaries (Note 12)
Remunerations (A)
(Note 2)
Retirement and pension
(B)
Remunerations for directors
(C) (Note 3)
Operational expenditure (D) (Note 4)
Salaries, prizes, and
special expenditure (E)
(Note 5)
Retirement and pension
(F)
Remunerations for employees (G) (Note 6)
Shares available for subscription
with an employee stock option
certificate (H) (Note 7)
Restrictive shares for
employees (I) (Note 13)
The Compa
ny
All compan
ies within
the Financi
al Report (Note
8)
The Compa
ny
All compan
ies within
the Financi
al Report (Note
8)
The Compa
ny
All compan
ies within
the Financi
al Report (Note
8)
The Compa
ny
All compan
ies within
the Financi
al Report (Note
8)
The
Compa
ny
All compa
nies within
the Financ
ial Report (Note
8)
The Compan
y
All compani
es within
the Financial Report (Note 8)
The Compan
y
All compani
es within
the Financial Report (Note 8)
The Company
All companies within the Financial Report
(Note 8) The
Compa
ny
All compa
nies within
the Financ
ial Report (Note
8)
The
Compa
ny
All compa
nies within
the Financ
ial Report (Note
8)
The
Compa
ny
All compa
nies within
the Financ
ial Report (Note
8)
Current value
Stock value
Cash value
Stock value
Chairman Fei-Lung
Chen
14,807,26
8
16,977,27
9 385,524 419,288
16,834,66
2
16,834,66
2 133,200 2,155,178 2.89% 3.27% 0 0 0 0 0 0 0 0 0 0 0 0 2.89% 3.27% None
Vice
Chairman
Fei-Peng
Chen 9,126,184
10,113,90
4 335,844 355,596
11,223,10
8
11,223,10
8 90,000 90,000 1.87% 1.96% 0 0 0 0 0 0 0 0 0 0 0 0 1.87% 1.96% None
Director
Representat
ive of
Lucky
Royal Co.,
Ltd.
Kan-Wen
Lee
0 0 0 0 5,611,554 5,611,554 0 0 0.5% 0.5% 9,648,400 11,525,55
4 264,156 275,304 203,918 0 232,142 0 0 0 0 0 1.41% 1.59% None
* According to the new requirements of 2015, remunerations shall be disclosed for individual directors and supervisors if the total value of remunerations paid to all directors and supervisors reaches 2% of the after-tax net profits of the Company and remunerations received by any director/supervisor exceed NTD 15 million.
* Retirement and pension as listed above show the value set aside and the associated proportion.
32
(1-2) Remunerations for directors (including independent directors) (The names shall be summarized and disclosed reflective of the bracket.)
Unit: NTD
Title Name
Remuneration for directors Sum of A, B, C,
and D
and
its after-tax
earnings
ratio
(Note 11)
Remunerations for part-time employees
Sum of A, B, C, D
E, F, and G
its after-tax
earnings
ratio
(Note 11)
Claim of
remunera
tions
from
re-invest
ed
business
es other
than
subsidiar
ies (Note
12)
Remunerations (A)
(Note 2)
Retirement and
pension
(B)
Remunerations for
directors (C)
(Note 3)
Operational
expenditure
(D) (Note 4)
Salaries, prizes, and
special expenditure
(E)
(Note 5)
Retirement and
pension
(F)
Remunerations for employees (G)
(Note 6)
Shares available
for subscription
with
an employee stock
option
certificate (H)
(Note 7)
Restrictive
shares for
employees (I)
(Note 13)
The
Company
All
companie
s within
the
Financial
Report
(Note 8)
The
Company
All
companie
s within
the
Financial
Report
(Note 8)
The
Company
All
companie
s within
the
Financial
Report
(Note 8)
The
Company
All
companie
s within
the
Financial
Report
(Note 8)
The
Compan
y
All
compani
es within
the
Financial
Report
(Note 8)
The
Company
All
companies
within the
Financial
Report
(Note 8)
The
Company
All
companies
within the
Financial
Report
(Note 8)
The Company
All companies
within the
Financial Report
(Note 8)
The
Compan
y
All
compani
es within
the
Financial
Report
(Note 8)
The
Compan
y
All
compani
es within
the
Financial
Report
(Note 8)
The
Compan
y
All
compani
es within
the
Financial
Report
(Note 8)
Cash
value
Shares
value
Cash
value
Shares
value
Director Chin-Tsai
Chen
0 0 0 0 11,223,108 11,223,108 704,000 704,000 1.07% 1.39% 1,552,090 11,986,958 112,976 144,792 304,228 0 304,228 0 0 0 0 0 1.25% 2.51% None
Director
Hwa Zhin
Co., Ltd.
Representativ
e
Cheng-Wen
Chen
Director
Hwa Zhin
Co., Ltd.
Representativ
e
Ming-Liang
Ho
Indepen
dent
Director
Ding-Guo
Chen
Indepen
dent
Director
Jin-Shih Lin
Note: Retirement and pension as listed above show the value set aside and the associated proportion.
33
(2-1)Remuneration bracket table
Bracket by which remunerations are paid to individual directors of the company
Name of director
Sum of the said four types of remunerations (A+B+C+D)
Sum of the said seven types of remunerations (A+B+C+D+E+F+G)
The Company (Note 9) All companies within the Financial Report
(Note 10) The Company (Note 9)
All companies within the Financial Report (Note 10)
J
Below NTD 2,000,000 Ding-Guo Chen, Jin-Shih
Lin Ding-Guo Chen,
Jin-Shih Lin Ding-Guo Chen,
Jin-Shih Lin Ding-Guo Chen, Jin-Shih
Lin
NTD 2,000,000 (inclusive) ~ NTD 5,000,000 (exclusive) Ming-Liang Ho,
Cheng-Wen Chen Ming-Liang Ho,
Cheng-Wen Chen Ming-Liang Ho Ming-Liang Ho
NTD 5,000,000 (inclusive) ~ NTD 10,000,000 (exclusive) Kan-Wen Lee, Chin-Tsai
Chen Kan-Wen Lee, Chin-Tsai Chen
Cheng-Wen Lee, Chin-Tsai Chen
Cheng-Wen Chen
NTD 10,000,000 (inclusive) ~ NTD 15,000,000 (exclusive) Kan-Wen Lee Chin-Tsai Chen
NTD 15,000,000 (inclusive) ~ NTD 30,000,000 (exclusive) Fei-Peng Chen Fei-Peng Chen Fei-Peng Chen Kan-Wen Lee, Fei-Peng
Chen
NTD 30,000,000 (inclusive) ~ NTD 50,000,000 (exclusive) Fei-Lung Chen Fei-Lung Chen Fei-Lung Chen Fei-Lung Chen
NTD 50,000,000 (inclusive) ~ NTD 100,000,000 (exclusive)
Over NTD 100,000,000
Total 8 people 8 people 8 people 8 people
Note 1: Names of directors shall be listed separately (both the name of the institution and its representative shall be listed for an institutional
shareholder) and individual payments made shall be disclosed through a summary. If the director is also a general manager or vice general manager, this table and the following table (3-1 or 3-2) shall be completed.
Note 2: The remunerations paid to directors in the latest year (including salaries, additional pay, service pay, various prizes, rewards, among others)
Note 3: Value of remunerations planned to be paid to directors that have been approved by the Board of Directors prior to the shareholders meeting on the annual earnings distribution proposal.
Note 4: Related expenses for carrying our tasks incurred by directors in the latest year (including transportation, special expenditure, various allowances, dormitory, and car, among other actual items provided) For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and other payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations.
Note 5: Salaries, additional pay, service pay, various prizes, rewards, transportation, special expenditure, various allowances, dormitory, cars, and other actual items that are claimed by directors and employees (including part-time general managers, vice general managers, other managers, and employees) in the latest year For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and other payments
34
shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations.
Note 6: Bonus (including stock bonus and cash bonus) available for directors and employees (including part-time general managers, vice general managers, other managers, and employees) in the latest year. The value of bonus planned to be distributed to employees that has been approved by the Board of Directors prior to the earnings distribution proposal for the latest year shall be disclosed. If it is impossible to estimate the value planned to be distributed this year, follow the actual value distributed last year and calculate proportionally. In addition, the attached Table 1-3 shall be completed.
Note 7: Shares (excluding those already executed) available for subscription with an employee stock option certificate subscribed by directors who are also employees (including part-time general managers, vice general managers, other managers, and employees) as of the date of printing of Annual Report. Besides this table, Exhibit 15 shall completed.
Note 8: The total value of remunerations paid to directors of the Company by all companies in the Consolidated Report (including the Company) shall be disclosed.
Note 9: For the total value of various remunerations paid to each director by the Company, disclose the name of the director in the respective bracket.
Note 10: For the total value of various remunerations paid to each director of the Company by all companies (including the Company) in the Consolidated Report, disclose the name of the director in the respective bracket.
Note 11: After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity or individual financial report from the most recent year.
Note 12: a. The value of related remunerations claimed by directors of the Company from reinvested businesses other than subsidiaries shall be specified in this column.
b. In the event that directors of the Company claim related remunerations from reinvested businesses other than subsidiaries, the said remunerations shall be combined in Column J of the remuneration bracket table and the name of the column shall be changed to "all reinvested businesses."
c. Remunerations are the compensation, rewards, employee bonus, and operational expenses, among others, claimed by directors of the Company who serve as the director, supervisor, or manager at a reinvested business other than the subsidiary.
Note 13: Restrictive new shares obtained by directors who are also employees (including part-time general managers, vice general managers, other managers, and employees) as of the date of printing of Annual Report. Besides this table, Exhibit 15-1 shall completed.
* The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only, not for taxation.
35
(2-2)Remunerations for Supervisors (The names shall be summarized and disclosed reflective of the bracket.)
Unit: NTD
Title Name
Remunerations for supervisors Sum of A, B, and C
After-tax earnings ratio
(Note 8)
Claim of
remunerations
from
re-invested
businesses
other than
subsidiaries
(Note 9)
Remunerations (A)
(Note 2)
Remunerations (B)
(Note 3)
Operational expenditure
(C)
(Note 4)
The
Company
All
companies
within the
Financial
Report
(Note 5)
The
Company
All
companies
within the
Financial
Report
(Note 5)
The
Company
All
companies
within the
Financial
Report
(Note 5)
The
Company
All
companies
within the
Financial
Report
(Note 5)
Supervisor
Namchow
Chemical
Industrial
CO., LTD.
Employee
Welfare
Committee
Representative
Yi-Wen Chen
0 5,598,371 11,223,108 11,223,108 72,000 864,010 1.01% 1.59% None
Supervisor Oh-Kuan
Chang
36
(3-1)Remuneration bracket table
Bracket by which remunerations are paid to individual supervisors of
the company
Name of supervisor
Sum of the said three types of remunerations (A+B+C)
The Company (Note 6) All companies within the Financial
Report (Note 7) D
Below NTD 2,000,000
NTD 2,000,000 (inclusive) ~ NTD 5,000,000 (exclusive)
NTD 5,000,000 (inclusive) ~ NTD 10,000,000 (exclusive) Yi-Wen Chen, Oh-Kuan Chang Oh-Kuan Chang
NTD 10,000,000 (inclusive) ~ NTD 15,000,000 (exclusive) Yi-Wen Chen
NTD 15,000,000 (inclusive) ~ NTD 30,000,000 (exclusive)
NTD 30,000,000 (inclusive) ~ NTD 50,000,000 (exclusive)
NTD 50,000,000 (inclusive) ~ NTD 100,000,000 (exclusive)
Over NTD 100,000,000
Total 2 people 2 people
Note 1: Names of supervisors shall be listed separately (both the name of the institution and its representative shall be listed for an institutional shareholder) and individual payments made shall be disclosed through a summary.
Note 2: The remunerations paid to supervisors in the latest year (including salaries, additional pay, service pay, various prizes, rewards, among others)
Note 3: Value of remunerations approved by the Board of Directors to be distributed to supervisors in the most recent year
Note 4: Related expenses for carrying our tasks incurred by supervisors in the latest year (including transportation, special expenditure, various allowances, dormitory, and car, among other actual items provided) For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the actual or market-value-based rental, the cost of gasoline, and other payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be included in the calculation of remunerations.
Note 5: The total value of remunerations paid to supervisors of the Company by all companies in the Consolidated Report (including the Company) shall be disclosed.
Note 6: For the total value of various remunerations paid to each supervisor by the Company, disclose the name of the supervisor in the respective bracket.
Note 7: For the total value of various remunerations paid to each supervisor of the Company by all companies (including the Company) in the Consolidated Report, disclose the name of the supervisor in the respective bracket.
Note 8: After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity or individual financial report from the most recent year.
37
Note 9: a. The value of related remunerations claimed by supervisors of the Company from reinvested businesses other than subsidiaries shall be specified in this column.
b. In the event that supervisors of the Company claim related remunerations from reinvested businesses other than subsidiaries, the said remunerations shall be combined in Column D of the remuneration bracket table and the name of the column shall be changed to "all reinvested businesses."
c. Remunerations are the compensation, rewards (including rewards for employees, directors, and supervisors) and operational expenditures claimed by supervisors of the Company who serve as the director, supervisor, or manager at a reinvested business other than the subsidiary.
* The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only, not for taxation.
38
(3-2)Remunerations for general managers and vice general managers (The names shall be summarized and disclosed reflective of the bracket.)
Title Name
Salaries (A)
(Note 2)
Retirement and
pension (B)
Prizes and
special
expenditure (C)
(Note 3)
Employee remunerations (D)
(Note 4)
After-tax
earnings ratio
of the sum of
A, B, C, and D
(%)
(Note 9)
Number of
employee
stock option
certificates
obtained
(Note 5)
Restrictive
new shares
obtained
(Note 11)
Cla
im
of
re
mu
ner
atio
ns
fro
m
re-i
nve
ste
d
bus
ine
sse
s
oth
er
tha
n
sub
sidi
arie
s (Note
10)
The
Comp
any
All
compa
nies
within
the
Financ
ial
Report
(Note
6)
The
Comp
any
All
compa
nies
within
the
Financ
ial
Report
(Note
6)
The
Compa
ny
All
compani
es
within
the
Financia
l Report
(Note 6)
The
Company
All companies
within the
Financial
Report
(Note 6)
The
Com
pany
All
compa
nies
within
the
Financ
ial
Report
(Note
6)
The
Com
pany
All
comp
anies
withi
n the
Fina
ncial
Repo
rt
(Note
6)
The
Com
pany
All
co
mp
ani
es
wit
hin
the
Fin
anc
ial
Rep
ort (Note
6)
Cash
value
Sha
res
val
ue
Cash
value
Shar
es
value
Vice General
Manager/Executiv
e Vice President
Kan-W
en
Lee
26,023,441 38,348,808 1,363,932 1,494,792 18,437,495 32,696,262 1,120,777 0 1,378,089 0 4.22% 6.64% 0 0 0 0 None
Vice General
Manager/Vice
President
Cheng-
Wen
Chen
Special Assistant
of the Chairman
and Chief Risk
Control Officer
Mei-H
ui Liao
Chief Financial
Officer
Dongbi
ao Bai
39
Chief Human
Resources Officer
Wan-Ji
ng
Zhou
Vice President Ming-F
en
Zhou
Vice President Shu-W
en Dai
Vice President Er-Kun
Zhou
General Manager
of Business
Department
Shu-Mi
ng
Zhang
General Manager
of Business
Department
Yo-Qin
g Liu
Vice General
Manager of
Business
Department
Ming-
Chuan
Lin
40
Remuneration bracket table
Bracket by which remunerations are paid to
respective general managers and vice general
managers of the Company
Name of General Manager/Vice General Manager
The Company (Note 7) All companies within the Financial Report
(Note 8) E
Below NTD 2,000,000 Dong-Biao Bai, Ming-Fen Zhou,
Mei-Hui Liao, Yo-Qing Liu Mei-Hui Liao, Yo-Qing Liu
NTD 2,000,000 (inclusive) ~ NTD 5,000,000
(exclusive)
Ming-Chuan Lin, Shu-Ming Zhang,
Cheng-Wen Chen Ming-Chuan Lin, Shu-Ming Zhang
NTD 5,000,000 (inclusive) ~ NTD 10,000,000
(exclusive)
Wan-Qing Zhou, Shu-Wen Dai,
Er-Kun Zhou
Wan-Qing Zhou, Dong-Biao Bai, Shu-Wen
Dai, Er-Kun Zhou, Ming-Fen Zhou
NTD 10,000,000 (inclusive) ~ NTD 15,000,000
(exclusive)
Kan-Wen Lee Kan-Wen Lee, Cheng-Wen Chen
NTD 15,000,000 (inclusive) ~ NTD 30,000,000
(exclusive)
NTD 30,000,000 (inclusive) ~ NTD 50,000,000
(exclusive)
NTD 50,000,000 (inclusive) ~ NTD
100,000,000 (exclusive)
Over NTD 100,000,000
Total 11 people 11 people
Note 1: Names of general managers and vice general managers shall be listed separately and individual payments made shall be disclosed through a summary. If the director is also a general
manager or vice general manager, this table and the above table (1-1 or 1-2) shall be completed.
Note 2: Salaries, additional pay, and service pay for general managers and vice general managers in the latest year.
Note 3: Various prizes, awards, transportation, special expenditure, various allowances, dormitory, cars, and other actual items provided and other compensations for general managers and vice
general managers in the latest year. For housing, automobiles, and other transportation tools or expenses that are specific to individuals, the nature and cost of the assets provided, the
actual or market-value-based rental, the cost of gasoline, and other payments shall be disclosed. If a driver is assigned, please indicate the pay available for the driver but it may not be
included in the calculation of remunerations.
Note 4: Employee remunerations (including stock and cash) distributed to general managers and vice general managers as approved by the Board of Directors in the latest year. If it is
impossible to estimate the value planned to be distributed this year, follow the actual value distributed last year and calculate proportionally. In addition, the attached Table 1-3 shall be
completed. After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity
or individual financial report from the most recent year.
41
Note 5: Shares (excluding those already executed) available for subscription with an employee stock option certificate subscribed by general managers and vice general managers who are also
employees as of the date of printing of Annual Report. Besides this table, Exhibit 15 shall completed.
Note 6: The total value of remunerations paid to general managers and vice general managers of the Company by all companies in the Consolidated Report (including the Company) shall be
disclosed.
Note 7: For the total value of various remunerations paid to each general manager and vice general manager by the Company, disclose the name of the general manager and the vice general
manager in the respective bracket.
Note 8: For the total value of various remunerations paid to each general manager and vice general manager of the Company by all companies (including the Company) in the Consolidated
Report, disclose the name of the general manager and vice general manager in the respective bracket.
Note 9: After-tax pure earnings are those in the latest year. When the International Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in the entity or
individual financial report from the most recent year.
Note 10: a. The value of related remunerations claimed by general managers and vice general managers of the Company from reinvested businesses other than subsidiaries shall be specified in
this column.
b. In the event that general managers and vice general managers of the Company claim related remunerations from reinvested businesses other than subsidiaries, the said
remunerations shall be combined in Column E of the remuneration bracket table and the name of the column shall be changed to "all reinvested businesses."
c. Remunerations are the compensation, rewards (including rewards for employees, directors, and supervisors) and operational expenses, among others, claimed by general managers
and vice general managers of the Company who serve as the director, supervisor, or manager at a reinvested business other than the subsidiary.
Note 11: Restrictive new shares obtained by directors who are also employees (including part-time general managers, vice general managers, other managers, and employees) as of the date of
printing of Annual Report. Besides this table, Exhibit 15-1 shall completed.
* The content of the remunerations disclosed in this table differs from the idea of income indicated in the Income Tax Act. As such, the purpose of this table is for disclosure of information only,
not for taxation.
42
(2) Names and distribution of managers assigned with employee rewards
Title
(Note 1)
Name
(Note 1) Stock value Current value Total
After-tax
earnings ratio
(%)
Man
ager
Executive Vice
President
Kan-Wen
Lee
0 1,573,637 1,573,637 0.14%
Vice President Cheng-Wen
Chen
Chief Human Resources
Officer
Wan-Jing
Zhou
Special Assistant of the
Chairman and Chief
Risk Control Officer
Mei-Hui
Liao
Vice President Ming-Fen
Zhou
Vice President Shu-Wen
Dai
Vice General Manager
of Business Department
Ming-Chuan
Lin
Assistant Manager Rong-Zhang
Lian
Assistant Manager Zhou-Jing
Chen
Assistant Manager Yi-Feng
Huang
Assistant Manager Rui-Zi Zhu
Assistant Manager Hai-Li Qi
Note 1: The name and title of the individual shall be disclosed but distribution of profits may be
disclosed through a summary.
Note 2: Employee remunerations (including stock and cash) distributed to managers through the
Board of Directors in recent years. If it is impossible to estimate the value planned to be
distributed this year, follow the actual value distributed last year and calculate
proportionally. After-tax pure earnings are those in the latest year. When the International
Financial Reporting Standards are adopted, after-tax pure earnings are those indicated in
the entity or individual financial report from the most recent year.
Note 3: For the applicability of managers, follow the Tai-Cai-Zheng-San No. 0920001301 letter
dated March 27, 2003.
(1) General managers and people of equivalent ranking
(2) Vice general managers and people of equivalent ranking
(3) Assistant managers and people of equivalent ranking
(4) Head of Department of Finance
(5) Head of Accounting Department
(6) Other people handling corporate affairs and signature rights
Note 4: If directors, general managers, and vice general managers receive employee
remunerations (including stock and cash), this table needs to be completed in addition to
Exhibit 1-2.
43
(3) Compare and describe separately the analysis of ratios of total remunerations paid to
directors, supervisors, general managers, and vice general managers of the Company for
the past two years by the Company and all companies in the Consolidated Report in
after-tax earnings indicated in the entity or individual financial reports. In addition,
describe correlation among the remuneration payment policy, standards and combination,
remuneration establishing procedures, and management efficacy and risks in the future.
1. Ratios of remunerations paid in the past two years in after-tax earnings indicated in the
entity financial report:
Year The Company
All companies in the
Consolidated Report
2014 2015 2014 2015
Total remunerations for
directors 60,864,682 82,560,220 76,746,668 100,176,655
Ratio of total
remunerations for directors
in after-tax earnings
indicated in the entity
financial report
6.42% 7.42% 8.09% 9.00%
Total value of
remunerations for
supervisors
6,902,162 11,295,108 13,041,605 17,685,489
Ratio of total
remunerations for
supervisors in after-tax
earnings indicated in the
entity financial report
0.73% 1.10% 1.37% 1.59%
Total value of
remunerations for general
managers and vice general
managers
40,496,446 46,945,645 65,949,992 73,917,951
Ratio of total
remunerations for general
directors and vice general
directors in after-tax
earnings indicated in the
entity financial report
4.27% 4.22% 6.95% 6.64%
Note: The after-tax earnings were NTD 948,633,723 in the 2014 Entity Financial
Report and those were NTD 1,112,849,911 in the 2015 Entity Financial Report.
2. Correlation among the remuneration payment policy, standards and combination,
remuneration establishing procedures, and management efficacy and risks in the future:
(1) The Company set up the Compensation Committee in compliance with the
Regulations Governing the Appointment and Exercise of Powers by the
Compensation committee of a Company Whose Stock is Listed on the Stock
Exchange or Traded Over the Counter. The Committee evaluates and decides the
remuneration payment policy according to the company's management strategy,
manpower utilization policy, and payment capability and establishes and
periodically reviews the remuneration levels for directors, supervisors, and
managers of the Company and provides the Board of Directors with suggestions
accordingly for the latter's reference while making decisions by referring to the
44
findings obtained by the Company through the compensation survey conducted by
a professional compensation survey institution.
(2) Criteria for paying remunerations to directors and supervisors of the Company are
defined in the Articles of Incorporation of the Company.
(3) Salaries for general managers and vice general managers of the Company are paid
according to their personal performance and their contribution to the overall
operation of the Company and taking into account of the market salary level found
out in the survey conducted by the professional institution. The distribution of
bonus is to be based on the performance management guidelines of the Company
with reference to the annual management performance of the Company and the
individual.
(4) Risk in the future: Liability insurance has been purchased for directors and
supervisors as required by the Articles of Incorporation of the Company.
45
(IV) Status of Corporate Governance
1. Board of Directors
The Board of Directors met 11 times (A) in the latest year. Attendance of directors and
supervisors in the meetings is as follows:
Title Name (Note 1) Actual
frequency of
attendance
(being
seated) in
meetings B
Frequenc
y of
attendan
ce
through
proxy
Actual attendance
(seated) rate (%)
[B/A] (Note 2)
Remark
Chairman Fei-Lung Chen 11 0 100% Re-elected through the
shareholders' meeting
on June 10, 2015
Director Fei-Peng Chen 9 2 81.8% Re-elected through the
shareholders' meeting
on June 10, 2015
Director Chin-Tsai
Chen
11 0 100% Re-elected through the
shareholders' meeting
on June 10, 2015
Director Kan-Wen Lee,
Representative
of Lucky
Royal Co.,
Ltd.
10 1 90.9% Re-elected through the
shareholders' meeting
on June 10, 2015
Director Ming-Liang
Ho,
Representative
of Hwa Zhin
Co., Ltd.
5 0 45.5% Retained
Director Cheng-Wen
Chen,
Representative
of Hwa Zhin
Co., Ltd.
4 1 36.4% Newly elected through
the shareholders'
meeting on June 10,
2015
Independent
Director
Ding-Guo
Chen
5 0 45.5% Newly elected through
the shareholders'
46
meeting on June 10,
2015
Independent
Director
Jin-Shih Lin 5 1 45.5% Newly elected through
the shareholders'
meeting on June 10,
2015
Supervisor Yi-Wen Chen,
Representative
of Namchow
Chemical
Industrial CO.,
LTD.
Employee
Welfare
Committee
5 0 45.5%
Supervisor Oh-Kuan
Chang
5 0 45.5%
Other details to be documented:
I. The items included in Article 14-3 of the Securities and Exchange Act and other
comments objected or retained by other Independent Directors in record or the
resolutions of the Board of directors in a written statement should indicate the date,
period, content of the motion, opinions of all Independent Directors and how the
company handles the opinion of the Independent Directors:
1. Two independent directors were elected through the shareholders' meeting in 2015
of the Company. A total of six Board of Directors meetings were held following the
election of independent directors. There are no items included in Article 14-3 of the
Securities Exchange Act and comments objected or retained by other Independent
Directors in record or the resolutions of the Board of directors in a written statement.
II. For the enforcement of recusal upon conflicts of interest among directors, the name of
the director, content of the proposal, reason for the recusal, and participation in the
voting process or not shall be described.
1. Article 31 of the Company's Corporate Governance Best-Practice Principles
stipulates that:
Directors of the Company shall be highly self-disciplined. For proposals brought forth
by the Board of Directors that will undermine the interests of directors themselves and
the Company's interests, the directors shall recuse themselves and may not take part in
the discussion and voting process. They may not exercise voting rights on behalf of
other directors in this case, either. Self-discipline shall be expected among directors,
too. No inadequate mutual support is allowed.
For spontaneous recusals of directors, they shall be specified in the meeting agenda of
47
the Board of Directors.
2. Article 15 of the Board of Directors Meeting Rules of the Company stipulates:
For matters to be discussed in the meeting that concern the interests of participating
directors or the institutions they represent, there should be descriptions of important
contents concerning conflicts of interest in the current meeting. In cases of undermine
interests of the Company, the directors may not take part in the discussion and voting
process and shall recuse themselves during discussion and voting and they may not
exercise voting rights on behalf of other directors.
For a resolution, the votes that directors not allowed to exercise voting rights as
indicated in the foregoing paragraph are entitled to will not be counted in the overall
number of voting rights.
3. Proposals relating to the Company's Board of Directors and concerning directors in
the latest year up to the date of printing of Annual Report:
February 12, 2015 The Board of Directors discussed the proposal detailing
individual values of year-end bonus of 2014 for directors and managers of the
Company submitted by the Compensation Committee. The five directors of the
Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and
Directors Chin-Tsai Chen, Kan-Wen Lee, and Ming-Liang Ho were recused in
accordance with the Company Act and Article 15 of the Board of Directors Meeting
Rules of the Company: Directors who are stakeholders of matters being discussed
shall recuse themselves.
Voting outcome of this case: The case was approved unanimously, without taking
into account of the directors who recused themselves.
June 18, 2015 The Board of Directors discussed the value of remunerations to be
issued separately to five directors and two supervisors for 2014 as submitted by the
Compensation Committee. The five directors of the Company, namely Chairman
Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen,
Kan-Wen Lee, and Ming-Liang Ho were recused in accordance with the Company
Act and Article 15 of the Board of Directors Meeting Rules of the Company:
Directors who are stakeholders of matters being discussed shall recuse themselves.
Voting outcome of this case: The case was approved unanimously, without taking
into account of the directors who recused themselves.
June 18, 2015 The Board of Directors discussed and nominated independent
directors Ding-Guo Chen and Jin-Shih Lin and Professor Hai-Ming Chen to be the
members of the 3rd Intake of Compensation Committee, with a tenure that begins on
June 19, 2015 and ends on June 18, 2018. The two independent directors Ding-Guo
Chen and Jin-Shih Lin of the Company recused themselves in accordance with the
Company Act and Article 15 of the Board of Directors Meeting Rules of the
Company: Directors who are stakeholders of matters being discussed shall recuse
themselves.
Voting outcome of this case: The case was approved unanimously among attending
directors, without taking into account of directors who were nominated.
48
August 13, 2015 The Board of Directors discussed the separate remuneration
suggestions for the two independent directors Ding-Guo Chen and Jin-Shih Lin as
submitted by the Compensation Committee. The two independent directors
Ding-Guo Chen and Jin-Shih Lin of the Company recused themselves in accordance
with the Company Act and Article 15 of the Board of Directors Meeting Rules of the
Company: Directors who are stakeholders of matters being discussed shall recuse
themselves.
Voting outcome of this case: The case was approved unanimously among all
attending directors except for the two independent directors who recused
themselves.
January 28, 2016 The Board of Directors discussed the proposal detailing individual
values of year-end bonus of 2015 for 5 directors and 13 managers of the Company
submitted by the Compensation Committee. 。 The five directors of the Company,
namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors
Chin-Tsai Chen, Kan-Wen Lee, and Cheng-Wen Chen were recused in accordance
with the Company Act and Article 15 of the Board of Directors Meeting Rules of the
Company: Directors who are stakeholders of matters being discussed shall recuse
themselves.
Voting outcome of this case: The case was approved unanimously, without taking
into account of the directors who recused themselves.
III. Reinforced assessments of functional objectives of the Board of Directors (e.g. to set
up the Audit Committee and to enhance information transparency, among others) and
implementation status of the objectives of the immediate year and the latest year.
1. It was decided in the general shareholders' meeting of 2014 that independent
directors will be added according to law under Article 18 of the Company's
Articles of Incorporation.
2. In response to the addition of independent directors, the Guidelines for Electing
Board Directors and Supervisors and the Procedures for the Acquisition or
Disposal of Assets of the Company were amended through the general
shareholders' meeting in 2014.
3. December 11, 2014 The Board of Directors decided to revise the Company's
Corporate Governance Best-Practice Principles and Ethical Corporate
Management Rules.
4. June 10, 2015 Ding-Guo Chen and Jin-Shih Lin were elected independent directors
through the general shareholders' meeting.
5. December 29, 2015 The Board of Directors decided to establish the Company's
Corporate Social Responsibility Best Practice Principles.
Note 1: If directors and supervisors are institutions, names of shareholders and the representative
of the institutions shall be disclosed.
Note 2: (1) In the event that directors or supervisors leave before a year is completed, the date
49
when they leave should be indicated in the memo column. The actual attendance
(seated) rate (%), on the other hand, shall be calculated by the number of Board of
Directors meetings held during service and the frequency number of attendance
(being seated) in the meetings.
(2) Before a year is completed, upon any re-election of directors or supervisors, names
of the said directors/supervisors, new and old, shall be listed and it shall be specified
in the remark column that a specific director or supervisor is old, new, or re-elected,
and the date of re-election. The actual attendance (seated) rate (%), on the other hand,
is to be calculated by the number of Board of Directors meetings held during service
and the frequency number of attendance (being seated) in the meetings.
50
2. State of operations of the Audit Committee:
There is no Audit Committee available at the Company yet so no related information can be
disclosed.
Participation of supervisors in the operations of the Board of Directors:
The Board of Directors met 11 times (A) in the latest year, where supervisors are seated as follows:
Title Name The actual frequency
of being seated in the
meetings
(B)
Actual seated rate
(%)
(B/A) (Note)
Supervisor Yi-Wen Chen, Representative of Namchow Chemical Industrial CO., LTD. Employee Welfare Committee
5 45.5%
Supervisor Oh-Kuan Chang 5 45.5%
Other details to be documented:
(I) Composition and Responsibilities of Supervisors:
I. Communication between Supervisors and Company employees and shareholders (e.g.
communication channel and method, among others)
1. Article 45 of the Company's Corporate Governance Best-Practice Principles stipulates
that:
To facilitate discovery of possible loopholes of the Company in a timely manner,
communication channels should be available at the Company among its employees,
shareholders, stakeholders, and supervisors.
Once found, loopholes shall be prevented from spreading by supervisors taking
appropriate measures in a timely manner. When it is required, reporting to related
competent authorities or units shall also be done.
In the event that independent directors, general managers, and heads of the finance,
accounting, R&D, and internal audit departments or the CPA of the Company resigns
or is replaced, supervisors shall get into the bottom to find out the underlying causes.
Supervisors shall be responsible for compensating the Company for its losses that
result from their negligence at work.
2. Communication: Supervisors can communicate with employees and shareholders by
means of various reporting forms or channels, such as by phone, fax, or through email.
II. Communication between supervisors and the internal audit head and the CPA (e.g. on the
financial and business status of the Company, the means, and the results, among others)
1. Article 44 of the Company's Corporate Governance Best-Practice Principles stipulates
51
that:
Supervisors may investigate the business and financial status of the Company at any
time and related departments in the Company shall cooperate by providing the required
books and documents.
When inspecting the Company's finance and business operations, supervisors may
authorize an attorney or the CPA with the review on behalf of the Company. The
Company, however, shall inform related people of their confidentiality obligation.
The Board of Directors or managers shall submit reports as requested by supervisors
and may not obstruct, circumvent, or refuse inspection behavior of supervisors for any
reason.
While supervisors fulfill their duties, the Company shall provide with necessary
assistance as required, with the necessary and reasonable expenses incurred to be borne
by the Company.
2. Communication: Supervisors understand the operational status and audit status of the
Company by means of the audit reports periodically provided by the audit unit and
communicate with audit supervisors during Board of Directors meetings. Supervisors
may also communicate with the CPA by phone, through email, by fax, and through
meetings in order to understand the financial and operational status of the Company.
(II) If supervisors seated in Board of Directors meetings state opinions, the date of the Board of
Directors meeting, session number, contents of the proposal, and decision made by the Board
of Directors, and how stated opinions of the supervisors are handled by the Company shall be
described.
Supervisors did not state opinions while being seated in Board of Directors meetings
throughout 2015.
Note:
* In case of resignation of supervisors before the year is completed, the date of resignation shall be
stated in the remark column. The actual seated rate (%), on the other hand, shall be calculated by
the number of actual frequency of the supervisors being seated in the meetings during their tenure.
* Before a year is completed, upon any re-election of supervisors, names of the said supervisors,
new and old, shall be listed and it shall be specified in the remark column that a specific
supervisor is old, new, or re-elected, and the date of re-election. The actual seated rate (%), on the
other hand, is calculated by the frequency of the supervisor being seated in the meetings during
his/her tenure.
52
3. Corporate governance implementation status and deviations from Corporate Governance
Best-Practice Principles for TWSE/TPEx Listed Companies and reasons
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
(I) Does the company establish and disclose its corporate governance principles in accordance with the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies?
Yes
The Board of Directors decided on December 11, 2014 to establish the Company's Corporate Governance Best-Practice Principles and upload it to the MOPS on December 12, 2014 while at the same time disclosing it in the "Investors" section of the Company's website.
Compliant
(II) Shareholding structure & shareholders' rights
1. Does the company establish internal operating procedures for handling shareholder suggestions, questions, disputes or litigation and handle related matters accordingly?
2. Does the company have a list of major shareholders that have actual control over the Company and a list of ultimate owners of those major shareholders?
Yes
Yes
1. Article 13 of the Company's Corporate
Governance Best-Practice Principles stipulates that: To ensure protection over shareholders' rights, the Company shall have specialists to handle properly shareholder suggestions, questions, and disputes. In the event that decisions made in shareholders' meetings or Board of Directors meetings violate laws and regulations or the Company's Articles of Incorporation or that directors, supervisors, or managers violate laws and regulations or the Company's Articles of Incorporation while performing their duties to accordingly undermine shareholders' rights, the Company shall handle properly lawsuits filed by shareholders by laws. Information of the contact window for shareholders is available in the "Stakeholders" section of the Company's website to handle issues concerning shareholders.
2. Article 19 of the Company's Corporate Governance Best-Practice Principles stipulates that: The Company shall keep track of the list of major shareholders that hold a relatively larger ratio of shares at any time and are actually in control of the Company and their ultimate
Compliant
Compliant
53
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
3. Has the company established and implemented risk management and firewall systems within its affiliated enterprises?
Yes
owners at any time. The Company shall periodically disclose information such as pledge, increase or decrease in shares held of the Company, or other important matters that might result in changes to shareholding composition of shareholders holding more than 10% of the Company's shares to facilitate supervision by other shareholders. The said major shareholders under Paragraph 1 refer to those with a shareholding ratio of 5% or higher or on the Top 10 shareholding list; the Company, however, may set a lower shareholding ratio reflective of the actual control they have over the Company's shareholding status. The Department of Finance of the Company is in charge of this.
3. (1) Article 14 of the Company's Corporate Governance Best-Practice Principles stipulates that: The responsibilities of management over the personnel, assets, and finance of the Company and its associated enterprises shall be specific and risk assessment shall be precisely done and an adequate firewall shall be established.
(2) Article 17 of the Company's Corporate Governance Best-Practice Principles stipulates that: Business correspondence between the Company and its associated enterprises shall be based on the principle of fairness and legitimacy. Written regulations shall be established to govern mutual financial operations. For contracts to be signed, pricing requirements and payment method shall be specified to eradicate abnormal transactions. Transactions or contract-signing matters between the Company and related parties and their shareholders shall also be handled
Compliant
54
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
4. Has the company established internal rules against insiders trading with undisclosed information?
Yes
in accordance with the principle stated in the preceding paragraph and transfer of interest is strictly prohibited.
4. Article 10 of the Company's Management and Control Operating Guidelines for the Prevention against Insider Trading stipulates the prohibition of insider trading: Upon actually knowing of any information that will have a material impact on the price of the Company's stock price, buy or sale of the any shares or equity-type securities of the company that are listed on an exchanges or traded in securities firms is disallowed prior to the public disclosure of such information or within 12 hours after its public disclosure.
Compliant
(III) Composition and Responsibilities of the Board of Directors 1. Has the Board of
Directors developed and implemented a diversified policy for the composition of its members?
No
1. (1) The Company has not established a diversification policy on the membership of the Board of Directors yet.
(2) The Company does not set restrictions with regard to the gender, age, nationality, and culture of directors to be elected. The professional knowledge and skills of the Company's directors shall meet the following requirements indicated in Article 20 of the Company's Corporate Governance Best-Practice Principles: Members of the Board of Directors shall generally be equipped with the knowledge, skills, and quality required for performing their duties. In order to accomplish the ideal goals of corporate governance, the Board of Directors shall generally be equipped with the following capabilities: (1) operational judgement, (2) accounting and financial analysis, (3) administration, (4) risk management, (5) industrial knowledge, (6) perspectives of the international market, (7) leadership, and (8) decision-making.
(3) The Company has actually consolidated
Compli
ant
55
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
2. Does the Company voluntarily establish other functional committees in addition to Compensation Committee and Audit Committee that are established as required by laws?
3. Has the Company established standards and method for evaluating the performance of the Board of Directors, and implemented the performance evaluation
No
No
diversification with regard to the membership of the Board of Directors. Independent directors Mr. Ding-Guo Chen and Mr. Jin-Shih Lin nominated by the Board of Directors were approved on March 20, 2015. Mr. Ding-Guo Chen is a chair professor on business administration at the College of Management of Tamkang University and the general counsel of the Ruentex Group while Mr. Jin-Shih Lin is a CPA at the Lin Jin-Shih Accounting Firm. Both of them were elected through the general shareholders meeting of 2015. Nomination at the Company has been diversified.
2. (1) Article 25 of the Company's Corporate Governance Best-Practice Principles stipulates that: In order to normalize the supervisory function and strengthen the management mechanism, the Company's Board of Directors may set up various functional committees to take charge of auditing, nomination, risk management, or others taking into consideration the scale of the Board of Directors and the number of independent directors available and may set up the Environmental Protection Committee or other committees and include the ideas of corporate social responisibilities and sustainable management in the Articles of Incorporation.
(2) No other functional committees are available at present.
3. (1) The Company has not established its own guidelines for evaluating the performance of the Board of Directors yet.
(2) The Company's Board of Directors abide by government laws and regulations, the Company's Articles of Incorporation, decisions reached in shareholders' meetings, the Company's Board of Directors Meeting
Non-complian
t To be set up
according to
priorities in the future
Non-complian
t
56
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
annually?
4. Does the Company regularly evaluate the independence of CPAs?
Yes
Rules, and the Company's Corporate Governance Best-Practice Principles. Members of the Company's Board of Directors must precisely and truthfully carry out tasks, honor the due diligence duty as good-will administrator and exercise functions in a highly self-disciplined and cautious way. While performing tasks relating to the Company, decisions shall be made through shareholders' meetings as is indicated in regulatory requirements and the Company's Articles of Incorporation, the decisions of the Board of Directors shall be precisely followed.
4. Article 28 of the Company's Corporate Governance Best-Practice Principles stipulates that: The Company shall choose professional, responsible, and independent CPAs to periodically inspect the financial status and internal control of the Company. The Company shall precisely discuss and seek improvements with regard to abnormalities or deficiencies that are found or disclosed during audits by the CPA and the introduced substantial improvement or loophole prevention opinions. The Company shall periodically (at least once a year) evaluate the independence of CPAs hired. In the event that the CPA has not been replaced for five consecutive years or has been punished or has his/her independence undermined, the Company shall consider the necessity to replace the CPA and submit the conclusion to the Board of Directors.
Compliant
57
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
(IV) Does the company establish a communication channel and build a designated section on its website for stakeholders, and properly respond to corporate social responsibility issues that stakeholders are concerned about?
Yes (1) Article 49 of the Company's Corporate Governance Best-Practice Principles stipulates that: The Company shall keep communication channels open with its corresponding bank and other creditors, employees, consumers, suppliers, communities, or stakeholders of the Company and respect and maintain legal rights that it is entitled to.
(2) There is the Stakeholders section available on the website of the Company.
(3) The Company has also set up the section for Investors.
Compliant
(V) Does the company designate a professional shareholder service agency to deal with affairs relating to shareholders meetings?
Yes The Company authorizes China Trust with the professional shareholder service, which, internally, is the responsibility of the Company's Department of Finance.
Compliant
(VI) Disclosure of Information
1. Has the company established a corporate website to disclose information regarding the company's financial, business and corporate governance status?
2. Does the company have other information disclosure channels (e.g., maintaining an
Yes
Yes
1. Article 55 of the Company's Corporate
Governance Best-Practice Principles stipulates that the Company shall set up a website taking advantage of the convenience of the Internet where related financial and operational information and corporate governance information is disclosed for the reference of shareholders and stakeholders. (http://www.namchow.com.tw/IR/05.html) There should be exclusive people to be responsible for maintaining the website in the preceding paragraph. All the data disclosed should be true and accurate and updated in real time to avoid the concern of misleading people. Related information is disclosed on the Company's website.
2. Other ways of information disclosure: (1) No English website is set up yet. (2) Staff at the Accounting Office have been
designated to take charge of collecting
Compli
ant
Compliant
58
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
English website, appointing responsible people to handle information collection and disclosure, creating a spokesperson system, webcasting investor conference on company website)?
information on the Company and disclosure major information on the Company; information will be entered and announced through the MOPS periodically.
(3) Spokesperson, acting spokesperson, shareholder service and investment correspondence groups are available to consolidate the spokesperson system.
(4) Investors conference website: http://www.namchow.com.tw/IR/11.html
(VII) Is there any other important information available to facilitate a better understanding of the company’s corporate governance practices (including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, continuing education of directors and supervisors, the implementation of risk management policies and risk evaluation standards, the implementation of customer relations policies, and purchasing insurance for directors and supervisors)?
Yes 1. Employee rights: The Employee Welfare Committee is already set up for the Company, with group insurance of employees, manager liability insurance, and integrity insurance of related employees purchased.
2. Employee wellness: Employee Welfare Committee has been set up . Emphasis is placed on gender equity and
adequate day-care measures are provided for the employees' reference. Meanwhile, the adequacy of day-care measures is discussed on a yearly basis.
Public folders are available in the Outlook feature to be accessed by respective business units and functional or administrative units of the Company. The folders provide staff with information on business operation, health insurance, labor insurance, and welfare.
3. Investor relations: There is a section for Investors on the website of the Company to disclose company information and provide it to investors.
4. Supplier relations: Desirable supplier relationship is maintained. By comparing prices, it ensures the legitimacy of raw material pricing and compliance with health laws and regulations
Compliant
Compliant
Compliant
Compliant
59
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
such as FGMP, HACCP, ISO-9001, ISO-22000, ISO-14064-1, CNS mark, certification criteria for health foods and recommendation requirements for disease preventive products to help control quality of raw materials and equipment and to ask suppliers to provide with corresponding product laboratory test certificates. Protection of the quality, health, and safety of products
5. Rights of stakeholders: Article 49 of the Company's Corporate Governance Best-Practice Principles stipulates that the Company shall keep communication channels open with its corresponding bank and other creditors, employees, consumers, suppliers, communities, or stakeholders of the Company and respect and maintain legal rights they deserve. In case of management acquisitions, the Company shall pay attention to the soundness of the Company's financial structure in the future. When the legal rights of stakeholders are infringed upon, the Company shall handle them adequately by the principle of sincerity. There is the Stakeholders section available on the website of the Company.
Compliant
60
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
6. Implementation of risk management policy and risk measuring criteria: Article 16 of the Company's Corporate Governance Best-Practice Principles stipulates that the Company shall establish a sound financial, operational, and accounting management system in compliance with applicable laws and regulations and shall adequately and comprehensively assess risks associated with the corresponding bank, customers, and suppliers with its affiliated enterprises in order to implement a necessary control mechanism that helps minimize credit risk. There are related departments responsible at
the Company to evaluate and analyze matters such as major operational policies, investment plans, acquisition and disposal of assets, endorsement and guarantee, fund lending, and banking/financing before they are submitted to the Board of Directors for a decision.
The Audit Office has stipulated the Annual Audit Plan and precisely implemented it according to risk assessment outcome in order to consolidate the supervisory mechanism and to control and manage various risks.
For the compensation liability inflicted upon directors and supervisors during their tenure within the scope of tasks they carry out, the liability insurance has been purchased; the latter will help minimize and dilute the risk of major damage to the Company or borne by shareholders as a result of mistakes or negligent behavior of directors and supervisors.
7. Implementation of customer policies: Protection of consumer rights of end
customers: It is the Company's policy to provide consumers with healthy, safe, and desirable quality products so that they can
Compli
ant
Compliant
61
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
eat healthily and safely. Related certifications on the manufacture and the sanitary, safe, and healthy benefits of products have been obtained; products of optimal quality are provided to consumers. The liability insurance has been purchased for products. In addition, there is the 0800 hotline for customer service.
Competitive advantages of clients: It is the Company's policy to create a Win-Win situation that contributes to co-prosperity and co-sharing of maximum benefits among downstream customers. Downstream clients are provided with the Company's information through the Company's website, the Outlook feature, and the ERP system. In addition, quality, health, and safety of products are maintained to seek various certifications, to promote brand publicity, and to provide clients and employees with information on how to enhance their technical and marketing/management capabilities by means of the bi-monthly professional journal entitled "Namchow Frozen Dough and Baking Oils and Fats" that is issued by an associated enterprise.
8. Purchase of liability insurance by the Company for its directors and supervisors: Article 38 of the Company's Corporate Governance Best-Practice Principles stipulates that the Company may purchase liability insurance for the tasks performed by directors during their tenure as required by laws in accordance with the Articles of Incorporation or decisions reached through shareholders' meetings in order to minimize and dilute the risk of major damage to the Company or borne by shareholders as a result of wrong or negligent behavior of directors. The decision that the Articles of Incorporation were to be revised and the Board of Directors
Compliant
62
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
would be authorized to purchase the said insurance was reached in the 2010 general shareholders' meeting and liability insurance has been purchased for directors and supervisors since January 1, 2011.
9. Continuing education sought by directors and supervisors: Continuing education sought by directors and supervisors in 2015:
Fei-Lung Chen 12.15 3 hours Something about integrity-based
management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance
Association) 12.17 3 hours Mainstream - CSR and sustainable
governance (Taiwan Corporate Governance
Association)
Fei-Peng Chen
12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)
12.17 3 hours Mainstream - CSR and sustainable governance Taiwan Corporate Governance Association
Chin-Tsai Chen
08.12 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)
10.22 3 hours Corporate social responsibilities and sustainable competitive
Compliant
63
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
advantages (Taiwan Corporate Governance Association)
Kan-Wen Lee
01.22 3 hours Corporate Social Responsibility Report - Seminar on the Value of Sustainable Management (Securities and Futures Institute )
06.26 6 hours International Seminar on "Corporate Governance, Financial Supervision, and Law" (Taiwan Stock Exchange)
Cheng-Wen Chen
12.2-4 6 hours EXCEL in Risk Management Data Analysis and Application Workshop (Taiwan Academy of Banking and Finance)
12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)
12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)
Ding-Guo Chen
03.19 3 hours Corporate Mergers & Acquisitions and Legal Liabilities of Directors and Supervisors (Taiwan Corporate Governance Association)
11.10 3 hours Risk Management and Internal Control (Taiwan Corporate Governance
64
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
Association)
12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)
12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)
Jin-Shih Lin
02.13 3 hours Update on the Profit-seeking Enterprise Income Tax Act and Precautions on Declaration and Inspections (National Federation of Certified Public Accountant Associations of the Republic of China)
07.28 3 hours Practical application of cases confirmed through inspections or authentication of non-historical financial information (National Federation of Certified Public Accountant Associations of the Republic of China)
07.29 3 hours New Company-related Laws and Regulations and Practical Analysis of the Future (National Federation of Certified Public Accountant Associations of the Republic of China)
08.17 6 hours Analysis of Latest Information Included in Newly Promulgated Taxation Affairs of 2015 (National Federation of Certified Public Accountant Associations of the Republic of China)
65
Assessed areas
Operational status (Note 1) Deviatio
ns from
Corporat
e
Governa
nce
Best-Pra
ctice
Principl
es for
TWSE/
TPEx
Listed
Compan
ies and
reasons
Yes No Summary
Oh-Kuan Chang
12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)
12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)
Yi-Wen Chen
12.15 3 hours Something about integrity-based management, corporate governance, and corporate social responsibilities and real cases (Taiwan Corporate Governance Association)
12.17 3 hours Mainstream - CSR and sustainable governance (Taiwan Corporate Governance Association)
(VIII) Does the company have corporate governance self-assessment report or have engaged any other professional organization to conduct such assessment? (If so, please describe the opinion of the board, the results of self or outside evaluation, major deficiencies found, suggestions, or improvement actions taken) (Note 2)
No The Company started to evaluate its own corporate governance in 2015; the operation, however, has not been completed and no written records have been kept on related operations.
Non-compliant
66
Note 1: Regardless of the answer, "Yes" or "No", descriptions need to be provided in the
summary column.
Note 2: The so-called corporate governance self-assessment report refers to the fact that the
Company performs assessments on its own according to the corporate governance
self-assessment items and provides descriptions and produces a report on the current
corporate operation and implementation status of each item included in the
self-assessment.
67
4. If the Company has a Compensation Committee, the composition, responsibilities, and
operations of the Committee shall be disclosed.
(1) Membership of Compensation Committee
Status
(Note
1)
Require
ment
Name
More than five years of work
experience
and the following professional
eligibility
Compliance with the independence
requirement (Note 2)
Numb
er of
other
public
offerin
g
compa
nies
with
part-ti
me
memb
ership
of
their
Comp
ensati
on
Comm
ittee
Rema
rk
(Note
3)
Lecturer
or higher
ranking
at the
business,
legal
affairs,
financial
affairs,
or
accounti
ng
departme
nt, or
other
departme
nts
relating
to
corporat
e
operatio
n of
public
and
private
colleges
and
universit
ies
Judge,
prosecutor
, lawyer,
CPA, or
other
profession
als and
technician
s that
have
taken and
been
approved
in national
exams
required
for
corporate
operation
Work
experienc
e required
for
business,
legal
affairs,
financial
affairs,
accountin
g, or
corporate
operation
1 2 3 4 5 6 7 8
Indep
endent
Direct
or
Ding-G
uo
Chen
1
Indep
endent
Direct
or
Jin-Shi
h Lin
0
Other Hai-Mi
ng
Chen
2
Note 1: Provide "director, independent director, or other" for the "status."
68
Note 2: Note: When any of the following conditions is met for each member during the two years
prior to and during their tenure, please check "" in the box underneath each conditional
code.
(1) Not an employee of the company or its associated enterprise.
(2) Not a director or supervisor of the Company or its associated enterprise. This, however, does not include independent directors of the
Company or its parent company, or subsidiary where the Company holds directly or indirectly more than 50% of the voting shares.
(3) Not a natural person shareholder that holds by himself/herself or by his/her spouse or minor child in someone else's name more than
1% of all circulating shares of the Company or is on the Top 10 shareholding list.
(4) Not the spouse, a relative within the second degree of kinship, or a direct blood relative within the third degree of kinship of the said
people indicated in the foregoing three subparagraphs
(5) Not a director, supervisor, or employee of an institutional shareholder directly holding more than 5% of all circulating shares of the
Company or a director, supervisor, or employee of an institutional shareholder on the Top 5 shareholding list.
(6) Not a director, supervisor, manager, or a shareholder holding more than 5% of shares of a specific company or institution with
financial or business activities with the Company
(7) Not a professional providing services or consultations on business, legal affairs, financial affairs, and accounting at the Company or its
associated enterprise or the owner, partner, director, supervisor, manager, and his/her spouse of a sole proprietorship or collaborative
company or institution.
(8) None of the conditions indicated under Article 30 of the Company Act
Note 3: If the status of a member is director, please explain if he/she meets the requirements
under Article 6 Paragraph 5 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) State of operations of the compensation committee
1. The Company's Compensation Committee has 3 members in total.
2. Current members will serve from June 19, 2012 to June 18, 2015 for the second intake and
from June 19, 2015 to June 18, 2018 for the third intake. The Compensation Committee met
six times (A) in the latest year. Qualification and attendance of members are as follows:
Title Name
The actual frequency
of attendance
in the meetings
(B)
Frequency of
attendance through proxy
Actual attendance
rate (%) (B/A) (Note)
Remark
Convener Ding-Guo
Chen 6 0 100%
Re-elected (Date of
re-election: June 18, 2015)
Member Hai-Ming
Chen 5 1 83%
Re-elected (Date of
re-election: June 18, 2015)
Member Dai-Zhou
Li 1 0 100%
Resigned as member of
Namchow Compensation
Committee on February 1,
2015.
69
Member Jin-Shih
Lin 4 1 80%
New member, with a tenure
that begins on February 12,
2015 (Date of re-election:
February 12, 2015)
Re-elected (Date of
re-election: June 18, 2015)
Other details to be documented:
1. If the Board of Directors does not accept or modifies suggestions provided by the
Compensation Committee, the date of the Board of Directors meeting, the session number,
contents of the proposal, decisions made by the Board of Directors, and management of
opinions from the Compensation Committee by the Company should be stated (If the
compensation and rewards approved by the Board of Directors are superior to those
advised by the Compensation Committee, there should be descriptions of the differences
and reasons considered).
2. For decisions made by the Compensation Committee, as long as there are members
objecting or having their reservations that are recorded or stated in writing, the date of the
Compensation Committee meeting, the session number, contents of the proposal, and how
opinions from all members and from opposing members are handled should be described.
Note:
(1) In the event that members of the Compensation Committee resign before a year is completed,
the date of resignation should be indicated in the remark column. The actual attendance rate
(%), on the other hand, shall be calculated by the number of Compensation Committee
meetings held during service and the frequency number of attendance in the meetings.
(2) Before a year is completed, upon any re-election of Compensation Committee members,
new and old, shall be listed and it shall be specified in the remark column that a specific
member is old, new, or re-elected, and the date of re-election. The actual attendance rate (%),
on the other hand, is to be calculated by the number of Compensation Committee meetings
held during service and the frequency number of attendance in the meetings.
70
5. Fulfillment of social responsibilities
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
(I) Consolidation of corporate governance
1. Does the company establish corporate social responsibility policy or system and examine its implementation results?
2. Does the company
provide educational training on corporate social responsibility on a regular basis?
3. Does the company have a
Yes
Yes
Yes
I. 1. 52 of the Company's Corporate
Governance Best-Practice Principles stipulates that while maintaining normal operations and developments and realizing maximum interests for its shareholders, the Company shall pay attention to consumer rights, environmental protection in communities, and public interest, among others, as well as its social responsibilities.
2. The CSR (corporate social responsibility) system has been jointly promoted by respective functional units under the leadership of Vice Executive President and the CSR Report has been compiled accordingly.
3. The 2014 CSR Report has been completed for the Company and been released in the CSR section on the website of the Company.
4. December 29, 2015 The Board of Directors decided to establish the Company's Corporate Social Responsibility Best Practice Principles.
5. KPMG Sustainability Consulting is authorized by the Company to assist in the compilation of the CSR Report and provides management suggestions after it is completed.
II. The Company has been preparing the CSR Report on a yearly basis since 2015. KPMG Sustainability Consulting is authorized to provide assistance and educational training. In addition, related supervisors are assigned to receive educational training organized by external institutions.
III. The Company's CSR promoting policy is
Compliant
Compliant
Compliant
71
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
unit that specializes (or is involved) in CSR practices? Is the CSR unit run by senior management and reports its progress to the Board of Directors?
4. Has the company established a reasonable salary remuneration policy, and integrated the employee performance evaluation system with its CSR policy, and established an effective reward and disciplinary system?
Yes
made by the Board of Directors and jointly implemented by respective functional units under the General Manager's Office while its implementation status is reported by the Executive Vice President to the Board of Directors.
IV. (1) Article 7 of the Company's Organic Rules for Compensation Committee stipulates the scope of responsibility: The Committee shall pay attention as good-will administrator and truthfully exercise the following functions while at the same time submitting suggestions to the Board of Directors for discussion. Suggestions regarding the compensation and rewards for supervisors, however, are to be submitted to the Board of Directors for discussion and shall be limited to those authorized to be handled by the Board of Directors under the Articles of Incorporation or decisions made through shareholders' meetings. (I) Stipulate and periodically discuss
the annual and long-term performance goals and compensation and reward policies, systems, standards, and structures for directors, supervisors, and managers of the Company.
(II) Periodically evaluate the accomplishment of performance goals by directors, supervisors, and managers of the Company and stipulate the contents and values of their individual compensation and rewards.
(2) Article 8 of the Company's Organic Rules for Compensation Committee (function exercising principle) stipulates that:
Compliant
72
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
The Committee shall abide by the following principles when exercising functions in the preceding article: (I) Ensure that the Company's
compensation and rewards arrangement mets applicable regulatory requirements and is sufficient to attract oustanding talent.
(II) For the performance assessment and compensation and rewards of directors, supervisors, and managers, payments shall be made with reference to counterparts' levels and taking into account of personal performance, corporate management performance, and reasonable association with risks in the future.
(III) Directors and managers shall not be misled to engage themselves in behavior exceeding the risk appetite of the Company for the pursuit of their own compensation and rewards.
(IV) Industrial characteristics and corporate operational essence shall be taken into consideration while the ratio of bonus distributed based on the short-term performance of directors and high-ranking managers and the payment period of partially changed compensation and rewards is being decided.
(V) Rewards for members of the Committee are to be decided by the Board of Directors. If a member is also the director of the Company or its reinvested business, however, no rewards
73
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
will be paid. (II) Development of a Sustainable Environment
1. Has the Company endeavored to improve the efficiency of resource utilization and used recycled materials which have a low impact on the environment?
2. Has the Company
developed an appropriate environmental management system, given its distinctive characteristics?
3. Has the Company
monitored the impact of climate change on business operations, conducted greenhouse gas inventory and formulated strategies for energy conservation and carbon and greenhouse gas reduction?
Yes
Yes
Yes
I. (1) The Company authorizes a registered
service provider to take charge of the recycling of waste.
(2) The Company mainly produces foods and the use of materials needs to comply with food-grade requirements. Packaging cartons are produced with renewable paper.
II. The Company maintains a workplace and
natural environment that is compliant with public safety and construction laws and regulations, fire-fighting laws and regulations, labor safety and health laws and regulations, the Waste Disposal Act, and energy-saving and carbon reduction requirements and prepares reports accordingly.
III. (1) The Company has not established corporate strategies to save energy and reduce carbon emissions as well as greenhouse gases.
(2) The general affairs staff in respective offices of the Company and specialists at respective facilities are responsible for managing the workplace of employees and protecting the natural environment. Office: Inspections by the Public Utilities Division of the Department of Economic Development under the Taipei City Government confirmed compliance of room temperature and lighting with the requirements and criteria indicated in the Taipei City Industrial and Commercial Energy-saving and Carbon Reduction Assistance and Management
Compliant
Compliant
Compliant
74
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
Self-government Act. Facilities are ISO-9001, ISO-22000, and ISO-14064-1 certified and various environmental, occupational safety and health, food safety, and information safety management systems are confirmed to be compliant with requirements.
(III) Protection of public interest in society
1. Has the Company developed its policies and procedures in accordance with applicable laws and regulations and the International Bill of Human Rights?
2. Does the Company have
means through which employees may raise complaints? Are employee complaints being handled properly?
Yes
Yes
I. (1) Employee rights: Labor Insurance,
National Health Insurance, and appropriations for the pension fund have been precisely taken care of according to laws.
(2) Insurance. Public accidents liability insurance and group insurance have also been purchased for employees.
(3) The guidelines for preventing against sexual harassments and filing complaints accordingly have been established and implemented in compliance with laws and regulations such as the Act of Gender Equality in Employment, the Occupational Safety and Health Act, and the People with Disabilities Rights Protection Act promulgated by the government.
(4) Other management methods and procedures: The Code of Conduct has been established and released in Outlook to be followed by employees.
II. (1) The human resources unit and legal affairs unit accept complaints filed by respective employees and review them case by case.
(2) The Company has also established the "Sexual Harassment Prevention and Control and Complaint Filing Guidelines for Namchow and Its
Compliant
Compliant
75
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
3. Does the Company
provide employees with a safe and healthy work environment as well as periodic safety and health education?
4. Does the Company have channels to communicate with employees on a regular basis, and inform them in a reasonable way of operational changes that may be of a significant impact?
Yes
Yes
Associated Enterprises" in compliance with the Act of Gender Equality in Employment. The goal of equal rights to work and abolition of sexual discrimination is fulfilled through open and just communication mechanisms and channels.
(3) Upon infringement such as sexual harassment, one can file a complaint through the sexual harassment mailbox: [email protected] and report it or request a written complaint form from the Human Resources Unit and complete it to unveil the incident. The complaint hotline is 02-25352958. For a sustained complaint, the subsequent management shall be based on the requirements indicated in the guidelines.
III. Employee health examination: Employees are entitled to periodical health examinations (once a year or every two years) done by healthcare professionals at contract medical institutions. The workplace is configured in compliance with applicable requirements of the Occupational Safety and Health Act and is the responsibility of specialized safety staff.
IV. (1) The Company holds employer-employee meetings from time to time.
(2) Article 51 of the Company's Corporate Governance Best-Practice Principles stipulates that:
The Company shall establish communication channels and encourage its employees to communicate directly with the management, directors, or supervisors and to adequately reflect the feedback that employees have on the management and financial standing of
Compliant
Compliant
76
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
5. Has the Company
implemented an effective training program that helps employees develop skills over the course of their career?
6. Has the Company established any consumer protection policies and complaint procedures regarding R&D, purchase, production, operation and service?
7. Has the Company
complied with laws and
Yes
Yes
Yes
the Company and major decisions concerning employee benefits.
(3) There are the Employee Welfare Committee and Union available to meet periodically or on an ad hoc basis for smooth communications.
(4) Operational plans of the Company have been announced and published internally and externally through Outlook, Bridge Magazine, and the website of the Namchow Group.
(5) There is the section for Stakeholders on the Company's website where employees can communicate their opinions.
V. Staff training, career development, and performance assessment guidelines are available under (III) of the Human Resources Policy in II of the Employee Handbook of the Company.
VI. (1) Article 52 of the Company's
Corporate Governance Best-Practice Principles stipulates that while maintaining normal operations and developments and realizing maximum interests for its shareholders, the Company shall pay attention to consumer rights, environmental protection in communities, and public interest, among others, as well as its social responsibilities. The Company manages raw materials from suppliers from the source and has a Food Safety Office in place to ensure the healthy status and safety of products developed and produced.
(2) Consumer complaints: There is the 0800 hotline for consumers to provide feedback.
VII. Products of the Company are GMP, ISO-22000, CNS Mark, ISO-9001,
Compliant
Compliant
Compliant
77
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
international standards concerning the marketing and labeling of products and services?
8. Has the company
evaluated the records of suppliers’ impact on the environment and society before doing business with the supplier?
9. Do contracts between the Company and its major suppliers include termination clauses which come into force once the suppliers breach the corporate social responsibility policy and cause significant impact on the environment and society?
Yes
Yes
ISO-14064-1, HACCP, and Health Food certified; the marketing and labeling of products meet applicable regulatory requirements.
VIII. The company always evaluates the
records of suppliers’ impact on the environment and society before doing business with the supplier.
IX. (1) Contracts between the Company and
its major suppliers include termination or dismissal clauses which come into force once the suppliers breach the corporate social responsibility policy and cause significant impact on the environment and society.
(2) Requirements in the Purchase Contract of the Company: The Company may change the content of purchase whenever it is considered necessary, to which the supplier may not object. If a supplier violates the CSR policy and results in significant impacts on the environment and society, the Company will discontinue transactions immediately.
Compliant
Compliant
(IV) Reinforced Information Disclosure
1. Has the Company disclosed relevant and reliable information regarding its corporate social responsibility on its website and the MOPS?
Yes
1. The Company already completed the 2014
CSR Report in 2015 and disclosed relevant and reliable CSR information on the Company's website and the MOPS.
Compliant
(V) If the Company has its own CSR principles established according to the Corporate Social Responsibility Best Practice Principles for TWSE/GTSM Listed Companies, please describe the differences between its implementation and the principles: 1. The Board of Directors decided to establish the Company's CSR Practical Principles on
December 29, 2015.
78
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
2. The CSR Report is to be compiled jointly by respective relevant functional units under the leadership of the Executive Vice President of the Company and under the guidance of KPMG Sustainability Consulting. The 2014 CSR Report was completed in the fourth quarter of 2015.
3. The Company does not have differences in the implementation of its CSRs and the established principles.
(VI) Other Important Information to Help Understand Utilization of Corporate Social Responsibilities:
1. Environmental Protection: Related costs of environmental protection totaled NTD 30,637
thousand in 2015.
2. Community involvement and social service:
Free access to the Taoyuan Tourism Factory of Namchow is available. There are around
17,335 people on average visiting the factory each month and services available include crystal
soap marking DIY, Dian Shui Lou steamed dumplings DIY, Dian Shui Lou egg tart DIY,
Kabisuo honey toast DIY, Paulaner pizza DIY, and Kabisuo ice cream DIY. The factory
facilitates people-to-people diplomacy, industrial exchange and welcomes visits by government
agencies and schools of all levels. Returning to the neighborhood is done from time to time; the
carnival fair was held in the spring of 2014 from April 6 to April 7.
3. Contributions to society:
Namchow has been adhering to its corporate management and product development
principle of "safeguarding the Earth and protecting future generations." It provides safety,
healthy, and quality products and dining services.
Its crystal soap is the mother of corporate developments. The product is 100% natural. The
second generation featuring laundry crystal soap detergents and food container cleansing
solution introduced in the past few years was honored with the Jade Mount Award of
National Brands in 2012 and three of the products were certified with the benefit to
prevent against diseases in 2014. The "Antrodia cinnamomea" series of products was
developed with the state-grade Alishan Antrodia cinnamomea extract solution to hopefully
further diversify choices of natural and healthy cleansing products.
Namchow created a transparent cloud system for food traceability. In the World Market
Namchow exhibition between October 13 to 17 of 2014, the 8 stands in total
accommodated around 300 seats to activate the 20-year development plan of the Namchow
Group of developing a global niche market while based in Taiwan. The food value chain
traceability cloud application program of the Namchow Group was introduced and
Commissioner Been-Huan Chiang was invited as the VIP to speak on "Cloud Source
79
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
Management and the Management of the Global Market".
The Handy Gift Carnival of the Namchow Group between December 26 and 28 of 2014
combined exclusive local pastries of Taiwan with local culture and international
sightseeing industries. Sixty-two benchmark handy-gift businesses throughout Taiwan
gathered. There were a total of 120 stands to sell benchmark pastries and desserts,
including pineapple cakes, sun cakes, mother's cakes, egg rolls, cake, candy and cookies.
There were seven kinds of pineapple cakes and 26 kinds of mother's cakes alone. In total,
the handy gifts that appeared in the exhibition could be divided into 15 categories
consisting of 122 products. This is the latest picture of the handy-gift industry in Taiwan.
The exhibition helped create a new outlook for 2015 of the Taiwan handy-gift industry.
4. Public interest:
One hundred illuminating ropes were donated to the Fire Department of Taoyuan City
Government, totaling NTD 1,904,762 in value.
A total of NTD 307,248 was donated throughout 2015 through joint fund raising.
NTD 1.5 million was raised for the Nepal Earthquake relief effort.
Other donations throughout 2014 including those made to the Single Parent Education
Foundation and the Dalongtong campaign in the Datong District of Taipei City, etc.
5. Consumer rights: There is the 0800 consumer service hotline available and product liability
insurance and public accident liability insurance have been purchased.
6. Human rights: The public accident liability insurance and group insurance have been purchased
and construction safety and management have been implemented. The Namchow Guidelines
for Preventing against Sexual Harassments and Filing Complaints are established and the
complaint channel is made available.
7. Safety and health:
Employee safety and health: Public accident liability insurance has been purchased.
Safety and healthy products and production lines:
a. CNS Mark: Since 1952 when Namchow Soap became the fifth product to bear the
CNS mark in Taiwan, it is now the only one that has been in existence among the Top
180 products approved for the CNS Mark back then.
b. Disease prevention products: Disease prevention products reviewed and recommended
by the Institute for Biotechnology and Medicine Industry as authorized by the Centers
80
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
for Disease Control of the Ministry of Health and Welfare include Namchow Crystal
Grapefruit Seed Spray Dry Hand Wash, Namchow Crystal Grapefruit Seed Antiseptic
Hand Wash Solution, and Namchow Crystal Grapefruit Seed Antiseptic Hand Soap.
c. Health foods: Health foods reviewed and approved by the Ministry of Health and
Welfare include Dietary Fiber Cooked Rice Healthy Grains and Dietary Fiber Cooked
Rice Double-Wheat.
d. Other certifications obtained by Namchow products include FGMP, ISO-9001,
ISO-22000, ISO-14064-1, HACCP, and SGS.
In response to the government's Project of Traceability Cloud Application on Safe Foods",
the Namchow Group has configured Namchow system quality information management.
Suppliers can control their shipping and quality assurance processes through this platform
while Namchow can review the receiving, acceptance, shipping, and quality assurance
processes and distributors and service providers within the network can manage receiving
and acceptance of goods. Meanwhile, related product resume information is provided for
inquiries by consumers that can be accomplished easily by applying the GS1 international
code about information from the farmland to the dining table.
There is already a Food Safety and Health Office and food safety regulatory supervisor
under the Executive Vice President's office of associated enterprises of Namchow to take
charge of communicating food safety-related laws and regulations, organizing educational
training and monitoring compliance and perform ultimate review and audit supervision on
the legitimacy of operations relating to the labeling of additives in raw materials of foods
produced by respective business units and food safety and health.
The Company has disclosed the name of the Company's product, name, address, business
registration number, factory registration number, registration document number, product
storage and transport conditions, product traceability system connection codes, packing
specifications, and packing materials of the responsible domestic manufacturer on the
Food and Drug Administration registry http://fadenbook.fda.gov.tw.
The Company has disclosed the name of its products, name of the Company, specification,
nutrition label, composition table, final report, and warnings on the Food and Drug
Administration traceability information management system: http://ftracebook.fda.gov.tw.
81
Assessed areas
Operational status (Note 1) Departure
from
Corporate
Social
Responsibi
lity Best
Practice
Principles
for
TWSE/GT
SM listed
companies
and
reasons
Yes No Brief Descriptions (Note 2)
(VII) In the event that validation criteria of related verification institutions are approved in the
Company's CSR Report, it shall be stated so:
(1) The CSR Report is to be compiled jointly by respective relevant functional units under
the leadership of the Executive Vice President of the Company and under the guidance of
KPMG Sustainability Consulting. The 2014 CSR Report was completed in the fourth
quarter of 2015 and validated by the KPMG.
Note 1: Regardless of the answer, "Yes" or "No", descriptions need to be provided in the
summary column.
Note 2: If the CSR Report has been prepared, how the CSR Report can be accessed and the index
page number may be indicated in the Brief Descriptions column instead.
6. Implementation of ethical corporate management
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
(I) Establishment of ethical corporate management policy and proposal 1. Has the
Company declared its ethical corporate management policies and procedures in its rules and
Yes
1. (1) Article 6 of the Company's Ethical Corporate Management Rules deals with policies: The Company, based on its management beliefs of honesty, transparency, and responsibility, establishes integrity-based policies and a desirable corporate management and risk control mechanism to help create a management setting in favor
Compliant
82
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
external documents, as well as the commitment of its Board of Directors and management to implementing the management policies?
of sustainable developments. (2) Article 3 of the Company's Ethical
Corporate Management Rules prohibits dishonest behavior: Staff of the Company may not provide, promise, request, or accept, directly or indirectly, unjustified interests or engage themselves in dishonest behavior against integrity, which is illegal, or against the authorized duties in order to obtain or keep the interests (collectively "dishonest behavior") while conducting business. The preceding paragraph shall apply to public servants, political candidates, members of a party or someone taking a partisan position and any public or private enterprise or institution and its director, supervisor, manager, employee, actual controller, or stakeholder.
(3) Article 4 of the Company's Ethical Corporate Management Rules deals with the types of interests: "Interest" indicated herein refers to any object of value, including money, gift, commission, position, service, preferred treatment, or rebate in any form or under any title. This, however, does not include normal social etiquettes that are occasional and do not affect specific rights and obligations.
(4) Article 5 of the Company's Ethical Corporate Management Rules deals with compliance with regulatory requirements: The Company shall abide by applicable laws and regulations, such as the Company Act, Securities Exchange Act, Commercial Accounting Act, Political Donations Act, Law Against Accepting Bribes Act, Government Procurement Act, Public Officer Conflict of Interest Avoidance Act, Listing-related regulations, or others that have to do with commercial behavior, which shall serve as the fundamental premises for consolidating ethical corporate management.
(5) Article 9 of the Company's Ethical Corporate Management Rules deals with the undertaking and implementation: The ethical corporate management policy is
83
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
2. Has the
Company established policies to prevent unethical conduct with relevant procedures, guidelines of conduct, punishment for violation, rules of appeal clearly stated in the policies, and implemented the policies?
Yes
specified on the website and annual report of the Company. Both the Board of Directors and the management shall undertake to proactively consolidate them and precisely implement them as part of internal management and external commercial activities.
2. (1) Article 7 of the Company's Ethical Corporate Management Rules deals with preventive measures: The Company establishes operating procedures or behavioral norms against dishonest behavior in compliance with these Rules and substantially specifies precautions of the Company's staff while carrying out duties.
(2) Article 8 of the Company's Ethical Corporate Management Rules specifies the scope of ethical corporate management. The preventive proposal stipulated by the Company shall cover preventive measures against the following behavior: (I) Bribing others and accepting bribery (II) Providing illegal political donations (III) Unjustified charity donations or
sponsorship (IV) Providing or accepting unreasonable
gifts, treatment, or other unjustified interests
(3) Article 19 of the Company's Ethical Corporate Management Rules deals with reporting and punishment: In case of violations of ethical corporate management requirements by the staff of the Company, they shall be reported to the supervisor, manager, internal audit head, the Human Resources Office, or another suitable head spontaneously. The Company will precisely keep confidential the status of the reporter and the reported content. The Company insists on a zero-loophole principle with regard to its operations. If staff of the Company try to inadequately benefit themselves or other people taking advantage of the duties they perform to accordingly result in losses suffered by the Company, they shall be dismissed and compensate all losses suffered as such by the Company unconditionally.
Compliant
84
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
3. Has the
Company established appropriate precautionary measures for operating activities with higher risk of unethical conducts provided in Paragraph 2, Article 7 of the Ethical Corporate Management Best-Practice Principles for TWSE/TPEx Listed Companies or within its scope of business?
Yes
When found with violations with ethical corporate management rules, the Company will punish the violators in accordance with its Merit and Demerit Procedures, depending on the severity of the circumstances. Those dismissed will never be able to work for the Company and its associated enterprises again. There is a complaint filing system available in the Company to serve as a means for violators of these Rules to seek relief measures in compliance with applicable requirements.
3. Articles 11, 12, 13, and 14 of the Company's Ethical Corporate Management Rules deal with respective requirements of preventive measures under Article 7 Paragraph 2 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies that can be taken: Article 11 Prohibited bribery and acceptance of bribery Staff of the Company shall act rigidly and may not provide, promise, request, or accept, directly or indirectly, unjustified interests while conducting business, including bribery, rebate, commission, facilitation payment or other unjustified interests provided to or accepted from customers, agents, contractors, suppliers, public servants, or other stakeholders in other ways. This, however, does not include those in compliance with the laws in the locality of operation. Article 12 Prohibited provision of illegal political donations The staff of the Company shall abide by the Political Donations Act and applicable internal operating procedures of the Company when providing donations, directly or indirectly, to political parties or organizations and individuals taking part in political campaigns and may not seek business interests or trading advantages accordingly. Article 13 Prohibited justified charity donations or sponsorship For charity donations or sponsorship, the staff of the Company shall comply with applicable laws and regulations and the internal operating procedure and may not use it as a
Compliant
85
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
means of bribery in disguise. Article 14 No unreasonable gifts, treatment, or other justified interests The Company absolutely prohibits that the staff of the Company request any donations, preferred or special treatment, directly, or indirectly, from suppliers, distributors, or clients doing business with the Company or seeking to have transactions with the Company, including special and luxurious meals or other forms of reception that have nothing to do with business or the local custom. Staff of the Company may not accept donations or preferred deals provided by any supplier, distributor, or customer unless they are part of a local custom or etiquette. Without prior reporting to the head of their department in advance in writing, staff of the Company may not accept gift or donations from related manufacturers during celebrations or networking events organized by the Company. Except when on a business trip and except for conditions approved by the Company, it is strictly prohibited that staff of the Company receive any reception by the supplier, distributor, or customer on a trip. Staff on a business trip (or on public errands) may not accept invitations for attending a feast or reception by the counterparty that is unjustified or inflicts the staff on a business trip (or on public errands) with malfeasance. What the staff on a business trip (or on public errands) do and say represent the Company and hence special attention should be paid. If the staff get into trouble or engage in events that undermine the reputation of the Company, they will be strictly punished once found. Staff of the Company may not borrow money from suppliers, distributors, or customers that do business with the Company or engage in other paid or free rental or use behaviors.
(II) Consolidation of ethical corporate management
1. Has the
Yes
1. (1) Article 10 of the Company's Ethical
Compliant
86
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
Company evaluated the ethical records of parties it does business with and stipulated ethical conduct clauses in business contracts?
2. Has the
Company established a dedicated (concurrent) unit under the Board of Directors to promote ethical corporate management, and reported the status of implementation to the Board of Directors periodically?
3. Has the
Company established policies to prevent conflict of interests, provided appropriate channels for filing related
Yes
Yes
Corporate Management Rules deals with ethical corporate management activities: The Company conducts business activities in a fair way. Before business correspondence begins, the Company will consider the legitimacy and presence of dishonest behavior records or not of the agents, suppliers, customers, or other counterparts in business transactions and avoid doing business with those with prior records of dishonest behavior.
(2) The anti-bribery clause has been added to purchase contracts and engineering contracts.
(3) For counterparts, the ethical corporate management clause is added only to important transaction contracts.
2. Article 15 of the Company's Ethical Corporate Management Rules deals with the organization and responsibilities:
The Company's Board of Directors shall pay due attention as good-will administrator to help the Company prevent against dishonest behavior, to reflect on the implementation efficacy from time to time, and to constantly seek improvements to help ensure consolidation of the ethical corporate management policy. In order to normalize ethical corporate management, the Human Resources Office of the Company is in charge of establishing and monitoring the implementation of the ethical corporate management policy and preventive solution and periodically reporting to the Board of Directors.
3. (1) Article 17 of the Company's Ethical Corporate Management Rules specifies avoidance upon conflicts of interest for the staff of the Company: Directors of the Company shall be highly self-disciplined. For proposals brought forth by the Board of Directors that concern the interests of directors themselves and the Institution they represent to accordingly undermine interests of the Company, the directors
Compliant
Compliant
87
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
complaints and implemented the policies accordingly?
may state opinions and answer questions but may not take part in the discussion and voting process. They shall recuse themselves during discussion and voting and may not exercise voting rights on behalf of other directors. Self-discipline shall be expected among directors, too. No inadequate mutual support is allowed. Staff of the Company may not help themselves, their spouse, parents, children, or other people receive unjustified interests taking advantage of the position they hold in the Company.
(2) Implementation: The Board of Directors discussed on
February 12, 2015 the proposal detailing individual values of year-end bonus of 2014 for directors and managers of the Company submitted by the Compensation Committee. The five directors of the Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen, Kan-Wen Lee, and Ming-Liang Ho were recused in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously, without taking into account of the directors who recused themselves.
June 18, 2015 The Board of Directors discussed the value of remunerations to be issued separately to five directors and two supervisors for 2014 as submitted by the Compensation Committee. The five directors of the Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen, Kan-Wen Lee, and Ming-Liang Ho were recused in accordance with the Company Act and Article 15 of the
88
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously, without taking into account of the directors who recused themselves.
The Board of Directors discussed and nominated on June 18, 2015 independent directors Ding-Guo Chen and Jin-Shih Lin and Professor Hai-Ming Chen to be the members of the 3rd Intake of Compensation Committee. The two independent directors Ding-Guo Chen and Jin-Shih Lin of the Company recused themselves in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously among attending directors, without taking into account of directors who were nominated.
August 13, 2015 The Board of Directors discussed the separate remuneration suggestions for the two independent directors Ding-Guo Chen and Jin-Shih Lin as submitted by the Compensation Committee. The two independent directors Ding-Guo Chen and Jin-Shih Lin of the Company recused themselves in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously among all attending directors except for the two independent directors who recused themselves.
The Board of Directors discussed on
89
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
4. Has the
company had effective accounting and internal control systems set up to facilitate ethical corporate management, and have those systems been audited by either internal auditors or CPAs on a regular basis?
Yes
January 28, 2016 the proposal detailing individual values of year-end bonus of 2015 for directors and managers of the Company submitted by the Compensation Committee. The case was approved unanimously, without taking into account of the directors who recused themselves. The five directors of the Company, namely Chairman Fei-Lung Chen, Vice Chairman Fei-Peng Chen, and Directors Chin-Tsai Chen, Kan-Wen Lee, and Cheng-Wen Chen were recused in accordance with the Company Act and Article 15 of the Board of Directors Meeting Rules of the Company: Directors who are stakeholders of matters being discussed shall recuse themselves. Voting outcome of this case: The case was approved unanimously, without taking into account of the directors who recused themselves.
When one of the directors engages in transactions with the Company, the supervisor shall sign the Contract on behalf of the Company.
4. (1) Article 18 of the Company's Ethical Corporate Management Rules deals with accounting and internal control: The Company has established effective accounting and internal control systems for business activities at higher risk of dishonest behavior. There is no outstanding account or secretly retained account. The systems are discussed from time to time as well to make sure that their design and implementation continue to be valid. The internal audit staff of the Company shall periodically inspect compliance with the system indicated in the preceding paragraph and produce the Audit Report to be submitted to the Board of Directors.
(2) When the CPA performs reviews and inspections, implementation of internal control is included and suggestions regarding internal control will be
Compliant
90
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
5. Does the
Company hold internal and external educational trainings on operational integrity regularly?
Yes
provided. 5. Although the Company does not hold internal
educational training on ethical corporate management regularly, responsible heads and related staff, however, are sent to attend educational training on ethical corporate management organized by the competent authority and related institutions if it is considered necessary.
(III) Reporting System of the Company
1. Does the Company provide incentives and means for employees to report malpractices? Does the company assign dedicated personnel to investigate reported malpractices?
2. Has the Company established any standard procedures or confidentiality measures for handling reported malpractices?
Yes
Yes
1. Article 19 of the Company's Ethical Corporate Management Rules deals with reporting and punishment: In case of violations of ethical corporate management requirements by the staff of the Company, they shall be reported to the supervisor, manager, internal audit head, the Human Resources Office, or another suitable head spontaneously.
2. Article 19 of the Company's Ethical Corporate Management Rules deals with reporting and punishment: In case of violations of ethical corporate management requirements by the staff of the Company, they shall be reported to the supervisor, manager, internal audit head, the Human Resources Office, or another suitable head spontaneously. The Company will precisely keep confidential the status of the reporter and the reported content. The Company insists on a zero-loophole principle with regard to its operations. If staff of the Company try to inadequately benefit themselves or other people taking advantage of the duties they perform to accordingly result in losses suffered by the Company, they shall be dismissed and compensate all losses suffered as such by the Company unconditionally. When found with violations with ethical
Compliant
Compliant
91
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
3. Does the
Company assure employees who reported on malpractices that they will not be prosecuted for making such reports?
Yes
corporate management rules, the Company will punish the violators in accordance with its Merit and Demerit Procedures, depending on the severity of the circumstances. Those dismissed will never be able to work for the Company and its associated enterprises again. There is a complaint filing system available in the Company to serve as a means for violators of these Rules to seek relief measures in compliance with applicable requirements.
3. The Company assures employees who reported on malpractices that they will not be prosecuted for making such reports.
Compliant
(IV) Reinforced Information Disclosure
1. Has the Company disclosed information regarding the company's ethical corporate management principles and implementation status on its website and the MOPS.?
No
1. (1) The Ethical Corporate Management Rules
are already disclosed on the website of the Company and on the MOPS. Website of the Company http://www.namchow.com.tw/IR/15.html MOPS: http://mops.twse.com.tw/mops/web/t100sb04_1
(2) The implementation efficacy is not provided.
Non-complia
nt
(V) If the Company has its own Ethical Corporate Management Rules established according to the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies, please describe the differences between its implementation and the principles: The Company established the new Ethical Corporate Management Rules on December 11, 2014. Review of the Rules did not reveal differences between actual implementation and the established guidelines.
(VI) Other important information that helps understand the implementation of ethical corporate management of the Company: (e.g. discussion and correction of the Ethical Corporate Management Rules established by the Company)
92
Assessed areas
Operational status (Note 1) Departure from Ethical
Corporate Management Best Practice Principles for TWSE/GTS
M Listed Companies
and Reasons
Yes No Summary
The Company established the new Ethical Corporate Management Rules on December 11, 2014.
Note 1: Regardless of the answer, "Yes" or "No", descriptions need to be provided in the summary column.
7. How they may be found shall be disclosed if the Company has established Corporate
Governance Principles and related regulations:
Website of the Namchow Group: www.namchow.com.tw
MOPS http://mops.twse.com.tw/mops/web/index
8. Other important information that is sufficient to boost knowledge of corporate governance
shall be disclosed as well:
Website of the Namchow Group: www.namchow.com.tw
MOPS http://mops.twse.com.tw/mops/web/index
93
9. Matters that should be disclosed regarding the implementation of the internal control
system:
1) Internal Control Statement:
Namchow Chemical Industrial CO., LTD.
Internal Control System Statement
Date: March 18, 2016
For the Company's internal control system of 2015, we would like to declare as follows
according to the results of spontaneous inspections:
I. The Company knows that establishing, enforcing, and maintaining an internal control
system is the responsibility of the Company's Board of Directors and managers and has
such a system in place already. It is meant to reasonably ensure fulfillment of the
operational efficacy and efficiency (including profits, performance, and protection of
asset security), reliability of financial reports, and compliance with applicable laws and
regulations, among other goals.
II. The internal control system has its inherited restrictions that cannot be overcome with
improved design. An effective internal control system can also only reasonably ensure the
fulfillment of the three goals stated above and its effectiveness may change as the
environment or situation changes. There is a self-surveillance mechanism; however, built
inside the internal control system of the Company that helps the Company take a
corrective action against deficiencies confirmed.
III. The Company determines the effectiveness of the design and implementation of its
internal control system in accordance with the items in "Governing Regulations for Public
Company's Establishment of Internal Control System" (hereinafter called "Governing
Regulations") that are related to the effectiveness of internal control systems. The items
adopted in the Governing Regulations for determining the internal control system are the
five constitutional elements of the internal control system divided according to the
management and control process: 1. control environment, 2. risk assessment, 3. control
process, 4. information and communication, and 5. supervision. Each element further
encompasses several items. Please refer to "Governing Regulations" for details.
IV. The Company has adopted the abovementioned determining items and conducted
inspection of the design and effectiveness of its internal control system.
V. Pursuant to the results of the abovementioned inspections, the Company is of the view
that the design and implementation of its internal control system as of December 31, 2015
(including its supervision and management of subsidiaries), including its awareness the
extent by which the operating effects and efficiency goals are fulfilled, reliability of
financial reporting, and compliance with relevant laws and regulations, are such that it is
effective and capable of reasonably ensuring that the aforementioned goals can be
achieved.
94
VI. This Statement constitutes a major part of the Company's Annual Report and the
Company's Prospectus that are made available to the public. The Company shall be
legally liable under Articles 20, 32, 171 and 174 of the Securities and Exchange Act with
respect to any unlawful aspects such as falsehood or concealment of facts in relation to
the aforesaid statement.
VII. This Statement was approved at the meeting of the Company's Board of Directors on
March 17, 2016 with no Directors expressing dissent out of the 7 Directors in attendance.
Namchow Chemical Industrial CO., LTD.
Fei-Lung Chen
Chairman
Kan-Wen Lee
General Manager
2) When a CPA is authorized to review the internal control system, the Review Report
prepared by the CPA shall be disclosed: None.
10. Any legal sanctions against the Company or its internal personnel, or any disciplinary
action taken by the Company against its own personnel for violating internal control
requirements, in the latest year or during the current fiscal year up to the printing of the
Annual Report; and a description of the main shortcomings in the company's internal
control system as well as an indication of measures for improvement
1) The Company was fined by the Department of Health of the Taipei City Government NTD 30
million on October 20, 2014 for its people failing to apply for tests before importing edible
oils between 2013 and August 2014. Since the applicable laws were wrong, the Company
appealed and the original punishment was voided on January 23, 2015. The Taipei City
Government already corrected the fine to be NTD 7.05 million on January 30, 2015. For the
acts between August 7, 2014 and August 24, 2014, a fine of NTD 3 million was finalized. The
fine of NTD 4.05 million between March 2013 and May 2014 has been appealed at the
Supreme Administrative Court at present. For the 30 batches of edible fats and oils imported
on November 28, 2012, the Department of Health of Taipei City Government fined NTD 150
thousand on October 16, 2015. Namchow appealed on November 17, 2015.
Major deficiency: Edible oil products were imported without applying for tests as required.
Improvement: The raw material and additive safety review mechanism (with food safety
control features, subordinate directly under the Executive Vice President
who reports to the Board of Directors" was set up on December 19, 2013.
The Food Safety and Health Management Guidelines were established by
the Food Safety Regulatory Unit on June 27, 2014. The Company's
95
procurement and payment revolving internal control system (SOP#A02)
was revised on November 11, 2014. The collaborative coordinating unit has
been added to the operating procedure for the procurement and payment
revolving internal control system (SOP). The said collaborative coordinating
unit includes the Product Development Office, the Warehousing Division,
the Quality Control Section, the Production Control Section, Procurement
Status Control, and audits are performed by the Audit Office in compliance
with the internal control system. The scale of the food safety regulatory unit
was expanded on July 14, 2015, with the addition of the Food Safety Office
that reports to the Executive Vice President, who will then report to the
Board of Directors.
2) The Department of Labor of Taipei City Government fined the Company NTD 20 thousand on
July 17, 2015 for not giving employees days off on holidays. The Company disagreed on the
decision and appealed on August 17, 2015. The appeal was overruled on March 02, 2016.
Whether an administrative lawsuit will be filed will be evaluated within two months.
Major deficiency: The personnel calculation basis differs from that adopted by the Department
of Labor.
Improvement: Adjustments have been made according to laws to prevent against doubts.
96
11. Important decision reached in shareholders' meetings and made by the Board of Directors
in the latest year as of the date of printing of Annual Report.
1) Shareholders' Meeting:
1. The following were approved in the general shareholders' meeting on June 10, 2015.
The 2014 Business Report and Financial Statement were recognized.
Implementation: Announcement and declaration of financial reports, among others, were
completed on March 26, 2015.
The 2014 earnings distribution form of the Company was recognized. Stock dividends in the
value of NTD 617,679 thousand, that is, NTD 2.10 per share, are to be distributed. Once
approved in the general shareholders' meeting, the Board of Directors will be authorized to
set the baseline date for distribution of cash dividends separately.
Implementation: It was determined in the Board of Directors meeting on June 18, 2015 that
July 13 would be the baseline date for distribution of cash dividends while cash dividends
were actually issued on August 6.
Changes made to the Company's Rules and Procedures for Shareholders’ Meetings and
Guidelines for Electing Board Directors and Supervisors were approved.
Implementation: They shall be implemented following revisions.
2) Board of Directors:
1. The decision was approved on February 12, 2015.
The year-end bonus proposal for 2014 for directors and managers of the Company that was
submitted by the Compensation Committee was approved unanimously among all directors
that were present in the meeting except for votes from those who recused themselves.
The capital lent by the Company to Nankyo Japan Co., Ltd. totaling NTD 449,790,000
(equivalent to JPY 550 million only at the time it was loaned) is planned to be transferred to
be the capital stock; that is, JPY 850 million in total has been increased in the investment in
Nankyo Japan Co., Ltd.
Jin-Shih Lin was nominated as member of the Company's Compensation Committee.
2. The decision was approved on March 20, 2015.
The Company's 2015 general shareholders' meeting was convened and were scheduled to
take place at 9:00 am on the morning of June 10, 2015 (Wednesday) in the Leadership Hall
of the Taipei International District of Commerce on the third floor of No. 51, Hengyang
Road, Taipei City.
The 2014 Business Report and Financial Statement of the Company were approved and sent
to the supervisors for verification before being brought forth in the shareholders' meeting for
97
endorsement.
The earnings distribution proposal consisting of NTD 2.1 per share to be distributed as part
of the Company's cash dividends of 2014 has been approved. Cash dividends are issued to
the minimum of one NTD (rounded to the integer) and the fractional shares are to be
included as part of the Company's other income. Once verified to be accurate by supervisors,
it would be brought forth in the shareholders' meeting for endorsement and the Board of
Directors would be authorized through the shareholders' meeting to set a separate baseline
date, the date of issuance for distribution of interest, and to handle other related matters.
NTD 34, 151 thousand as remunerations for directors and supervisors were to be issued by
the Company for 2014.
Seven directors were to be re-elected during the general shareholders' meeting; among them,
two were independent directors, with a tenure that begins on June 19, 2015 and ends on June
18, 2018. Election of independent directors was done applying the nomination system. They
were elected from the list of independent directors during the shareholders' meeting.
Independent and non-independent directors were elected together but the votes were counted
separately.
Nomination period, openings, and handling location. Openings: 2; Nomination period: from
March 27, 2015 to April 7, 2015. Handling location: Department of Finance, Namchow
Chemical Industrial Co., Ltd. (Address: 2F, No. 100, Yenping North Road Section 4,
Datong District, Taipei City; Telephone: (02) 25351251).
Independent director candidates Ding-Guo Chen and Jin-Shih Lin nominated by the Board
of Directors were approved. The Department of Finance was authorized to accept
nominations during the period announced by the Company and nominations of independent
directors were accepted at the location announced by the Company.
Shareholders' proposals were accepted in compliance with the requirements under Article
172-1 of the Company Act.
After the Chairperson asked individual directors for opinions, the Internal Control System
Statement that both the design and implementation of the 2014 internal control system of
Namchow submitted by the Audit Office were valid was approved unanimously.
Changes made to the Company's Rules and Procedures for Shareholders’ Meetings and
Guidelines for Electing Board Directors and Supervisors were approved unanimously
among all directors that were present and were brought forth in the shareholders' meeting for
a decision.
98
○11 The 2015 Shareholders Meeting Agenda of the Company was stipulated.
3. The decision was approved on April 28, 2015.
Nominees Professor Ding-Guo Chen and CPA Jin-Shih Lin as independent directors by the
Company's Board of Directors were included in the list of independent director candidates to
be re-elected in the 2015 general shareholders' meeting.
4. The decision was approved on June 18, 2015.
July 13 was set to be the baseline date for distribution of cash dividends and the Chairman
was authorized to handle the case at its full discretion by laws.
The Compensation Committee submitted (1) values of remunerations to be distributed to
individual directors and supervisors for 2014; (2) values of bonuses to be distributed to
individual managers for 2014; and (3) adjustment of the separate remunerations for the
Chief Human Resources Officer Wan-Qing Zhou of the Company.
The endorsement and guarantee provided by the Company to its subsidiary Nacia
International Corporation during the latter's loan with Cathay United Bank in May 2015 was
endorsed.
5. The decision was approved on June 18, 2015.
Mr. Fei-Lung Chen was elected as the new Chairman of the Company, Fei-Peng Chen as the
Vice Chairman.
Nomination of independent directors Ding-Guo Chen and Jin-Shih Lin and Professor
Hai-Ming Chen to be the members of the 3rd Intake of Compensation Committee.
6. The decision was approved on August 13, 2015.
Yo-Qing Liu was hired to serve as General Manager of the Home Supplies Department and
the Compensation Committee provided suggestions on the compensation and salary for
General Manager Yo-Qing Liu after assessment.
Separate remuneration suggestions for the two independent directors Ding-Guo Chen and
Jin-Shih Lin were submitted by the Compensation Committee.
The endorsement and guarantee provided by the Company to its subsidiaries Nacia
International Corporation and Ting Hao (Cayman Islands) Holdings Corporation during the
latter's loans with financial institutions from June 10 to July 31, 2015 was endorsed.
The Taoyuan County Pharmaceutical Manufacturing License No. 6132070034 was canceled
for discontinued operations of the pharmaceutical company.
To streamline the investment framework of the Company in food business in mainland
China, individual subsidies set up in mainland China were held directly and indirectly 100%
99
by Ting Hao (Cayman Islands) Holdings Corporation: (1) The 50% shares held by
Namchow International Corporation of Tianjin Yoshiyoshi Food Co., Ltd. were all
transferred to Tianjin Namchow Food Co., Ltd. (2) Namchow International Corporation
again transferred 32.43% shares that it held of Ting Hao (Cayman Islands) Holdings
Corporation to Nacia International Corporation and then wrote them off. (3) Nacia
International Corporation transferred 100% of the shares that it held of Shanghai Qiaohao
Trading Co., Ltd. to Ting Hao (Cayman Islands) Holdings Corporation.
7. The decision was approved on October 8, 2015.
Mei-Hui Liao was hired as the special assistant to the Chairman of the Company and Chief
Risk Control Officer and the Compensation Committee provided suggestions on the salary
and compensation payable to her after assessment.
8. The decision was approved on November 5, 2015.
Hai-Li Qi was hired to serve as the assistant manager at the Human Resources Office of the
Company and the Compensation Committee provided suggestions on the salary and
compensation payable to her after assessment.
The Operating Procedure for Applying for Suspension and Reinstatement of Transactions of
the Company was established.
9. The decision was approved on December 29, 2015.
The Audit Office stipulated the Company's 2016 Audit Plan.
To meet the demand for operating funds of 2016, it is requested to authorize the Chairman to
sign contracts for loans with financial institutions on behalf of the Company.
If subsidiaries of the Company, namely Lucky Royal Co., Ltd., Namchow (BVI) Ltd., Nacia
International Corp., Ting Hao (Cayman Islands) Holding Corp., and others have demand for
operating funds in 2016, the Company will serve as the guarantor and the Chairman is
authorized to handle related matters with financial institutions at his full discretion on behalf
of the Company.
For other companies that do business with the Company, it there is any need in 2016, the
Company will serve as the guarantor and the Chairman is authorized to handle related
matters with financial institutions at his full discretion on behalf of the Company.
The Company's Corporate Social Responsibility Best Practice Principles were established.
The endorsement and guarantee by the Company for its subsidiary Nankyo Japan Co., Ltd.
in the loan with financial institutions in November 2015 was endorsed.
The Food Safety Laboratory was set up at the headquarters to govern laboratories at
100
respective subsidiaries and to perform tests on its own, which helps normalize autonomous
management by food businesses.
10. The decision was approved on January 28, 2016.
The Compensation Committee submitted its suggestions on the values of year-end bonuses
from 2015 to be distributed to 5 directors and 13 managers of the Company.
The Compensation Committee submitted its suggestions on remunerations to be distributed
to directors and supervisors of the Company and the Articles of Incorporation were
amended.
The Compensation Committee submitted its suggestions on remunerations to be distributed
to employees of the Company and the Articles of Incorporation were amended.
11. The decision was approved on March 17, 2016.
Article 31 of the Company's Articles of Incorporation was revised and Article 31-1 was
added and Article 34 was revised.
The Company's 2016 general shareholders' meeting was convened and were scheduled to
take place at 9:00 am on the morning of June 8, 2016 (Wednesday) in the Leadership Hall of
the Taipei International District of Commerce on the third floor of No. 51, Hengyang Road,
Taipei City.
The Compensation Committee submitted the remunerations in the value of NTD 56,116
thousand to be distributed to directors and supervisors and those in the value of NTD 14,029
thousand to be distributed to employees for 2015.
The 2015 Business Report and Financial Statement of the Company were approved and sent
to the supervisors for verification before being brought forth in the shareholders' meeting for
endorsement.
The earnings distribution proposal consisting of NTD 2.6 per share to be distributed as part
of the Company's cash dividends of 2015 has been approved. Cash dividends are issued to
the minimum of one NTD (rounded to the integer) and the fractional shares are to be
included as part of the Company's other income. Once verified to be accurate by supervisors,
it would be brought forth in the shareholders' meeting for endorsement and the Board of
Directors would be authorized through the shareholders' meeting to set a separate baseline
date, the date of issuance for distribution of interest, and to handle other related matters.
The Compensation Committee submitted its suggestions on the salary and compensation to
be paid to Vice President Shu-Wen Dai and Assistant Manager Yi-Feng Huang of the
Company.
101
Shareholders' proposals were accepted in compliance with the requirements under Article
172-1 of the Company Act.
After the Chairperson asked individual directors for opinions, the Internal Control System
Statement that both the design and implementation of the 2015 internal control system of
Namchow submitted by the Audit Office were valid was approved unanimously.
Supervisors of the Company were re-elected.
The 2016 Shareholders Meeting Agenda of the Company was stipulated.
○11 Chief Financial Officer Dong-Biao Bai retired on April 30, 2016. The position was filled by
the Chairman's special assistant Mei-Hui Liao.
○12 Subsidiary Chow Ho Enterprise Co., Ltd. reduced its capital size by NTD 75 million and
then increased it by NTD 20 million.
○13 The CPAs for the Company's Financial Statement are changed to Bo-Shu Huang and
An-Tian Yu in 2016.
12. Main contents of different opinions of directors or supervisors that are recorded and
stated in writing on important decisions made by the Board of Directors in the latest year
and as of the date of printing of Annual Report: None.
13. Summary of resignations and dismissals of the Company's Chairman, general managers,
accounting heads, financial heads, internal audit heads, and R&D heads in the latest year
as of the date of printing of Annual Report: Financial Head--Chief Financial Officer of the
Company Mr. Dong-Biao Bai retired on April 30, 2016. It was approved in the meeting of the
Board of Directors on March 17, 2016 that the position would be filled by the Chairman's
special assistant Mei-Hui Liao.
102
(V) Public Expenditure on CPAs
1. When the non-audit public expenditure paid to CPAs and their firms and their associated
enterprises accounts for more than one-fourth of the audit public expenditure, the values
of both audit and non-audit public expenditures and contents of non-audit services shall
be disclosed: None.
2. When the accounting firm is changed and the audit public expenditure in the year of
replacement is reduced compared to that in the preceding year, the audit public
expenditures before and after the replacement and the reasons shall be disclosed: None.
3. When the audit public expenditure is reduced by more than 15% from the preceding year,
the value reduced and its ratio and cause shall be disclosed: None.
CPA public expenditure information bracket table
Name of accounting
firm
Name of CPA Inspection period Remark
KPMG An-Tian Yu Xiu-Yu Lin 104.01~104.12
Note: If any CPA or the accounting firm is replaced for the Company this year, the inspection
periods shall be listed separately.
In addition, the reason for the replacement shall be indicated in the remark column.
Value: NTD 1,000
Entry of public expenditure
Value bracket Audit public
expenditure
Non-audit
public
expenditure
Total
1 Below NTD 2,000 thousand
2 Between NTD 2,000 (inclusive)
thousand and NTD 4,000 thousand
3 Between NTD 4,000 (inclusive)
thousand and NTD 6,000 thousand 3,780 880 4,660
4 Between NTD 6,000 (inclusive)
thousand and NTD 8,000 thousand
5 Between NTD 8,000 (inclusive)
thousand and NTD 10,000 thousand
6 More than NTD 10,000 thousand
(inclusive)
103
Public Expenditure on CPAs
Value: NTD 1,000
Name of
accounti
ng firm
Name of
CPA
Audit
public
expenditu
re
Non-audit public expenditure
CPA
inspectio
n period Remark
System
Design
Busines
s
Registra
tion
Human
Resourc
es
Other
(Note 2)
Subtotal
KPMG
An-Tian
Yu 3,780 9 695 704
104.01
~104.12
Other:
Including the business tax, transfer pricing report, and CSR CPA affirmation fees
Xiu-Yu
Lin
Grant
Thornto
n
Yu-Jie
Luo
176 176
01.2014
~12.201
4
Note 1: If any CPA or the accounting firm is replaced for the Company this year, the inspection
periods shall be listed separately. In addition, the reason for the replacement shall be
indicated in the remark column and information on audit and non-audit public expenditure
shall be disclosed.
Note 2: The non-audit public expenditure shall be listed separately by the service item. When
"Other" of non-audit public expenditure reaches 25% of the total value of non-audit public
expenditure, contents of the service shall be listed in the remark column.
(VI) Information on the Replacement of CPAs: No CPAs were replaced in the past two years
and thereafter for the Company.
(VII) Disclosure of Name, Position, and Duration of Service at Firms or Their Associated
Enterprises within Past Year of Chairman, General Manager, and Managers in
Charge of Financial or Accounting Affairs: None.
104
(VIII) Transfer of Stock Options and Changes in Equity Pledge of Directors, Supervisors, Managers, and Shareholders Holding More
Than 10% of Shares in the Latest Year and as of the Date of Printing of Annual Report
1. Changes in the stock options of directors, supervisors, managers, and heavyweight shareholders:
Title Name
2015 As of March 29 of the year
Increase/decrease
in the number of
shares held
Increase/decrease
in the number of
shares pledged
Increase/decrease
in the number of
shares held
Increase/decrease
in the number of
shares pledged
Chairman and shareholder
holding more than 10% of
shares
Fei-Lung Chen 0
(70,000)
0
0 5,000,000
Vice Chairman and
shareholder holding more than
10% of shares
Fei-Peng Chen 0 0 305,000 0
Director Representative of Lucky Royal Co., Ltd.: Kan-Wen Lee
0 0 0 0 Shareholder holding more than
10% of shares Lucky Royal Co., Ltd.
Director Chin-Tsai Chen 13,000 0 13,000 0
Director Representative of Hwa Zhin Co., Ltd.: Cheng-Wen Chen 0 0 0 0
Independent Director Ding-Guo Chen (Date of inauguration: June 19, 2015) 0 0 0 0
Independent Director Jin-Shih Lin (Date of inauguration: June 19, 2015) 0 0 0 0
Supervisor Oh-Kuan Chang 0 0 0 0
Supervisor Namchow Chemical Industrial CO., LTD. Employee Welfare
Committee 0 0 0 0
General Manager Kan-Wen Lee 0 0 0 0
Vice President Shu-Wen Dai 0
(3,000) 0 0 0
Vice General Manager/Vice
President Cheng-Wen Chen 0 0 0 0
Chief Human Resources
Officer Wan-Jing Zhou 0 0 0 0
Chief Risk Control Officer Mei-Hui Liao (Date of inauguration: October 12, 2015) 0 0 0
Assistant Manager Zhou-Jing Chen 0 0 0 0
Assistant manager and head of
the Accounting Department Rong-Zhang Lian 0 0 0 0
Vice General Manager of
Business Department Ming-Chuan Lin 0 0 0 0
Assistant Manager Yi-Feng Huang 0 0 0 0
105
Title Name
2015 As of March 29 of the year
Increase/decrease
in the number of
shares held
Increase/decrease
in the number of
shares pledged
Increase/decrease
in the number of
shares held
Increase/decrease
in the number of
shares pledged
Assistant Manager Rui-Zi Zhu (Date of inauguration: January 1, 2015) 0 0 0 0
Assistant Manager Hai-Li Qi (Date of inauguration: November 06, 2015) 0 0 0 0
Head of Department of
Finance Dongbiao Bai 0 0 0 0
General Manager of Business
Department Shu-Ming Zhang (Date of dismissal: August 3, 2015) 0 0 0 0
General Manager of Business
Department
Yo-Qing Liu (Date of inauguration: August 3, 2015) (Date of
dismissal: February 1, 2016) 0 0 0 0
Vice President Er-Kun Zhou (Date of dismissal: February 16, 2016) 0
(4,000) 0 0 0
2. The counterparty for the transfer or pledge of stock options is a related party: None.
106
(IX) Information of Relationship among Top 10 Shareholders Who Are Related, Spouses, or Relatives Within the Second Degree of Kinship
No. Name
Oneself Spouse, minor
child(ren)
Shares held in someone else's name
Total
The title or name and relationship among
shareholders in the Top shareholding list who are
related, spouse to each other, or relatives within
the second degree of kinship
Remark
Quantity of shares
Shareholding ratio
Quantity of shares
Shareholding ratio
Quantity of
shares
Shareholding ratio
Title Relationship
1
Lucky Royal
Co., Ltd.
Representative:
Fei-Lung Chen
46,041,259
33,814,934
15.65%
11.50%
0
7,577,413
0
2.58%
0
0
0
0
Fei-Lung Chen Chairman None
Fei-Peng Chen Vice Chairman None
Shiao-Chuan
Chen-Huang Spouse None
Fei-Peng Chen Brother None
Lucky Royal
Co., Ltd. Chairman None
Namchow
Chemical
Industrial CO.,
LTD.
Employee
Welfare
Committee
Representative:
Yi-Wen Lee
Father and
Daughter None
2 Fei-Peng Chen 36,097,995 12.27% 0 0 0 0
Fei-Lung Chen Brother None
Lucky Royal
Co., Ltd. Vice Chairman None
3 Fei-Lung Chen 33,814,934 11.50% 7,577,413 2.58% 0 0
Shiao-Chuan
Chen-Huang Spouse None
Fei-Peng Chen Brother None
Lucky Royal
Co., Ltd. Chairman None
Namchow
Chemical
Industrial CO.,
LTD.
Employee
Welfare
Committee
Representative:
Yi-Wen Lee
Father and
Daughter None
4
Cathay Life
Insurance
Company, Ltd.
14,849,000 5.05% 0 0 0 0 None None None
5
Bank SinoPac
as Custodian
for Reva
Spring Ltd.
Investment
Account
11,520,165 3.91% 0 0 0 0 None None None
107
6
Bank SinoPac
as Custodian
for Ever
Cosmos Ltd.
Investment
Account
9,980,992 3.39% 0 0 0 0 None None None
7 Shiao-Chuan
Chen-Huang 7,577,413 2.58% 33,814,934 11.50% 0 0
Fei-Lung Chen Spouse None
Namchow
Chemical
Industrial CO.,
LTD.
Employee
Welfare
Committee
Representative:
Yi-Wen Lee
Mother and
daughter None
9
Public Service
Pension Fund
Management
Board
5,631,000 1.91% 0 0 0 0 None None None
8 Cathay United
Bank 5,575,000 1.90% 0 0 0 0 None None None
10
Namchow
Chemical
Industrial Co.,
Ltd. Employee
Welfare
Committee
Representative:
Yi-Wen Lee
4,908,960
0
1.67%
0
0
686,635
0
0.23%
0
0
0
0
Fei-Lung Chen Father and
Daughter None
Shiao-Chuan
Chen-Huang
Mother and
daughter None
108
(X) Shares Held by Company, Directors, Supervisors, Managers of Company, and Businesses
Controlled Directly or Indirectly by Company of Same Reinvestment Business and
Consolidated Calculation of Comprehensive Shareholding Ratio
Unit: Share; %
Reinvested
business (Note)
Company
Directors, supervisors, managers,
and directly or indirectly
controlled businesses
Comprehensive investment
Quantity of
shares
Shareholding
ratio
Quantity of
shares
Shareholding
ratio
Quantity of
shares
Shareholding
ratio
Namchow
(Thailand) Ltd. 9,244,995 100.00 4 0.00 9,244,999 100.00
Yongju (Thailand)
Ltd. 100,000 100.00 - - 100,000 100.00
Nacia International
Corporation 1,250 100.00 - - 1,250 100.00
Lucky Royal Co.,
Ltd. 95,337,885 99.65 326,768 0.34 95,664,653 100.00
Chow Ho Enterprise
Co., Ltd. 7,999,994 100.00 5 0.00 7,999,999 100.00
Qizhi Co., Ltd. 80,000 80.00 20,000 20.00 100,000 100.00
Namchow Japan 3 100.00 - - 3 100.00
Namchow
Consultation 500,000 100.00 - - 500,000 100.00
Note: The long-term investments of the Company adopting the equity method
109
IV. Fundraising
(I) Capital and Shares
1. Source of capital stock
Year/
Month
Issu
ing
pric
e
Approved capital stock Paid-in capital stock Remark
Quantity of
shares value
Quantity of
shares value
Source of
capital
stock
Share
value
written off
by assets
other than
cash
Other
1998
Augus
t
10 400,000,000
shares
NTD 4
billion
294,132,962
shares NT$2,941,329,620
Capital
increase
with
capital
reserve
-
Date of approval
for capital
increase
and document
number
FSC (I) No.
0930131932 on
July 19, 2004
Type of share Approved capital stock
Remark Circulating shares Shares yet to be issued Total
Common stock 294,132,962 shares 105,867,038 shares 400,000,000 shares Listed stock
Related information of the general declaration system: Not applicable
110
2. Shareholder structure
Shareholder
structure
Quantity
Governm
ent
agency
Financial
institution
Other
institutional
investors
Foreign
institution
and foreigner
Individual Total
No. of persons 0 13 78 161 36,995 37,247
Shares held 0 21,966,107 73,184,164 59,673,239 139,309,452 294,132,962
Shareholding ratio 0.00% 7.47% 24.88% 20.29% 47.36% 100.00%
3. Diversification of share options
Shareholding classification No. of shareholders Shares held Shareholding ratio
(%)
1 - 999 26,799 2,737,006 0.93%
1,000 - 5,000 8,464 16,665,288 5.68%
5,001 - 10,000 962 7,534,289 2.56%
10,001 - 15,000 308 3,889,561 1.32%
15,001 - 20,000 184 3,425,891 1.16%
20,001 - 30,000 155 3,972,014 1.35%
30,001 - 40,000 76 2,710,885 0.92%
40,001 - 50,000 53 2,461,173 0.84%
50,001 - 100,000 84 5,864,705 1.99%
100,001 - 200,000 67 9,219,804 3.13%
200,001 - 400,000 38 11,335,513 3.85%
400,001 - 600,000 16 7,892,712 2.68%
600,001 - 800,000 10 6,793,619 2.31%
800,001 - 1,000,000 7 6,200,628 2.11%
More than 1,000,001 shares 24 203,429,874 69.17%
Total 37,247 294,132,962 100.00%
Special stock: Not applicable
4. Names of major shareholders: Shareholders holding 5% or more of total shares or in the
Top 10 stock option holding ratio list
Name of major shareholder/shares held Shares held Shareholding ratio
Lucky Royal Co., Ltd. 46,041,259 15.65%
Fei-Peng Chen 36,097,995 12.27%
Fei-Lung Chen 33,814,934 11.50%
Cathay Life Insurance Company, Ltd. 14,849,000 5.05%
Bank SinoPac as Custodian for Reva Spring Ltd.
Investment Account 11,580,165 3.94%
Bank SinoPac as Custodian for Ever Cosmos Ltd.
Investment Account 10,010,992 3.40%
Shiao-Chuan Chen-Huang 7,577,413 2.58%
111
Public Service Pension Fund Management Board 5,631,000 1.91%
Cathay United Bank 5,575,000 1.90%
Namchow Chemical Industrial Co., Ltd. Employee
Welfare Committee 4,908,960 1.67%
112
5. Related information of market price per share, net value, earnings, and dividends for the
past two years
Year
No.
2014 2015 March 29, 2016
Market
price
per share
(Note 1)
Highest 72.10 77.40 68.50
Lowest 40.75 55.00 56.60
Average 57.33 66.79 62.39
Market
price
Net value
(Note 2)
Before distribution 21.17 22.75 _
After distribution 18.86
To be
determined and
finalized in the
shareholders
meeting
_
Market
price
Earnings
Weighted average number
of shares 294,132,962 294,132,962 294,132,962
Earnings per share (Note
3) 3.82 4.49 _
Market
price
Dividends
Cash 2.10 2.60 _
Free
share
assignment
Earnings-based
share
assignment
0 0 _
Capital
reserve-based
share
assignment
0 0 _
Accumulated unpaid
dividends (Note 4) 0 0 _
Investment
return
analysis
Price-earnings ratio (Note
5) 15 15 _
Cost-benefit ratio (Note 6) 27 26 _
Cash dividend yield (Note
7) 3.66% 3.89% _
* If there are shares assigned with earnings or upon capital increase with capital reserve,
information of the market price and cash dividends adjusted retroactively according to the
number of shares issued shall also be disclosed.
Note 1: The highest and lowest market prices of common stock each year are shown and the
annual average market price is calculated according to the strike price and the trading
volume in each year.
Note 2: Please fill in distributions decided in the shareholders meeting of the following year
113
according to the number of shares that were already issued for the specific year.
Note 3: If retroactive adjustments are required because of free share distribution, earnings per
share before and after adjustments shall be shown.
Note 4: For the equity shares issuance criteria, if there are requirements that dividends not
distributed for a specific year can be carried over to the year with earnings, the dividends
that have not been paid up to the said year with earnings shall be disclosed separately.
Note 5: Price-earnings ratio = Average closing price per share for the year/earnings per share.
Note 6: Cost-benefit ratio = Average closing price per share for the year/cash dividends per share.
Note 7: Cash dividend yield = cash dividends per share/average closing price per share for the
year
Note 8: For the net value per share and earnings per share, data inspected (reviewed) by CPAs
from the latest quarter up to the date of printing of the Annual Report shall be provided.
For the other columns, data of the immediate year up to the date of printing of the Annual
Report shall be provided.
114
6. Company's dividend policy and implementation status
(1) Dividend policy
The Company's dividend policy is based on its current and future development
plans, taking into consideration the investment environment, demand for capital,
and domestic and international competition as well as shareholders' benefits. Each
year, no less than 30% of earnings available for distribution are appropriated to be
the dividend bonus for shareholders. While dividend bonus is to be distributed to
shareholders, they may be done in cash and (or) stock. Cash dividends may not be
below 10% of the total value of dividends.
(2) Intended distribution of dividends through the current shareholders meeting: Cash
dividends are intended to be distributed as per the decision made by the Board of
Directors on March 17, 2016; that is, NTD 2.60 per share will be distributed.
7. Impacts of free share assignment intended through the current shareholders meeting on the
Company's operational performance and earnings per share: None.
8. Remunerations for employees, directors, and supervisors:
(1) Percentages or ranges of remunerations for employees, directors, and supervisors
under the Articles of Incorporation:
Article 31 of the Articles of Incorporation: In cases of profits for the year, the
company shall set aside no less than 1% to be the remunerations for employees and
no more than 5% to be those for board directors and supervisors. If there are
accumulated losses, however, the value to make up for the losses should be set
aside first.
Article 31-1 of the Articles of Incorporation: In the event that the annual audit
renders earnings, the company shall pay taxes according to law and cover
accumulated losses before setting aside 10% to be the legal reserve; if the legal
reserve has reached the company's paid-in capital size, however, it is allowed not
to set aside further earnings. From the remainder, the special reserve shall be set
aside or reversed as required by law and any further remainder after that shall be
brought forth in the shareholders' meeting based on the Earnings Distribution
Proposal prepared by the Board of Directors along with accumulated retained
earnings for a decision on assignment of dividend bonus to shareholders.
(2) Basis for estimating the amount of remunerations for employees, directors and
supervisors, basis for calculating the number of shares to be distributed as
employee remunerations, and the accounting treatment of the discrepancy, if any,
between the actual distributed amount and the estimated amount, for the current
period:
The Company based its estimation of remunerations for employees, directors, and
supervisors for 2015 on the pre-tax income before remunerations for employees,
directors, and supervisors are calculated for the year and estimated as advised by
the Articles of Incorporation and the Compensation Committee and according to
the ratio approved as a decision of the Board of Directors. If the actually
distributed value differs from the estimated value, it is considered as changes in
accounting estimates and will be listed as gains or losses of the year where the
value is actually distributed.
(3) Remuneration proposals passed by the Board of Directors:
A. Remunerations distributed to employees, directors, or supervisors in cash or
in stock:
As per the decisions made according to the Company's Articles of
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Incorporation and by the Board of Directors, 4% of the pre-tax income before
remunerations for employees, directors, and supervisors are calculated is set
aside to be the remunerations for directors and supervisors and 1% to be the
remunerations for employees. The value of remunerations for directors and
supervisors set aside this year total NTD 56,116 thousand and that for
employees amounts to NTD 14,029 thousand. If the actually distributed value
differs from the original estimated value, the difference will be listed as losses
for the current term of 2016.
B. Employee remunerations distributed in stock and their ratio in the after-tax
income indicated in the Entity Financial Statement of the current term and
their ratio in the overall remunerations assigned to employees: Not applicable.
(4) Actual distribution of remunerations for employees, directors, and supervisors for
the previous year:
A. Cash bonus (remunerations) for employees: NTD 8,538 thousand
B. Remunerations for directors and supervisors: NTD 34,151 thousand
There is no difference from the original intended distribution decided by the
Board of Directors.
9. Buyback of the Company stock: None.
(II) Corporate Debts, Special Shares, Global Depositary Receipt, Employee Stock Option
Certificate, Restricted Employee Shares and M&A (Including Merger, Acquisition, and
Segmentation): None
(III) Implementation of Capital Utilization Plan: None
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V. Operational Status
(I) Business Content
1. Scope of activity
(1) Main activities and their ratios in operations
Business activities Main products
Ratio in the
consolidated
revenue of
the Group
(%)
A. Manufacturing and sale of
cleaners
Crystal soap series, liquid crystal
soap, antiseptic series, and herbal
nourishing soap series 4
B. Manufacturing and sale of
oils and fats
Namchow butter oil substitute, King
Brand g Brand pastry margarine, and
Weijia series of butter 60
C. Manufacturing and sale of
flour-based foods
Frozen dough, frozen noodles,
instant noodles 8
D. Manufacturing and sale of
ice products
Duroyal ice cream, Kabisuo Russian
ice cream 7
E. Manufacturing and sale of
rice-based foods
Recreational foods such as aseptic
cooked rice and rice crackers 9
F. Dining business
Paulaner, Dian Shui Lou,
Chaojiangyan, Benchangliu, Kabisuo
Café, Duroyal Café, Binjiang No. 1,
Xianzhixuan, Beikeli, among others
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(2) New products planned to be developed
A. Cleaners: Research and development of the natural antiseptic crystal series, natural, and
biodegradable cleaning products
B. Oils and fats: Research and development of zero-transfat series to be introduced to the
market
C. Flour-based foods: Development of tasty, nutritional, and quality foods
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D. Ice products: Continuous development of optimal, safe, and high-quality new flavors
E. Rice-based foods: Development of recreational foods that are healthy, sanitary, and of
optimal quality
F. Dining: Emphasis is placed on the food ingredients and the introduction of seasonal
cuisines and constantly research and development of new cuisines.
2. Industrial Overview
A. Cleaners
The constantly improving living standards and rising awareness of environmental protection
have made consumers constantly pay attention to cleaning products that are highly
biodegradable and will not hurt the ecological environment. The crystal soap series of
Namchow is made with natural oils and fats, without any additives, and hence has been
recognized by consumers as a whole.
B. Oils and fats
In light of the fact that transfat has an effect on the human health and the future trends on the
overall market, the oil and fat series of the Company continues to feature zero-transfat products
and is tailor-made as per customers' requirements in order to satisfy customers' needs for
products and to further maintain an interdependent upstream-downstream relationship with
customers. Meanwhile, the package after-sale service and baking workshops are available to
add to the differential competitive advantages and to accordingly boost the Company's sales
and profits.
C. Flour-based foods
As socioeconomics advances, the ratio of people eating out is increasing. With two days off a
week and rising awareness of staying healthy, Taiwanese people pursue healthy, tasty, and
high-quality products. In light of the above, the Company continues to introduce exquisite and
project-based commodities and develop new products jointly with its clients; these products
feature unique styles and desirable quality to earn recognition among consumers. The
Company's products are assuring, tasty, and unique.
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D. Ice products
There are two major trends in the development of the ice products industry: Because of a low
birth rate and recreational foods getting more and more exquisite, consumers are willing to
spend more money purchasing products of additional value. In addition, as the awareness of
food safety surges, consumers pay more and more attention to legal labeling, food traceability,
health and safety and they demand that products should have clean labels and as few additives
as possible.
E. Rice-based foods
To go with trends in society, consumers appeal to the pursuit of safe and tasty products. With
this belief in mind, the Company continues to develop nutritional, healthy, tasty, and delicious
products.
F. Dining
A dining business needs to be able to provide tasty cuisines that satisfy the needs of the taste
buds of customers while at the same time constantly developing new options so that the
restaurant can keep its customers interested at all times. The dining business of Namchow
features introduction of new cuisines in season and prepared with local ingredients. Besides
introducing new options by the season, there are theme cuisines from time to time to best
satisfy the needs of consumers.
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3. Technical and research and development status
(1) Amount spent in research and development in the latest year by the Company
Year 2014 2015 2016 (estimates)
Total (NTD
thousand) 125,678 139,141 169,000
(2) Developed product items
A. Cleaners
The development of 100% natural laundry liquids, bathing, food container cleaning, and herbal
nourishing soaps, among other products, has continued.
B. Oils and fats
The development of zero-transfat series of products and exclusive oils for cakes, frozen bread,
and pineapples has continued.
C. Flour-based foods
Frozen dough: with products including croissants, Danish bread, puff pastry, and soft
European bread products
Frozen noodles: with products including Japanese Udon, ramen, soba, spaghetti, Chinese
cooked noodles, Chinese wide noodles, yolk ramen, pink cherry noodles, and
northern China knife-sliced noodles, and northern China ramen.
Instant noodles: New flavors such as ginkgo mushrooms and green curry are researched and
developed.
D. Ice products
The Super Premium French ice cream - the Parfait series, and Kabisuo Russian ice cream of
Duroyal were introduced.
E. Rice-based foods
Rice: There are healthy rice products certified as health foods and capable of regulating blood
sugar and blood lipid at the moment~Dietary fiber cooked rice, imperial rice, healthy
double-wheat rice, prepared porridges and rice, among other products. A series of
health-preserving rice-based products will continued to be developed on a proactive basis in the
future to satisfy the needs for people to stay healthy.
Rice crackers: Health-oriented rice crackers have been introduced.
(3) Future research and development plans
A. Cleaners
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As the awareness of organic properties and environmental protection continued to rise in the
past few years, consumers emphasize not only the good or bad cleansing power but also safe
composition of cleaning products when it comes to home supplies and cleaning products that
help maintain the household environment. Natural and highly biodegradable cleaning products
will be the focus of research and development in the future.
B. Oils and fats
The emphasis is placed on the fundamental research of oils and fats to continue creating
differential competitive advantages for customers with one-stop and 360-degree all-around
professional services as well as customized product specifications. Our oil and fat products will
appear to be diversified and functional and feature comprehensive services in the future.
C. Flour-based foods
Frozen dough: Frozen dough is the product designed to meet consumer needs. Trends are
precisely kept track of according to the changes in the demographic structure,
dietary preferences and habits. Continous efforts will be made jointly with
customers in the research and development of tasty and assuring products
attractive to consumers.
Frozen noodles: The competitive niche of frozen noodles lies in the supply of innovative and
differential commodities and high value-added products. With the latest food
technology and technique, they fall in line with the diversified lifestyles of
modern people and satisfy the pluralistic needs of dining service providers in
creating a desirable customer relationship.
Instant noodles: Positioned to be slow food and enjoying life, these noodles provide consumers
with convenience and introduce the idea of multiple nutrients in one dish.
D. Ice products
Namchow is the first of its kind in Taiwan to commission the "Traceability Cloud Application
on Safe Foods - the Private Cloud System" where all of its 239 products are made available.
Data of more than 130 suppliers and more than 900 raw materials are filed and managed on the
private cloud resume inquiry website. The only food manufacturer that also produces ice cream
in Taiwan, all of Namchow's products are managed over the cloud for traceability. Consumers
and clients can search for product information, nutrition label, raw material information,
product tests, process information, and circulating temperature, among others. The public and
transparent information enables consumers and clients to buy and eat with assurance.
E. Rice-based foods
Rice: Modern people eat well but do not exercise as much. This gives rise to more
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and more civilization diseases. Namchow will continue to proactively
develop a series of health-preserving rice products in the future.
Rice crackers: Namchow will continue to develop products that meet health demand and are
suitable for respective age groups, such as babies, teenagers, and old people.
F. Dining
In terms of the dining business, comfortable dining environments will be created on the
unchanged belief of "innovation, differentiation, pursuit of excellence, and one-stop service." In
terms of cuisines, fresh and unique local ingredients are used to prepare each intriguing and
affectionate entree in a skilled and experienced way.
4. Long-term and short-term business development plans
(1) Short-term business development plans
Corporate resources will be integrated to make the best of the Company’s advantages with
regard to products it owns and its research and development performance and to be devoted to
the research and service relating to daily consumer products and to provide general consumers
with market-oriented products that are natural, healthy, and exquisite; they will help create
additional value and enhance profitability.
(2) Long-term business development plans
Corporate resources will be integrated to strengthen application of research, development, and
innovation and to improve product differentiation, develop new products, new businesses and
new niches. Not only the technique and products are innovative, the operational model is also
innovative. What is also needed is to precisely keep track of key factors to success in order to
lead the future market and to ensure that the Company keeps its competitive advantages.
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(II) Overview of Marketing and Production/Distribution
Since 1952, when Namchow started to produce soaps, it has been adhering to the belief of
managing multiple aspects, in terms of raw materials, technique, distribution channels, and culture.
Its six major fields, daily cleaners, oils and fats/dairy products, flour, rice, biotechnology, and
dining feature production in Taiwan, Thailand, and China. Operations are based on niche markets
while products are sold to places around the world. Products in respective fields are analyzed as
follows:
1. Market analysis
A. Cleaners
(1) Sale of major commodities:
1) Major products sold are the crystal soaps: solid, liquid, powdered forms, detergents for
food containers, antiseptic series, Crystal bath wash series, herbal nourishing soap series,
among other cleaners.
Official website: http://www.crystalsoap.com.tw/
2) Sold to: domestic market
3) Pattern: B to C
4) Distribution channels: wholesale supermarkets, PXMart, stores for military and public
servants only, distributors and retailers, online shopping malls, among others.
5) Market share:
A) Namchow crystal soaps are the first brand in Taiwan and account for 75% of all
soaps on the local market.
B) The liquid crystal soap grapefruit seed antiseptic laundry soap and liquid crystal soap
of Namchow are products made of natural oils and fats and also the first liquid soap
successfully researched and developed on the domestic market. They account for
more than 95% of all laundry detergents made of natural oils and fats that are
available on the market.
C) The liquid crystal soap for food containers of Namchow is a product made of natural
oils and fats and the first one successfully researched and developed domestically for
washing vegetables and fruits. It accounts for more than 95% of all dish detergents
made of natural oils and fats that are available on the market.
D) The laundry powder made of crystal soap of Namchow is fine powder ground from
natural soaps that features easy rinsing and solubility. It is an innovative product of
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laundry powder made from soaps and accounts for more than 95% of all powdered
soap made of natural oils and fats that are available on the market.
E) Shreds and chips made of Namchow crystal soaps account for around 75% of all
equivalent products made of natural oils and fats that are available on the market.
(2) Future supply and demand and growth on the market:
As the national income in Taiwan increases, awareness of environmental protection rises, and
the organic and natural fad emerges, consumers start to evaluate corporate social
responsibilities while pursuing natural products. Soap products that are made of natural oils
and fats, environmental, and skin friendly have gradually become a lifestyle and attitude and
this is also what supports the steady growth of the crystal soap series of products of
Namchow.
Consumers emphasize not only the good or bad cleansing power but also safe composition of
cleaning products when it comes to home supplies and cleaning products that help maintain
the household environment. In addition, they are more and more concerned about the impacts
of household detergents on the environment and the emphasis on natural and highly
biodegradable cleaners hence takes prominence.
Future development trends of the cleaner industry:
1) The rise of natural and environmentally-friendly cleaners: The constantly improving living
standards and rising awareness of environmental protection have made consumers constantly pay
attention to cleaning products that are highly biodegradable and will not hurt the ecological
environment.
2) The emphasis over multi-purpose products: Besides originally expected cleaning properties of
detergents, consumers are paying attention to additional features of products, if any, including
antiseptic, softening, and color-safe, among other auxiliary features that are popular among
consumers.
3) Components and safety of cleaners are prioritized concern: Because many cleaning products
come into contact with the human body directly, what they are made of and their safety have
gradually become a prioritized concern of consumers before they make a purchase.
4) Popular antiseptic and disinfectant products: Because of the spread of the bird flu, MERS,
enterovirus, and new flu virus, consumers are highly concerned about their personal hygiene and the
importance of a clean home. As such, products claimed to be antiseptic, disinfectant, and anti-virus
continue to be a hit.
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With the introduction of the crystal soap series of Namchow, the products have transformed from
being just a bar of hand wash soap to being a brand that is natural, healthy, fashionable, and modern
in the heart of people nowadays. This brand spirit has made the crystal soap of Namchow a
must-have natural rinsing product with the rising awareness of environmental protection and
LOHAS and health. Besides the liquid laundry crystal soap for washing clothes and that for
washing food containers in the kitchen, Namchow went ahead to introduce the grapefruit seed series
of hand wash products and set foot in the personal cleaning field. Different types of products have
been developed in response to the changing cleaning methods in order to take care of different user
populations comprehensively and the effort has been recognized by general consumers.
(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) There is great demand and potential for natural products as the awareness of health
and environmental protection rises.
B) Unique products of the crystal brand of Namchow supported by powerful assets are
widely loved by consumers.
C) Successful development of the grapefruit seed series of products helps extend the life
span of crystal soap products and add to the value of the brand.
D) Products are known for its unique natural fragrance; there is a normal special
distribution channel and network.
2) Undesirable factors for development prospects
A) Fluctuating and rising costs of raw materials and oils on the international market
B) Increasing costs of distribution channels on a daily basis
C) Consumer habit of switching among different products because they want to try
something new.
3) Countermeasures
A) Persistent assertions over "natural", "skin-friendly", and "environmental": To help
consumers feel that their money is well spent, quality of the existing crystal soap
series of products has been constantly improved and messages about products being
natural and environmentally-friendly of the new generation are communicated so that
consumers of the new generation know and understand the benefits brought about by
the soap itself. The defined brand positioning has helped the crystal soap series
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become a natural, optimal, and environmentally-friendly cleaning product that
demonstrates love toward family and care for the Earth.
B) Continuing reinforcement of the existing intensive distribution network, with product
penetration and coverage as the biggest goal of distribution, to precisely enable each
household to have access to the crystal soap series of products at any time.
C) Collaboration with environmental protection-oriented institutions/groups to
communicate the idea and products to the general public for a synergistic effect
D) Continued promotion of the antiseptic series that spans over household cleaning and
personal cleaning fields so that consumers obviously feel the benefits of products that
work 99.99% in inhibiting bacteria supported by the SGS test.
E) Proactively researching and developing various new crystal products manufactured
with 100% natural oils and fats; the products include household cleaning series and
personal hygiene series to precisely promote the ideas of love for family and care for
the Earth and to fulfill the responsibilities as protector of the social environment.
B. Oils and fats
(1) Sale of major commodities:
1) Major products sold include mixing oils and fats, wrap oils and fats, stuffing oils and fats,
cake-oriented oils and fats, deep-fry oils and fats, special purpose oils and fats, among
others. Around 200 in total, there is a variety of choices of products available. Besides
self-made oils and fats, natural butter is introduced from Europe and cream from Japan to
continue maximizing the scope of service and manage natural butter from Europe and
cream from Japan at better depths.
Official webpage: Taiwan oils and fats
http://www.namchow.com.tw/namchow_OFD.html
Mainland China oils and fats http://www.ncbakery.com/
2) Sold to: Taiwan, mainland China
3) Pattern: B to B
Taiwan market for oils and fats: The products are sold throughout Taiwan. There are
around 3,000 distributors for direct sales; that is, the clients are the end users of
Namchow's oil and fat products. The clients include wholesale stores, supermarkets,
convenience stores, chained bakeries, independent bakeries, hotels, restaurants,
composite cafes, baking processing plants, cakes and pastries stores, handy gift stores,
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and airliner contract kitchens.
Mainland China market for oils and fats: Both direct and indirect sales are adopted as
the distribution models in mainland China. Sales to direct-sale clients account for nearly
40%. In addition, approximately 140 quality distributors were developed and continuous
efforts are made to develop new distributors, with dispatching locations scattered around
the nation; they form the most competitive cold chain inventory and logistics system.
(2) Future supply and demand and growth on the market:
Oils and fats have been a core business for the Namchow Group. Featuring one-stop
professional service, outstanding technology, and tailored product specifications, they
continue to create differential competitive advantages for clients. Namchow has spent many
years in the development of oils and fats to precisely keep track of market trends and create a
baking trend while internally it reinforces the production, research, and development of
differential products in order to satisfy clients' needs and improve clients' profits and
accordingly increase the Company's sales and profits, making Namchow an expert in oils and
fats that grows together with the baking industry and a strategic partner of all businesses in
the global baking industry for common innovative developments. To date, Namchow has
always insisted to be based on customer value and devoted to growing together with its clients.
Thanks to the professional, ethical, and corporate culture-based consensus team, the Company
has been able to constantly introduce high-quality oils and fats that meet current and future
needs on the market.
Opportunities on the Taiwan market for oils and fats: After the oil safety incident in 2014,
some companies went out of business on the baking oil and fat market. The Company,
however, with the support from its huge customer base, has managed to accomplish a
constantly increasing market share for the products of the highest safety standards that are
healthy and of optimal quality that it provides. The increase in the number of visitors in the
past few years has helped drive up the demand for and requirements of handy gifts and helped
these products to secure a position on the high-end market. Consumers are highly picky about
the quality and taste of baked foods. The constantly improving production technique and
technology has also contributed to steady growths in the oil and fat industry.
Opportunities on the mainland China market for oils and fats: The mainland China market
for oils and fats showed rapid development trends; the market scale was worth RMB 7.019
billion in 2011 and it increased to approximately RMB 11.371 billion in 2015. The annual
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growth rate managed to remain at around 13%. It is expected the commissioning of the
Shanghai facility of Namchow in the fourth quarter of 2016 will help satisfy the huge demand
on the market for oils and fats in the future to accordingly realize a growth in gains.
Namchow's oils and fats have always been a leading brand on the mainland China market.
Continuous efforts have been devoted to the research and development of products in various
new fields in order to meet the demand for diversification and products of additional value on
the market. The introduction of Beikeshi ready-to-serve stuffing, for example, has helped
demonstrate the leadership of the Company's products. In addition, to improve the demand for
healthy foods, Namchow took the lead to upgrade all of its products to be low in transfat,
which will gradually contribute to its competitive advantages on the market.
(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) Namchow insists on honesty, quality, and has a powerful brand. It keeps track of
popular trends on domestic and international markets and secures a leading position in
the industry with a high market share. Clients are willing to grow together with
Namchow.
B) Product functions are detail-oriented. They are healthy and safe and feature steady and
optimal quality and complete product choices to meet the demand for oils and fats of
various types of clients; this is unprecedented in the industry. In addition, the
Company proactively introduces quality products from overseas to develop the
high-end market.
C) Powerful R&D capability, advanced technology, professional tailored service, and
improved product differentiation have all helped quickly address customer demand to
accordingly secure an upstream-downstream relationship with customers.
D) The direct-sale system quickly reflects market leads to help form a mutual-trust and
reciprocal strategic partnership with customers.
E) Consultation-oriented marketing and one-stop service. There are professional service
teams to provide all-around services at the front, middle, and late stages of a
distribution process.
F) The commissioning of the Shanghai facility contributes to increased productivity and
helps satisfy the high demand.
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G) The customer service center with the highest penetration rate in the nation provides
customers with timely research and development and high value-added services right
on the spot.
H) Professional workshops, exhibitions, and training classes are proactively organized at
individual locations to help customers improve their management efficacy.
2) Undesirable factors for development prospects
A) There are a variety of recreational foods (such as cookies) already packaged currently
imported from overseas to squeeze the local market and to accordingly undermine the
sales of baking oils and fats.
B) The growth rate of the market exceeds the supply of manpower; professionals are
largely wanted.
C) Increased costs in the running of a bakery have caused the growth and expansion rate
on the market to slow down; so is the growth.
E) Competition on the market has become more and more fierce; products and services
are copying one another.
3) Countermeasures
A) Continuing to create differential competitive advantages for customers and keep track
of popular trends in the baking industry
B) Reinforcing the production, research, and development to provide differential products
that help satisfy customers' needs and increase profits for customers.
C. Flour-based foods
C1. Frozen dough
(1) Sale of major commodities:
1) Frozen dough in Taiwan: Nine major types of frozen dough products are sold ~ toast,
health-oriented, rigid, sweet bread, puff pastry, Danish, western pastries, Chinese pastries,
soft bread, more than 200 items in total. Namchow is a leader among all the frozen dough
brands in Taiwan for it has the widest supply of products.
Official website: http://www.frozendough.com.tw/
2) Frozen dough in mainland China: Mainly Namchow American desserts, Danish bread,
puff pastry, sweet bread, crackers, European bread, cookies, toast and bread, rigid bread,
among others, are sold. Namchow American desserts, in particular, are exclusively
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available at Namchow.
3) Sold to: domestic market, mainland China market and other overseas markets such as the
United States, Canada, Australia, Japan, Hong Kong, and Dubai.
4) Pattern: B to B
5) Distribution channel:
Frozen dough in Taiwan: There are more than 2,000 stores selling the frozen dough,
including wholesale stores, supermarkets, convenience stores, chained bakeries,
independent bakeries, hotels, restaurants, composite cafe, baking processing plants,
handy gift stores, and airliner contract kitchens.
Frozen dough in mainland China: With an emphasis on in-depth integration and
far-reaching developments with clients, the clients can mainly be divided into the
following~large chained bakeries, small-to-medium-sized chained bakeries, bread
sections in wholesale stores, restaurants, hotels, and cafes, among others.
(2) Future supply and demand and growth on the market:
With the emphasis placed by food and health governing authorities in different countries
around the world on the safety and management of raw materials in the food industry in
recent years and the increase in the concern about food safety and a healthy diet among
consumers, it helps the Company secure its presence on the market for frozen dough products
and become a leading brand across the Strait of Taiwan. Frozen dough is a leading and
far-reaching investment on the market that begins with taking the lead, goes through
educating customers, and contributes to the establishment of a successful win-win operational
model with customers in order to lay the groundwork for the business.
1) Opportunities for frozen dough in Taiwan:
A) Popular network and food programs: Consumers can access popular baking information
quickly in a timely manner through the network or on TV, which has formed tangible incentives for
the baking industry to seek innovations and changes and this trend has also made customers more
reliant on the Company to constantly introduce new frozen dough products.
B) Increased demand from consumers and governments for healthy and safe foods: Because of
the increasing awareness among consumers, customers must choose products and suppliers with
high health and safety criteria and requirements. The spontaneous introduction of food health and
safety systems such as HACCP, ISO, and FSSC contributes to the advantages that the frozen dough
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business of the Company possesses.
C) Altered consumption habits of consumers in sluggish economy: Consumers in an M-shaped
society tend to buy the cheap one of products that are highly similar but are also willing to spend
more time in buying value-added products. Since the frozen dough business of the Company was
established, it has been devoted to researching and developing characteristic products and providing
them to customers. On the one hand, these products separate themselves from their competitors. On
the other hand, the appearance and quality of these products gain approval among customers and are
adopted accordingly to satisfy highly-demanding consumers and create a win-win-win situation for
the Company, its customers, and the consumers.
D) As the prices of raw materials continue to surge around the world, consumers are
becoming more and more calculating. Clients (customers) have to deal with the pressure brought
about by price surges that happen one after another and adequately increase the selling prices of
their products while at the same time introducing new high-end products. Under this circumstance,
the propositions of the Company’s frozen dough business successfully connect with consumers'
demand.
2) Opportunities for frozen dough in mainland China:
A) While the market for cake stores continues to grow, brand power is the key to expansion:
The growth rate in the overall food industry of China is not as high as it used to be. It is
approximately equivalent to the increase in the per-capita GDP as a whole. The growth momentum
on the baking market continued; nevertheless, the developments tend to be polarized. As the
operational costs such as raw materials, manpower, rent, and utilities continue to surge, businesses
on the baking market are faced with even sterner challenges. Brands with robust foundations are
able to grow quickly while bakeries of undesirable composition are going out of business.
B) Production model transits from traditional artificial production to industrialized
production: As the baking industry grows quickly, so does the growth of regional and local
chained bakeries. The shortage in manpower has also become more and more common. Meanwhile,
artificial costs quickly surge. The manpower-based traditional production model is getting outdated
in accommodating the rapid corporate developments. Therefore, the production model started to be
industrialized, with constant investments in large factories and equipment. The huge investments in
industrialized, however, pose challenges not only in terms of funding but also in software and
management issues such as talent training, quality stability, refrigerated delivery to retail shops and
the bridging issue. These are the challenges that have to be dealt with when businesses are being
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industrialized.
C) Fresh-baking is the trend to bring up the end baking price: Fresh-baked bread is getting
more and more popular among consumers while bread supplied in traditional package is getting
outdated. Fresh baking has become a consensus among more and more bakeries. Bakeries in China,
however, have not yet been able to provide one-stop service. As such, quality of products at many
bakeries cannot truly successfully add value to the products. This shows that there is still significant
room to be desired when it comes to the operational model for frozen dough and diversification of
fresh-baked products.
D) Increased demand from consumers and governments for healthy and safe foods: Because
of the increasing awareness among consumers, customers must choose products and suppliers with
high health and safety criteria and requirements. Transparency of and control over the composition
has been one of the requirements of customers for their suppliers for the past few years.
The Namchow Group sensitively captured the trends in the baking industry and the challenges and
opportunities while bakeries are developing toward industrialization by being the first to invest in
frozen dough factories that help the Group continue to lead on the market and introduce diversified
products and jointly push the growth in the baking industry jointly with its counterparts.
(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) The frozen dough factory is internationally certified (ISO9001, ISO22000); the quality
is steady and guaranteed.
B) Rich experience in producing frozen dough, controlling and getting insights of the
baking market, and outstanding research, development, and production capabilities.
C) Omnipresent services from back office to the front stage to provide customers with
comprehensive solutions. There is an in-depth understanding of the customer's
operational model and cold chain status. Tailored professional consultation-based
marketing is reflective of the conditions of different customers and the different
business development stages, which not only brings about demand for commodities
for customers but also provide customers with training on how to promote products,
retail services, and help customers increase their baking competitive advantages for
mutual growths.
2) Undesirable factors for development prospects
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A) The surging costs of raw materials and manpower pose even sterner challenges on the
baking market.
3) Countermeasures
A) Customers are provided with the needs to develop new products and apply the baking
technique to become a loyal partner of customers while they run bakeries.
B) Assistance is provided to customers while they maximize operational and management
aspects and enrich product lines.
C2. Frozen noodles
(1) Sale of major commodities:
1) Main products sold include Japanese Udon, ramen, soba, spaghetti, northern China
noodles, Chinese wide noodles, Henan cooked noodles, yolk ramen, among others.
Official website: http://www.sanuki.com.tw/
2) Sold to: domestic market, mainland China market and other overseas markets such as
Europe, the United States, Australia, Canada, Zurich in Switzerland, Indonesia, and Hong
Kong
3) Pattern: B to B, B to C.
4) Distribution channel: Namchow has been focusing on the domestic dining market for
many years. There are currently more than 20,000 customers throughout Taiwan at
present. Namchow's dining services are available at five-star hotels, high-end Japanese
cuisine, composite/theme-based dining chain stores, food courts, airports, freeway rest
areas, traffic arteries, scenic areas, schools/institutions, airport catering service, Chinese
restaurants, fast food stores, steak houses, private lodging, and online shopping, among
others. Consumers can purchase Namchow's products at department store supermarkets,
seafood stores, wholesale stores, shopping malls, among other famous chain stores, and
SOGO, Shin Kong Mitsukoshi, Wellcome, Jasons, Citysuper, Matsusei, RT-Mart,
Carrefour, Far Eastern Amart, Taisugar, and Dale.
5) Market share: Namchow's Premium Frozen Noodles has a market share of more than
70%. Each year, a headcount of more than 2 million consumers consume them. These
consumers and customers offer the best testimonials to successfully establish brand
publicity.
(2) Future supply and demand and growth on the market:
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Frozen noodles are popular among advanced countries in Europe, the United States, and Japan
and serve as the steam engine for the food industry to seek further advancement and
innovation. Taiwanese people are entitled to two days off each week from work and as the
awareness of staying healthy rises, frozen noodles will be needed on the market. With
unprecedented visions, Namchow took the lead to become the first to introduce frozen
noodles and has specialized in research and development, production, distribution, and service.
The standard and professional factory, quick freezing noodle production equipment that is
leading in the world, and topnotch technology have successfully been FSSC22000
(international food safety certification system) certified. Food safety is strictly monitored. The
noodles are of world-class quality texture to boost the industrial criteria for noodles and set a
benchmark and help create new opportunities.
Thanks to the pursuit of health, high quality, and delicious food, with Premium Frozen
Noodles that feature unique commodity advantages and professional frozen noodles core
production technology, Namchow has been able to become the one and only professional
manufacturer and supplier in the industry of frozen noodles in 17 years. Sales on the market
have doubled for the past few years. The fully-loaded production line was unable to meet the
increasing demand. The second production line that was newly established offers more
sufficient production volume and more diversified options to satisfy the needs of consumers
and customers around the world.
Eyeing on the global market, Namchow introduces the new northern China noodles this year
to enter the largest mainstream market of Chinese noodles in the world. Products of Namchow
such as northern China knife-sliced noodles, northern China ramen, homemade noodles,
butterfly noodles, among others, were chosen to be the noodles to be used at the Taipei
International Beef Noodle Festival contest and the 2015 Hong Kong International Beef
Noodle Festival. Famous beef noodle stores such as Master Hong, Master Deng, San Xia San
Jue, and Li's Family only use these noodles, too. The noodles are available at supermarkets in
department stores, wholesale stores, seafood stores of Farmers' Associations as well. The
sales and profits of the company are enhanced and created. The future is in perspective while
Namchow stands in Taiwan and tries to reach out to the world.
(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) Socioeconomic advancement contributes to an increased ratio of people eating out.
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B) FSSC22000 (including HACCP) certified, safe and healthy, without preservatives and
artificial additives at all, an assuring great choice for the health of general consumers
C) Easy to operate, easy to preserve, free of scrappage, and diversified ways of preparing
to offer dining businesses with plenty of room for survival and development
D) Innovative and differential commodities and high value-added commodities to reflect
the diversified lifestyles of modern people and the pluralistic needs of dining
businesses and to create desirable customer relations
E) Frozen noodles are the right solution to the problem as the service sector flourishes
and quality of life for Taiwanese people increases on a daily basis and make Namchow
the one and only professional manufacturer in Taiwan.
2) Undesirable factors for development prospects
A) Growing sales bring full loads for production lines.
3) Countermeasures
A) Additional production lines to provide more sufficient production volume and more
diversified options that help satisfy consumers' demand.
C3. Instant noodles
(1) Sale of major commodities:
1) Main products sold: Mee Jang and Little Chef series of instant noodles.
2) Sold to: Taiwan, Southeast Asia, Australia
(2) Future supply and demand and growth on the market:
In light of the world trade internationalization and liberation trends, the Company invested in
Thailand in 1990 by setting up its overseas production site. Namchow (Thailand) produced
instant noodles and rice crackers in the beginning.
With the food safety incident breaking out in 2014, Namchow (Thailand) decided to sell its
safe and tasty Little Chef instant noodles back to Taiwan and repositioned instant noodles to
be slow noodles. Little Chef Slow Noodles were introduced to enable consumers in Taiwan to
enjoy noodles made with solid ingredients and materials that are safe and tasty and were
planned to be sold through virtual channels and physical channels. Virtual channels include
Yam, YAHOO, PChome, momo, among other shopping platforms while physical channels
include 300 convenience stores and supermarkets at department stores throughout the greater
Taipei area.
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(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) Keeping track of trends on the market and rich in experience, capable of researching
and developing products in a professional way
B) ISO 9001, ISO 14001, GMP, HACCP, BRC, Halal Thai, and IFSOU Kosher certified:
Product quality and safety are assured.
C) Flexible production schedule to provide best-in-class supply chain services.
2) Undesirable factors for development prospects
A) Unstable prices of raw materials
3) Countermeasures
A) More mobile in global procurement in the acquisition of competitive raw materials
D. Ice products
(1) Sale of major commodities:
1) Main products sold include Duroyal and Kabisuo series of ice products, such as ice cream
bars, cones, popsicles, and ice cream in barrels, among others.
Official website: Duroyal http://www.duroyal.com.tw/
Kabisuo http://www.kabisuoicecream.com.tw/index/index_1.htm
2) Sold to: Taiwan market
3) Pattern: B to B, B to C. The products are available at convenience stores, supermarkets,
wholesale stores, dining channels, more than 35,000 sale locations throughout the nation.
The market share exceeds 30%. OEM and ODM businesses of ice products have been
even expanded since 2009, making Namchow one of the largest ice products producers in
Taiwan.
4) Distribution channel:
A) Duroyal Ice Cream
I. Retail: The products are meant as sweet desserts.
I) Ice cream bar: Kuangshiqipai series, Super Kuanshiqipai series, sesame,
and honeydew ice cream bars
II) Cones: Duroyal select chocolate stuffing cones, double chocolate cones,
Oubuleike cones, premium cones, strawberry cones, grapefruit fragrance
brown sugar cones
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III) Ice cream in barrels: Duroyal super series, Duroyal select series, Duroyal
low fat series, Enjoy series, and Amazing series
IV) Popsicles: Duroyal green mango popsicles
V) Ice cream desserts: Maqibing series, Dafu series
II. Distribution channel: The products are meant as raw materials for ice cream, sweets,
reconstituted drinks, and soft-serve ice cream and are supplied to intermediaries in
the dining business.
I) Products: Duroyal Ice Cream, Duroyal Soft-serve Ice Cream, Duroyal
Parfait Ice Cream, and Duroyal Super Ice Cream
B) Kabisuo Royal Russian Ice Cream
I. Retail: The products are meant as sweet desserts.
I) 475 ml, 120ml
II. Distribution channel: The products are meant as raw materials for ice cream, sweets,
and reconstituted drinks and are supplied to intermediaries in the dining business.
I) 5 liters, 3 liters
C) OEM, ODM
I. Retail: The products are meant as sweet desserts.
I) Yuanzu Ice Cream Cakes and Desserts, Family Mart Collection, among
others
II. Distribution channel: The products are meant as raw materials for ice cream, sweets,
and reconstituted drinks and are supplied to intermediaries in the dining business.
I) Family Mart Soft-serve ice cream, among others
(2) Future supply and demand and growth on the market:
Because of a low birth rate and recreational foods getting more and more exquisite,
consumers are willing to spend more money purchasing products of additional value. In
addition, as the awareness of food safety surges, consumers pay more and more attention to
legal labeling, food traceability, health and safety. The Company takes part in the Project of
Traceability Cloud Application on Safe Foods of the Department of Industrial Technology
under the Ministry of Economic Affairs. Raw materials and transport control of all ice
products can be found applying the QR Code so that consumers feel more assured and
protected with what they eat.
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The Company runs popular and premium ice cream markets with its two brands, Duroyal and
Kabisuo. The premium ice cream market features mainly imported premium products while
the popular market consists of middle-priced and low-priced products. For the middle-priced
category, there are mainly differential ice cream, ice cream bars, and cones with favorable
texture while the low-priced segment consists mainly of water-based popsicles supplied by
small local factories.
Being optimistic about business opportunities in ice products, Duroyal again introduced brand
new strawberry cones, grapefruit brown sugar cones, sesame ice cream bars without addition
of artificial colors and spices for retail sales and the Amazing series that is known for its rich
stuffing in 2016. For the distribution channel, there are the highest-grade French Ice Cream
Parfait in the Super Premium series of Duroyal and the American Rock-and-Roll Style
Duroyal Super Ice Cream series.
(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) Production sites are located in Tainan and Taoyuan and are ISO9001, 22000, and
HACCP certified. Safe and optimal raw materials are carefully selected and there is
strict process quality control. Quality of the products is free of concern.
B) Product innovation and brand investment have been the long-term focus of Duroyal
and Kabisuo. Characteristic products are being researched and developed to satisfy
consumers' expectations for novelty and changes and create differential competitive
advantages for customers.
C) Ice produces are an industry featuring a high degree of automation in the production
process. Duroyal has become a No. 1 brand on the market and its production has
reached the level of an economy of scale.
D) Sound warehousing and logistic systems to maintain the display and quality of ice
products.
E) Persistent investment in brand advertising to keep the brand new to consumers despite
elapsed time
F) The one and only ice products food factory in Taiwan. All products are managed over
the cloud for traceability. Consumers and customers can find product information,
nutrition label, raw material information, product test, process information and data
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about their circulation and temperature. The information is released to the public and
is transparent so that consumers and customers can buy them and eat them with
assurance.
2) Undesirable factors for development prospects
A) A variety of products on the market for fierce competition
3) Countermeasures
B) Continuous focus on product innovation and brand investment. Products with
exclusive characteristics are being researched and developed to satisfy consumers'
expectations for novelty and changes.
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E. Rice-based foods
E1. Rice
(1) Sale of major commodities:
1) Main products sold are the biotech cooked rice - Dietary fiber cooked rice, healthy
double-wheat rice, and impirial rice, among others.
Official website: http://www.omefun.com.tw/
2) Sold to: Domestic and international markets such as the United States, Australia, Norway,
the United Kingdom, among others.
3) Distribution channel: Biotech cooked rice is available on the retail market (chained
supermarkets and department store supermarkets), e-commerce virtual platforms (online
shopping malls, group purchase platforms, Alibaba International E-Commerce Platform),
and special channels (TV shopping channels, chained pharmacies, clinics, and
pharmacies), among others.
(2) Future supply and demand and growth on the market:
Food security has become a global concern. Our government is also proactively promoting
local consumption to boost consumption of local rice by initiating the one-more-bite of rice
movement in Taiwan; it will help increase consumption of rice and reduce farmland lying
fallow and enhance the food self-support rate.
Ambient temperature sterile-packaged rice has been prevailing in Japan, Korea, and even
mainland China, where rice is the staple. In Taiwan, however, it is still at the budding phase
now. Ambient temperature sterile-packaged rice marks a new milestone reached by Namchow
on the rice market. In response to the rising trend of having Chinese food, business
opportunities surface on the market to bring rice back home and reintroduce it on the dining
table at home; It helps develop the market share for the staple, rice, in Taiwan, arouse the
value of traditional rice culture, and create new business opportunities.
Modern people eat well but exercise little; this gives rise to more and more civilization
diseases. Obesity, diabetes, hypertension, hypercholesterolemia, and kidney disease, in
particular, are increasing. Statistics of the National Health Insurance Administration show that
more than 2 million people seek treatment because of hyperglycemia and high cholesterol
levels domestically. The Company current supplies healthy rice products certified as health
foods that can effectively regulate blood sugar and blood lipid and will continue to
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proactively develop a series of health-preserving rice products. Taiwan is turning into an aged
society. Preventive and functional traditional rice staple will be optimal in keeping oneself
healthy and caring for one's future.
The rice series of products are made available on the Alibaba International E-Commerce
Platform in 2016. There are English descriptions of product features that are supported by
professional licenses and certificates and a variety of photos of real products, among other
information and introduction to help reach out to the overseas market. Certified by the US
FDA, products are now sold to the United States and Australia, among other countries.
Western people are accustomed to using long-grain rice. As such, we also import different
kinds of rice from overseas, process them, and export them, in order to increase the
competitive advantages of our rice products on the international market. The bonded factory
approved to be set up in 2010 can import rice from Thailand, Pakistan, and India, produce
them on the domestic production platforms, and export them overseas. In addition, we have
also applied for and have been approved for the Islam HALAL certification to proactively
expand our exportation network.
(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) The Company is the only one in Taiwan that produces ambient-temperature
sterile-packaged rice; there are no other competitors on the market yet.
B) Approved by the government and certified as health food, the products have
health-preserving claims.
C) Ready-to-serve after having been microwaved for 90 seconds; they are delicious and
convenient and can satisfy the quick needs of consumers.
2) Undesirable factors for development prospects
A) Ambient-temperature sterile-packaged rice is an emerging product on the market and
is yet to be widely accepted.
3) Countermeasures
A) The dietary fiber cooked rice online shopping mall is created by means of online
resources to focus attention on the target consumer population.
141
B) Phased promotion helps consumers understand the strengths and characteristics of
products.
C) Creating incentives for consumers to keep buying and building the brand image and
reputation.
E2. Rice cookies
(1) Sale of major commodities:
1) Main products sold include rice crackers, rice crackers for babies, prepared cooked rice,
among others.
2) Sold to: Europe, America, Australia, Africa, and Southeast Asia
(2) Future supply and demand and growth on the market:
Because rice-based recreational foods are gluten free and non-GMO and meet the demand for
eating healthily, they have begun to gain prominence on the mainstream market in the western
world and are full of development potential. Products can be developed to suit the needs of
babies, women, men, and old people and hence the development potential is infinite. The
market for baby rice cookies has been successfully developed in 2014 in the United States,
Canada, and the United Kingdom. Development of the market in Australia, Europe, Korea,
and China was expanded in 2015. Baby rice crackers are the "Rising Star" of Namchow
Thailand.
(3) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) Product development capability and perfect quality
B) Flexible production schedule to provide best-in-class supply chain services.
C) Long-term collaboration with western markets to win trust.
2) Undesirable factors for development prospects
A) Unstable prices of raw materials
3) Countermeasures
A) Strengthened research and development to maximize product differentiation and to
keep the leading strength
B) Extension of product items to create monopoly value
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F. Dining
F1. Dining in Taiwan
(1) Sale of major commodities:
1) Dining services for consumers
2) Sites: Taipei, Taoyuan, and Hsinchu
(2) Brands and business locations:
Brand Location
Benchangliu Professional Noodles and Rice
Namchow introduced Japanese frozen noodles
to Taiwan in 1998. Both the production and
sale take place in Taiwan. Benchangliu was
opened particularly for demonstration
purpose.
Udon, Chinese ramen, and other noodles are
served in the store. There are also special set
meals and rice options to satisfy the dining
needs of consumers who demand
exquisiteness, delicious taste, fast service, and
convenience.
http://www.namchow.com.tw/mobile/large/NC
GTYTF/flash.index.html
Taoyuan Store
Paulaner Fresh-brewed Beer Restaurant
Fresh-brewed German beer and self-made
German pork knuckle, sausage, chop meal,
and pizza, among other delicious entrees are
served in the store.
From the Guandu Store, one can overlook the
natural views of the Guandu plains. The
Taoyuan Store is equipped with a beer
brewery facility where one can watch at a
1. Guandu Store
2. Taoyuan Store
3. Qingcheng Store
143
close distance how beer is made. The
Qingcheng Store features exotic cuisines
where a live band from the Philippines is
performing.
https://www.facebook.com/taipeipaulaner
Dian Shui Lou Jiangzhe Cuisine
The restaurant features a southern China
architecture style. One can see artificial
landscapes resembling views in southern
China everywhere. They are the classic scenic
characteristics of Dian Shui Lou.
Local cuisines from Jiangsu and Zhejiang are
served in the store and are customized to suit
the needs of consumers reflective of the
characteristics of the shopping district the
restaurant is located in.
http://www.dianshuilou.com.tw/
1. Nanjing Store
2. Fuxing Store
3. Huaning Store
4. Nankan Store
5. Taoyuan Store
6. Hsinchu Store
7. Linkou Store
Chaojiangyan Chaoguang Cuisine
Local entrees, desserts, and live seafood from
Chaozhou and Guangzhou are served in the
store. With the unique preparation technique,
delicacies and intriguing cuisines from
Chaozhou are reproduced. The restaurant
attracts mostly celebrities from the political
and business circles.
http://www.chaojiangyan.com.tw/
Qingcheng Store
Kabisuo Cafe
Mostly traditional Russian cuisines are served.
Along with the Kabisuo Russian ice cream
that is highly recommended in the store, one
is able to enjoy a feast from a different nation.
http://www.kabisuoicecream.com.tw/index/ind
ex_1.htm
Lishui Store
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Thai Cuisine Restaurant
Authentic Thai food is served and quality
fresh spices from Thailand are mixed to
produce the most authentic Thai curry and
facilitate the preparation of real Thai cuisines.
http://www.namchow.com.tw/mobile/large/NC
GTYTF/flash.index.html
Taoyuan Store
Duroyal Cafe
The first Duroyal Cafe flagship store opened
at Mitsui Outlet Park as invited in 2016.
Featuring a Northern European style, the cafe
is filled with active and young aura. The store
serves salads, bread, and food from Northern
Europe, European bread, pound cake, and
various creative ice cream and desserts.
https://www.facebook.com/MR.J.DUROYAL/?
fref=ts
Linkou Store
(3) Future supply and demand and growth on the market:
Namchow runs its dining business on the beliefs of innovation and differentiation. Its
restaurants have been providing authentic and classic menus for a long term and combined
local and seasonal fresh food ingredients in the research and development of unique and
innovative recipes that have been honored with countless awards since history. Namchow was
invited to set up its presence at Mitsui Outlet Park this year (2016), where it opened Dian Shui
Lou and Duroyal Cafe later to help inspire the food and beverage business at Linkou. It is
believed that the move will bring about another wave of business growth.
(4) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) The promotion of tourism and delicacies by the government has brought about positive
benefits on the dining market.
B) Promoting multi-national cuisines to differentiate from the general market
C) The restaurant has been developing innovative cuisines with seasonal and local food
ingredients to keep customers interested in dining at the restaurants at all times.
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D) Food safety issue has gained prominence. The Group established its own food safety
office to take charge of assisting restaurants in proactively spontaneous health
management and manage food ingredients from the source.
2) Undesirable factors for development prospects
A) The competition on the dining market is fierce and appears to be saturated.
B) The commodity price is rising yet people's income is not increased, which has an
effect on the number of people eating out and the budget they have on food
consumption.
3) Countermeasures
A) One-stop service, select food ingredients, and changing menus help meet the demand
of consumers, increase the number of customers, and consolidate the customer base.
B) Taking advantage of online resources to increase operating efficiency and
competitiveness.
F2. Dining in mainland China
(1) Major products are sold to:
1 Dining services for consumers
2 Location: Shanghai, China
(2) Brands and business locations:
Brand Location
Paulaner Fresh-brewed Beer Restaurant
Fresh-brewed German beer and authentic
Bavarian cuisines (German pork knuckle, sausage)
are served. There is also a live band from the
Philippines performing on site to let every
customer feel the happy and noisy aura. The
restaurant also provides various banquet services
and is capable of accommodating various large
networking activities to satisfy the needs of
different customers.
http://www.bln-restaurants.com/paulaner/
1. Fenyang Store
2. New Palace
Store
3. Binjiang Store
4. World's Fair
Store
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Ambrosia Premium Japanese Cuisine
It was once rated by the world-famous travel
network Conde Nast Traveler to be the only best
new restaurant in Shanghai and one of the Top 75
high-end restaurants in the world. Xianzhixuan
Japanese Cuisine Restaurant cares about the natural
flavor of each food ingredient and the uniqueness of
drinks and provides wedding reception services.
Fenyang Store
Ambrosia Teppanyaki
The Teppanyaki restaurant is designed with
high-end fume-free iron plates. One can watch the
artistic performance of the chefs while they are
preparing Teppanyaki cuisines and enjoy a
different dining experience.
http://www.bln-restaurants.com/ambrosia/
1. Fenyang Store
2. World's Fair
Store
KÄ FER Binjiang No. 1 Premium European
Cuisine
Located on the bank of Pudong River of Shanghai,
it was previously the Longhua Garden, the only
historical house by the river. With the partnership
with the well-known Germany high-end dining
business KÄ FER, the restaurant mainly deals with
European continental cuisines and provides
topnotch western cuisines without borders.
http://www.bln-restaurants.com/kaefer/
Binjiang Store
Deli and Bakery
There are meals, cuisines, pastries, bread, and
sandwiches. One can also enjoy coffee, flower tea,
and homemade noodles and rice. Consumers have
comprehensive choices. To serve office workers
and residents in the surroundings, they also deliver
orders, which is well received among consumers.
Fenyang Store
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http://www.bln-restaurants.com/the-deli-bakery/
Dian Shui Lou Jiangzhe Cuisine
The restaurant entered Shanghai in 2012 and
combines preferred flavours and styles from
Jiangsu, Zhejiang, and Shanghai with addition of
local cuisines from Taiwan and consumers'
favorite cuisines from Sichuan. The rich food
options and careful preparing process are widely
loved by gourmands.
http://www.bln-restaurants.com/dian-shui-lou/
Yishan Store
(3) Future supply and demand and growth on the market:
Namchow set foot in the dining market for the first time in 1997 by opening Paulaner Beer &
Garden Restaurant in Shanghai. Persistently devoted to developing delicacies, Namchow has
set up dining locations throughout the whole Shanghai area and has developed different kinds
of theme foods and beverages. As the living standards and consumption levels improve in
Shanghai, the local dietary culture is developing quickly, too. Namchow Shanghai has many
brands and is able to combine resources inside the Group to satisfy the needs of different
consumer populations. They are highly competitive on the dining market and it is expected
that there is even more room for development in the future.
(4) Competitive niche and desirable and undesirable factors for development prospects and
countermeasures:
1) Competitive niche and desirable factors for development prospects
A) Outstanding brand image
B) Proactively developing customer sources and providing tailored services
C) Combining Group resources and making the best of the Group advantages
2) Undesirable factors for development prospects
A) Increased costs of operation such as rent and human resources
B) Fierce competition on the dining market
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3) Countermeasures
A) Creating high accession barriers and creating monopoly value on the dining market
B) Being novel and changeable in terms of service and marketing in order to attract
consumption and increase profitability
C) Taking advantage of online resources to increase operating efficiency and
competitiveness.
2. Purposes and production processes of main products and correlation among the upstream,
mid-stream, and downstream of the industry
(1) Purposes of main products
A. Cleaners: Namchow Crystal Soap, based on the persistent belief of "made with natural
oils and fats", develops home cleaning and personal hygiene products.
B. Oils and fats: Oils and fats for baking and food processing are produced and products in
various new fields continue to be researched, developed, and introduced to address the various
needs on the baking market.
C. Flour-based foods
Frozen dough: Semi-finished products that fall in the category of bread. Produced frozen
dough is provided to clients (stores). They only have to thaw, ferment, and bake it to render
fresh-baked bread or pastries at any time. It is fresh, convenient, quick, delicious, safe, and
healthy.
Frozen noodles: With noodles producing technology that leads the world, noodles are cooked
to the extent where they taste the best and frozen fresh at -35. Before eating, one only has to
reheat it. It is easy, convenient, tasty, safe, and can accommodate diversified preparation
techniques.
Instant noodles: Delicious, tasty, fast, convenient, and nutritious products are made.
D. Ice products: Duroyal and Kabisuo have been devoted to product innovation and brand
investment for the long term. Unique and characteristic ice products are researched and
developed to satisfy the taste buds of consumers for sweets.
E. Rice-based foods
Ambient-temperature rice: Raw rice is prepared applying high technology to render delicious
cooked rice that can be kept at ambient temperature. The rice is claimed to exercise
health-preserving benefits. Rice is made delicious and easily accessible.
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Rice crackers: Delicious and tasty desserts and foods that are popular among the young and
the old are produced through the continuous and automatic production process to meet the
demand for eating healthily.
F. Dining: Supplied to restaurants for preparing meals.
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(2) Production and preparation processes of main products
1) Production flowchart for cleaners
2) Production flowchart for oils and fats
3) Production flowchart for flour-based foods
3-1) Production flowchart for frozen dough
3-2) Production flowchart for frozen noodles
3-3) Production flowchart for instant noodles
Boiling Pressing Cutting Printing Packaging
Packaging
Boiling
Finished product
Finished
product
Filling
Raw
material
Refining
Deodorizing
Reconstituti
ng Freezing and
combining
Filling and
packaging
Ripening Warehousin
g
Formula
reconstitution Dough mixing Shaping
Quick freezing
Packaging
Warehousin
g
Packagi
ng
Finished
product
Mixing with salt
water or alkaline
water
Pouring in flour
to make dough
Producin
g into four
bands
Cutting four
bands into
pieces
Boiling in
water
Four body taking
shape
Detectin
g the
weight
Quick freezing
Boxing Entering
freezer
Flour Mixing of the
formula Proofing
Rolling
Slitting and waving
Cooling
Deep
frying
Cutting and metering
Pouring Steaming
Assembly and packaging
(bread and seasonings)
Metal and weight
detection
Boxing Warehousing and
shipping
151
4) Production flowchart for ice products
5) Production flowchart for ice crackers
5-1) Production flowchart for ambient-temperature rice
5-2) Production flowchart for rice crackers
Cooling Homogeniz
ation
Ripening Seasoning
Sterilizing
Mixing of raw materials
Freezing
Filling
Rice
refining
Rice washing
and soaking
Metering and
filling
Steam pressurized
heating
(sterilization, α
processing)
Filling of
cooking water
Cooking
Sterile
packaging
Reverse steaming
and cooking
Cooling
Drying Package
inspection
Imperial rice
Storage at ambient
temperature
Rice
refining Rice washing and
soaking
Grinding rice into
powder Steaming
Cooling
Ripening
Warehousing and
shipping
Packaging
Seasoning
Rolling into shape Drying for the first
time Drying for the second
time
Baking or frying in oil
152
(3) Correlation among the upstream, mid-stream, and downstream of the industry
1) Correlation among the upstream, mid-stream, and downstream of cleaners
2) Correlation among the upstream, mid-stream, and downstream of oils and fats
3) Correlation among the upstream, mid-stream, and downstream of four-based foods.
3-1)Correlation among the upstream, mid-stream, and downstream of frozen dough
3-2) Correlation among the upstream, mid-stream, and downstream of frozen noodles
Raw
mater
ial
suppli
er
Raw material
Namchow
oils and fats
Oil refining
Mater
ial
suppli
er
Packing
materials
Plastic products
Paper products
Home
suppli
es
manu
factur
ing
sector
Wholesale store
Chained
supermarket
Stores serving
military staff,
teachers, and
public servants Traditional
distributor
Convenience
store
Department store
Exquisite goods
grocery store
Cons
umer
Base oil suppliers (palm oil,
coconut oil, soybean oil,
butter, and rapeseed oil,
among others)
Baking and dining (wholesale
stores/supermarkets/convenience
stores/chained bakeries/independent
bakeries/hotels/restaurants/composite food and
beverage stores/baking processing plants/cake
and pastry stores/handy gift stores/airliner
contract kitchens, among others)
Oil and fat
manufacturing
facility
Raw material
suppliers
(flour/oils and
fats, among
others)
Frozen dough
manufacturing
facility
Baking
(wholesale stores/supermarkets/convenience
stores/chained bakeries/independent
bakeries/hotels/restaurants/composite food and
beverage stores/baking processing plants/handy gift
stores/airliner contract kitchens, among others)
153
3-3) Correlation among the upstream, mid-stream, and downstream of instant noodles
4) Correlation among the upstream, mid-stream, and downstream of ice products
5) Correlation among the upstream, mid-stream, and downstream of rice-based products
5-1) Correlation among the upstream, mid-stream, and downstream of ambient-temperature
rice
Raw materials
suppliers
(four/acetic starch,
salt, among others)
Frozen noodles
manufacturing
facility
Channels
(five-star hotels, high-end Japanese cuisine,
composite/them food and beverage chain stores,
food court, airports, freeway rest areas, traffic
arteries, scenic areas, schools/institutions, airport
catering service, Chinese restaurants, fast food
stores, steak houses, private lodging, and online
shopping, among others)
Upstream Raw material (flour) Material (packing) Material
Thailand Importation Importation Importation Thailand Thailand
Namchow
Thailand
Market
Instant
noodles
Distribut
or Importer
Retail
Retail
Raw material Manufacturing
company Distribution channel (retail and sales) Consumer
154
5-2) Correlation among the upstream, mid-stream, and downstream of rice crackers
6) Correlation among the upstream, mid-stream, and downstream of dining
Raw material supply
(packing/Rice and others)
(packing/Rice and
others)
Ambient-temperature
rice
manufacturing facility
Channel (chained supermarkets/department store
supermarkets/chained pharmacy and cosmetics
stores/clinics/shopping platforms/TV shopping
channels, among others)
Upstream Raw material (rice)
Material (packing) Material
Thailand Importation Importation Importation Thailand Thailand
Namchow
Thailand
Market
Distribut
or Importer
Retail
Retail
Rice crackers
Small farmer
Vegetables
Cultivation farm
Soft-shelled turtle
Fish
Beef
Wholesale
intermedia
ry
Farmers'
Association
Pork, beef, lamb,
chicken, duck, geese,
fish, crab, vegetables,
fruits, groceries
Vegetables
Restaurant
Catering/to-go/delive
ry
Handy gift
Reunion/banquet
155
3. Supply of main raw materials
(1) Cleaners
The main raw materials are the oils and fats, namely butter, coconut oil, palm oil, and canola oil,
which are bulky raw materials on the international market. Because of the climate and international
supply and demand, prices on the international market fluctuate. Selling prices on the market need
to be planned in advance to reflect the cost and to avoid undermined profits as a result of the
fluctuations. In terms of marketing, the assertion of loving for family and the Earth continues to be
passed down so that consumers fully feel that the products are worth the money.
(2) Oils and fats
The most important raw materials for oils and fats are palm oil, coconut oil, soybean oil, butter, and
rapeseed oil, all of which are bulky raw materials on the international market, whose supply and
demand at the source are under close control by related units to make sure that they are imported by
schedule. Main raw materials for oils and fats are highly affected by the abnormal global climate;
there is minimal control over them. The ability to keep track of the latest prices and information at
any time makes effective and reasonable control over the cost of raw materials to be purchased and
those in stock possible.
(3) Frozen dough
Main raw materials are the flour, oils and fats, yeast, chicken eggs, sugar, and various stuffing,
among others. Flour needs to be supplied by domestic flour manufacturers while oils and fats are
provided by the Company's oils and fats business. The mutual support inside the Company in the
research and development of oils and fats particularly needed for the production of the frozen dough
is the key to the management advantages.
(4) Frozen noodles
1) The main raw materials of Udon are the flour, acetic starch, and salt. The flour is imported by
Namchow from Australia. Flour has been able to be purchased at appropriate time points
reflective of the international factor, changes in prices, and the production and distribution
plan to keep reasonable inventory. Acetic starch is supplied by domestic dealers. The dealers
set their own secure volumes.
2) The main raw materials of ramen, soba, spaghetti, and Chinese noodles are flour, acetic starch,
gluten, egg white powder, improver, alkali, salt, and pigments, among others. Besides flour,
salt, and improver, which are manufactured domestically, all the others are purchased through
156
agencies. All of the raw materials are closely monitored according to the production and
distribution plan at the source of supply by related units and there is reasonable inventory at
any time.
(5) Instant noodles
The main raw material is flour. In order to get steady source of supply, it is necessary to keep track
of prices of wheat on the international market at all times and take into consideration the exchange
rate.
(6) Ice products
The main raw materials are the skimmed milk powder, clarified butter, oils and fats, and special
sugar, among others.
1) Skimmed milk powder, clarified butter: Lucky Royal Co., Ltd. imports products from New
Zealand, where cows are raised in a natural and pure environment.
The needed volume is purchased at appropriate time points according to the prices on the
international market and safe inventory is kept.
2) Oils and fats: Namchow oils and fats are used because they are of optimal quality and come
from safe sources. The supply is steady and prices are reasonable.
3) Special sugar: The special sugar from the Taiwan Sugar Corporation is used. Taiwan Sugar is
known for its scientific sugar production methods and quality products. The supply is steady
and prices are reasonable.
157
(7) Ambient-temperature rice
The main raw materials are the packing materials and rice.
1) Packing material: The sealing film and shallow plates used for the ambient-temperature rice
are made of multi-layered obstructive functional materials that can completely keep off
oxygen to accordingly inhibit the growth of microorganisms. There are no similar products
available in Taiwan and hence they have to be imported from Japan. Joint development with
domestic famous packing material heavyweight manufacturers will be a goal in the future to
bring down the packaging cost.
2) Rice: CNS first-grade optimal rice grown locally in Taiwan is used as the main ingredient for
the delicious cooked rice. Efforts will be placed to further investigate the feasibility of
devoted contract cultivation in order to maintain steady quantity and quality of this main raw
material for the product and storage and transport conditions will be carefully monitored.
What is the most important is that a complete product production traceability and follow-up
system has been in place to enable the general consumers to feel safe and assured with what
they eat.
(8) Rice crackers
The main raw material is rice. Quality Thai rice and other special types of rice are used for
production. Meanwhile, contracts are signed with suppliers to ensure steady quality and quantity of
the rice supplied.
(9) Dining
All the main raw materials are CAS, GMP, FGMP, HACCP, ISO22000 and ISO9001-certified
products that are approved by the government to closely safeguard consumers' health and safety. A
system has been built to proactively trace sources of food ingredients and manage the suppliers.
Livestock, meat products, and seafood are supplied with test reports to prove that they are healthy
and safe. Meanwhile, we collaborate with Farmers' Associations in different places to have access
to local and seasonal food ingredients.
158
4. Names of customers with 10% or more purchases or sales and the value of purchases or
sales in the past two years and their ratios: please describe the reason for the increase or
decrease.
(1) Data of major suppliers in the past two years
Unit: NTD thousand
2015 2014
No. Title value
Ratio in net
purchases
throughout the
year (%)
Relations
hip with
the issuer
Title value
Ratio in net
purchases
throughout the
year (%)
Relations
hip with
the issuer
1 Wilmar Trading Pte Ltd. 732,760 11 None Wilmar Trading Pte Ltd. 741,762 10 None
Other 5,663,674 89 - Other 6,565,196 90 -
Net purchases 6,396,434 100 - Net purchases 7,306,958 100 -
(2) Data of major sales customers in the past two years
Unit: NTD thousand
2015 2014
No. Title value
Ratio in net sales
throughout the
year (%)
Relationship with
the issuer Title value
Ratio in net sales
throughout the
year (%)
Relationship with
the issuer
Customers without reaching 10% or more of the total value of sales in any of these two years
Other 15,446,582 100 - Other 14,763,103 100 -
Net sales 15,446,582 100 - Net sales 14,763,103 100 -
Reason for the increase or decrease:
Purchase: mainly because of the fluctuating oil and fat prices on the international market and changes caused
by adjustment of the inventory
Sales: The increase is mainly the result of business growth.
159
5. Production volumes/values in the past two years
Unit: Ton - NTD thousand
Year
2015 2014 Volume
Main products Throughput Production volume Production value Throughput
Production
volume Production value
Oils and fats 185,843 127,145 6,260,834 172,998 118,090 6,039,474
Cleaners 9,420 8,716 358,195 9,420 9,250 381,515
Ice products 17,561 9,349 687,050 17,561 12,621 860,263
Foods 100,578 40,244 2,040,146 100,354 43,348 1,897,895
Other 2,098 686 429,321 2,098 723 421,899
Total 315,500 186,140 9,775,547 302,431 184,032 9,601,047
6. Sales volume/values in the past two years
Unit: Ton - NTD thousand
Year 2015 2014
Volume Domestic International Domestic International
Main products
Sold
volume Sold value Sold volume Sold value Volume Value Volume Value
Oils and fats 17,265 1,168,565 108,425 8,114,492 16,208 1,067,532 101,732 7,524,475
Cleaners 8,509 603,539 7 218 9,124 663,843 0 0
Ice products 8,738 974,295 379 125,917 11,968 1,474,601 383 127,722
Foods 15,270 681,187 28,042 1,979,585 13,591 561,544 26,063 1,587,074
Dining 0 586,672 0 840,716 0 534,736 0 863,175
Other 0 142 595 404,216 0 150 644 426,995
Total 49,782 4,014,400 137,448 11,465,143 50,892 4,302,406 128,823 10,529,442
160
(III) Information of Employees
Information of employees in the past two years and up to the date of printing of the Annual
Report
Year 2014 2015 As of
March 29, 2016
Number
of
employee
s
Domestic 1,208 1,289 1,303
International 2,841 2,866 2,999
Total 4,049 4,155 4,302
Mean age 35.3 36.1 36.0
Mean seniority in service 6.07 6.43 6.33
Educatio
n
Distributi
on
Ratio
PhD 2
(0.05%)
3
(0.07%)
3
(0.07%)
Master 127
(3.14%)
176
(4.24%)
181
(4.21%)
College and University
Graduate
1,301
(32.13%)
1,446
(34.80%)
1,475
(34.29%)
Senior high/vocational
high school graduate
1,405
(34.70%)
1,270
(30.57%)
1,323
(30.75%)
Below senior
high/vocational high
1,214
(29.98%)
1,260
(30.32%)
1,320
(30.68%)
161
(IV) Information on Environmental Protection Expenditure:
1. Tainan Plant
(1) The Tainan plant was inspected by the Environmental Protection Bureau of Tainan City
Government on January 6, 2015 for water pollution (Inspection No.: 14-W-275193; Test
Report No.: RW-104-01-007).
(2) It was determined by the Environmental Protection Bureau of Tainan City Government
that the Tainan plant was in violation of the requirement under Article 7 Paragraph 1 of the
Water Pollution Control Act and Article 2 of the Effluent Standards. The plant was fined
NTD 80 thousand according to Article 40 Paragraph 1 of the Water Pollution Control Act
and the requirement in Appendix 1 under Article 2 of the Punishment Guidelines for the
Value of Fine for Violating the Water Pollution Control Act.
(3) The Environmental Protection Bureau of Tainan City Government visited the plant again
in July for sampling and the secondary inspection and the plant was determined to be met
regulatory requirements.
(4) Waste water treatment, management, and requirements will be reinforced at the plant to
ensure compliance with regulatory requirements.
(5) There is no concern of environmental pollution and no compensation was involved.
2. Tianjin Plant
Total values of losses (including compensation) and punishments suffered by Namchow
Tianjin because of polluting the environment in 2015
Namchow Tianjin 2015 GL Date Receipt Number Value (RMB)
Fine for sewage treatment
test results exceeding limits 2015-11-02 515110132 14,890.18
Cause of the fine: Total phosphorus exceeds the limit. Current preventive measure: Detection
devices have been installed.
The detection devices configured total around RMB 11,000 in value.
162
(V) Employer-employee Relations
Since the Company was established, it has been valuing benefits for and the health of its employees
very much and looking at employees as its most important assets. Therefore, when planning and
implementing respective personnel systems and welfare measures, the Company place employees at
the core. Various personnel and welfare systems are described as follows:
1. Personnel system:
Personnel guidelines are established in compliance with the Labor Standards Act and applicable
laws and regulations; there are requirements on the wages, working hours, leave, layoff, benefits,
retirement, labor safety and health, gender equity, and various types of welfare for employees.
2. Retirement system:
The Namchow Group recognizes the cost of retirement fund set aside each year based on the
results provided by the actuary and sets aside the retirement reserve for employees who are
applicable under the old retirement system and save it in the special account at the Trust
Department of the Bank of Taiwan. The Employee Retirement Reserve Supervisory Committee
is responsible for the supervision. For employees who are applicable under the Labor Pension
Act, on the other hand, 6% of their salaries is set aside to their Personal Labor Pension Account
at the Bureau of Labor Insurance to accomplish the goal of taking care of their employees career
and life after retirement.
The government started to enforce setting aside the balance of retirement fund for employees
under the old system in 2016. As required, at the end of March each year, the employer must set
aside the balance yet to be paid to the retirement fund for employees who are qualified for
retirement but are still in service. Namchow will follow the government's requirement by setting
aside the said balance.
3. Gender equity in employment:
The guidelines for handling complaints about sexual harassment are established to proactively
protect gender equity in employment and enable both genders to apply their skills in a fair, open,
and just working environment. Meanwhile, the Company works with registered legal daycare
centers which provide children of its employees with preferred rates so that employees can take
care of their family and their work at the same time. The hope is that employees can grow
together with the Company.
4. Employee benefits:
1) Employee Welfare Committee
The Employee Welfare Committee is established to plan for the establishment of a welfare
163
system and to continue promoting various benefits; the information is provided to
colleagues through the intranet of the Company.
2) The following shows the various benefits made available by the Company and the
Employee Welfare Committee. The fundamental welfare value that each employee is
entitled to each year totals around NTD 7,800.
Type No.
Education support Scholarship
Preferred rates are offered to the Company's employees by
collaborative daycare centers that are registered by law.
Subsidies for
clubs/activities Employee travels/outings/reunions/necessary equipment and venue
for the society and activities
Festival gifts Dragon Boat Festival/Mid-Autumn Festival/Double Ninth
Festival/New Year's Day/Spring Festival
Birthday subsidies Birthday gift
Employee insurance Labor Insurance/National Health Insurance
Group Insurance (life, accidents, medical care in an accident,
hospitalized medical care, and cancer medical care)
Retirement Fund There is the retirement fund set aside for each employee in
accordance with the Labor Standards Act and the Labor Pension Act.
Medical care Health examination (once a year for employees at each factory and
the cafeteria and once every two years for employees at the main
office and operation sites)
Consolation money for hospitalized employees or their linear
relatives
Red envelopes for a wedding and white envelopes for a funeral
5. Continuing education and training:
Employees are important assets of Namchow. The Company proactively develops talent through
various types of educational training:
1) Internal training: Zhongli Plant_Labor Safety and Health and Food Safety and Health
Training (12/2/2015), Zhongli Plant&Taoyuan _ Introduction to Cleaning and
Disinfection Technology for Cleaners Used Inside the Plant_Safe Handling of Chemicals
164
(6/5/2015), Taoyuan Plant_GMP Practice (9/21/2015), Royal Tainan Plant_Production
Supervisor Quality Training/Food Safety (1/9/2015), Chaojiangyan_Reception Etiquettes
(4/10/2015&4/17/2015)……etc.
2) External Training: Employees can submit a request to be approved by the head of their
department and take part in external training programs that suit their needs at work, e.g. the
Food Bioactivity Test Method Seminar (8/17/2015), Professional Skills
Development/Management (5/25/2015), Food Safety Control System Fundamental
Training (10/19/2015)...... etc.
3) Participating in exhibitions/seminars: To help extend the horizon of its employees and help
them absorb new knowledge, the Company sends them to attend food fairs and seminars in
the nation and overseas.
6. Workplace and personal safety:
To create a safe, sanitary, and healthy workplace, fire prevention/public safety trainings and
employee safety educational trainings (4/29/2015, 5/4/2015, 5/5/2015) are organized at each
plant for the first half and the second half of the year.
7. Employer-employee Relations:
Being aware of the importance of co-existence and co-prosperity between employers and
employees, the Company proactively promotes a harmonious employer/employee relationship by
comprehensively reinforcing communication and coordination and constantly improving the
workplace. In addition, the industrial union is established by law. The parties communicate with
each other periodically and from time to time to reach a consensus. In the future, efforts will
continue to bring together the employer and the employees by heart applying the principle of
integrity to jointly create profits.
8. Employer-employee disputes in the past three years: None
165
(VI) Important Contract
Nature of
contract Client
Start/end dates of
contract Main contents Restrictions
Use of
brewing
technique
Namchow
BVI and
Germany
Paulaner
12.1.1996-12.1.2016 1200 liters (inclusive) and less: 170
Euros of royalties shall be paid for
each hundred liters of beer
produced; From 1201 liters to 2,400
liters: 130 Euros of royalties shall
be paid for each hundred liters of
beer produced; From 2401 liters to
6,000 liters: 110 Euros of royalties
shall be paid for each hundred liters
of beer produced; 6,000 liters and
more: 90 Euros shall be paid for
each hundred liters of beer
produced.
Use of
brewing
technique
Lucky
Royal and
Germany
Paulaner
07/01/2009 ~ the
parties agree to
dismiss the Contract
250 liters (inclusive) and less: 170
Euros of royalties shall be paid for
each hundred liters of beer
produced; From 251 liters to 2,500
liters: 130 Euros of royalties shall
be paid for each hundred liters of
beer produced; 2,501 liters and
more: 110 Euros shall be paid for
each hundred liters of beer
produced.
166
VI. Financial Status
(I) Brief Balance Sheet and Income Statement for the Past Five Years
1. Brief Consolidated Asset Balance Sheet - International Financial Reporting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 2015
Current assets - - 6,313,685 8,498,553 9,391,406
Funds and long-term
investments - -
90,862 41,453 40,715
Real estate, manufacturing
facilities and equipment - -
6,353,212 7,774,260 8,216,461
Intangible assets - - 105,417 105,417 105,417
Other Assets - - 395,375 494,631 645,336
Gross assets - - 13,258,551 16,914,314 18,399,335
Current
liabilities
Before
distributio
n
- -
5,122,599 6,178,713 6,871,475
After
distributio
n
- -
5,710,865 6,796,392 Note 2
Non-current liabilities - - 3,508,300 5,483,023 5,883,783
Others - - - - -
Gross
liabilities
Before
distributio
n
- -
8,630,899 11,661,736 12,755,258
After
distributio
n
- -
9,219,165 12,279,415 Note 2
Capital stock - - 2,941,330 2,941,330 2,941,330
Capital reserve - - 332,677 424,437 520,786
Retained
earnings
Before
distributio
n
- -
1,691,523 2,040,571 2,508,036
After
distributio
n
- -
1,103,257 1,422,892 Note 2
Other equities - - 32,816 204,619 59,781
Treasury stock - - (530,114) (530,114) (530,114)
Non-controlling interests - - 159,420 171,735 144,258
Shareholders’
equity
Before
distributio
n
- -
4,627,652 5,252,578 5,644,077
Total
After
distributio
n
- -
4,039,386 4,634,899 Note 2
Inspecting (Reviewing)
CPA - -
Xiu-Yu Lin
Lin Wu
An-Tian Yu
Xiu-Yu Lin
An-Tian Yu
Xiu-Yu Lin
Inspection (Review) - - No No No
167
Feedback reservations reservations reservations
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
Note 2: To be finalized after a decision is made in the shareholders meeting.
168
2. Brief Consolidated Income Statement - International Financial Reporting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 2015
Business income - - 13,426,115 14,831,846 15,479,543
Gross operating profit - - 4,325,418 4,918,316 5,608,250
Business loss - - 1,387,009 1,577,941 1,955,419
Non-business income and
expenditure - - (58,912) 662 (214,378)
Pre-tax net profits (losses) - - 1,328,097 1,578,603 1,741,041
Continuing department
Net profits of the term - - 899,546 1,008,737 1,163,961
Gains and losses for the
discontinued department - - - - -
Net profits (losses) of the
term - - 899,546 1,008,737 1,163,961
Other comprehensive gains
and losses of the term
(After-tax net value)
- - 102,365 165,608 (177,248)
Sum of general gains and
losses of the term - - 1,001,911 1,174,345 986,713
The net profits belong to the
client of the parent company - - 854,366 948,634 1,112,850
The net profits are part of
non-controlling interests - - 45,180 60,103 51,111
The sum of general gains
and losses belongs to the
client of the parent
company.
- - 948,536 1,109,117 940,307
The sum of general gains
and losses is part of
non-controlling interests.
- - 53,375 65,228 46,406
Earnings per share - - 3.44 3.82 4.49
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
169
3. Brief Entity Asset Balance Sheet - International Financial Reporting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 2015
Current assets - - 1,021,536 1,419,456 1,121,981
Funds and long-term
investments 5,086,250 6,009,097 7,250,538
Real estate, manufacturing
facilities and equipment - - 2,649,554 2,674,472 2,665,947
Intangible assets - - - - -
Other Assets - - 11,703 24,458 39,485
Gross assets - - 8,769,043 10,127,483 11,077,951
Current
liabilities
Before
distribution - - 1,860,731 1,068,458 1,409,720
After
distribution - - 2,448,997 1,686,137 Note 2
Non-current liabilities - - 2,440,080 3,978,182 4,168,412
Others - - - - -
Gross
liabilities
Before
distribution - - 4,300,811 5,046,640 5,578,132
After
distribution - - 4,889,077 5,664,319 Note 2
Capital stock - - 2,941,330 2,941,330 2,941,330
Capital reserve - - 332,677 424,437 520,786
Retained
earnings
Before
distribution - - 1,691,523 2,040,571 2,508,036
After
distribution - - 1,103,257 1,422,892 Note 2
Other equities - - 32,816 204,619 59,781
Treasury stock - - (530,114) (530,114) (530,114)
Shareholders
’ equity
Before
distribution - - 4,468,232 5,080,843 5,499,819
Total
After
distribution - - 3,879,966 5,698,522 Note 2
Inspecting (Reviewing) CPA - - Xiu-Yu Lin An-Tian Yu An-Tian Yu
Lin Wu Xiu-Yu Lin Xiu-Yu Lin
Inspection (Review)
Feedback - - No reservations No reservations No reservations
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
Note 2: To be finalized after a decision is made in the shareholders meeting.
170
4. Brief Entity Income Statement - International Financial Reporting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 2015
Business income - - 2,390,240 2,578,036 2,780,173
Gross operating profit - - 802,546 868,415 1,006,609
Business loss - - 20,259 (19,319) (2,165)
Non-business income
and expenditure - - 842,008 1,089,021 1,334,909
Pre-tax net profits
(losses) - - 862,267 1,069,702 1,332,744
Continuing department - - 854,366 948,634 1,112,850
Net profits of the term
Gains and losses for the
discontinued department - - - - -
Net profits (losses) of
the term - - 854,366 948,634 1,112,850
Other comprehensive
gains and losses of the
term - - 94,170 160,483 (172,543)
(After-tax net value)
Sum of general gains
and losses of the term - - 948,536 1,109,117 940,307
Earnings per share - - 3.44 3.82 4.49
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
171
5. Brief Consolidated Asset Balance Sheet - National Financial Accounting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 015
Current assets 4,968,521 4,922,792 - - -
Funds and long-term
investments 90,264 89,876 - - -
Fixed assets 6,419,745 6,309,229 - - -
Intangible assets 126,530 119,796 - - -
Other Assets 68,741 71,185 - - -
Gross assets 11,673,801 11,512,878 - - -
Current
liabilities
Before
distribution 4,945,566 3,390,734 - - -
After distribution 5,107,339 3,684,867 - - -
Long-term liabilities 2,263,132 3,450,716 - - -
Others 466,242 577,784 - - -
Gross
liabilities
Before
distribution 7,674,940 7,419,234 - - -
After distribution 7,836,713 7,713,367 - - -
Capital stock 2,941,330 2,941,330 - - -
Capital reserve 357,838 383,072 - - -
Retained
earnings
Before
distribution 424,870 709,309 - - -
After distribution 263,097 415,176 - - -
Financial instruments
Unrealized losses of falling
prices
(345,691) (344,735) - - -
Cumulative translation
adjustment 438,843 360,689 - - -
Unrealized revaluation
increments 317,893 317,893 - - -
Treasury stock (188,250) (188,250) - - -
Not recognized as pension
Net losses of cost (111,973) (234,612) - - -
Shareholde
rs’ equity
Before
distribution 3,998,861 4,093,644 - - -
Total After distribution 3,837,088 3,799,511 - - -
Inspecting (Reviewing) CPA
Bo-Shu
Huang
An-Tian Yu
Bo-Shu Huang
Xiu-Yu Lin
- - -
Inspection (Review)
Feedback
No
reservations
No
reservations - - -
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
172
6. Brief Consolidated Income Statement - National Financial Accounting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 2015
Business income 11,020,127 12,060,837 - - -
Gross operating profit 3,038,633 3,537,090 - - -
Business loss 600,351 814,871 - - -
Non-business income
and interest 205,872 102,273 - - -
Non-business costs and
losses 196,236 188,795 - - -
Continuing department 609,987 728,349 - - -
Pre-tax gains and losses
Continuing department
Gains and losses 394,081 477,723 - - -
Gains and losses for the
discontinued department - - - - -
Extraordinary gains or
losses - - - - -
cumulative effect of
changes in accounting
standards
- - - - -
Gains and losses of the
term 394,081 477,723 - - -
Earnings per share 1.40 1.80 - - -
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
173
7. Brief Entity Asset Balance Sheet - National Financial Accounting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 2015
Current assets 947,175 961,456 - - -
Funds and long-term
investments 3,852,466 4,230,431 - - -
Fixed assets 2,265,396 2,423,424 - - -
Intangible assets - - - - -
Other Assets 194,681 195,928 - - -
Gross assets 7,259,718 7,811,239 - - -
Current
liabilities
Before
distribution 1,680,881 - - - -
After
distribution 1,842,654 - - - -
Long-term liabilities 1,555,461 2,899,582 - - -
Others 188,516 272,914 - - -
Gross
liabilities
Before
distribution 3,424,858 - - - -
After
distribution 3,586,631 - - - -
Capital stock 2,941,330 2,941,330 - - -
Capital reserve 357,838 383,072 - - -
Retained
earnings
Before
distribution 424,870 - - - -
After
distribution 263,097 - - - -
Financial instruments
Unrealized losses of
falling prices
(345,691) (344,735) - - -
Cumulative translation
adjustment 438,843 360,689 - - -
Unrealized revaluation
increments 317,893 317,893 - - -
Treasury stock (188,250) (188,250) - - -
Not recognized as
pension
Net losses of cost
(111,973) (234,612) - - -
Shareholder
s’ equity
Total
Before
distribution 3,834,860 - - - -
After
distribution 3,673,087 - - - -
Inspecting (Reviewing)
CPA
Bo-Shu Huang
An-Tian Yu
Bo-Shu Huang
Xiu-Yu Lin - - -
174
Inspection (Review)
Feedback No reservations No reservations - - -
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
175
8. Brief Entity Income Statement - National Financial Accounting Standards
Unit: NT$1,000
Year
No.
Financial data of the past 5 years (Note 1)
2011 2012 2013 2014 2015
Business income 2,333,784 2,348,488 - - -
Gross operating profit 669,581 697,959 - - -
Business loss (39,029) (46,443) - - -
Non-business income and
interest 461,524 603,367 - - -
Non-business costs and
losses 50,836 87,446 - - -
Continuing department
Pre-tax gains and losses 371,659 469,478 - - -
Continuing department
Gains and losses 348,114 446,212 - - -
Gains and losses for the
discontinued department - - - - -
Extraordinary gains or
losses - - - - -
cumulative effect of
changes in accounting
standards
- - - - -
Gains and losses of the
term 348,114 446,212 - - -
Earnings per share 1.40 1.80 - - -
Note 1: Financial data from the past 5 years have all been inspected and authenticated by CPAs.
176
(II) Financial Analysis for the Past Five Years
1. Financial Analysis - Consolidated Financial Statement by the International Financial
Accounting Standards
Year
Analyze
Analysis of the past five years (Note 1)
2012 2013 2014 2015 Year
Fi
na
nc
ial
str
uc
tur
e
%
Liabilities to assets ratio 66 65 69 69 -
Permanent capital to real estate,
manufacturing facilities and equipment
ratio
131 128 138 141 -
Li
qu
idi
ty
Current Ratio (%) 142 123 138 137 -
Quick Ratio (%) 97 87 2015 111 -
Interest protection multiples 7 15 14 13 -
O
pe
rat
in
g
pe
rf
or
m
an
ce
Average collection turnover(times) 6.69 7.79 8.65 9.06 -
Average collection days 55 47 42 40 -
Inventory turnover (times) 5.83 5.62 5.43 5.69 -
Average payables turnover (times) 15.66 15.76 15.07 14.19 -
Average inventory turnover days 63 65 67 64 -
Real estate, manufacturing facilities
and equipment turnover (times) 2.01 2.14 2.09 1.94 -
Total asset turnover (times) 1.04 1.08 0.98 0.87 -
Pr
ofi
ta
bil
ity
Return on total assets (%) 5 8 7 7 -
Return on equity (%) 12 21 20 21 -
Pretax income to paid-in capital (%) 24 45 54 59 -
Net profit rate (%) 4 7 7 8 -
Earnings per share (NT$) (Note 2) 1.73 3.44 3.82 4.49 -
Ca
sh
Fl
o
w
Cash flow ratio (%) 36 32 28 39 -
Cash flow adequacy ratio (%) 155 127 91 106 -
Cash flow reinvestment ratio (%) 8 10 6 11 -
Le
ve
ra
ge
Operating leverage 5 4 4 3 -
Financial leverage 1 1 1 1 -
Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the analysis can be
waived.)
1. The revenue grew and profits increased. The net cash inflow from business activities increased around NTD 1
billion in 2015 from 2014 (+89%). The oil and fat prices were climbing in 2014 on the international market but
they were falling in 2015. Therefore, the inventory dropped from 2014 to 2015 by around NTD 250 million and
other payable amounts increased in 2015 from 2014 by around NTD 230 million. These affected the cash flow
177
ratio, cash flow adequacy ratio, and cash flow reinvestment ratio.
2. The revenue grew and business profits increased in 2015 from 2014 by around NTD 380 million (+24%) to
accordingly affect the operational leverage.
Note 1: Financial data from the past 4 years have all been inspected and authenticated by CPAs.
Note 2: The earnings per share are calculated with the number of shares of common stock already issued applying
the weighted average method. The number of shares increased as a result of earnings or capitalizing with
capital reserve, on the other hand, is adjusted and calculated retroactively.
178
2. Financial Analysis - Entity Financial Statement by the International Financial Accounting
Standards
Year
Analyze
Analysis of the past five years (Note 1)
2012 2013 2014 2015 Year
Fi
na
nc
ial
str
uc
tur
e
%
Liabilities to assets ratio 51 49 50 50 -
Permanent capital to real estate,
manufacturing facilities and equipment
ratio
270 261 350 375 -
Li
qu
idi
ty
Current Ratio (%) 126 55 133 80 -
Quick Ratio (%) 79 32 87 48 -
Interest protection multiples 10 16 18 21 -
O
pe
rat
in
g
pe
rf
or
m
an
ce
Average collection turnover(times) 4.63 4.75 4.84 4.98 -
Average collection days 79 77 75 73 -
Inventory turnover (times) 4.54 4.27 4.11 4.23 -
Average payables turnover (times) 14.18 13.73 12.12 12.25 -
Average inventory turnover days 80 85 89 86 -
Real estate, manufacturing facilities
and equipment turnover (times) 0.91 0.90 0.97 1.07 -
Total asset turnover (times) 0.31 0.29 0.27 0.26 -
Pr
ofi
ta
bil
ity
Return on total assets (%) 6 11 11 11 -
Return on equity (%) 12 21 20 21 -
Pretax income to paid-in capital (%) 15 29 36 45 -
Net profit rate (%) 18 36 37 40 -
Earnings per share (NT$) (Note 2) 1.73 3.44 3.82 4.49 -
Ca
sh
Fl
o
w
Cash flow ratio (%) 8 3 -34 24 -
Cash flow adequacy ratio (%) 13 12 -14 4 -
Cash flow reinvestment ratio (%) (Note
3) - - - - -
Le
ve
ra
ge
Operating leverage (Note 3) - 40 - - -
Financial leverage (Note 4) - - - - -
Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the analysis can be
waived.)
179
1. The Company's pre-tax net profits increased from NTD 1,069,702 thousand in 2014 to NTD 1,332,744 thousand
in 2015 (+25%). This affected the pretax income to paid-in capital ratio, cash flow ratio, cash flow adequacy
ratio, and cash reinvestment ratio.
2. The Company lent around NTD 250 million to Namchow Japan in 2014 to accordingly affect the current ratio,
quick ratio, and cash flow ratio in 2014.
3. The new inflow of cash for business activities increased around NTD 690 million in 2015 from 2014 and the
pre-tax net profits surged significantly from 2012 to 2015. Cash dividends issued also climbed on a yearly basis.
These affected the cash flow ratio, cash flow adequacy ratio, and cash reinvestment ratio.
4. The original receivables (for Namchow Japan) totaled NTD 250 million. Debt equity swap was used as the
investment capital stock and short-term loans and notes as part of current liabilities increased in 2015 from 2014
by around NTD 350 million. These affected the current ratio and the quick ratio.
Note 1: Financial data of the past few years have all been inspected and authenticated by CPAs.
Note 2: The earnings per share are calculated with the number of shares of common stock already issued applying the
weighted average method. The number of shares increased as a result of earnings or capitalizing with capital
reserve, on the other hand, is adjusted and calculated retroactively.
Note 3: Because the ratio is a negative value, it is of no significance in comparison and is not listed.
Note 4: Between 2012 and 2015, business profits were all smaller than the costs of interest. As such, the financial
leverage data are not provided.
180
Calculation formula:
1. Financial structure
(1) Liabilities to assets ratio = total liabilities/total assets
(2) Permanent capital to real estate, manufacturing facilities and equipment ratio = (shareholders'
equity net value + non-current liabilities)/real estate, manufacturing facility and equipment
net value.
2. Liquidity
(1) Current ratio = current assets/current liabilities
(2) Quick ratio = (current assets - inventory - pre-paid costs)/current liabilities
(3) Interest protection multiples = Pre-income tax and interest profits/interest expenditure of the
term
3. Operating performance
(1) Receivables (including accounts receivable and bills receivable that are incurred as a result of
business operation) = net sales/balance from average receivables of each term (including
accounts receivable and bills receivable)
(2) Average collection days = 365/receivables turnover
(3) Inventory turnover = sales cost/average inventory value
(4) Payables (including accounts payable and bills payable that are incurred as a result of
business operation) = sales cost/balance from average payables of each term (including
accounts payable and bills payable)
(5) Average inventory turnover days = 365/inventory turnover
(6) Real estate, manufacturing facility and equipment turnover = net sales/net average real estate,
manufacturing facility, and equipment value
(7) Total asset turnover = net sales/gross assets on average
4. Profitability
(1) Return on assets = [after-tax gains and losses + interest × (1-tax rate)]/gross assets on average
(2) Return on shareholders' equity = after-tax gains and losses/net shareholders’ equity on
average
(3) Net profit rate = after-tax gains and losses/net sales
(4) Earnings per share = (after-tax profits - special stock dividends)/ weighted average of issued
shares
5. Cash Flow
(1) Cash flow ratio = Net cash flow from business activities/current liabilities
181
(2) Net cash flow adequacy ratio = net cash flow from business activities of the past five
years/past 5 years (capital expenditure + increased inventory + cash dividends)
(3) Cash flow reinvestment ratio = (net cash flow from business activities - cash dividends)/(net
value of real estate, manufacturing facility, and equipment + long-term investment + other
assets + working capital)
6. Leverage:
(1) Operating leverage = (net business income - variable business costs and expenses)/ business
profits
(2) Financial leverage = business profits/(business profits - cost of interest)
182
3. Financial Analysis - Consolidated Financial Statement by the National Financial
Accounting Standards
Year
Analyze
Analysis of the past five years (Note 1)
2011 2012 2013 2014 2015
Financial
structure %
Liabilities to assets ratio 66 64 - - -
Permanent capital to real
estate, manufacturing
facilities and equipment
ratio
105 129 - - -
Liquidity
Current Ratio (%) 100 145 - - -
Quick Ratio (%) 67 99 - - -
Interest protection
multiples 7 8 - - -
Operating
performance
Average collection
turnover(times) 6.44 6.70 - - -
Average collection days 57 54 - - -
Inventory turnover (times) 6.04 5.83 - - -
Average payables turnover
(times) 14.68 15.66 - - -
Average inventory
turnover days 60 63 - - -
Fixed asset turnover
(times) 1.91 1.89 - - -
Total asset turnover
(times) 1.04 1.04 - - -
Profitability
Return on total assets (%) 4 5 - - -
Return on shareholders’
equity (%) 10 12 - - -
Ratio in
paid-in
capital
(%)
Business
profits 20 28 - - -
Pre-tax
profits 21 25 - - -
Net profit rate (%) 4 4 - - -
Earnings per share (NT$)
(Note 2) 1.4 1.8 - - -
Cash Flow
Cash flow ratio (%) 10 40 - - -
Cash flow adequacy ratio
(%) 40 62 - - -
Cash flow reinvestment 1 9 - - -
183
ratio (%)
Leverage Operating leverage 7 6 - - -
Financial leverage 1 1 - - -
Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the
analysis can be waived.) Starting from 2013, the International Accounting Standards are adopted and
hence comparison of the last two years is not applicable.
Note 1: Financial data from 2011 and 2012 have all been inspected and authenticated by CPAs.
Note 2: The earnings per share are calculated with the number of shares of common stock already
issued applying the weighted average method. The number of shares increased as a result
of earnings or capitalizing with capital reserve, on the other hand, is adjusted and
calculated retroactively.
184
4. Financial Analysis - Entity Financial Statement by the National Financial Accounting
Standards
Year
Analyze
Analysis of the past five years (Note 1)
2011 2012 2013 2014 2015
Financial
structure %
Liabilities to assets ratio 47 49 - - -
Permanent capital to fixed
assets ratio 238 282 - - -
Liquidity
Current Ratio (%) 56 139 - - -
Quick Ratio (%) 33 86 - - -
Interest protection
multiples 10 10 - - -
Operating
performance
Receivables
turnover(times) 4.95 4.72 - - -
Average collection days 74 77 - - -
Inventory turnover (times) 4.60 4.54 - - -
Payables turnover(times) 5 5 - - -
Average inventory
turnover days 79 80 - - -
Fixed asset turnover
(times) 1.03 1.00 - - -
Total asset turnover
(times) 0.32 0.31 - - -
Profitability
Return on total assets (%) 6 6 - - -
Return on shareholders’
equity (%) 9 11 - - -
Ratio in
paid-in
capital (%)
Business
profits (1) (2) - - -
Pre-tax
profits 13 16 - - -
Net profit rate (%) 15 19 - - -
Earnings per share (NT$)
(Note 2) 1.40 1.80 - - -
Cash Flow
Cash flow ratio (%) 14 22 - - -
Cash flow adequacy ratio
(%) 68 43 - - -
Cash flow reinvestment
ratio (%) Note 4 Note 4 - - -
Leverage Operating leverage (21) (19) - - -
Financial leverage (Note - - - - -
185
3)
Descriptions of changes in the financial ratios: (If the increase or decrease does not reach 20%, the
analysis can be waived.) Starting from 2013, the International Accounting Standards are adopted and
hence comparison of the last two years is not applicable.
Note 1: Financial data from 2011 and 2012 have all been inspected and authenticated by CPAs.
Note 2: The earnings per share are calculated with the number of shares of common stock already
issued applying the weighted average method. The number of shares increased as a result
of earnings or capitalizing with capital reserve, on the other hand, is adjusted and
calculated retroactively.
Note 3: Between 2011 and 2012, business profits were all smaller than the costs of interest. As
such, the financial leverage data are not provided.
Note 4: Because the ratio is a negative value, it is of no significance in comparison and is not
listed.
186
Calculation formula:
1. Financial structure
(1) Liabilities to assets ratio = total liabilities/total assets
(2) Permanent capital to fixed assets ratio = (Net shareholders’ equity +permanent
liabilities)/net fixed assets
2. Liquidity
(1) Current ratio = current assets/current liabilities
(2) Quick ratio = (current assets - inventory - pre-paid costs)/current liabilities
(3) Interest protection multiples = Pre-income tax and interest profits/interest expenditure of the
term
3. Operating performance
(1) Receivables (including accounts receivable and bills receivable that are incurred as a result of
business operation) = net sales/balance from average receivables of each term (including
accounts receivable and bills receivable)
(2) Average collection days = 365/receivables turnover
(3) Inventory turnover = sales cost/average inventory value
(4) Payables (including accounts payable and bills payable that are incurred as a result of
business operation) = sales cost/balance from average payables of each term (including
accounts payable and bills payable)
(5) Average inventory turnover days = 365/inventory turnover
(6) Fixed asset turnover = net sales/net fixed assets on average
(7) Total asset turnover = net sales/gross assets on average
4. Profitability
(1) Return on assets = [after-tax gains and losses + interest × (1-tax rate)]/gross assets on average
(2) Return on shareholders' equity = after-tax gains and losses/net shareholders’ equity on
average
(3) Net profit rate = after-tax gains and losses/net sales
(4) Earnings per share = (after-tax profits - special stock dividends)/ weighted average of issued
shares
5. Cash Flow
(1) Cash flow ratio = Net cash flow from business activities/current liabilities
(2) Net cash flow adequacy ratio = net cash flow from business activities of the past five
years/past 5 years (capital expenditure + increased inventory + cash dividends)
187
(3) Cash flow reinvestment ratio = (net cash flow from business activities - cash
dividends)/(gross fixed assets + long-term investments + other assets + working capital)
6. Leverage:
(1) Operating leverage = (net business income - variable business costs and expenses)/ business
profits
(2) Financial leverage = business profits/(business profits - cost of interest)
188
(III) Supervisor Report on Reviewing the Latest Annual Financial Report
Namchow Chemical Industrial CO., LTD.
Supervisor's Review Report
The Board of Directors prepared and submitted the Company's 2015 Business Report, Entity and
Consolidated Financial Statements and earnings distribution proposal. The Entity and Consolidated
Financial Statements, in particular, were already inspected by CPA An-Tian Yu and CPA Xiu-Yu
Lin of KPMG and the Inspection Report is presented. The said Business Report, Entity and
Consolidated Financial Statements and earnings distribution proposal have been reviewed by me
and believed to be adequate. This report is hence presented in accordance with Article 219 of the
Company Act for your review.
To
The company’s 2016 Shareholders’ Meeting
Supervisors:
Chang Oh Kuan
Namchow Chemical Industrial CO., LTD.
Employee Welfare Committee
Representative Chen Yi Wen
March 22, 2016
189
(IV) Latest Financial Report
Please refer to page 215-290 of this annual report.
(V) Latest Corporate Entity Financial Reports Audited and Certified by CPA
Please refer to page 291-348 of this annual report.
(VI) Impacts of Latest Financial Difficulties Encountered by Company and Its Associated
Enterprises on Company's Financial Standing as of Date of Printing of Annual Report:
None
190
VII. Discussion and Analysis of Financial Standing and
Financial Performance and Risks
(I) Financial Standing
Financial Standing Comparison and Analysis Table
Unit: NT$1,000
Year
No. 2015 2014
Difference
Value %
Current assets 9,391,406 8,498,553 892,853 11
Long-term
investments 40,715 41,453 (738) (2)
Real estate,
manufacturing
facilities and
equipment 8,152,440 7,774,260 378,180 5
Other Assets 814,774 600,048 214,726 36
Gross assets 18,399,335 16,914,314 1,485,021 9
Current liabilities 6,871,475 6,178,713 692,762 11
Long-term liabilities 4,488,105 4,297,111 190,994 4
Others 1,395,678 1,185,912 209,766 18
Gross liabilities 12,755,258 11,661,736 1,093,522 9
Capital stock 2,941,330 2,941,330 0 0
Capital reserve 520,786 424,437 96,349 23
Retained earnings 2,508,036 2,040,571 467,465 23
Other (326,075) (153,760) (172,315) 112
Total shareholders’
equity 5,644,077 5,252,578 391,499 7
Description: Main causes of major changes to assets, liabilities, and equities of the past two
years (changes by 20% or more and NTD 10 million or more) and their impacts and
countermeasures
Other assets: The increase came from investment-oriented real estate (NTD 64,021 thousand
in Namchow Tianjin) and down payment of NTD 178,212 thousand for the
equipment at the Jinshan Plant.
Impacts and response plans in the future: None
Capital reserve: because of Namchow issuing cash dividends to its subsidiary Lucky Royal Co.,
Ltd. (treasury stock)
Impacts and response plans in the future: None
191
Retained earnings: because of the increased earnings of the Group
Impacts and response plans in the future: None
Other: It is mainly because of the appreciation of RMB in 2014 that resulted in the
increase of NTD 141,978 thousand converted from the difference in shares by the
subsidiary applying the equity method and the depreciation of RMB in 2015 that
resulted in the decrease of NTD 85,617 converted from the difference in shares by
the subsidiary applying the equity method. Impacts and response plans in the
future: None
192
(II) Financial Performance
Financial Performance Comparison and Analysis Table
Unit: NT$1,000
Year
No. 2015 2014
Increased/reduced
value
Variable ratio
(%)
Net revenue 15,479,543 14,831,846 647,697 4
Operating cost 9,871,293 9,913,530 (42,237) 0
Gross operating profit 5,608,250 4,918,316 689,934 14
Business expenditure 3,652,831 3,340,375 312,456 9
Business profits 1,955,419 1,577,941 377,478 24
Non-business income and
expenditure (214,378) 662 (215,040)
(32,483)
Pre-tax profits of
continuing department 1,741,041 1,578,603 162,438
10
Personal Income Tax 577,080 569,866 7,214 1
After-tax profits of
continuing department 1,163,961 1,008,737 155,224
15
1. Descriptions of the increase or decrease in the ratio: (changes by 20% or more and NTD 10
million or more)
1. Business profits: mainly contributed to by the growing revenue and increased profits for
the Group
2. Non-business income and expenditure: Mainly caused by the depreciation of RMB that
resulted in the exchange losses worth NTD 226,569 thousand for the loans gotten out by
the subsidiary in mainland China in US dollar.
2. There were no changes to the contents of main business scope of the Company.
3. It is expected that the revenue will keep growing in the following year for the Company.
193
(III) Cash Flow
Cash flow analysis Unit: NT$1,000
Balance of
cash at start of
term
Net cash flow
from business
activities
throughout the
year
Cash outflow
throughout the
year
Balance of
cash
(shortage)
Remedies for shortage in
cash
Investment
plan
Wealth
management
plan
4,461,887 2,710,224 1,841,173 5,330,938 - -
(1) Liquidity analysis of the past two years
Year
No.
2015 2014
Ratio of
increase/decrease
(%)
Cash flow ratio 39 28 39
Cash flow adequacy ratio 106 91 16
Cash flow reinvestment ratio 11 6 83
Description:
The revenue grew and profits increased. The net cash inflow from business activities
increased around NTD 1 billion in 2015 from 2014 (+89%). The oil and fat prices were
climbing in 2014 on the international market but they were falling in 2015. Therefore,
the inventory dropped from 2014 to 2015 by around NTD 250 million and other
payable amounts increased in 2015 from 2014 by around NTD 230 million. These
affected the cash flow ratio, cash flow adequacy ratio, and cash flow reinvestment
ratio.
(2) Cash utilization and liquidity analysis for the coming year: Unit: NT$1,000
Balance of
cash at start of
term
Net cash flow
from business
activities
throughout the
year
Cash outflow
throughout the
year
Balance of
cash
(shortage)
Remedies for shortage in
cash
Investment
plan
Wealth
managemen
t plan
5,330,938 2,900,600 (3,423,238) 4,808,300 - -
1 Business activities: Business income for the year will increase to keep the net cash flow
associated with business activities relatively positive and increasing.
194
2 Investment activities: It is the estimated capital expenditure because of new business or
investments in new products in the coming year.
3 Financing: This refers mainly to the issuance of cash dividends and loans with
banks.
Expected remedies and liquidity analysis upon shortage in cash: It is expected that the working
cash flow of the Company will meet the cash requirements in the coming year to be sufficient
to support normal operations. As such, there are no measures required to make up for the
shortage in cash such as investment plans or wealth management plans.
195
(IV) Impacts of Latest Major Capital Expenditure on Financial Business
(1) Major capital expenditure and funding source Unit: NT$1,000
Project
Actual or
expected
funding
source
Actual or
expected date
of completion
Required
funds
Total
2013 2014 2015 2016 2017
Zhongli Plant FD
Production Line -
Machinery and
equipment
Bank loans
and
self-capital
December
2016 56,000 56,000
Tainan Plant
Warehouse and
Comprehensive
Administrative
Office
Bank loans
and
self-capital
June 2016 56,000 36,255 19,745
Lucky Royal Co.,
Ltd.- Taoyuan
Facility for
Producing Ice
Products
Bank loans
and
self-capital
September
2015 223,000 217,132 5,868
NCTJ Newly Built
Warehouse Self-capital June 2015 296,431 208,698 61,465 26,268
NCGZ Newly Built
Facilities and
Warehouse
Self-capital August 2016 550,422 124,758 202,927 222,737
Namchow Japan -
Land and Removal
Bank loans
and
self-capital
December
2015 674,238 633,390 40,848
Namchow Japan -
Construction of
New Building
Bank loans
and
self-capital
December
2016 403,942 104,920 299,022
(2) Expected impacts of possible benefits on financial operations
In response to the operating demand, investing in building new facilities and purchasing
production equipment will help upgrade the operational scale and profits for the Group and
bring about positive benefits for financial business.
196
(V) Main Reasons for Profits or Losses of Latest Reinvestment Policy, Improvement Plan, and Investment Plan for the Coming Year
Reinvestment Analysis Table Unit: NT$1,000
Description
No. Value invested
Holding ratio
at end of term
(%)
Gains and
losses of the
term
Main scope of operation
Main reason
for profits or
losses
Improvement
plan
Other investment
plans in the future
Namchow (Thailand)
Ltd. 1,027,405 100 245,413
Profits from investment, operation, production, and
sales
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Mostro (Thailand) Ltd. 10,201 100 4,951 Trading of foods and others
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Nacia International
Corporation 343,443 100 1,102,199 Reinvestment holding
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Chow Ho Enterprise
Co., Ltd. 80,000 100 (3,884) Dining business
Fluctuating
food
ingredients
and rising
costs
Increased
revenue and
expanded
sales
No substantial
investment plans
yet
Lucky Royal Co., Ltd. 938,438 100 50,683 Production and sale of ice cream and investment in
dining business
The
production and
distribution
policy is
bringing about
profits.
None Ice products
production line
197
Description
No. Value invested
Holding ratio
at end of term
(%)
Gains and
losses of the
term
Main scope of operation
Main reason
for profits or
losses
Improvement
plan
Other investment
plans in the future
Qizhi Business
Administration
Cultural Co., Ltd.
763 90 25 Publishing and issuance of books
Reduced
publications
and release
volume inside
the Company
None
No substantial
investment plans
yet
Namchow (BVI) Ltd. 69,133 58 120,860 Reinvestment holding
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Dian Shui Lou
Restaurant Business
Co., Ltd.
104,000 100 5,222 Wholesale of liquors and cigars, retail of liquors and
cigars, and dining business
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Namchow Food and
Dining Consultation
Co., Ltd.
5,000 100 (875) Restaurants and food consulting Cost increase
Increased
revenue and
expanded
sales
No substantial
investment plans
yet
Ting Hao (Cayman
Islands) Holdings
Corporation
378,438 100 1,063,076 Reinvestment holding
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Nacia International
Corporation 476,680 100 283,312 Reinvestment holding
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
198
Description
No. Value invested
Holding ratio
at end of term
(%)
Gains and
losses of the
term
Main scope of operation
Main reason
for profits or
losses
Improvement
plan
Other investment
plans in the future
Tianjin Namchow
Food Co., Ltd. 756,875 100 316,782
Production and sale of household oils, artificial
butter, and deep fry oil
The
production and
distribution
policy is
bringing about
profits.
None
Butter Cream and
warehouse
engineering
Shanghai Qiaohao Co.,
Ltd 6,055 100 13,522 Importation and exportation
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Shanghai Qiaohao
Business
Administration Co.,
Ltd
961 100 - Commerce, business administration, and investment
consulting
Yet to begin
operations None
No substantial
investment plans
yet
Shanghai Qiaohao
Food Co., Ltd 4,807 100 -
Packaged foods, sales of restaurant equipment,
goods, and technical imports and exports
Yet to begin
operations None
No substantial
investment plans
yet
Tianjin Yoshiyoshi
Food Co., Ltd. 121,100 100 133,724
Development, manufacturing, and sale of dairy
products and related services
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
BaolaiNa Co., Ltd. 112,018 58 62,139 Chinese and western foods and beverages and
self-made beer music restaurant
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
199
Description
No. Value invested
Holding ratio
at end of term
(%)
Gains and
losses of the
term
Main scope of operation
Main reason
for profits or
losses
Improvement
plan
Other investment
plans in the future
Guangzhou Namchow
Co., Ltd. 544,950 100 458,415 Manufacturing and sale of edible oils and fats
The
production and
distribution
policy is
bringing about
profits.
None
Processing third
line and newly
built facilities
Shanghai Qizhi Co.,
Ltd. 4,541 100 -
Commerce, business administration, and investment
consulting
Yet to begin
operations None
No substantial
investment plans
yet
Shanghai QiaoXing
Co.,Ltd. 60,550 100 265,922
Wholesale of edible oils and fats and foods and
importation/exportation
The
production and
distribution
policy is
bringing about
profits.
None
No substantial
investment plans
yet
Tianjin Namchow
Food Co.,Ltd. 676,597 100 -
Sale, development, production, and processing of
edible oil and fat products, fast-frozen foods, and
frozen foods
Yet to begin
operations
Manufacturing
and sale of
products once
construction
of the plant is
completed
No substantial
investment plans
yet
Namchow Japan 308,530 100 (15,913) Restaurant, beverages, and alcohol business Yet to begin
operations None
Construction of
new building
Namchow Consultation 5,000 100 (41) Restaurant and food and management consulting Cost increase
Increased
revenue and
expanded
sales
No substantial
investment plans
yet
200
(VI) Analysis and Assessment of Risks
1. Impacts of changes in the interest rate and exchange rate and inflation of the latest year on the
Company's gains and losses and response measures in the future:
The Company periodically evaluates the borrowing rates banks offer and is keeping close
correspondence with banks in order to get preferred borrowing rates. For exchange rates, there
are specific foreign exchange manipulation strategies and strict control process flows in place to
facilitate close monitoring over changes in foreign exchange. Although there are impacts on the
inflation, they are not obvious.
2. Main causes of the policies to engage in high-risk, high-leverage, lending, endorsement and
guarantee, and derivatives trading of the latest year and countermeasures in the future:
The Company does provide endorsements and guarantees to its subsidiaries but has never
engaged in high-risk and high-leverage investments.
3. Research and development plan of the latest year and in the future and expected cost of
research and development to be invested in:
Respective businesses within the Group are equipped with their own research and development
units that modify, develop, and seek innovations for products at any time. The cost already
invested in research and development in 2015 totaled NTD 139,141 thousand. Research and
development units in respective businesses are meant to ensure that existing products of the
Company keep their leading positions on the market. According to the product study in 2015,
the zero transfat series of oil and fat products will continue to be developed; the latest food
technology and technique will be applied to increase the quantities of exquisite frozen food
products of high additional value to be produced so as to satisfy the pluralistic needs of
consumers; and the development of natural cleaners for use exclusively at home and for
personal hygiene will continue to honor the principles of nature and environmental protection.
In terms of rice, there are currently two healthy rice products certified as health foods with
proven claims of blood sugar regulating and blood lipid regulating effects. Efforts will continue
in the future to proactively develop a series of rice products that can help preserve health. The
cost of research and development is estimated to have totaled NTD 169,000 thousand for 2016.
4. Impacts of important domestic and international policies and regulatory changes of the latest
year on the Company's financial performance: None
5. Impacts of changes in technology of the latest year on the Company's financial performance
and countermeasures: None.
6. Impacts of changes in the corporate image of the latest year on the management of corporate
risks and countermeasures: None.
7. Expected benefits and possible risks of acquisitions: None.
8. Expected benefits and possible risks of the expansion of manufacturing facilities:
Investments made by the Company in the past two years were in the expansion of production
lines and increase of the throughput in order to address the insufficient market demand. In the
future, the focus will be placed on improving the overall revenue and profits of the Group to
bring about positive benefits for the financial performance.
9. Risks encountered with focused purchases or sales:
(1) In 2015, the only supplier from whom companies within the Group imported more
than 10% of goods was an oil and fat trading company. The global oil and fat raw
material market, however, is huge; in the others, the Company can change its
201
procurement target at any time and hence there is no risk of disconnected supply.
(2) Among the sales targets of the Company, there are no clients accounting for 10% of all
sales and there is no risk of focused sales.
10. Impacts of transfer or exchange of stock options in large quantities by directors, supervisors, or
heavyweight shareholders holding more than 10% of all shares on the Company and the risks
and countermeasures: None.
11. Impacts of the change in the management on the Company and the risks and countermeasures:
None.
12. Lawsuits and non-lawsuit events: Major lawsuits and non-lawsuits or administrative disputes
with a finalized verdict or ongoing proceedings that involve the Company, the Company's
directors, supervisors, general managers, actual person in charge, and shareholders holding
more than 10% of all shares, and the associated companies shall be listed. If the results are
likely to have significant impacts on shareholders' equity or prices of securities, the facts, target
value, and start date of the lawsuit, main clients involved, and handling status as of the date of
printing of the Annual Report shall be disclosed.
The Company was fined by the Department of Health of the Taipei City Government NTD 30
million on October 20, 2014 for its people failing to apply for tests before importing edible oils
between 2013 and August 2014. Since the applicable laws were wrong, the Company appealed
and the original punishment was voided on January 23, 2015. The Taipei City Government
already corrected the fine to be NTD 7.05 million on January 30, 2015. For the acts between
August 7, 2014 and August 24, 2014, a fine of NTD 3 million was finalized. The fine of NTD
4.05 million between March 2013 and May 2014 has been appealed at the Supreme
Administrative Court at present.
13. Other important risks and countermeasures: None
(VII) Other important matters: None
202
VIII. Special Notes
(I) Related materials of associated enterprises
1. Consolidated Financial Statement of Associated Enterprises
Companies that should be included in the compiled Consolidated Financial Statement
of associated enterprises for 2015 in accordance with the Criteria Governing
Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated
Financial Statements of Affiliated Enterprises are identical to those that should be
compiled in the Consolidated Statement of Parent Company and Subsidiaries as per the
7th Communique of Financial Accounting Standards. Therefore, the Consolidated
Financial Statement of associated enterprises is not prepared separately.
2. Consolidated Business Report of Associated Enterprises
(1) Overview of Associated Enterprises
1) Organizational Chart of Associated Enterprises
203
Nacia International Corporation
Namchow Chemical
Industrial Co., Ltd.
Chowho Co., Ltd.
Namchow Consultation Co., Ltd.
Nankyo Japan Co., Ltd.
Lucky Royal Co., Ltd.
Qizhi Cultural Co., Ltd.
Shanghai Qiaohao Trading Co.,Ltd.
Shanghai Qiaohao Trading Co.,Ltd.
Shanghai Qiaohao Business Administration Co.,Ltd
Nacia International Corporation
Ting Hao (Cayman Islands) Holdings
Corporation
Tianjin Namchow Food Co.,Ltd.
Tianjin Yoshiyoshi Food Co., Ltd.
Guangzhou Namchow Food Co.,Ltd.
Shanghai Qizhi Consulting Co., Ltd.
Shanghai QiaoXing Co.,Ltd.
Shanghai Namchow Food Co.,Ltd.
Namchow Food and Dining Consultation
Co., Ltd.
Namchow (BVI) Ltd.
Shanghai BaolaiNa Co., Ltd.
Dian Shui Lou Restaurant Business Co.,
Ltd.
204
2) Profile of various associated enterprises of Namchow
Unit: NT$1,000
Date of
Establishment
Address Paid-in capital
size
Main scope of operation or production
Lucky Royal Co., Ltd. 75.08.26 7F, No. 64, Huaning Street, Taipei City 956,684 Manufacturing and sale of ice products
Namchow (Thailand) Ltd. 78.03.01 75/28-29, 19th Floor, Ocean Tower 2 Bldg, Soi Sukhumvit 19(Soi Wattana)
Sukhumvit Rd., North Klongtoey, Wattana Bangkok10110
1,027,405 Processing and sale of instant noodles and rice
crackers
Yongju (Thailand) Ltd. 77.09.21 75/28-29, 19th Floor, Ocean Tower 2 Bldg, Soi Sukhumvit 19(Soi Wattana)
Sukhumvit Rd., North Klongtoey, Wattana Bangkok10111
10,201 Land rental
Chow Ho Enterprise Co., Ltd. 88.11.20 2F, No. 64, Huaning Street, Taipei City 80,000 Management of chained noodles stores
Qizhi Business Administration
Cultural Co., Ltd.
76.11.05 2F, No. 64, Huaning Street, Taipei City 1,000 Publishing
Nacia International Corporation 85.05.24 Trinity Chambers, P.O.Box 4301. Road Town
Road Town, Tortola, B.V.I.
378,438 Investment holding
Shanghai Qiaohao Trading
Co.,Ltd.
90.03.26 Room 337 of Xinxing Building at No. 2005, Yanggao North Road, Waigao
Bridge, Shanghai
6,055 Trade
Nacia International Corporation 91.09.05 4th Floor,HarbourCentre,P.O.Box613,George Town,
Grand Cayman, Cayman Islands, British West Indies
386,612 Investment holding
Ting Hao (Cayman Islands)
Holdings Corporation
85.06.07 3rd Floor, Genesis Building, P.O.Box 613, George Town,
Grand Cayman, Cayman Islands, British West Indies
560,087 Investment holding
Tianjin Namchow Food Co.,Ltd. 81.09.16 No. 52, Bohai Road, Economic and Technological Development Zone, Tianjin 756,875 Production and sale of oil and fat products
Tianjin Yoshiyoshi Food Co.,
Ltd.
92.01.27 No. 52, Bohai Road, Economic and Technological Development Zone, Tianjin 121,100 Production and sale of fresh cream
Namchow (BVI) Ltd. 81.10.16 Akara Bldg,24 De Castro Street,Wickhams Cay 1,
Road Town,Tortola,British Virgin
156,219 Investment holding
Shanghai BaolaiNa Co., Ltd. 85.03.29 Room 310, No. 58, Huaihaizhong Road, Shanghai 112,018 Restaurant management
Dian Shui Lou Restaurant
Business Co., Ltd.
93.12.31 4F, No. 338, Chongqing North Road Sec. 3, Taipei 104,000 Restaurant management
Guangzhou Namchow Food
Co.,Ltd.
94.09.16 No. 333, Lianguang Road, East Section of Guangzhou Economic and
Technological Development Zone
544,950 Production and sale of oil and fat products
Shanghai Qizhi Business
Consulting Co., Ltd.
96.12.17 Unit A, 6F, 4th Building, No. 889, Yishan Road, Caohe Emerging Technology
Research and Development Zone, Shanghai
4,541 Business administration and investment
consulting
Shanghai QiaoXing Co.,Ltd. 99.08.02 Unit 1803, No. 889, Yishan Road, Xuhui District, Shanghai 60,550 Sales company that undertakes products within
the Group for sale.
Shanghai Qiaohao Business
Administration Co.,Ltd
99.06.28 Unit F, 6F, 4th Building, No. 889, Yishan Road, Shanghai 961 Exhibition and business information consulting
205
Shanghai Qiaohao Food Co.,Ltd 99.09.02 Unit 02, Building 1, Qilai Guest House on Yishan Road, Shanghai 4,807 Sale and distribution of packaged foods
Namchow Food and Dining
Consultation Co., Ltd.
100.11.11 7F, No. 276, Chongqing North Road Sec. 3, Taipei 5,000 Restaurant business and management
consulting
Shanghai Namchow Food
Co.,Ltd.
101.08.21 Section 12, Building 1, No. 888, Yuegong Road, Jinshan Industrial Park,
Shanghai
676,597 Production and processing of edible oils and
fats, frozen foods, among others
Namchow Japan 05.02.2014 東京都新宿区四谷四丁目 30 エスツウィン新宿 3 階 308,530 Restaurant, beverages, and alcohol business
Namchow Consultation 08.14.2014 7F, No. 276, Chongqing North Road Sec. 3, Taipei 5,000 Restaurant and food and management
consulting
3) The Company does not have the conditions determined to be a controlling or subordinate relationship under Article 369-3 of the
Company Act.
206
4) Industries covered in the scope of operation of associated enterprises as a whole and interaction and division of labor:
Name of associated
enterprise
Industry covered in the scope of
operation
Business
correspondence Interaction and division of labor
Namchow Chemical
Industrial CO., LTD.
Production and sale of oil and fat
products Yes
Some oil and fat products are sold to Lucky Royal Co., Ltd. to be the latter’s' production raw
materials.
Production and sale of frozen dough Yes Some of the bread products are sold to restaurants as their purchases.
Production and sale of cleaners Yes Some of the bread products are sold to restaurants as their purchases.
Production and sale of frozen
noodles Yes
Some of frozen noodles are sold to Chow Ho Enterprise Co., Ltd. to be the purchases by
chained bakeries while Lucky Royal Co., Ltd. is authorized as the general distributor for the
remainder.
Lucky Royal Co., Ltd. Production and sale of ice cream Yes Oil and fat raw materials are purchased from Namchow.
Sale and distribution of frozen
noodles Yes The frozen noodles produced by Namchow are undertaken to be sold.
Restaurant management Yes Some of the restaurants' food ingredients are purchased from Chowho and Namchow.
Namchow (Thailand) Ltd. Instant noodles and rice crackers,
among others None
Manufacturing, sale, and processing None
Yongju (Thailand) Ltd. Land rental Yes Land is leased to Namchow (Thailand) Ltd.
Chow Ho Enterprise Co.,
Ltd.
Management of chained noodles
stores Yes
Frozen noodles are purchased from Namchow while some of the ingredients are sold to Dian
Shui Lou and Lucky Royal
Qizhi Business
Administration Cultural
Co., Ltd.
Magazine publishing and release Yes Publications on associated enterprises
Nacia International
Corporation Investment holding None
Shanghai Qiaohao Co., Ltd Trade None
Nacia International
Corporation Investment holding None
Ting Hao (Cayman
Islands) Holdings
Corporation
Investment holding None
Tianjin Namchow Food
Co.,Ltd.
Production and sale of oil and fat
products Yes The products are sold by Shanghai QiaoXing Co.,Ltd.
Tianjin Yoshiyoshi Food
Co., Ltd. Production and sale of fresh cream Yes Fresh cream products are sold by Tianjin Namchow Co.,Ltd.
207
Namchow (BVI) Ltd. Investment holding None
Shanghai BaolaiNa Co.,
Ltd. Restaurant management None
Dian Shui Lou Restaurant
Business Co., Ltd. Restaurant management Yes Some of the food ingredients are purchased from Chowho.
Guangzhou Namchow
Food Co.,Ltd.
Production and sale of oil and fat
products Yes The products are sold by Shanghai QiaoXing Co.,Ltd.
Shanghai Qizhi Business
Consulting Co., Ltd.
Business administration and
investment consulting None
Shanghai QiaoXing
Co.,Ltd. Sales company Yes
Sale of oil and fat products from Tianjin Namchow, Guangzhou Namchow, and Tianjin
Yoshiyoshi Food Co., Ltd.
Shanghai Qiaohao
Business Administration
Co.,Ltd
Exhibition and business information
consulting Yes Design and planning for companies within the Group to attend exhibitions
Shanghai Qiaohao Food
Co.,Ltd
Sale and distribution of packaged
foods None
Namchow Food and
Dining Consultation Co.,
Ltd.
Restaurant business and
management consulting None
Shanghai Namchow Food
Co.,Ltd.
Production and processing of edible
oils and fats, frozen foods, among
others
None
Namchow Japan Restaurant, beverages, and alcohol
business None
Namchow Consultation Restaurant and food and
management consulting None
208
5) Profile of directors, supervisors, and general managers of individual associated enterprises
Name of Business Title Name or Representative
Number of shares
held Shareholdi
ng ratio
Lucky Royal Co., Ltd. Chairman
Fei-Lung Chen, Representative of Namchow
Chemical Industrial CO., LTD. 95,337,885 99.65%
Director
Fei-Peng Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Kan-Wen Lee, Representative of Namchow
Chemical Industrial CO., LTD.
Supervisor Dongbiao Bai
Supervisor Rong-Zhang Lian
Chow Ho Enterprise Co., Ltd. Chairman
Fei-Lung Chen, Representative of Namchow
Chemical Industrial CO., LTD. 7,999,994 100.00%
Director
Fei-Peng Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Heng-Li Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Supervisor
Yi-Wen Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Qizhi Business Administration
Cultural Co., Ltd. Chairman
Fei-Lung Chen, Representative of Namchow
Chemical Industrial CO., LTD. 80,000 80.00%
Director
Fei-Peng Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Chin-Tsai Chen, Representative of Lucky Royal
Co., Ltd. 10,000 10.00%
Supervisor
Yi-Wen Chen, Representative of Namchow
Chemical Industrial CO., LTD. 80,000 80.00%
Namchow (BVI) Ltd. Director
Fei-Lung Chen, Representative of Lucky Royal
Co., Ltd. 3,000,000 58.14%
Director
Fei-Peng Chen, Representative of Lucky Royal
Co., Ltd.
Director
Chin-Tsai Chen, Representative of Lucky Royal
Co., Ltd.
Director
Heng-Li Chen, Representative of Lucky Royal Co.,
Ltd.
Director
Dong-Biao Bai, Representative of Lucky Royal
Co., Ltd.
Nacia International Corporation Director
Fei-Lung Chen, Representative of Namchow
Chemical Industrial CO., LTD. 1,250 100.00%
Director
Fei-Peng Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Chin-Tsai Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Cheng-Wen Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Dong-Biao Bai, Representative of Namchow
Chemical Industrial CO., LTD.
Nacia International Corporation Chairman
Fei-Lung Chen, Representative of Nancia CO.,
LTD. 12,770,000 100.00%
Director
Fei-Peng Chen, Representative of Nancia CO.,
LTD.
Director
Cheng-Wen Chen, Representative of Nancia CO.,
LTD.
209
Name of Business Title Name or Representative Number of shares
Ting Hao (Cayman Islands)
Holdings Corporation Chairman
Fei-Lung Chen, Representative of Nancia CO.,
LTD. 12,500,000 100.00%
Director
Fei-Peng Chen, Representative of Nancia CO.,
LTD.
Director
Chin-Tsai Chen, Representative of Nancia CO.,
LTD.
Director
Kan-Wen Chen, Representative of Nancia CO.,
LTD.
Director
Heng-Li Chen, Representative of Nancia CO.,
LTD.
Director
Cheng-Wen Chen, Representative of Nancia CO.,
LTD.
Tianjin Namchow Food
Co.,Ltd. Chairman
Yi-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation 100.00%
Director
Chin-Tsai Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Director
Cheng-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Director
Zhou-Jing Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Tianjin Yoshiyoshi Food Co.,
Ltd. Chairman
Yi-Wen Chen, Representative of Tianjin Namchow
Oils and Fats Company 100.00%
Director
Chin-Tsai Chen, Representative of Tianjin
Namchow Oils and Fats Company
Director
Cheng-Wen Chen, Representative of Tianjin
Namchow Oils and Fats Company
Director
Dong-Biao Bai, Representative of Tianjin
Namchow Oils and Fats Company
Director
Rong-Zhang Lian , Representative of Tianjin
Namchow Oils and Fats Company
Director
Zhou-Jing Chen, Representative of Tianjin
Namchow Oils and Fats Company
Supervisor
Mei-Hui Liao, Representative of Tianjin Namchow
Oils and Fats Company
Shanghai BaolaiNa Chairman
Heng-Li Chen, Representative of Namchow (BVI)
Ltd. 100.00%
Vice
Chairman
Cheng-Wen Chen, Representative of Namchow
(BVI) Ltd.
Vice
Chairman
Li-Ming Chen, Representative of Namchow (BVI)
Ltd.
Vice
Chairman Jian-Fan Yu
Director
Chin-Tsai Chen, Representative of Namchow
(BVI) Ltd.
Supervisor
Yi-Wen Chen, Representative of Namchow (BVI)
Ltd.
Namchow (Thailand) Ltd. Director
Fei-Lung Chen, Representative of Namchow
Chemical Industrial CO., LTD. 9,245,000 100.00%
Director
Fei-Peng Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Chin-Tsai Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Yi-Jian Wei, Representative of Namchow
Chemical Industrial CO., LTD.
210
Name of Business Title Name or Representative Number of shares
Yongju (Thailand) Ltd. Director
Fei-Lung Chen, Representative of Namchow
Chemical Industrial CO., LTD. 100,000 100.00%
Director
Fei-Peng Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Yi-Jian Wei, Representative of Namchow
Chemical Industrial CO., LTD.
Shanghai Qiaohao Co., Ltd Chairman
Cheng-Wen Chen, Representative of Nancia
International Corporation 100.00%
Director
Chin-Tsai Chen, Representative of Nancia
International Corporation
Director
Dong-Biao Bai, Representative of Nancia
International Corporation
Dian Shui Lou Restaurant
Business Co., Ltd. Director
Fei-Lung Chen, Representative of Lucky Royal
Co., Ltd. 6,000,000 100.00%
Director
Fei-Peng Chen, Representative of Lucky Royal
Co., Ltd.
Chairman
Yi-Wen Chen, Representative of Lucky Royal Co.,
Ltd.
Supervisor
Chin-Tsai Chen, Representative of Lucky Royal
Co., Ltd.
Guangzhou Namchow Food
Co., Ltd. Chairman
Yi-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation 100.00%
Director
Chin-Tsai Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Director
Cheng-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Director
Zhou-Jing Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Shanghai Qizhi Business
Consulting Co., Ltd. Chairman
Cheng-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation 100.00%
Supervisor
Xi-Bin Chen, Representative of Ting Hao (Cayman
Islands) Holdings Corporation
Shanghai QiaoXing Co.,Ltd.,
Executive
Director
Cheng-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation 100.00%
Supervisor
Yi-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Qiaohao Business
Administration Co.,Ltd Chairman
Cheng-Wen Chen, Representative of Shanghai
Qiaohao Trading Co.,Ltd. 100.00%
Supervisor
Yi-Wen Chen, Representative of Shanghai
Qiaohao Trading Co.,Ltd.
Qiaohao Food Co.,Ltd. Chairman
Cheng-Wen Chen, Representative of Shanghai
Qiaohao Trading Co.,Ltd. 100.00%
Supervisor
Yi-Wen Chen, Representative of Shanghai
Qiaohao Trading Co.,Ltd.
Namchow Food and Dining
Consultation Co., Ltd. Chairman
Zhi-Mei Wang, Representative of Lucky Royal
Co., Ltd. 500,000 100.00%
Vice
Chairman
Heng-Li Chen, Representative of Lucky Royal Co.,
Ltd.
Director
Zhou-Jing Chen, Representative of Lucky Royal
Co., Ltd.
Supervisor
Yi-Wen Chen, Representative of Lucky Royal Co.,
Ltd.
Shanghai Namchow Food
Co.,Ltd. Chairman
Yi-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation 100.00%
211
Name of Business Title Name or Representative Number of shares
Director
Cheng-Wen Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Director
Zhou-Jing Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Supervisor
Chin-Tsai Chen, Representative of Ting Hao
(Cayman Islands) Holdings Corporation
Namchow Japan Chairman
Yi-Wen Chen, Representative of Namchow
Chemical Industrial CO., LTD. 3 100.00%
Director
Tian-Shi Tong, Representative of Namchow
Chemical Industrial CO., LTD.
Namchow Consultation Chairman
Zhi-Mei Wang, Representative of Namchow
Chemical Industrial CO., LTD. 500,000 100.00%
Director
Rong-Zhang Lian, Representative of Namchow
Chemical Industrial CO., LTD.
Director
Zhou-Jing Chen, Representative of Namchow
Chemical Industrial CO., LTD.
Supervisor
Yi-Wen Chen, Representative of Namchow
Chemical Industrial CO., LTD.
212
(2) Overview of individual associated enterprises' operation Unit: NTD 1,000
Name of company Code Paid-in
capital size Gross assets
Gross
liabilities Net value
Business
income
Business
profits
Gains and
losses of the
term (after
tax)
Earnings per
share
(NT$/after
tax)
Lucky Royal 0001 956,684 4,681,496 766,701 3,914,795 1,407,721 (4,914) 50,683 0.53
Namchow Thailand 0004 891,865 1,394,822 281,321 1,113,501 1,744,061 289,329 245,413 26.55
Yongju (Thailand) 0005 9,647 59,745 41,966 17,779 98,269 6,769 4,951 49.51
Nancia 0006 378,438 6,822,132 1,771,792 5,050,340 0 (12,854) 1,102,199 881,759.20
Namchow BVI 0007 156,219 354,788 21,227 333,561 0 (24,209) 120,860 23.42
Shanghai BaolaiNa 0008 112,018 435,891 142,304 293,588 1,235,189 91,546 62,139 -
Chowho 0009 80,000 9,431 6,586 2,845 28,301 (3,877) (3,884) (0.49)
Qizhi 0011 1,000 127 1 125 85 25 25 0.25
Shanghai Chowho 0015 6,055 136,882 111,054 25,828 246,576 14,573 13,522 -
Ting Hao (Cayman
Islands) 0017 560,087 5,778,563 874,600 4,903,963 0 (57,545) 1,063,076 57.46
Namchow
International
Corporation
(originally MIC) 0018 386,612 1,777,923 6,106 1,771,817 0 (249) 283,312 22.19
Tianjin Namchow 0019 756,875 3,532,468 1,681,895 1,850,573 2,741,791 381,966 316,782 -
Tianjin Yoshiyoshi 0020 121,100 404,753 91,867 312,886 770,007 174,122 133,724 -
Dian Shui Lou 0021 104,000 210,961 85,776 125,185 398,084 6,886 5,222 0.50
Guangzhou
Namchow 0023 544,950 4,642,124 2,264,778 2,377,346 3,015,288 719,524 596,066 -
Shanghai Qizhi 0024 4,541 5,167 0 5,167 0 0 0 -
Shanghai QiaoXing
Co.,Ltd., 0025 60,550 2,664,027 1,836,547 827,480 8,079,908 281,385 265,922 -
Qiaohao Business
Administration
Co.,Ltd 0026 961 999 0 999 0 0 0 -
213
Qiaohao Food
Co.,Ltd. 0027 4,807 8,425 3,430 4,995 0 0 0 -
Namchow Food and
Dining Consultation 0028 5,000 1,932 421 1,511 0 (879) (875) (1.75)
Shanghai Namchow 0029 676,597 1,608,437 891,372 717,065 0 0 0 -
Nankyo Japan Co.,
Ltd. 0030 58,800 667,126 406,139 260,986 0 (5,371) (15,913) -
Namchow
Consultation 0031 5,000 4,991 50 4,940 0 (51) (41) (0.08)
(3) Relations Report
The Company is not an affiliate of another company as indicated in the chapter about Associated Enterprises of the Company Act and hence it is not
necessary to compile the Relations Report with its controlling companies.
214
(II) Organization of latest private placement securities as of the date of printing of annual
report: None
(III) Latest holding or disposal of company's shares by subsidiaries as of the date of printing of
annual report: None
(IV) Other required supplementary matters: None
※ Latest Matters with Important Impacts on Shareholder Rights or Security Prices
Indicated in Article 36 Paragraph 2 Subparagraph 2 of the Securities Exchange Act as of
the Date of Printing of Annual Report: None
Namchow Chemical Industrial CO., LTD.
Person in Charge:
215
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
AND SUBSIDIARIES
Consolidated Financial Statements
For the Years Ended December 31, 2015 and 2014
(With Independent Auditors' Report Thereon)
Address: No. 100, Yanping N. Rd., Sec 4., Taipei, Taiwan R.O.C
Tel: (02)2535-1251
216
Independent Auditors’ Report
The Board of Directors
Namchow Chemical Industrial Co., Ltd.:
We have audited the accompanying consolidated balance sheets of Namchow Chemical Industrial Co., Ltd. and
subsidiaries (the Group) as of December 31, 2015 and 2014, and the related consolidated statements of
comprehensive income as well as the consolidated statements of changes in equity and of cash flows for the
years ended December 31, 2015 and 2014. These consolidated financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with the "Regulations Governing Auditing and Certification of Financial
Statements by Certified Public Accountants" and the generally accepted auditing standards in the Republic of
China. Those regulations and standards require that we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to in the first paragraph present fairly, in all
material respects, the consolidated financial position of the Group as of December 31, 2015 and 2014, and the
consolidated results of its operations and its cash flows for the years ended December 31, 2015 and 2014, in
conformity with the "Regulations Governing the Preparation of Financial Reports by Securities Issuers", and the
International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations and SIC
Interpretations endorsed by the R.O.C. Financial Supervisory Commission.
217
We have also audited the standalone financial statements of Namchow Chemical Industrial Co., Ltd. as of
December 31, 2015 and 2014, and its related consolidated statements of comprehensive income, as well as the
consolidated statements of changes in equity and of cash flows for the years ended December 31, 2015 and 2014,
on which we have issued an unqualified audit opinion.
KPMG
March 17, 2016
218
December 31, 2015 December 31, 2014
Assets Amount % Amount %
Current assets:
Cash and cash equivalents (notes 6(a) and (t)) $ 5,330,938 29 4,461,887 26
Financial assets at fair value through profit or loss-current (notes 6(b) and (t)) - - 50 -
Debt investment without active market-current (notes 6(c) and (t)) 249,750 2 - -
Notes receivable, net (notes 6(d) and (t)) 215,745 1 187,029 1
Accounts receivable, net (notes 6(d) and (t)) 1,502,657 8 1,505,716 9
Other receivables (notes 6(d), (s) and (t)) 143,597 1 153,583 1
Current income tax assets 13,680 - - -
Inventories (note 6(e)) 1,603,068 9 1,856,898 11
Prepayments 186,262 1 194,077 1
Other current assets 145,709 1 139,313 1
Total current assets 9,391,406 52 8,498,553 50
Non-current assets:
Available-for-sale financial assets-non-current (notes 6(b) and (t)) 13,549 - 14,287 -
Financial assets at cost-non-current (notes 6(f) and (t)) 27,166 - 27,166 -
Property, plant and equipment (notes 6(g), 8 and 9) 8,152,440 44 7,774,260 46
Investment property (note 6(h)) 64,021 - - -
Goodwill (note 6(i)) 105,417 1 105,417 1
Deferred income tax assets (note 6(n)) 33,432 - 27,461 -
Prepayments for equipment 234,258 1 56,046 -
Long-term prepaid rents 223,998 1 127,476 1
Other non-current assets (note 8) 153,648 1 283,648 2
Total non-current assets 9,007,929 48 8,415,761 50
Total assets $ 18,399,335 100 16,914,314 100
December 31, 2015 December 31, 2014
Liabilities and Stockholders' Equity Amount % Amount %
Current liabilities:
Short-term borrowings (notes 6(i), (t), 8 and 9) $ 3,612,664 20 3,405,688 20
Short-term commercial paper payable (notes 6(i) and (t)) 149,967 1 99,994 1
Current portion of long-term borrowings (notes 6(j), (t) and 8) 529,086 3 466,463 3
Notes payable (note 6(t)) 157 - 1,116 -
Accounts payable (note 6(t)) 721,917 4 663,996 4
Other payables (notes 6(o), (r), (s), (t) and 9) 1,261,772 7 1,028,208 6
Current income tax liabilities 159,599 1 171,578 1
Deferred revenue (note 6(q)) 349,410 2 282,132 2
Other current liabilities 86,903 - 59,538 -
Total current liabilities 6,871,475 38 6,178,713 37
Non-current liabilities:
Long-term borrowings (notes 6(j), (t) and 8) 4,488,105 24 4,297,111 25
Provision liabilities-non-current (note 6(k)) 8,585 - 8,585 -
Deferred income tax liabilities (note 6(n)) 769,801 4 605,543 4
Accrued pension liabilities-non-current (note 6(m)) 548,175 3 517,934 3
Other non-current liabilities 69,117 - 53,850 -
Total non-current liabilities 5,883,783 31 5,483,023 32
Total liabilities 12,755,258 69 11,661,736 69
Equity attributable to shareholders of the parent (notes 6(b), (n) and (o)):
Common stock 2,941,330 16 2,941,330 17
Capital surplus 520,786 3 424,437 3
Retained earnings:
Legal reserve 308,586 2 213,723 1
Special reserve 512,508 3 512,508 3
Unappropriated earnings 1,686,942 9 1,314,340 8
2,508,036 14 2,040,571 12
Other equities:
Financial statement translation differences for foreign operations 66,204 - 210,304 1
Unrealized gains (losses) on valuation of available-for-sale financial assets (6,423) - (5,685) -
59,781 - 204,619 1
Treasury stock (530,114) (3) (530,114) (3)
Total equity 5,499,819 30 5,080,843 30
Non-controlling interests 144,258 1 171,735 1
Total equity attributable to shareholders of the parent 5,644,077 31 5,252,578 31
Total liabilities and stockholders' equity $ 18,399,335 100 16,914,314 100
219
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars)
2015 2014
Amount % Amount %
Revenue (note 6(q)) $ 15,479,543 100 14,831,846 100
Operating costs (notes 6(e), (g), (l), (m), (o), (r), 7 and 9) 9,871,293 64 9,913,530 67
Gross profit 5,608,250 36 4,918,316 33
Operating expenses (notes 6(d), (g), (l), (m), (o), (r) and 7):
Selling expenses 2,326,392 15 2,094,263 14
General and administrative expenses 1,187,298 7 1,120,434 8
Research and development expenses 139,141 1 125,678 1
Total operating expenses 3,652,831 23 3,340,375 23
Operating profit 1,955,419 13 1,577,941 10
Non-operating income and expenses (notes 6(f), (g), (h) and 6(s)):
Other income 184,129 2 157,000 1
Other gains and losses (248,047) (2) (30,377) -
Finance costs (150,460) (1) (125,961) (1)
Total non-operating income and expenses (214,378) (1) 662 -
Net income before tax 1,741,041 12 1,578,603 10
Less: income tax expenses (note 6(n)) 577,080 4 569,866 4
Net income 1,163,961 8 1,008,737 6
Other comprehensive income (loss):
Items that will not be reclassified subsequently to profit or loss (note 6(m)):
Remeasurements of the defined benefit plans (27,724) - (11,300) -
Income tax expense related to items that will not be reclassified subsequently - - - -
Total Items that will not be reclassified subsequently to profit or loss (27,724) - (11,300) -
Items that may be reclassified subsequently to profit or loss (note 6(o)):
Financial statements translation differences on foreign operations (148,786) (1) 177,728 1
Unrealized gains (losses) on valuation of available-for-sale financial assets (738) - (820) -
Income tax expense relating to components of other comprehensive income (loss) - - - -
Total Items that may be reclassified subsequently to profit or loss (149,524) (1) 176,908 1
Other comprehensive income (loss), net of tax (177,248) (1) 165,608 1
Total comprehensive income $ 986,713 7 1,174,345 7
Net income attributable to:
Shareholders of the parent $ 1,112,850 8 948,633 6
Non-controlling interests 51,111 - 60,104 -
$ 1,163,961 8 1,008,737 6
Total comprehensive income attributable to:
Shareholders of the parent $ 940,307 7 1,109,117 7
Non-controlling interests 46,406 - 65,228 -
$ 986,713 7 1,174,345 7
Basic earnings per share (in New Taiwan dollars) (note 6(p)) $ 4.49 3.82
Diluted earnings per share (in New Taiwan dollars) (note 6(p)) $ 4.48 3.82
220
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
For the years ended December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars)
Equity attributable to shareholders of the parent Other equity adjustments Financial
statements
Unrealized
gain (loss) on
Retained earnings translation valuation of Total equity
Common
stock
Capital
surplus
Legal
reserve
Special
reserve
Unappropriated
earnings
Total
differences for
foreign
operations
available-for-s
ale financial
assets
Total
Treasury
stock
attributable to
shareholders of
the parent
Non-controllin
g interests Total
Balance at January 1, 2014 $ 2,941,330 332,677 128,287 512,508 1,050,728 1,691,523 37,681 (4,865) 32,816 (530,114) 4,468,232 159,420 4,627,652
Appropriations and distributions:
Legal reserve - - 85,436 - (85,436) - - - - - - - -
Cash dividends and adjustment of capital surplus for Company's
cash dividends received by subsidiaries
-
91,760
-
-
(588,266)
(588,266)
-
-
-
-
(496,506)
-
(496,506)
Net income - - - - 948,634 948,634 - - - - 948,634 60,103 1,008,737
Other comprehensive income (loss) - - - - (11,320) (11,320) 172,623 (820) 171,803 - 160,483 5,125 165,608
Total comprehensive income (loss) - - - - 937,314 937,314 172,623 (820) 171,803 - 1,109,117 65,228 1,174,345
Cash dividends to non-controlling interest from subsidiaries - - - - - - - - - - - (52,913) (52,913)
Balance at December 31, 2014 2,941,330 424,437 213,723 512,508 1,314,340 2,040,571 210,304 (5,685) 204,619 (530,114) 5,080,843 171,735 5,252,578
Appropriations and distributions:
Legal reserve - - 94,863 - (94,863) - - - - - - - -
Cash dividends and adjustment of capital surplus for Company's
cash dividends received by subsidiaries
-
96,349
-
-
(617,680)
(617,680)
-
-
-
-
(521,331)
-
(521,331)
Net income - - - - 1,112,850 1,112,850 - - - - 1,112,850 51,111 1,163,961
Other comprehensive income (loss) - - - - (27,705) (27,705) (144,100) (738) (144,838) - (172,543) (4,705) (177,248)
Total comprehensive income (loss) - - - - 1,085,145 1,085,145 (144,100) (738) (144,838) - 940,307 46,406 986,713
Cash dividends to non-controlling interest from subsidiaries - - - - - - - - - - - (73,883) (73,883)
Balance at December 31, 2015 $ 2,941,330 520,786 308,586 512,508 1,686,942 2,508,036 66,204 (6,423) 59,781 (530,114) 5,499,819 144,258 5,644,077
221
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the years ended December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars)
2015 2014
Cash flows from operating activities:
Consolidated net income before tax $ 1,741,041 1,578,603
Adjustments:
Adjustments to reconcile profit and loss
Depreciation 656,829 609,544
Provisions for bad debt 2,565 368
Gains on financial assets at fair value through profit or loss 50 (2,803)
Interest expenses 150,460 125,961
Interest income (94,068) (47,373)
Losses on disposal of property, plant and equipment, net 6,485 4,392
Gains on disposal of investments, net - (25,930)
Impairment losses on non-financial assets - 20,000
Total adjustments to reconcile profit and loss 722,321 684,159
Changes in assets / liabilities relating to operating activities:
Net changes in operating assets:
Notes receivable (28,716) (28,353)
Accounts receivable 1,004 54,112
Other receivables 110,394 43,122
Inventories 253,830 (75,207)
Prepayments 3,756 (101,610)
Other current assets (6,396) (45,697)
Total changes in operating assets, net 333,872 (153,633)
Net changes in operating liabilities:
Notes payable (959) 1,055
Accounts payable 57,921 17,773
Other payables 259,203 45,156
Provisions liabilities - 1,825
Other current liabilities 27,365 6,502
Net defined benefit liabilities 2,517 3,311
Deferred revenue 67,278 40,181
Total changes in operating liabilities, net 413,325 115,803
Total changes in operating assets / liabilities, net 747,197 (37,830)
Total adjustments 1,469,518 646,329
Cash provided by operating activities 3,210,559 2,224,932
Interest income received 94,068 47,373
Interest paid (149,951) (124,188)
Income tax paid (444,452) (441,113)
Net cash provided by operating activities 2,710,224 1,707,004
Cash flows from investing activities:
Acquisition of debt investments without active market (249,750) -
Proceeds from disposal of financial assets at cost - 43,490
Proceeds from capital reduction of financial assets at cost - 30,666
Acquisition of property, plant and equipment (1,408,065) (2,078,746)
Proceeds from disposal of property, plant and equipment 14,902 50,597
Decrease in Long-term prepaid rents 7,369 -
Decrease (increase) in other non-current assets 26,109 (168,987)
Net cash used in investing activities (1,609,435) (2,122,980)
Cash flows from financing activities:
Increase in short-term borrowings 10,893,563 9,235,626
Decrease in short-term borrowings (10,643,489) (7,775,624)
Increase in short-term commercial paper payable 49,973 55,043
Proceeds from long-term borrowings 1,272,609 4,165,804
Repayment of long-term borrowings (1,067,923) (2,909,591)
Increase (decrease) in other non-current liabilities 15,267 (5,624)
Cash dividends paid (691,563) (641,179)
Net cash provided by (used in) financing activities (171,563) 2,124,455
Effects of changes in exchange rates (60,175) 232,433
Increase in cash and cash equivalents 869,051 1,940,912
Cash and cash equivalents at beginning of period 4,461,887 2,520,975
Cash and cash equivalents at end of period $ 5,330,938 4,461,887
222
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars unless otherwise stated)
(1) Organization and Business Scope
Namchow Chemical Industrial Co., Ltd. (the Company) was incorporated on March 29, 1952 as a
corporation limited by shares under the laws of the Republic of China (R.O.C.). The consolidated financial
statements comprise the Company and its Subsidiaries (the Group). The Company is engaged in the
manufacture, sale, and processing of edible and non-edible oil products and frozen dough, as well as dish
and laundry liquid detergent, It also provides management consulting services.
(2) Financial Statements Authorization Date and Authorization Process
The consolidated financial statements were approved by the Board of Directors on March 17, 2016.
(3) New Standards and Interpretations Not Yet Adopted
(a) The effect of the new announcements and revisions of the standards and interpretations endorsed by
the Financial Supervisory Commission ("FSC")
The Group has adopted to prepare financial reports according to IFRSs 2013 endorsed by the FSC from 2015
onward (not including IFRS 9 Financial Instruments). A summary of the differences between IFRSs 2013
and 2010 are as follows:
New announcements/revisions/amendments of
standards and interpretations
Effective date per
IASB
Amendment to IFRS 1: Limited Exemption from Comparative IFRS 7
Disclosures for First-time Adopters
July 1, 2010
Amendment to IFRS 1: Severe Hyperinflation and Removal of Fixed Dates for
First-time Adopters
July 1, 2011
Amendment to IFRS 1: Government Loans January 1, 2013
Amendment to IFRS 7: Disclosures – Transfers of Financial Assets July 1, 2011
Amendment to IFRS 7: Disclosures – Offsetting Financial Assets and Financial
Liabilities
January 1, 2013
IFRS 10 Consolidated Financial Statements January 1, 2013
(subsidiaries
effective on
January 1, 2014)
IFRS 11 Joint Arrangements January 1, 2013
IFRS 12 Disclosure of Interests in Other Entities January 1, 2013
IFRS 13 Fair Value Measurement January 1, 2013
Amendment to IAS 1: Presentation of Items of Other Comprehensive Income July 1, 2012
Amendment to IAS 12: Deferred Tax: Recovery of Underlying Assets January 1, 2012
Revision to IAS 19 Employee Benefits January 1, 2013
Revision to IAS 27 Separate Financial Statements January 1, 2013
Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities January 1, 2014
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013
223
Except for the following, the Group assessed that adopting IFRSs 2013 will not have significant
impacts on the consolidated financial statements.
i) Amendments to IAS 1-Presentation of Items of Other Comprehensive Income
According to the amendments to IAS 1, items of other comprehensive income will be grouped into two
categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be
reclassified subsequently to profit or loss when specific conditions are met. In addition, income tax on items
of other comprehensive income is also required to be allocated on the same basis. The aforementioned
allocation basis will not be strictly enforced prior to the adoption of the amendments. The Group has also
revised the disclosure of the statement of comprehensive income in both current and prior periods.
ii) IFRS 13-Fair Value Measurement
IFRS 13 defines the meaning of fair value and sets the method of calculation and the presentation of
measurement of fair value. The Group follows the new amendments to disclose the fair value measurement,
and there is no need to disclose the information of comparable period. As the adoption will be postponed until
2015, the Group does not expect any significant influence on its financial condition and performance.
(b) New standards and interpretations not yet endorsed by the FSC
The new standards and amendments issued by the IASB that may have an impact to the consolidated financial
statements but not yet endorsed by the FSC are summarized as follows:
New standards and amendments and interpretations
Effective date
per IASB
IFRS 9 "Financial Instruments" January 1, 2018
Amended 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
Amended IFRS 10, IFRS 12 and IAS 28 " Investment Entities-Applying the
Consolidation Exception"
January 1, 2016
Amendments to IFRS 11 "Acquisitions of an Interest in Joint Operation" January 1, 2016
IFRS 14 "Regulatory Deferral Accounts" January 1, 2016
IFRS 15 "Revenue from Contracts with Customers" January 1, 2018
IFRS 16 "Leases" January 1, 2019
Amended IAS 1 "Disclosure Initiative" January 1, 2016
Amended to IAS 7 "Disclosure Initiative" January 1, 2017
Amended to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses" January 1, 2017
Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of
Depreciation and Amortization"
January 1, 2016
224
Amendments to IAS 16 and IAS 41"Bearer Plants" January 1, 2016
Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014
Amendments to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016
Amendments to IAS 36 "Recoverable Amount Disclosures for Non-financial
Assets"
January 1, 2014
Amendments to IAS 39 "Novation of Derivatives and Continuation of Hedge
Accounting"
January 1, 2014
Annual improvements to IFRSs 2010-2012 cycle and to IFRSs 2011-2013 cycle July 1, 2014
Annual improvements to IFRSs 2012-2014 cycle January 1, 2016
IFRIC 21 "Levies" January 1, 2014
The Group is currently evaluating the impact of the abovementioned standards and amendments on the Group's
financial position and operating results. Any related impact will be disclosed when the evaluation is completed.
(4) 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 financial statements, the Chinese version shall prevail.
The significant accounting policies presented in the financial statements are summarized as follows. The
following accounting policies have been applied consistently throughout the presented periods in the
financial statements.
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with the Regulations Governing the
Preparation of Financial Reports by Securities Issuers (the Regulations) and the IFRSs endorsed by the FSC.
(b) Basis of preparation
i) Basis of measurement
The financial statements have been prepared on a historical cost basis, unless, otherwise stated (please refer to
the summary of the significant accounting policies).
225
ii) Functional and presentation currency
The functional currency of each individual consolidated entity is determined based on the primary economic
environment in which the entity operates. The Group's consolidated financial statements are presented in New
Taiwan dollars, which is Company's functional currency. The assets and liabilities of foreign operations are
translated to the Group's functional currency at the exchange rates at the reporting date. The income and
expenses of foreign operations are translated to the Group's functional currency at the average rate. Foreign
currency differences are recognized in other comprehensive income. All financial information presented in
New Taiwan dollars has been rounded to the nearest thousand.
(c) Basis of consolidation
i) Principles of preparation of consolidated financial statements
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.
The Company controls an investee when the investor is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its control over the investee.
The financial statements of the subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. Transactions and balances, and any unrealized
income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated
financial statements. The comprehensive income from subsidiaries is allocated to the Company and its
non-controlling interests, even if the non-controlling interests have a deficit balance.
When necessary, adjustments are made to the financial statements of the subsidiaries to bring their accounting
policies into line with those used by the Group.
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over its
subsidiaries are accounted for as equity transactions. Any difference between the amount by which the
noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized
directly in equity and attributed to the shareholders of the parent.
ii) List of the subsidiaries included in the consolidated financial statements
Percentage of
ownership
Name investor Name of investee Scope of business December
31, 2015
December
31, 2014
Description
The Company Namchow (Thailand) Ltd. Manufacturing
and selling of
instant noodles
and rice cracker
100% 100%
The Company Mostro (Thailand) Ltd. Manufacturing
and selling of
food
100% 100%
The Company Nacia International Corp. (Nacia
Co.)
Holding of
investments
100% 100%
226
The Company Chow Ho Enterprise Co., Ltd.
(Chow Ho Co.)
Catering services,
food and beverage
retailing, and
frozen food
manufacturing
100% 100%
The Company Lucky Royal Co., Ltd. (Lucky Co.) Manufacturing,
selling and
processing of
various food and
beverage products
99% 99%
The Company Nankyo Japan Co., Ltd. (Nankyo
Japan Co.)
Catering services,
Bistro and
wine-selling
100% 100%
The Company Namchow Consulting Company,
Ltd. (Namchow Consulting Co.)
Catering services,
food and beverage
retailing and other
consulting
services
100% 100%
The Company &
Lucky Co.
Navigator Business Publications
Co., Ltd. (NBP Co., Ltd.)
Publishing,
distributing and
selling of printed
publications
90% 90% Note 2
Lucky Co. Namchow (British Virgin Island)
Ltd. (Namchow BVI Co.)
Holding of
investments
58% 58% Note 3
Lucky Co. Dian Shui Lou Restaurant Business
Co., Ltd. (Dian Shui Lou Co.)
Liquor importing
and retailing, and
catering services
99% 99% Note 4
Lucky Co. Namchow Gastronomy Consulting
Company, Ltd. (Namchow
Gastronomy Consulting Co.)
Catering services
and food
consulting
services
99% 99% Note 4
Namchow BVI Co. Shanghai Bao Lai Na Company
Limited. (Bao Lai Na Co.)
Multinational
eateries, and the
promotion and
management of
craft beers
58% 58% Note 3
Nacia Co. &
Namchow
International Co.
Ting Hao(Cayman Islands)Holding
Corp. (Ting Hao Cayman Co.)
Holding of
investments
100% 100% Note 5
Nacia Corp. Namchow International Corp.
(Namchow International Co.)
Holding of
investments
100% 100%
Nacia International
Corp.
Shanghai Qiaohao Trading Co., Ltd
(Shanghai Qiaohao Co.)
Holding of
investments and
international trade
100% 100%
Shanghai Qiaohao
Co.
Shanghai Qiaohao Enterprise
Management Co., Ltd. (Shanghai
Qiaohao Enterprise Management
Co.)
Business
management and
investment
consulting
services
100% 100%
227
Shanghai Qiaohao
Co.
Shanghai Qiaohao Food Co., Ltd.
(Shanghai Qiaohao Food Co.)
Food packaging,
selling and
trading of
restaurant
equipment
100% 100%
Ting Hao Cayman
Co.
Tianjin Namchow Food Co.,Ltd.
( Tianjin Namchow Co.)
Manufacturing,
and selling of
edible oil and
related services
100% 100%
Ting Hao Cayman
Co.
Guangzhou Namchow Food Co.,
Ltd. (Guangzhou Namchow Co.)
Manufacturing,
and selling of
edible oil and
related services
100% 100%
Ting Hao Cayman
Co.
Shanghai Qizhi Business Consulting
Co., Ltd. (Shanghai Qizhi Co.)
Business
management and
investment
consulting
services
100% 100%
Ting Hao Cayman
Co.
Shanghai Qiaoxing Co., Ltd.
(Shanghai Qiaoxing Co.)
Selling of edible
oil, food retailing
and international
trade
100% 100%
Ting Hao Cayman
Co.
Shanghai Namchow Food co., Ltd.
(Shanghai Namchow Co.)
Developing,
manufacturing,
processing and
selling of edible
oil, and frozen
food
manufacturing
100% 100%
Tianjin Namchow
Co. & Namchow
International Co.
Tianjin Yoshi Yoshi Food Co.,Ltd.
(Tianjin Yoshi Yoshi Co.)
Developing ,
manufacturing,
and selling of
dairy products
and related
services
100% 100% Note 1
Note 1: As of December 31, 2015 and 2014, the Company, directly and indirectly, holds 100% shares of Tianjin
Yoshi Yoshi Co. According to the Group's strategy, Namchow International Corp signed a stock transfer
contract with Tianjin Namchow Co. and disposed 50% shares of Tianjin Yoshi Yoshi Co. stock. The transfer
date was October 1, 2015.
Note 2: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 89.97% shares of NBP Co.
Note 3: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 57.94% shares of Namchow
(BVI Co.) and Bao Lai Na Co.
Note 4: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 99.65% shares of Dian Shui
Lou Co. and Namchow Gastronomy Consulting Co.
Note 5: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 100% shares of Ting Hao
Cayman Co. According to the Group’s strategy, Namchow International Corp. signed a stock transfer contract
with Nacia International Corp. and disposed 32.43% shares of Ting Hao (Cayman Island) stock. The transfer
date was October 1, 2015.
228
(d) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of 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 remeasured to the functional currency at the exchange rate at that date. The
foreign currency gain or loss on monetary items is the difference between 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 end of the year.
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 that 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 translation.
Foreign currency differences arising from remeasurement are recognized in profit or loss, except for the
difference resulting from available-for-sale equity investment which is recognized in other comprehensive
income arising from the remeasurement.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor
likely in the foreseeable future, foreign currency 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.
(e) Classification of current and non-current assets and liabilities
i) 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 period; 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.
ii) 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 even if
refinancing or a revised repayment plan is arranged between the reporting date and the
issuance date of the financial statements; 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.
229
An entity shall classify all other liabilities as non-current.
(f) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalent refers to short term investments with high
liquidity that are subject to insignificant risk of changes in their fair value and can be cashed into fixed amount
of money. The definition of time deposit is similar to that of cash equivalent; however, the purpose of holding
time deposit is for short term cash commitment rather than investment.
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 consolidated 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.
i) Financial assets
The Group classifies financial assets into the following categories: available-for-sale financial assets and loans
and receivables.
i. Available-for-sale financial assets
Available-for-sale financial assets are recognized initially at fair value, plus, any directly
attributable transaction cost. Subsequent to initial recognition, they are measured at fair
value, and changes therein, other than impairment losses, dividend income, and foreign
currency differences on available-for-sale debt instruments, are recognized in other
comprehensive income and presented in the fair value reserve in equity. When an
investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or
loss, and is included in non-operating income and expense. The purchase disposal of
financial assets are recognized using trade-date accounting.
Investments in equity instruments that do not have a quoted market price in an active market,
and whose fair value cannot be reliably measured, are measured at amortized cost, and are
included in financial assets measured at cost.
Dividend income is recognized in profit or loss on the date that the Group's right to receive
payment is established. However, in the case of quoted securities, the ex-dividend date is
normally recognized. Such dividend income is included in non-operating income and
expense.
ii. Loans and Receivables
Loans and receivables are financial assets with fixed or determinable payments that are not
quoted in an active market. Receivables comprise trade receivables, other receivables, and
investment in debt security with no active market. Such assets are recognized initially at fair
value, plus, any directly attributable transaction costs. Subsequent to initial recognition,
receivables are measured at amortized cost using the effective interest method, less, any
impairment losses other than insignificant interest on short-term receivables. The purchase
disposal of financial assets are recognized using trade-date accounting.
230
Interest income is recognized in profit or loss, and it is included in non-operating income
and expense.
iii. Impairment of financial assets
A financial asset is impaired if, and only if, there is an objective evidence of impairment as
a result of one or more events that occurred after the initial recognition of the asset (a ‘loss
event') and that loss event (or events) has an impact on the estimated future cash flows of
the financial asset that can be estimated reliably.
The objective evidence that financial assets are impaired includes default or delinquency by
a debtor, restructuring of an amount due to the Group on terms that the Group would not
consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse
changes in the payment status of borrowers or issuers, economic conditions that correlate
with defaults, or the disappearance of an active market for a security. In addition, for an
investment in an equity security, a significant or prolonged decline in its fair value below its
cost is accounted for as objective evidence of impairment.
The Group considers evidence of impairment for receivables at both a specific asset and
collective level. Receivables that are not individually significant are collectively assessed
for impairment by grouping together receivables with similar risk characteristics.
If objective evidence of an impairment exists, an impairment loss should be recognized.
An impairment loss in respect of a financial asset is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows discounted at the
asset's original effective interest rate. Collateral and proceeds from insurance should also
be considered when determining the estimated future cash flows. Losses are recognized in
profit or loss and reflected in an allowance account against receivables. When a
subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss. However, the reversing amount cannot
exceed the amortized balance of the assets assuming no impairment was recognized in prior
periods.
An impairment loss in respect of a financial asset measured at cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar financial asset. Such
impairment loss is not reversible in subsequent periods.
An impairment loss in respect of a financial asset is deducted from the carrying amount,
except for trade receivables, for which an impairment loss is reflected in an allowance
account against the receivables. When it is determined a receivable is uncollectible, it is
written off from the allowance account. Any subsequent recovery of receivable written off
is recorded in the allowance account. Changes in the amount of the allowance account are
recognized in profit or loss.
Impairment losses on available-for-sale financial assets are recognized by reclassifying the
losses accumulated in the fair value reserve in equity to profit or loss.
Impairment losses recognized on an available-for-sale equity security are not reversed
through profit or loss. Any subsequent recovery in the fair value of an impaired
available-for-sale equity security is recognized in other comprehensive income, and
accumulated in other equity.
231
If, in a subsequent period, the fair value of an impaired available-for-sale debt security
increases and the increase can be related objectively to an event occurring after the
impairment loss was recognized, then the impairment loss is reversed, with the amount of
the reversal recognized in profit or loss.
Impairment losses and recoveries are recognized in profit or loss. Recovery and loss on
doubtful debts of account receivables are included in operating expense; others are included
in non-operating income and expense.
iv. Derecognition of financial assets
The Group derecognizes financial assets when the contractual rights of the cash inflow from
the asset are terminated, or when the Group transfers substantially all the risks and rewards
of ownership of the financial assets.
On derecognition of a financial asset in its entirety, the difference between the carrying
amount and the sum of the consideration received or receivables and any cumulative gain or
loss that had been recognized in other comprehensive income and presented in other equity
-unrealized gains or losses from available-for-sale financial assets is recognized in profit
or loss, and included in non-operating income and expense.
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 sum of
the consideration received for the part derecognized, and any cumulative gain or loss
allocated to it that had been recognized in other comprehensive income shall be recognized
in profit or loss, and is included in non-operating income and expense.
A cumulative gain or loss that had been recognized in other comprehensive income is
allocated between the part that continues to be recognized and the part that is derecognized,
based on the relative fair values of those parts.
ii) Financial liabilities and equity instruments
i. Other financial liabilities
Financial liabilities not classified as held-for-trading or designated as at fair value through
profit or loss, which comprise loans and borrowings, and trade and other payables, are
measured at fair value plus any directly attributable transaction cost at the time of initial
recognition. Subsequent to initial recognition, they are measured at amortized cost
calculated using the effective interest method. Interest expense not capitalized as capital cost
is recognized in profit or loss, and is recorded under non-operating income and expenses.
ii. Derecognition of financial liabilities
The Group derecognizes a financial liability when its contractual obligation has been
discharged or cancelled or has expired.
The difference between the carrying amount of a financial liability removed and the
consideration paid (including any non-cash assets transferred or liabilities assumed) is
recognized in profit or loss, and is included in non-operating income and expense.
232
iii. Offsetting of financial assets and liabilities
The Group presents financial assets and liabilities on a net basis when the Group has the
legally enforceable right to offset, and intends to settle such financial assets and liabilities
on a net basis or to realize the assets and settle the liabilities simultaneously.
iv. Financial guarantee contract
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder of a loss it incurs because a specified debtor fails to make
payment when due in accordance with the original or modified terms of a debt instrument.
A financial guarantee contract not designated as at fair value through profit or loss issued by
the Group is recognized initially at fair value plus any directly attributable transaction cost.
After initial recognition, it is measured at the higher of (a) the contractual obligation amount
determined in accordance with IAS 37; or (b) the amount initially recognized less, when
appropriate, cumulative amortization recognized in accordance with accounting policies.
iii) Derivative financial instruments
The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures.
Derivatives are recognized initially at fair value and attributable 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, and are included in non-operating income and expense.
When a derivative is designated as a hedging instrument, its timing of recognition in profit or loss is determined
based on the nature of the hedging relationship. When the fair value of a derivative instrument is positive, it is
classified as a financial asset, and when the fair value is negative, it is classified as a financial liability.
(h) Inventories
The cost of inventories consists of all costs of purchase, costs of conversion, and other costs incurred in bringing
the inventories to their present location and condition. The cost of inventories includes an appropriate share of
fixed production overhead based on normal capacity and allocated variable production overhead based on
actual output. However, unallocated fixed production overhead arising from lower or idle capacity is
recognized in cost of goods sold during the period. If actual capacity is higher than normal capacity, fixed
production overhead should be allocated based on actual capacity. The method of valuing inventories is the
weighted-average method.
Inventories are measured at the lower of cost or net realizable value. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated costs of completion and selling expenses at the end
of the period. When the cost of inventories is higher than the net realizable value, inventories are written
down to net realizable value, and the write-down amount is charged to current year's cost of goods sold. If net
realizable value increases in the future, the cost of inventories is reversed within the original write-down
amount, and such reversal is treated as a reduction of cost of goods sold.
233
(i) Investment property
Investment property is property held either to earn rental income or for capital appreciation or for both, but not
for sale in the ordinary course of business, or to use in the production or supply of goods or services or for
administrative purposes. Investment property is measured at cost on initial recognition and subsequently
measured under the cost model, and the depreciation expense is calculated using the depreciable amount. The
depreciation method, the useful life, and the residual amount are the same as those adopted for property, plant
and equipment. Cost includes expenditure that is directly attributable to the acquisition of the investment
property.
When the use of an investment property changes such that it is reclassified as property, plant and equipment, its
carrying amount at the date of reclassification becomes its cost for subsequent accounting.
(j) Property, plant and equipment
i) Recognition and measurement
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, and any borrowing
cost that is eligible for capitalization.
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 the depreciation method of a significant part
of an item of property, plant and equipment are the same as the useful life and depreciation method 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 as non-operating income and expense.
ii) Subsequent cost
Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated with
the expenditure 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
The depreciable amount of an asset is determined after deducting its residual amount from its original cost and is
depreciated using the straight-line method over its useful life. Assets are evaluated based on their individually
significant components, and if the useful life of a component varies from that of others, then this component
should be separately depreciated. The depreciation charge for each period shall be recognized in profit or loss.
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:
Buildings 3~60 years
Machinery equipment 1~20 years
Other equipment 1~40 years
234
Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If expectations differ
from the previous estimates, the changes are accounted for as a change in an accounting estimate.
(k) Leases
i) Prepaid land lease
Prepaid land lease is the Group's right of land use, which is recorded under acquisition costs, and is
amortized within a useful term of 50 years by using the straight-line method, and is also reclassified as prepaid
expenses and long-term prepaid rents.
ii) Lessor
Lease income from an operating lease is recognized in income on a straight-line basis over the lease term. Initial
direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the
leased asset and recognized as an expense over the lease term on the same basis as the lease income. Incentives
granted to the lessee to enter into an operating lease are spread over the lease term on a straight-line basis so
that the lease income received is reduced accordingly.
iii) Lessee
Leases in which the Group assumes substantially all of the risks and rewards of ownership are classified as
finance leases. On initial recognition, the lease asset is measured at an amount equal to the lower of its fair
value or the present of the minimum lease payments. Subsequent minimum lease payments are attributable to
finance cost and the reduction of the outstanding liabilities, and the finance cost is allocated to each period
during the lease term using a constant periodic rate of interest on the remaining balance of the liability.
Other leases are operating leases and are not recognized in the Group's statement of financial position. 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 of
the total lease expense over the term of the lease. Any benefit provided by the lessor for the purpose of
reaching the agreement is accounted for as a reduction of lease expense on a straight-line basis.
(l) Intangible assets-Goodwill
i) Recognition
Upon conversion to the IFRSs endorsed by the Financial Supervisory Commission, R.O.C., the Group can
choose to restate all its business combinations that occurred on and after January 1, 2012. For those
acquisitions that occurred prior to January 1 2012, any excess of the cost of acquisition over the Company's
share of the net fair value of the identifiable assets recognized at the date of acquisition is recognized as
goodwill.
ii) Measurement
Goodwill is measured at cost, less, accumulated impairment losses.
Goodwill is not amortized. Instead, it is tested for impairment annually, or more frequently, when there is an
indication that the cash generating unit may be impaired.
235
(m) Impairment-non-financial assets
With regard to non-financial assets (other than inventories, deferred tax assets and employee benefits), the Group
assesses at the end of each reporting period whether there is any indication that an impairment loss has
occurred, and estimates the recoverable amount for assets with an indication of impairment. If it is not possible
to determine the recoverable amount for the individual asset, then the Group will have to determine the
recoverable amount for the asset's cash-generating unit.
Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with indefinite useful
lives or those not yet in use is required to be tested at least annually.
The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value less costs
to sell or 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. That reduction is an impairment loss.
An impairment loss shall be recognized immediately in profit or loss.
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. If the carrying amount of the cash-generating units
exceeds the recoverable amount of the units, the entity shall recognize the impairment loss, and the impairment
loss shall be allocated to reduce the carrying amount of each asset in the unit. Reversal of an impairment loss
for goodwill is prohibited.
The Group assesses at the end of each reporting period 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. If any
such indication exists, the entity shall estimate the recoverable amount of that asset. Impairment loss is
reversed if, and only if, there has been a change in the estimates used to determine the asset's recoverable
amount, increasing the individual asset's or cash-generating unit's carrying amount to its estimated recoverable
amount. The reversal of an impairment loss of an individual asset or cash-generating unit cannot exceed the
carrying amount of the individual asset or cash-generating unit, less any depreciation or amortization, had it not
recognized an impairment loss.
(n) Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive 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 as finance cost.
Site restoration reservation is the obligation of removement, moving and reinstatement after the Group obtained
or has used the lease asset for a while. The Group recognized its related cost as expense during the lease term.
236
(o) Treasury stock
Under the cost method, the treasury stock account is debited for the cost of the Group's shares purchased.
When the disposal price of treasury stock is greater than the cost, the difference is credited to capital surplus-
treasury stock; otherwise, the excess of the cost over the price is debited to capital surplus generated from
similar treasury stock transactions. If the capital surplus-treasury stock account is insufficient to cover the
excess of the cost over the price, retained earnings should be debited for the remaining amount. The book
value of each share of treasury stock is equal to its weighted-average cost and is calculated by each group
according to the reason for purchase.
When treasury stock is retired, capital surplus and common stock are debited according to the ratio of retiring
treasury stock to total issued stock. When the book value of the retiring treasury stock is higher than the sum of
its par value and capital surplus, the difference is debited to capital surplus generated from similar treasury
stock transactions. If the capital surplus-treasury stock account is insufficient to cover the difference,
retained earnings should be debited for the remaining amount. When the book value of the retiring treasury
stock is lower than the sum of its par value and capital surplus, the difference is credited to capital surplus
generated from similar treasury stock transactions. The shares that are owned by the Company's subsidiaries
are seen as treasury stock.
(p) Revenue
i) Sale of goods
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
discounts 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.
The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement.
For export transactions, transfer occurs upon loading the goods onto the relevant carrier at the port; however,
for sales in the domestic market, transfer usually occurs when the product is received at the customer's
warehouse.
Transactions on catering industry are basically completed over-the-counter, and the cash is collected by the
franchisee after authorization is granted. As such, revenue is recognized upon the provision of goods and
services, and booked at the end of the month.
ii) Customer loyalty program
Customer loyalty program of the Group is to provide customer bonus point and rights to purchase merchandise
according to the discount price. The fair value of the consideration received or receivable was allocated to
bonus point and other component of the sale. The amount allocated to bonus point can be valued according to
the fair value of the merchandise sold at discount price. Revenue is recognized when customers use their bonus
points in exchange for a discount price or complimentary items upon purchasing of any merchandise. Revenue
is calculated based on the estimated volume of the merchandise sold.
237
iii) Rendering of services
The Group is engaged in providing management services. Revenue from services rendered is recognized in
profit or loss in proportion to the stage of completion of the transaction at the reporting date and the account
collectability can be reasonably estimated.
(q) Employee benefits
i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognized as an employee benefit
expense in profit or loss in the periods during which services are rendered by employees.
ii) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net
obligation in respect of defined benefit pension plans 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 value of any plan assets is deducted. The discount rate is the yield at the reporting date (market yields of
high-quality corporate bonds or government bonds) on 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 portion 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 can reclassify the amounts recognized in
other comprehensive income to retained earnings.
iii) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related
service is 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.
238
(r) Income tax
Income tax expenses include both current taxes and deferred taxes. Except for expenses related to business
combinations or recognized directly in equity or other comprehensive income, all current and deferred taxes
shall be recognized in profit or loss.
Current taxes comprise the expected tax payable or receivable on the taxable income or loss for the year and any
adjustment to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or
substantively enacted at the reporting date.
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 shall not be recognized for the
exceptions below:
i) Assets and liabilities that are initially recognized but are not related to the business combination
and have no effect on net income or taxable gains (losses) during 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 apply 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 fulfills one of the scenarios below:
i. levied by the same taxing authority; or
ii. levied by different taxing authorities, but where each such authority intends to settle tax
assets and liabilities (where such amounts are significant) on a net basis every year of the
period of expected asset realization or debt liquidation, or where the timing of asset
realization and debt liquidation is matched.
A deferred tax asset should be recognized for 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 they can be
utilized. Such deferred tax assets shall also be reviewed at each reporting date, and are reduced to the extent
that it is no longer probable that the related tax benefit will be realized.
239
(s) Earnings per share
The Group discloses the Company's basic and diluted earnings per share attributable to ordinary equity holders
of the Company. The calculation of basic earnings per share is based on the profit attributable to the ordinary
shareholders of the Company divided by the weighted-average number of ordinary shares outstanding. The
calculation of diluted earnings per share is based on the profit attributable to ordinary shareholders of the
Company, divided by the weighted-average number of ordinary shares outstanding after the adjustment on the
effects of all dilutive potential ordinary shares. Employee bonuses are settled by issuing shares that are yet to
be approved at the shareholders' meeting.
(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) and each operating segment consists of standalone financial information. Operating results of the
operating segment are regularly reviewed by the Group's chief operating decision maker to make decisions
about resources to be allocated to the segment and to assess its performance.
(5) Significant Accounting Judgments and Sources of Estimation Uncertainty
The preparation of the consolidated financial statements in conformity with 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.
Management will continually review the estimates and basic assumptions. Changes in accounting estimates
will be recognized in the period of change and the future period of their impact.
There are no critical judgments in applying accounting policies that have significant effect on the amounts
recognized in the financial statements.
For information about critical judgments in applying accounting policies that have the most significant
effect on the amounts recognized in these consolidated financial statements, please refer to the following
notes:
(a) Note 6(g)-Key assumptions used in discounted cash flow projections.
(b) Notes 6(k)-Provision.
(c) Notes 6(m)-Measurement of defined benefit obligations
(d) Notes 6(n)-Utilization of tax losses.
(e) Notes 6(q)-Assumption of expecting redeem rate on deferred revenue.
240
(6) Description of Significant Accounts
(a) Cash and cash equivalents
December 31,
2015
December 31,
2014
Cash on hand $ 6,938 9,402
Savings and checking deposits 2,431,750 1,767,374
Time deposits 2,892,250 2,653,198
Cash in transit - 31,913
Cash and cash equivalents pen statements of cash flow $ 5,330,938 4,461,887
The Group's exposure to interest rate risk and the sensitivity analysis on the financial instruments held by the
Group are disclosed in note 6(t).
(b) Financial assets
i) Available-for-sale financial assets-non-current
December 31,
2015
December 31,
2014
Investment in listed securities
Stocks listed on domestic markets $ 13,549 14,287
Please refer to note 6(t) for credit risk, exchange rate risk and interest rate risk.
As of December 31, 2015 and 2014, the Group did not pledge its available-for-sale financial instruments.
ii) Sensitivity analysis-market price risk
If the market price of the available-for-sale financial assets fluctuates (assuming that all other variables remain
the same), the impact on other comprehensive income will be as follows:
2015 2014
Fluctuation in market
price at reporting
date
Other
comprehensive
income (after
tax)
Net income
Other
comprehensive
income (after
tax)
Net income
Increase 1% $ 135 - 143 -
Decrease 1% $ (135) - (143) -
241
iii) Non hedging derivatives
The Group uses derivative financial instruments to manage exposures due to fluctuations of foreign exchange
risk from its operating activities, investing activities and financing activities. As of December 31, 2014, the
Group reported the following derivatives financial instruments as available-for-sale financial assets and
liabilities without the application of hedge accounting.
Fair value
Contract
amount
(in thousands)
December 31, 2014
Forward contracts $ 50 USD 1,740
As of December 31, 2014, the financial instruments had maturity periods from November 4, 2014 to June 15,
2015.
(c) Debt investment without an active market
December 31,
2015
December 31,
2014
Finance product $ 249,750 -
The Group invested in finance products without public quotation, and the fair value can be reliably measured on
December 14, 2015. It can be redeemed at any time, and the expected rate of return was 3.4%.
As of December 31, 2015, the Group's debt investment without an active market was not provided as pledged
assets.
(d) Notes and accounts receivable, and other receivable
December 31,
2015
December 31,
2014
Notes receivable $ 215,745 187,029
Accounts receivable 1,538,286 1,540,781
Other receivable 143,597 153,583
Less: allowance for impairment 35,629 35,065
$ 1,861,999 1,846,328
The Group has not provided the notes and accounts receivable as collateral or factored them for cash.
242
The Group's aging analysis of overdue notes and accounts receivable, and other receivable was as follows:
December 31,
2015
December 31,
2014
Past due 0~60 days $ 129,191 112,438
Past due 61~365 days 4,853 10,535
Past due over one year 1,132 768
$ 135,176 123,741
The movement in the allowance for impairment with respect to notes and accounts receivable during the year
was as follows:
Individually
assessed
impairment
Collectively
assessed
impairment
Total
Balance at January 1, 2015 $ 35,065 - 35,065
Impairment loss recognized 2,565 - 2,565
Written off (1,491) - (1,491)
Effect of changes in exchange rate (510) - (510)
Balance at December 31, 2015 $ 35,629 - 35,629
Individually
assessed
impairment
Collectively
assessed
impairment
Total
Balance at January 1, 2014 $ 35,138 - 35,138
Impairment loss recognized 368 - 368
Written off (1,382) - (1,382)
Effect of changes in exchange rate 941 - 941
Balance at December 31, 2014 $ 35,065 - 35,065
243
(e) Inventories
The components of the Group's inventories were as follows:
December 31,
2015
December 31,
2014
Merchandise $ 69,514 70,156
Finished goods 502,741 554,277
Work in progress 85,322 95,523
Raw materials 573,668 761,698
Supplies 161,570 190,317
Goods in transit 210,253 184,927
Total $ 1,603,068 1,856,898
As of December 31, 2015 and 2014, the Group's inventories were not provided as pledged assets.
Except for operating costs arising from the ordinary sale of inventories, other gains and losses directly recorded
under operating cost in the years 2015 and 2014 are as follows:
2015 2014
Loss on decline in market value of inventory $ 3,711 3,014
Loss (gain) on physical count 3,882 1,086
Loss on scrap of inventory 18,447 19,854
Income from sale of scrap (20,357) (21,700)
Total $ 5,683 2,254
(f) Financial assets carried at cost
December 31,
2015
December 31,
2014
Domestic unlisted company $ 27,166 27,166
The Group holds unlisted stocks on domestic market-Global Securities Finance Corporation. In September
2014, the Company reduced both its capital and its return of capital of financial assets using the cost method on
a pro rata basis amounting to $30,666.
Namchow BVI Co. sold its common stocks in Xiamen Jintong Detergent Co., Ltd. amounting to USD1,436
($43,490). The disposal profit was $25,930, which was recognized as other income.
The aforementioned stocks held by the Group, whose fair value cannot be reliably measured, are measured at
amortized cost. The range of the estimated fair value was significant and cannot be reasonably evaluated.
244
Therefore, the management of the Group considered it cannot be evaluated reliably.
245
As of December 31, 2015 and 2014, the Group's financial assets carried at cost were not provided as pledged
assets.
(g) Property, plant and equipment
The cost, depreciation, and impairment of the property, plant and equipment of the Group were as follows:
Land Buildings Machinery
Other
equipment
Prepayments
for equipment Total
Cost:
Balance at January 1, 2015 $ 2,699,639 2,530,308 5,271,109 2,635,244 437,777 13,574,077
Additions 16,327 48,447 110,107 267,716 728,125 1,170,722
Disposals - - (50,632) (50,569) - (101,201)
Reclassification - (13,576) 144,083 46,660 (228,491) (51,324)
Effect of changes in exchange rates 13,918 (41,728) (120,377) (32,695) (9,368) (190,250)
Balance at December 31, 2015 $ 2,729,884 2,523,451 5,354,290 2,866,356 928,043 14,402,024
Balance at January 1, 2014 $ 2,110,676 2,122,525 4,726,885 2,280,282 410,216 11,650,584
Additions 632,829 171,991 347,141 524,709 413,649 2,090,319
Disposals - (46) (35,194) (253,042) (37,004) (325,286)
Reclassification - 173,686 71,904 35,409 (360,716) (79,717)
Effect of changes in exchange rates (43,866) 62,152 160,373 47,886 11,632 238,177
Balance at December 31, 2014 $ 2,699,639 2,530,308 5,271,109 2,635,244 437,777 13,574,077
Depreciation and impairment loss:
Balance at January 1, 2015 $ 31,953 1,023,375 3,186,199 1,558,290 - 5,799,817
Depreciation - 92,505 268,670 291,908 - 653,083
Disposal - - (43,514) (36,300) - (79,814)
Reclassification - (14,983) (9,184) 9,165 - (15,002)
Effect of changes in exchange rates - (16,210) (72,666) (19,624) - (108,500)
Balance at December 31, 2015 $ 31,953 1,084,687 3,329,505 1,803,439 - 6,249,584
Balance at January 1, 2014 $ 31,953 915,328 2,872,082 1,478,009 - 5,297,372
Depreciation - 84,614 234,241 290,689 - 609,544
Disposal - (7) (30,747) (239,543) - (270,297)
Reclassification - - 60 2,007 - 2,067
Impairment loss - - 20,000 - - 20,000
Effect of changes in exchange rates - 23,440 90,563 27,128 - 141,131
Balance at December 31, 2014 $ 31,953 1,023,375 3,186,199 1,558,290 - 5,799,817
Carrying value:
December 31, 2015 $ 2,697,931 1,438,764 2,024,785 1,062,917 928,043 8,152,440
December 31, 2014 $ 2,667,686 1,506,933 2,084,910 1,076,954 437,777 7,774,260
246
i) Impairment loss and subsequent reversal
As of December 2014, since the estimated recoverable amount of certain department of the Group was lower
than its book value, the Company recognized an impairment loss of $20,000. The discount rate used for
estimating the recoverable amount was 11.46% in 2014.
2015 2014
Beginning balance $ 243,114 223,076
Impairment loss recognized - 20,000
Written-off - -
Effect of changes in exchange rates - 38
Ending balance $ 243,114 243,114
ii) Collateral
Please refer to note 8 for information on pledged property, plant and equipment as of December 31, 2015 and
2014.
(h) Investment property
Buildings
Cost:
Balance as at January 1, 2015 $ -
Reclassification 84,212
Effect of changes in exchange rates (1,604)
Balance as at December 31, 2015 $ 82,608
Depreciation:
Balance as at January 1, 2015 $ -
Depreciation 3,746
Reclassification 14,907
Effect of changes in exchange rates (66)
Balance as at December 31, 2015 $ 18,587
Carrying value:
Balance as at December 31, 2015 $ 64,021
Fair value:
Balance as at December 31, 2015 $ 75,615
Investment property comprises a number of commercial properties that are leased to third parties. Each of the
247
leases contains an initial non-cancellable period of 5 years. Subsequent renewals are negotiable with the lessee,
and no contingent rents are charged. Please refer to note 6(s) for further information.
248
The fair value of investment property (as disclosed in the financial statements) is based on a valuation by the
management of the Group. The range of yields applied to the net annual rentals to determine the fair value of
the property was as follows:
Region 2015
Xuhui Dist, Shanghai 4.42%
As of December 31, 2015 and 2014, the Group's investment properties were not provided as pledged assets.
(i) Goodwill
Goodwill arising from the merger was as follows:
Fair value of consideration transferred $ 721,574
Less: Fair value of identifiable net assets 571,794
$ 149,780
December 31,
2015
December 31,
2014
Cost $ 149,780 149,780
Less: Accumulated amortization 44,363 44,363
Book value $ 105,417 105,417
Nacia Co. acquired 50% of Namchow International Co.'s equity on July 15, 2010. Nacia Co. recognized a
goodwill of $9,687.
Namchow International Co. invested in Ting Hao Cayman Co. and acquired 19.35% of its equity in June 2004.
Namchow International Co. recognized a goodwill of $140,093. The goodwill was amortized in five years
which had ceased since 2006.
(j) Short-term and long-term borrowings
The details, terms and clauses of the Group's short-term and long-term borrowings were as follows:
i) Short-term borrowings
December 31, 2015
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Unsecured loans THB 6.50~7.38 105 $ 1,383
Unsecured loans EUR 1.45~1.55 105 1,388,430
Unsecured loans USD 1.05~2.17 105 1,609,786
Unsecured loans TWD 1.00~1.19 105 610,000
Unsecured loans JPY 1.68 105 3,065
249
Total $ 3,612,664
250
December 31, 2014
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Unsecured loans THB 6.75~7.40 104 $ 1,414
Unsecured loans EUR 1.73~1.75 104 56,076
Unsecured loans USD 1.04~1.97 104 3,018,153
Unsecured loans TWD 1.05~1.35 104 300,000
Unsecured loans JPY 0.97~1.76 104 30,045
Total $ 3,405,688
As of December 31, 2015 and 2014, the unused credit facilities amounted to $8,072,542 thousand and
$7,495,598 thousand, respectively.
ii) Short-term commercial paper payable
December 31, 2015
Guarantee or
acceptance institution
Range of
interest rates
(%)
Amount
Commercial paper payable TA CHING BILLS
FINANCE
CORPORATION
0.61~0.69 $ 65,000
Commercial paper payable CHINA BILLS
FINANCE
CORPORATION
0.61 25,000
Commercial paper payable MEGA BILLS FINANCE
CO., LTD.
0.80~1.18 30,000
Commercial paper payable DAH CHUNG BILLS
CORPORATION
0.77 20,000
Commercial paper payable TAIWAN FINANCE 0.90 10,000
CORPORATION
150,000
Less: discount 33
Total $ 149,967
251
December 31, 2014
Guarantee or
acceptance institution
Range of
interest rates
(%)
Amount
Commercial paper payable TA CHING BILLS
FINANCE
CORPORATION
1.18 $ 50,000
Commercial paper payable CHINA BILLS
FINANCE
CORPORATION
0.78 20,000
Commercial paper payable MEGA BILLS FINANCE 1.18~1.20 30,000
CO., LTD.
100,000
Less: discount 6
Total $ 99,994
The Group did not pledge assets against the short-term commercial paper payable.
As of December 31, 2015 and 2014, the unused credit facilities amounted to $240,000 thousand and $380,000
thousand, respectively.
iii) Long-term borrowings
December 31, 2015
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Secured loans TWD 1.79~1.87 105~116 $ 2,254,600
Secured loans JPY 2.00 106 403,596
Unsecured loans TWD 1.52~1.85 105~108 1,374,875
Unsecured loans USD 1.07~1.78 105~109 921,773
Unsecured loans JPY 0.98 109 8,880
Unsecured loans EUR 0.83 109 53,467
Total $ 5,017,191
Current $ 529,086
Non-current 4,488,105
Total $ 5,017,191
252
December 31, 2014
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Secured loans TWD 1.79~1.80 104~116 $ 1,500,000
Secured loans JPY 2.00~2.10 106 391,608
Unsecured loans TWD 1.54~1.89 104~106 2,089,508
Unsecured loans USD 0.98~1.65 104~109 782,458
Total $ 4,763,574
Current $ 466,463
Non-current 4,297,111
Total $ 4,763,574
As of December 31, 2015 and 2014, the unused credit facilities amounted to $0 thousand, and $800,000
thousand, respectively.
The Group has disclosed the related risk exposure to the financial instruments in note 6(t).
The Group has pledge certain assets against the loans; please refer to note 8 for additional information.
iv) Commitments of loan contracts
The Group entered into syndicated loan contract amounting to $1,800,000 with Industrial Bank of Taiwan and
nine other banks on October 24, 2014. The main purpose of the loan was to repay the previous medium-term
loan contract and to increase the limit of debt ratio. The following is a summary of the debt ratio calculated
according to the contract:
i. The borrower is obligated to maintain the following financial ratios, which are assessed
annually, within the designated length of the contract:
1) Debt ratio shall not exceed 250%
2) The interest coverage ratio shall not be lower than 2.5 times of the loan interest.
3) The identifiable net worth shall not be less than $3,000,000.
All of the aforementioned financial ratios and obligations are calculated based on the
calculation used in the consolidated financial statements.
ii. Unless a written consent from the lending bank is obtained, the borrower shall not engage in
the following events:
1) Merger, separation, selling, or transferring of the Company's shares.
2) All events outlined in Article 185 of the ROC Company Act.
If there is any breach of the contract, after obtaining the consent from most of the banks, the
credit limit will either be fully or partially cancelled, depending on the decision made by the
banks. Also, the Group will be requested to pay all the remaining balance in an earlier time,
and all the agreement stated in the contract will be considered invalid.
253
In addition, the Group signed the first supplementary contract on December 16, 2015. The financial ratio was
adjusted as follows:
i. The debt ratio for both 2015 and 2016 shall not exceed 295%; for 2017 and 2018, the debt
ratio shall not exceed 285% and 250%, respectively.
ii. The interest coverage ratio shall not be less than 300%.
iii. The identifiable net worth shall not be less than $4,000,000.
The Group renewed its contracts with Taishin International Bank Co., Ltd., Mega International Commercial
Bank, and Industrial Bank of Taiwan, amounting to $200,000 thousand, $300,000 thousand, and $200,000
thousand, respectively, in May, June, and November, respectively, of 2014. The following is a summary of the
debt ratio calculated according to the contract, wherein the borrower is obligated to maintain the following
financial ratios which are assessed annually, within the designated length based on the said contracts :
i. Debt ratio shall not exceed 250%
ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.
iii. The identifiable net worth shall not be less than $2,200,000.
In addition, the Group signed a supplementary amounting to $200,000 thousand with Industrial Bank of Taiwan
in October 2015. The financial ratios were adjusted as follows:
i. Debt ratio shall not exceed 295%
ii. The interest coverage ratio shall not be lower than 3 times of the loan interest.
iii. The identifiable net worth shall not be less than $4,000,000.
The Group renewed its loan contract amounting to $200,000 thousand with CTBC Bank on August 25, 2015.
The main purpose of the loan was to repay the previous long-term loan contract. The borrower is obligated to
maintain the following financial ratios, which are assessed semi-annually, within the designated length of the
contract.
i. Debt ratio shall not exceed 250%
ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.
iii. The identifiable net worth shall not be less than $2,200,000.
All of the aforementioned financial ratios and obligations are calculated based on the calculation used in the
consolidated financial statements.
The Group was in compliance with the covenants (described above) in 2015 and 2014.
254
(k) Provisions
The information of the Group's provisions for the years ended December 31, 2015 and 2014 were as follows:
Site restoration
Balance as of January 1, 2015 $ 8,585
Provisions made during the year -
Balance as of December 31, 2015 $ 8,585
Balance as of January 1, 2014 $ 6,760
Provisions made during the year 1,825
Balance as of December 31, 2014 $ 8,585
The provision was the estimation for removing, moving and restoring the lease assets according to the lease,
which was recognized as long-term liability. The future cost shall result in an uncertainty of provision due to
the long-term lease of the restaurant. Related costs are expected to paid in full after the lease term reaches its
maturity.
(l) Operating leases
Non-cancellable rental payables of operating leases were as follows:
December 31,
2015
December 31,
2014
One year $ 160,919 211,108
Less than five years 282,947 409,170
More than five years 192,221 471,064
$ 636,087 1,091,342
The Group leases offices, restaurant and transport equipment under operating leases. The leases typically run for
a period of 1 to 6 years. The lease payment will be adjusted to reflect market price.
For the years ended December 31, 2015 and 2014, lease expenses were $270,807 thousand and $211,108
thousand, respectively.
(m) Employee benefits
i) Defined benefit plans
The following table shows a reconciliation between the present value of the defined benefit obligation and the
fair value of plan assets:
December 31,
2015
December 31,
2014
The present value of the defined benefit obligations $ 595,286 573,882
Fair value of plan assets (47,111) (55,948)
255
The net defined benefit liability $ 548,175 517,934
256
The Group established the pension fund account for the defined benefit plan in Bank of Taiwan. The plan, under
the Labor Standards Law, provides benefits based on an employee's length of service and average monthly
salary for the six-month period prior to retirement.
i. Composition of plan assets
The Group allocates pension funds in accordance with the Regulations for Revenues,
Expenditures, Safeguard and Utilization of the Labor Retirement Fund, and such funds are
managed by the Bureau of Labor Funds, Ministry of Labors. Minimum annual
distributions of the funds by the Bureau shall be no less than the earnings attainable from
the two-year time deposits with the interest rates offered by local banks.
The Group's Bank of Taiwan labor pension reserve account balance amounted to $47,111
thousand at the end of the reporting period. 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.
ii. Movements in present value of defined benefit plan obligation
The movements in present value of the Group's defined benefit plan obligation for the years
ended December 31, 2015 and 2014 were as follows:
2015 2014
Defined benefit obligation at 1 January $ 573,882 571,946
Current service costs and interest 20,756 21,472
Remeasurements of the net defined benefit liability
(asset)
-Due to changes in financial assumption of
actuarial (losses) gains
28,737 11,748
Past services cost and settlement losses (235) -
Benefits paid by the plan (27,854) (31,284)
Defined benefit obligation at 31 December $ 595,286 573,882
257
iii. Movements in fair value of defined benefit plan assets
The movements in the fair value of the defined benefit plan assets for the years ended
December 31, 2015 and 2014 were as follows:
2015 2014
Fair value of plan assets, January 1 $ 55,948 68,623
Remeasurements of the net defined benefit liability
(asset)
-Return on plan assets (excluding amounts
included in net interest expense)
632 1,359
-Due to changes in financial assumption of
actuarial (losses) gains
1,013 448
Contributions made 17,372 16,802
Benefits paid by the plan (27,854) (31,284)
Fair value of plan assets, December 31 $ 47,111 55,948
iv. Expenses recognized in profit or loss
The expenses recognized on profit or loss for the years ended December 31, 2015 and 2014
were as follows:
2015 2014
Current service cost $ 8,687 8,925
Net interest on the defined benefit liability (asset) 9,821 11,187
Past servies cost and settlement losses (235) -
$ 18,273 20,112
2015 2014
Operating costs $ 7,185 7,473
Selling expenses 3,371 3,892
General and administration expenses 7,092 8,104
Research and development expenses 625 643
$ 18,273 20,112
258
v. Remeasurement in the net defined benefit liability (asset) recognized in other
comprehensive income
The Group's remeasurement in the net defined benefit liability (asset) recognized in other
comprehensive income for the years ended December 31, 2015 and 2014 were as follows:
2015 2014
Cumulative amount, January 1 $ 84,583 73,283
Recognized during the period 27,724 11,300
Cumulative amount, December 31 $ 112,307 84,583
vi. Actuarial assumptions
The following are the Group's principal actuarial assumptions at the reporting dates:
December 31,
2015
December 31,
2014
Discount rate 1.63~1.88% 2.00%
Future salary increases rate 1.00~2.00% 1.00~2.00%
The Group expects to make contributions of $15,973 thousand to the defined benefit plans
in the next year starting from the reporting date of 2015.
The weighted average duration of the defined benefit obligation is 12.10~20.54 years.
vii. Sensitivity analysis
When calculating the present value of the defined benefit obligation, the Group uses
judgments and estimations to determine the related actuarial assumptions, including
discount rate, employee turnover rates and future salary changes, as of the financial
statement date. Any changes in the actuarial assumptions may significantly impact the
amount of the defined benefit obligation.
As of December 31, 2015, the present value of defined benefit obligation impact was as
follow:
The impact of defined benefit
obligation Increase Decrease
Discount rate (0.25%) $ (12,588) 13,050
Future salary increase rate (0.25%) 12,802 (12,408)
Reasonably possible changes at the reporting date to one of the relevant actuarial
assumptions, holding other assumptions remain constant, would have affected the defined
benefit obligation by the amounts shown above. The method used in the sensitivity
analysis is consistent with the calculation of the pension liabilities in the balance sheets.
259
There is no change in the method and assumptions used in the preparation of the sensitivity
analysis for 2015 and 2014.
ii) Defined contribution plans
The Company and its subsidiaries in Taiwan have made monthly contributions equal to 6% of each employee's
monthly wages to the labor pension personal account at the Bureau of the Labor Insurance in accordance with
the provisions of the Labor Pension Act. Subsidiaries in China have made monthly contributions equal to 20%
of each employee’s monthly wages to China Social Security Fund in accordance with the provisions of the
Endowment Insurance of the People’s Republic of China. Under this defined contribution plan, the Group
contributes a fixed amount to the Bureau of the Labor Insurance and China Social Security Fund without
additional legal or constructive obligations.
The Group's pension costs under the defined contribution plan were $133,090 thousand and $118,982 thousand
for the years 2015 and 2014, respectively.
(n) Income tax
i) Income tax expenses
The amount of the Group's income tax for the years ended December 31, 2015 and 2014, were as follows:
2015 2014
Current income tax expense
Current period $ 466,556 465,899
Adjustment for prior periods (47,763) 40,483
418,793 506,382
Deferred tax benefit
Origination and reversal of temporary differences 158,287 63,484
Income tax expenses on continuing operations $ 577,080 569,866
No income tax recognized in other comprehensive income for 2015 and 2014.
260
Reconciliations of the Group's income tax expense and the profit before tax for 2015 and 2014 were as follows:
2015 2014
Income before tax $ 1,741,041 1,578,603
Income tax calculated on pretax accounting income at
statutory rate
$ 295,977 268,363
Effect of tax rates in foreign jurisdiction 369,098 356,470
Adjustment for prior periods (47,763) 40,483
Non-deduction expenses 11,924 15,603
Tax-exempt expense (16,725) (15,976)
Investment income (132,791) (121,871)
Estimated withholding tax of attributable earnings of
subsidiaries in Mainland China
40,117 15,683
Interest withholding tax on disposal of investments - 3,655
Current-year losses for which no deferred income tax
assets was recognized
41,533 5,114
Unrecognized changes in temporary differences 3,973 911
10% surtax on undistributed earnings 23,472 15,932
Others (11,735) (14,501)
Total $ 577,080 569,866
ii) Recognized deferred tax assets and liabilities
i. Unrecognized deferred income tax assets
The Deferred income tax assets that have not been recognized by the Group are as follows:
December 31,
2015
December 31,
2014
Deductible temporary differences $ 4,682 1,395
Impairment loss 19,072 17,842
Tax losses 17,632 18,498
$ 41,386 37,735
Tax losses are applied to Income Tax Act that can be carried forward for ten years, after
assessed by tax authority, to offset taxable income before apply to tax rate. Deferred
income tax assets have not been recognized in respect of these items because it is not
probable that the future taxable profit will be available, against which, the Group can utilize
the benefits therefore.
261
As of December 31, 2015, the amount of tax losses not yet recognized as deferred tax assets
and their last year for credit is as follows:
Year
Amount
Year of expiration
2008 $ 3,443 2018
2009 33,520 2019
2010 10,542 2020
2011 15,947 2021
2012 21,537 2022
2013 8,252 2023
2014 5,988 2024
2015 4,490 2025
$ 103,719
ii. Recognized deferred income tax assets and liabilities
Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as
follows:
Deferred tax liabilities:
Withholding
tax of
attributable
earnings of
subsidiaries in
Mainland
China
Foreign
investment
income
accounted for
using equity
method
Depreciation
difference
between
financial and
tax reporting
Land value
increment tax Other Total
Balance at January 1, 2015 $ 144,677 90,496 65,798 304,572 - 605,543
Recognized in profit or loss 5,086 169,101 (10,033) - 104 164,258
Balance at December 31, 2015 $ 149,763 259,597 55,765 304,572 104 769,801
Balance at January 1, 2014 $ 139,980 26,113 68,038 304,572 - 538,703
Recognized in profit or loss 4,697 64,383 (2,240) - - 66,840
Balance at December 31, 2014 $ 144,677 90,496 65,798 304,572 - 605,543
Deferred tax assets:
Loss carry
forward
Allowance for
inventory
valuation Other Total
Balance at January 1, 2015 $ - 2,849 24,612 27,461
Recognized in profit or loss 4,389 (173) 1,755 5,971
262
Balance at December 31, 2015 $ 4,389 2,676 26,367 33,432
Balance at January 1, 2014 $ - 3,678 20,427 24,105
Recognized in profit or loss - (829) 4,185 3,356
Balance at December 31, 2014 $ - 2,849 24,612 27,461
263
iii) Examination and approval
The tax returns of the Company have been examined by the tax authorities through 2013.
iv) Imputation tax information
The components of unappropriated earnings were as follows:
December 31,
2015
December 31,
2014
Derived from year 1997 and prior years $ - -
Derived from year 1998 and thereafter 1,686,942 1,314,340
$ 1,686,942 1,314,340
December 31,
2015
December 31,
2014
Balance of imputation credit account (ICA) $ 73,577 23,225
2015(estimated) 2014(actual)
imputation tax credit ratio of earnings to residents of
ROC 4.35% 7.65%
Effective January 1, 2015, the imputation tax credit of dividends or earnings distributed to individual shareholder
who are residents of the ROC was adjusted to half of the original amount. Furthermore, the imputation tax
credit of dividends or earnings distributed to individual shareholders resulting from the 10% surtax on
unappropriated earnings was also adjusted to half of the original amount.
Under the integrated income tax system, the above imputation credit account and creditable ratio were calculated
according to the formal interpretation No.10204562810 issued by Taxation Administration, Ministry of
Finance, R.O.C. on October 17, 2013.
(o) Capital and other equity
As of December 31, 2015 and 2014, the total value of authorized ordinary shares amounted to $4,000,000
thousand, with par value of $10 per share, of which 400,000 thousand shares, 294,133 shares were issued. All
issued shares were paid up upon issuance.
A reconciliation of the Company's outstanding shares of the years 2015 and 2014 were as follows:
Unit: thousand shares 2015 2014
Balance at January 1 (Balance at December 31) 294,133 294,133
264
i) Additional paid-in capital
The components of additional paid-in capital as of December 31, 2015 and 2014, were as follows:
December 31,
2015
December 31,
2014
Share premium $ 1,280 1,280
Treasury stock 519,506 423,157
$ 520,786 424,437
The Company's subsidiary, Lucky Co., was awarded with cash dividends on August 6, 2015 and June 25, 2014
amounting to $96,349 thousand and $91,760 thousand, respectively, and they were recognized as capital
surplus-treasury stock transactions.
In accordance with the ROC Company Act in January 2012, realized capital surplus can be used to increase
share capital or to distribute as cash dividends after offsetting losses. The aforementioned capital surplus
includes share premiums and donation gains. In accordance with the Securities Offering and Issuance
Guidelines, the amount of capital surplus to increase share capital shall not exceed 10 percent of the actual
share capital amount.
ii) Retained earnings
As the Company is in a fluctuating business environment and in its growth stage, the dividend policy states that
the distribution of dividends varies depend on the Company's cash position and reflects its capital budget and
working capital demands. However, distribution of earnings shall be distributed preferably by using stock
dividends.
In accordance with the Company's articles of incorporation, the Company must retain 10% of its after-tax
earnings as legal reserve (less deficits of prior years, if any) and then provide a special reserve for the
stockholders' equity account. The remaining amount should be distributed as follows:
i. Remuneration of directors and supervisors as propose by the Board of Directors;
ii. 1% is distributed as employee bonuses.
iii. 50% to 100% of the remainder, as necessary, should be distributed as dividends, in which
cash dividends should be at least 10% of the total dividends distributed.
The abovementioned distribution of earnings should be proposed by the Board of Directors and is subject to the
stockholders' approval.
For the upcoming three years, The Company plans to distribute all the earnings of each year, and the ratio of
cash and stock distributed is determined in accordance with the policy in The Company's articles of
incorporation and with consideration of The Company's financial situation.
265
In accordance with the amendments to the Company Act in May 2015, employee bonuses and the directors' and
supervisors' remuneration are no longer part of the appropriations of earnings. The Board of Directors proposed
the amendments on March 17, 2016, which will be approved at the 2016 annual shareholders’ meeting. Please
refer to employee benefits expense in Note 6(r).
i. Legal reserve
In accordance with the Company Act as amended in January 2012, that companies must
retain 10% of their annual net earnings, as defined in the Act, until such retention equals the
amount of issued share capital. When a company incurs no loss, it may, pursuant to a
resolution to be adopted by the shareholders' meeting as required, distribute its legal reserve
by issuing new shares or cash. Only the portion of legal reserve which exceeds 25% of the
issued share capital may be distributed.
ii. Special earnings reserve
As the Company opted for the exemptions allowed under IFRS 1 "First-time Adoption of
International Financial Reporting Standards" during the Company's first-time adoption of
the IFRS as endorsed by the FSC, unrealized revaluation increments and cumulative
translation adjustments of $512,508 thousand, which were previously recognized in
shareholders' equity were reclassified to retained earnings. In accordance with Regulatory
Permit No.1010012865 as issued by the FSC on April 6, 2012, a special reserve is
appropriated from retained earnings for the aforementioned reclassification. In addition,
during the use, disposal or reclassifications of relevant assets, this special reserve is reverted
to distributable earnings proportionately. The carrying amount of special reserve amounted
to $512,508 thousand as of December 31, 2015.
For the regulatory permission mentioned above, the Company is also required to set aside
an additional special reserve, as part of the distribution of its annual earnings, equal to the
difference between the amount of the above-mentioned special reserve and net debit balance
of the other components of stockholders’ equity.
iii. Distribution of retained earnings
For the year 2014 and 2013, the estimated amounts of employees' bonuses was $8,538
thousand and $7,689 thousand, respectively, and the estimated amounts of directors' and
supervisors' emoluments was $34,151 thousand and $30,757 thousand, respectively. Such
amounts were estimated by multiplying after-tax income by the percentage of distribution of
employees' bonuses and directors' and supervisors' emoluments, and recorded as cost of
sales or operating expenses in the period. The actual amount of employee bonus and
remuneration to the board of directors and supervisors distributed for the years 2014 and
2013 is identical to that estimated in the financial report ended 2014 and 2013, and related
information can be accessed through the Market Observation Post System.
266
The appropriations of 2014 and 2013 earnings as dividends to stockholders that were
approved by the Company's shareholders during their meetings on June 10, 2015, and June
6, 2014, respectively, were as follows:
2014 2013 Amount
per share
(NT
dollars)
Total
amount
Amount
per share
(NT
dollars)
Total
amount
Dividends distributed to
common shareholders:
Cash $ 2.10 617,680 2.00 588,266
iii) Treasury stock
None shares were purchased by the Company and its subsidiaries during the years 2015 and 2014. The reason is
that the subsidiaries held by long-term of the Company shares previous years. As of December 31, 2015 and
2014, the subsidiaries held the Company’s shares as follows:
December 31, 2015
Number of
shares (in
Market
price per
Adjusted
cost per
Total
market
Total
treasury Subsidary name thousand) share share value stock
Lucky Co. 46,041 67.90 11.51 $ 3,126,201 530,114 December 31, 2014 Number of
shares (in
Market
price per
Adjusted
cost per
Total
market
Total
treasury Subsidary name thousand) share share value stock
Lucky Co. 46,041 55.30 11.51 $ 2,546,082 530,114
267
iv) Other equities
Foreign
exchange
differences
arising from
foreign
operation
Available-f
or-sale
financial
assets
Non-contro
lling
interests Total
Balance as of January 1, 2015 $ 210,304 (5,685) 5,056 209,675
Foreign exchange differences arising
from foreign operation
(58,483) - (4,686) (63,169)
Exchange differences on translation
financial statements of foreign
subsidiaries accounted for using
equity method
(85,617) - - (85,617)
Unrealized gains (losses) from
available-for-sale financial assets
- (598)
- (598)
Unrealized gains (losses) on
available-for-sale financial assets,
subsidiaries accounted for using
equity method
-
(140)
-
(140)
Balance as of December 31, 2015 $ 66,204 (6,423) 370 60,151
Balance as of January 1, 2014 $ 37,681 (4,865) (49) 32,767
Foreign exchange differences arising
from foreign operation
30,645 - 5,105 35,750
Exchange differences on translation
financial statements of foreign
subsidiaries accounted for using
equity method
141,978 - - 141,978
Unrealized gains (losses) from
available-for-sale financial assets
- (664)
- (664)
Unrealized gains (losses) on
available-for-sale financial assets,
subsidiaries accounted for using
equity method
-
(156)
-
(156)
Balance as of December 31, 2014 $ 210,304 (5,685) 5,056 209,675
268
(p) Earnings per share
The calculation of the Group's basic earnings per share and diluted earnings per share for the years ended
December 31, 2015 and 2014, was as follows:
i) Basic earnings per share
2015 2014
Net income attributable to common shareholders of the
Company $ 1,112,850 948,634
Weighted-average number of common shares 248,092 248,092
Basic earnings per share (in NT dollars) $ 4.49 3.82
ii) Diluted earnings per share
2015 2014
Net income attributable to common shareholders of the
Company (diluted) $ 1,112,850 948,634
Weighted-average number of common shares (basic) 248,092 248,092
Impact of potential common shares
Effect of employee's bonuses 263 266
Weighted-average number of shares outstanding
(diluted) 248,355 248,358
Diluted earnings per share (in NT dollars) $ 4.48 3.82
(q) Revenue
The details of the Group's revenue for the years ended December 31, 2015 and 2014, are as follows:
2015 2014
Sale of goods $ 15,446,582 14,763,103
Service income 31,556 30,255
Revenue on conversion 1,405 38,488
$ 15,479,543 14,831,846
269
The articles of incorporation of the Company and its subsidiary, Shanghai Qiaoxing Co., are in accordance with
those of the customer loyalty program, which aim to boost the sales on all of their liquid products (such as
edible and non-edible oil products, as well as dish and laundry liquid detergent) by providing customers bonus
points in exchange for a discount price or complimentary items upon purchasing of any merchandise. Deferred
income is derived from the fair value of the bonus points or complimentary items which have not been
exchanged by the customers.
December 31,
2015
December 31,
2014
The Company $ 92,977 79,496
Shanghai Qiaoxing Co. 256,433 202,636
Total $ 349,410 282,132
(r) Employees' compensation and directors' remuneration
In accordance with the Company's article in March 17, 2016, this has been revised but has not yet been approved
by the shareholders meeting. If there is profit for the year, the Company should contribute more than 1% of its
profit as employee compensation, and less than 5% as directors' remuneration. However, if the Company has
accumulated deficits, the profit should be reserved to offset the deficit. The amount of remuneration to
directors, and compensation to employees had been approved by the board of directors.
The Company estimated its employee compensation and directors' remuneration amounting to $14,029 thousand
and $56,116 thousand for the year 2015, respectively. The estimated amounts mentioned above are based on
the net profit before tax of each respective ending period, multiplied by the percentage of the employee
compensation, and the directors' remuneration, as specified in the Company's article. The estimations are
recorded under operating expenses and cost. The differences between the estimated amounts in financial
statements and actual amounts approved by the Board of Directors, if any, shall be accounted for as changes in
accounting estimates and recognized in 2016.
(s) Non-operating income and expenses
i) Other income
2015 2014
Interest income $ 94,068 47,373
Government grants 47,847 76,570
Rental income 7,671 1,984
Other 34,543 31,073
$ 184,129 157,000
270
The Company recalled and disposed its products because it violated the Act Governing Food Safety and
Sanitation. However, the Company did not inform the Department of Public Health (DOH), Taoyuan, and has
to penalty of $3,000 thousand, which was recognized as loss. However, the Company appealed to the DOH,
Taoyuan regarding the said penalty. As a result, on December 24, 2015, the DOH, Taoyuan, decided to reduce
the amount to $300 thousand instead of $3,000 thousand, which were recognized as other accounts payable and
other accounts receivable, respectively. Therefore, the difference of $2,700 thousand, which the Company is
expected to receive from the DOH, Taoyuan, was recognized as other gains as of December 31, 2015.
ii) Other gains and losses
2015 2014
Gains (loss) of foreign exchange $ (226,569) (6,327)
Loss on disposal of property, plant and equipment, net (6,485) (4,392)
Depreciation of investment property (3,746) -
Penal loss - (7,050)
Net gains (losses) on disposal of financial assets
(liabilities) measured at fair value through profit or loss
6,712 2,850
Gains on disposal of investments - 25,930
Impairment loss on non-financial assets - (20,000)
Handling charges - (11,303)
Other (17,959) (10,085)
$ (248,047) (30,377)
The Company declared its 30 batches of raw materials as industrial materials during the period from 2013 to
August 2014. However, the said materials were not registered with the Food and Drug Administration (FDA),
Ministry of Health and Welfare, which violated the Act Governing Food Safety and Sanitation. Therefore, On
October 15, 2014, the Company was ordered by the DOH of Taoyuan County Government to temporarily
cease its production on all types of edible oil, as well as recall 123 kinds of its products island-wide. In addition,
the Company was requested to pay the penalty amounting to $30,000 thousand by the DOH of Taipei City
Government. On October 19, 2014, the DOH of Taoyuan City Government gave the Company the permission
on all of its recalled products to be sold again in the market under the condition that the said products will have
to be examined and approved by the FDA for market consumption. On January 23, 2015, the DOH of Taipei
City Government revoked its decision on the amount the Company has to pay for its penalty; instead of
paying the fine of $30,000 thousand, on January 30, 2015, the Company will only have to pay the amount of
$7,050 thousand as ordered by the DOH of Taipei City Government. On December 31, 2015, the Company
paid the DOH of Taipei City Government the requested amount in full.
iii) Finance costs
2015 2014
Interest expenses $ 150,460 125,961
271
(t) Financial instruments
i) Credit risk
i. Credit risk exposure
The maximum credit risk exposure of the Group's financial assets is equal to their carrying
amount.
ii. Concentration of credit risk
The Group's cash and cash equivalents and accounts receivable are the main source of
potential credit risk. The Group deposits its cash and cash equivalents in different financial
institutions and has no concentration of credit risk on an individual customer. Therefore, the
Group concluded that it is not exposed to credit risk.
ii) Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest payments but
excluding the impact of netting agreements.
Carrying
amount
Contractual
cash flows
Within a
year
1-2 years
2-5 years
More than 5
years
December 31, 2015
Non-derivative financial liabilities
Secured loans $ 2,658,196 2,802,668 83,945 496,940 2,052,142 169,641
Short-term commercial paper payable 149,967 150,000 150,000 - - -
Notes payable 157 157 157 - - -
Accounts payable 721,917 721,917 721,971 - - -
Unsecured loans 5,971,659 6,057,293 4,115,619 1,475,238 453,729 -
Other payable 873,222 873,222 873,222 - - -
$ 10,375,118 10,605,257 5,944,914 1,972,178 2,505,871 169,641
December 31, 2014
Non-derivative financial liabilities
Secured loans $ 1,891,608 2,042,333 103,153 375,351 1,394,188 169,641
Short-term commercial paper payable 99,994 100,000 100,000 - - -
Notes payable 1,116 1,116 1,116 - - -
Accounts payable 663,996 663,996 663,996 - - -
Unsecured loans 6,277,654 6,397,787 3,896,216 2,050,590 405,896 45,085
Other payable 690,070 690,070 690,070 - - -
$ 9,624,438 9,895,302 5,454,551 2,425,941 1,800,084 214,726
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier
or at significantly different amounts.
272
iii) Currency risk
i. Risk exposure
The Group's financial assets and financial liabilities exposed to significant currency risk
were as follows:
Foreign
currency
Exchange
rate
NTD
December 31, 2015
Financial assets:
Monetary assets:
USD $ 3,560 32.85 118,169
Financial liabilities:
Monetary liabilities:
USD $ 79,968 32.85 2,624,965
EUR $ 40,685 35.88 1,459,778
December 31, 2014
Financial assets:
Monetary assets:
USD $ 3,605 31.65 114,095
Financial liabilities:
Monetary liabilities:
USD $ 120,591 31.65 3,816,691
ii. Sensitivity analysis
The Group's exposure to foreign currency risk arose from cash and cash equivalents,
accounts and other receivables, loans and borrowings, and accounts and other payables that
were denominated in foreign currencies. A 1% appreciation (depreciation) of the NTD
against the USD, and EUR as of December 31, 2015 and 2014, would have increased
(decreased) the net income before tax by $98,048 thousand and $98,324 thousand,
respectively.
iii. Foreign exchange gain and loss on monetary item
Since the Group has many kinds of functional currency, the information on foreign
exchange gain (loss) on monetary items is disclosed by total amount. For the years 2015
and 2014, foreign exchange gain (loss) (including realized and unrealized abortions)
amounted to $(226,569) thousand and $(6,327) thousand.
iv) Interest rate risk analysis
Please refer to the note on liquidity risk management for the interest rate exposure of the Group's financial assets
and liabilities.
273
The following sensitivity analysis is based on the risk exposure to interest rates on derivative and non-derivative
financial instruments on the reporting date. Regarding assets with variable interest rates, the analysis is on the
basis of the assumption that the amount of assets outstanding at the reporting datewas outstanding throughout
the year. The rate of change is expressed as the increment or decrement by 1% when reporting to the
management internally, which also represents the management's assessment of the reasonable interest rate
change.
If the interest rate had increased / decreased by 1%, the Group's net income before tax would have increased /
decreased by $71,628 thousand and $67,805 thousand for the years ended December 31, 2015 and 2014,
respectively, with all other variable factors remaining constant.
v) Fair value and carrying amount
i. Categories and fair value of financial instruments
Except for the followings, carrying amount of the Group's financial assets and liabilities are
valuated approximately to their fair value, and are not based on observable market date and
the value measurements which are not reliable. No additional fair value disclosure is
required in accordance to the Regulations.
December 31, 2015 Fair value Carrying
amount
Level 1 Level 2 Level 3 Total
Available-for-sale financial
assets
Domestic listed stock $ 13,549 13,549 - - 13,549
Financial assets at cost 27,166 - - - -
Subtotal 40,715 13,549 - - 13,549
Loans and receivables
Cash and cash equivalents 5,330,938 - - - -
Debt bond investment
without active market
249,750 - - - -
Accounts and notes
receivable and other
1,861,999 - - - -
receivables
Subtotal 7,442,687 - - - -
Total $ 7,483,402 13,549 - - 13,549
274
December 31, 2015 Fair value Carrying
amount
Level 1 Level 2 Level 3 Total
Financial liabilities
measured at amortized cost
Short-term borrowings $ 3,612,664 - - - -
Short-term commercial
paper payable
149,967 - - - -
Notes and accounts
payable
722,074 - - - -
Other payables 873,222 - - - -
Long-term borrowings
(including current
5,017,191 - - - -
portion)
Subtotal 10,375,118 - - - -
Total $ 10,375,118 - - - -
December 31, 2014 Fair value Carrying
amount
Level 1 Level 2 Level 3 Total
Financial assets at fair value
through profit or loss
Derivative financial assets $ 50 - 50 - 50
Available-for-sale financial
assets
Domestic listed stock 14,287 14,287 - - 14,287
Financial assets at cost 27,166 - - - -
Subtotal 41,453 14,287 - - 14,287
Loans and receivables
Cash and cash equivalents 4,461,887 - - - -
Accounts and notes
receivable and other
1,846,328 - - - -
receivables
Subtotal 6,308,215 - - - -
Total $ 6,349,718 14,287 50 - 14,337
275
December 31, 2014 Fair value Carrying
amount
Level 1 Level 2 Level 3 Total
Financial liabilities
measured at amortized cost
Short-term borrowings $ 3,405,688 - - - -
Short-term commercial
paper payable
99,994 - - - -
Notes and accounts
payable
665,112 - - - -
Other payables 690,070 - - - -
Long-term borrowings
(including current
4,763,574 - - - -
portion)
Total $ 9,624,438 - - - -
ii. Valuation techniques and assumptions used in fair value determination
1) Non-derivative financial instruments
Financial instruments traded in active markets are based on quoted market prices. The
quoted price of a financial instrument obtained from main exchanges and on-the-run
bonds from Taipei Exchange can be used as a basis to determine the fair value of the
listed companies’ equity instrument and debt instrument of the quoted price in an
active market.
Stocks of listed Companies and open ended funds are financial assets possessing
standard provision and trading in active markets. The fair values are determined based
on the market quotes and net assets value, respectively.
2) Derivative financial instrument
Fair value of forward currency exchange is usually determined by using the forward
currency rate.
iii. Fair value hierarchy
The Group used the fair value that can be observed in the market to measure the value of
assets and liabilities. Fair value levels are based on the degree in which the fair value can be
observed and grouped in to Levels 1 to 3 as follows:
1) Level 1: quoted prices (unadjusted) in active markets for identified assets or liabilities.
2) Level 2: inputs, other than the quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
3) Level 3: inputs for assets or liabilities that are not based on observable market data
(unobservable inputs).
276
There was no such situation that the Company reclassified the financial instruments from
one level to another as of the reporting date.
(u) Financial risk management
i) Overview
The Group is exposed to the following risks arising from financial instruments:
i. Credit risk
ii. Liquidity risk
iii. Market risk
This note discloses information about the Group's exposure to the aforementioned risks, and its goals, policies,
and procedures regarding the measurement and management of these risks. For additional quantitative
disclosures of these risks, please refer to the notes regarding each risk disclosed throughout the financial report.
ii) Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the risk management
framework.
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 Group's Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both
regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the
Precursory Audit Committee.
iii) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group's receivables from customers and
investment securities.
i. Trade and other receivables
The Group's exposure to credit risk is influenced mainly by the individual characteristics of
each customer. However, management also considers the demographics of the Group's
customer base, including the default risk of the industry and country in which customers
operate, as these factors may have an influence on credit risk, particularly during
deteriorating economic circumstances. In 2015 and 2014, there was no geographical
concentration of credit risk regarding the Group's revenue.
277
The Group have established a credit policy under which each new customer is analyzed
individually for creditworthiness before the Group's standard payment and delivery terms
and conditions are offered. Purchase limits are established for each customer, which
represent the maximum open amount without requiring approval; these limits are reviewed
on a periodic basis. Customers that fail to meet the Group's benchmark creditworthiness
may transact with the Group only on a prepayment basis.
The Group set the allowance for bad debt account to reflect the estimated losses for trade,
other receivables, and investment. The allowance for bad debt account consists of specific
losses relating to individually significant exposure and unrecognized losses arising from
similar assets groups. The allowance for bad debt account is based on historical collection
record of similar financial assets..
ii. Investments
The credit risk exposure in the bank deposits, fixed income investment and other financial
instruments is measured and monitored by the Group's finance department. Since those who
transact with the Group are banks and other external parties with good credit standing, there
are no non-compliance issues, and therefore, there is no significant credit risk.
iii. Guarantees
Pursuant to the Group’s policies, it is only permissible to provide financial guarantees to
subsidiaries. As of December 31, 2015 and 2014, the Group did not provide any
endorsement and guarantees to preparation of the third-party.
iv) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its
financial liabilities that are settled by delivering cash or another financial asset. The Group's approach to
managing liquidity is to ensure, as far 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 uses activity-based costing to estimate the cost of its products and services, which assists it in
monitoring cash flow requirements and optimizing its cash return on investments. The Group aims to maintain
the level of its cash and cash equivalents and other highly marketable debt investments at an amount in excess
of the expected cash flows on financial liabilities (other than trade payables) over the succeeding 60 days. The
Group also monitors the level of expected cash outflows on trade and other payables. This excludes the
potential impact of extreme circumstances that cannot be reasonably predicted. The Group has unused short
term bank facilities of $8,312,542 thousand on December 31, 2015.
278
v) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates, and equity
prices will affect the Group's income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters.
i. Currency risk
The Group is exposed to currency risk on sales, purchases and borrowings that are
denominated in a currency other than the respective functional currencies of the Group's
entities, primarily TWD, CNY, JPY and THB. The currencies used in these transactions are
the TWD, USD, THB, JPY and CNY.
Interest expenses are denominated in the same currency as that of the principal. Generally,
the currency of loans matches that of the Group's operating cash flow, primarily consisting
of TWD, USD, THB, CNY, and JPY.
With regard to monetary assets and liabilities denominated in a foreign currency, when a
short-term risk exposure exists, the Group relies on immediate foreign exchange
transactions to ensure the net exposure to foreign exchange risk is maintained at an
acceptable level.
ii. Interest rate risk
The interest rates of the Group's long-term and short-term borrowings are floating. Hence,
changes in market conditions will cause fluctuations in the effective interest rate of the
aforementioned loans. The Group's finance department monitors and measures potential
changes in market conditions to achieve a fixed interest rate on the Group's loans.
iii. Other market price risk
The Group does not enter into any commodity contracts other than to meet the Group's
expected usage and sales requirements; such contracts are not settled on a net basis.
(v) Capital management
The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence
and to sustain future development of the business. Capital consists of ordinary shares, capital surplus, retained
earnings, and non-controlling interests of the Group. The Board of Directors monitors the return on capital as
well as the level of dividends to ordinary shareholders.
The Group's debt-to-adjusted-capital ratio at the end of the reporting period was as follows:
December 31,
2015
December 31,
2014
Total liabilities $ 12,755,258 11,661,736
Less: cash and cash equivalents 5,330,938 4,461,887
Net debt $ 7,424,320 7,199,849
Total equity $ 5,644,077 5,252,578
Debt-to-adjusted-capital ratio 132% 137%
279
As of December 31, 2015, there were no changes in the Group's approach of capital management.
(7) Related-party Transactions
(a) Parent company and ultimate controlling party
The Company is the ultimate controlling party of the Group.
(b) Significant transactions with related parties
i) Leases
Type of related parties Object Period 2015 2014
Key management Building 2015.1.1~
2016.12.31
2013.1.1~
2014.12.31
$ 8,169 7,641
As of December 31, 2015 and 2014, the rent expense due to the aforementioned transactions was paid.
(c) Personnel transactions from key management
The compensation of the key management personnel comprised as the following:
2015 2014
Short-term employee benefits $ 195,701 173,861
Post-employments benefits 2,672 2,551
$ 198,373 176,412
(8) Pledged Assets
The carrying values of pledged assets were as follows:
Pledged assets
Object
December 31,
2015
December 31,
2014
Other non-current assets:
Time deposits Operating lease deposits $ 408 408
Property, plant and equipment:
Land Short-term and long-term
borrowings
2,477,812 2,442,952
Buildings Short-term and long-term
borrowings
282,539 300,288
Machinery and other Short-term and long-term 97 103
equipment borrowings
$ 2,760,856 2,743,751
280
(9) Significant Commitments and Contingencies
(a) Major contracts not recognized the commitment:
i) The Group's unrecognized contractual commitments were as follows:
December 31,
2015
December 31,
2014
Acquisition of property, plant and equipment $ 1,287,873 393,600
ii) The Group's unused letters of credit for purchases of materials:
December 31,
2015
December 31,
2014
Unused letters of credit for purchases of materials $ 61,875 42,218
iii) Long-term letters of credit guarantee bill:
December 31,
2015
December 31,
2014
Long-term letters of credit guarantee bill $ 392,000 392,000
(b) The Group's subsidiary, Dian Shui Lou Co., signed several lease contracts which will get 5% to 12%
commission of revenue. The contracts expire from February 29, 2016 to July 28, 2017.
(c) Namchow BVI Co. and Paulaner Brauhaus Consult GmbH (PBCG) have entered into a contract for
the use of the PBCG brand name and beer brewing techniques. In accordance with the contract, PBCG
has to provide the right to use its brand name and its management consultation service for restaurant
management, information service and brewing methods. The contract content is as follows:
i) Contract for the use of PBCG brand name: The contract lasts for 10 years, starting from
February 15, 1997 to February 15, 2007, with the option of extending it for an additional of five
years to a maximum of 10 years. The contract was extended. The terms of the contract state that a
royalty of 3% of service revenue (net of beer sales) for using the brand name will be paid to
PBCG based on a predetermined exchange rate with the Euro. In addition, after July 1, 2000, the
Company need not have to pay for the royalty anymore.
ii) Contract for the use of the beer brewing techniques: The contract lasts for 10 years, starting from
December 1, 1996 to December 1, 2006, with the option of extending it for an additional of five
years to a maximum of 10 years. In accordance with the contract, as royalty for the beer brewery,
starting from July 1, 2008, Namchow BVI Ltd. would have to pay the amount of 170 Euros for
every one hundred litres if the production is below 1,200 litres; 130 Euros for every one hundred
litres if the production is within the range of 1,201 to 2,400 litres; and 110 Euros for every one
hundred litres if the production ranges from 2,401 to 6,000 litres. The amount will be reduced to
90 Euros if the production is more than 6,000 litres.
281
The royalty payments made by Namchow BVI Co.,which are in accordance with the aforementioned contracts in
2015 and 2014, were $26,249 thousand and $31,171 thousand, respectively. As of December 31, 2015 and
2014, the royalty payables amounted to $2,422 thousand and $2,675 thousand, respectively, which were
recorded under accrued expenses and other current liabilities.
(d) Paulaner Brauchaus Consult GmbH (PBCG) has to provide information services and brewing methods
to Lucky Co. Contract for the use of the beer brewing techniques: In accordance with the contract, as
royalty for the beer brewery, starting from July 1, 2009, Lucky Co. would have to pay amount of 170
Euros for every one hundred litres if the production is below 250 litres; and 130 Euros for every one
hundred litres if the production ranges from 251 to 2,500 litres. The amount will be reduced to 110
Euros if the production is more than 2,501 litres.
The royal payments made by Lucky Co., which are in accordance with the aforementioned contracts in 2015 and
2014, were $1,813 thousand and $2,046 thousand, respectively. As of December 31, 2015 and 2014, the royalty
payables amounted to $617 thousand and $395 thousand, which were recorded under other payables.
(10) Significant Losses from Calamity: None.
(11) Significant Subsequent Events: None.
(12) Others
The employee benefit expenses, depreciation and amortization, categorized by function, were as follows:
By function 2015 2014
By nature
Operating
costs
Operating
expenses
Total
Operating
costs
Operating
expenses
Total
Employee benefits
Salary 857,075 1,132,463 1,989,538 792,444 998,475 1,790,919
Labor and health insurance 235,212 85,604 320,816 202,083 71,215 273,298
Pension 64,609 86,754 151,363 58,322 80,772 139,094
Others 83,651 85,600 169,251 109,513 71,725 181,238
Depreciation (note 1) 482,113 170,970 653,083 457,338 152,206 609,544
Amortization - - - - - -
note 1: Depreciation expenses for investment property recognized under other income and expenses amounting to
$3,746 thousand for 2015 were excluded.
282
(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:
i) Loans extended to other parties:
Unit: thousand dollars
No.
Name of
Name of
Financial
statement
account
Related Highest balance
of financing to
other parties
Ending Amount
actually
drawn
Range of
interest
rates
Purposes of fund
financing for the
borrowers
Transaction
amount for
business between
Reasons for
short-term
financing
Allowance
for bad
debt
Collateral Financing limit
for each
borrowing
Maximum
financing
limit for the
lender borrower party during the year balance (Note 7) two parties Item Value company lender
1 The company Nankyo Japan
Co.
Other
accounts
receivable-
related parties
Yes 249,730 - - - 2 - Capital need
for operation
- - 2,199,928
(Note 1)
2,199,928
(Note 1)
2 Guangzhou
Namchow Co.
Shanghai
Namchow Co.
Other
long-term
accounts
receivable-
related parties
Yes 750,000 750,000 750,000 4% 2 - Capital need
for operation
- - 2,377,346
(Note 2)
2,377,346
(Note 2)
Note 1: Base on the Company’s guidelines, the allowable aggregate amount of financing provided to others cannot exceed 40% of the Company’s stockholder’s equity; the maximum financing provided to an individual company
cannot exceed 40% of the Company’s stockholder’s equity.
Note 2: Base on the Guangzhou Namchow Co.’s guidelines, the allowable aggregate amount of financing provided to others and the maximum financing provided to an individual company cannot exceed 100% of the Guangzhou
Namchow Co’s stockholder’s equity.
Note 3: The transactions within the Group were eliminated in the consolidated financial statements.
ii) Guarantees and endorsements for other parties:
Unit: thousand dollars
Name
Counter-party of guarantee
and endorsement
Limitation on
amount of
guarantees and
Highest balance
for guarantees
and
Ending
balance of
guarantees
Amount
Property
pledged on
guarantees
Ratio of accumulated
amounts of guarantees
and endorsements to
Maximum
allowable
amount for
Parent company
endorsement /
guarantees to
Subsidiary
endorsement /
guarantees to
Endorsements/
guarantees to
third parties on
No.
of
company
Name Relationship
with the
company
endorsements
for one party
endorsements
during the year
and
endorsements
actually
drawn
and
endorsements
(Amount)
net worth of the latest
financial statements
guarantees
and
endorsements
third parties
on behalf of
subsidiary
third parties
on behalf of
parent company
behalf of
company in
Mainland China
0 The
Company
Nacia Co. 2 5,499,819 356,700 310,300 117,160 - 5.64% 5,499,819 Y
0 The
Company
Ting Hao Cayman
Co.
3 5,499,819 884,500 493,000 435,000 - 8.96% 5,499,819 Y
0 The
Company
Tianjin Namchow
Co.
3 5,499,819 429,200 - - - - % 5,499,819 Y Y
0 The
Company
Guangzhou
Namchow Co.
3 5,499,819 435,000 - - - - % 5,499,819 Y Y
0 The
Company
Nankyo Japan Co. 2 5,499,819 552,344 552,344 434,824 - 10.04% 5,499,819 Y
1 Lucky Co. Dian Shui Lou
Co.
2 3,914,795 76,000 46,000 6,214 - 1.18% 3,914,795
Note 1: The guarantee's relationship with the guarantor is as follows:
(1) Ordinary business relationship.
(2) A subsidiary whose common stock is more than 50% directly owned by the guarantor.
(3) An investee whose common stock is more than 50% owned by the parent company and its subsidiary in aggregate.
(4) The parent company owns, directly or indirectly via subsidiaries, more than 50% of the guarantor's common stock.
(5) A company in the same trade that is mutually guaranteed pursuant to the covenants of a construction contract upon contracting a project.
(6) A company that is guaranteed proportionately according to the guarantor's ownership percentage due to co-investment by various investors.
Note 2: According to Namchow Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Namchow Co.’s net worth, while the total guarantees and endorsements for an individual party
not exceed 100% of Namchow Co.’s net worth.
Note 3: According to Lucky Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Lucky Co.’s net worth, while the total guarantees and endorsements for an individual party not
exceed 100% of Namchow Co.’s net worth.
Note 4: The transactions within the Group were eliminated in the consolidated financial statements.
iii) Securities held as of December 31, 2015 (excluding investment in subsidiaries, associates and joint ventures):
Unit: thousand dollars
Nature and name Relationship Ending balance Maximum
Name of holder
of security
with the security
issuer
Account name Number of
shares
Book value
Holding
percentage
Market
value
(Note 1)
investment
in 2015
Remarks
The Company Global securities
Financial Corporation Investee accounted for by
cost method
Financial assets carries at cost-noncurrent
3,504 27,166 0.87 % 27,166 57,832
The Company
Stock:
Capital Co., Ltd
-
Available-for-sale financial
asset-noncurrent
1,108
10,979
0.05
%
10,979
16,186
Lucky Co., Ltd.
Stock: The Company
Parent company
Available-for-sale financial
asset-noncurrent
46,041
3,126,201
15.65
%
3,126,201
530,114
Note
2
Lucky Co., Ltd.
Stock:
Capital Co., Ltd
-
Available-for-sale financial asset-noncurrent
259
2,570
0.01 %
2,570
3,789
Note 1: For financial assets carried at cost-non-current in listed companies, market value is determined by the latest monthly average sales price. Market value of unlisted
companies is the net worth or the book value prevailing on the balance sheet date.
Note 2: The stated book value is after subtraction of the amount being reclassified treasury stock.
283
iv) Accumulated holding amount of a single security in excess of $300 million or 20% of Namchow Co.'s issued share capital:
None.
v) Acquisition of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.
vi) Disposal of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.
vii) Sales to and purchases from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:
Unit: thousand dollars
Name of
Transaction details
Status and reason for
deviation from arm's-
length transaction
Account / note receivable
(payable)
company Counter-party Relationship Purchase /
Sale
Amount
Percentage of
total purchases /
sales
Credit
period
Unit price
Credit period
Balance
Percentage of total
accounts / notes
receivable (payable)
Remarks
The Company Lucky Co. Subsidiary (Sales) (228,697) 8 % Note - 46,530 8% Note 2
Tianjin Namchow
Co.
Shanghai Qiaoxing
Co.
Subsidiary (Sales) (2,383,423) 87 % Note - 622,386 94% Note 2
Guangzhou
Namchow Co.
Shanghai Qiaoxing
Co.
Subsidiary (Sales) (2,988,796) 99 % Note - 582,932 100% Note 2
Tianjin Yoshi Yoshi
Co.
Shanghai Qiaoxing
Co.
Subsidiary (Sales) (764,666) 98 % Note - - -% Note 2
Tianjin Namchow
Co.
Tianjin Yoshi Yoshi
Co.
Subsidiary (Sales) (213,808) 8 % Note - 26,397 4% Note 2
Note 1: Depending on capital movement motor adjustment.
Note 2: All inter-company accounts and transactions are eliminated.
viii) Receivables from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:
Unit: thousand dollars
Name of related
Counter-party
Relationship
Balance of
receivables from
Turnover
rate
Overdue amount Amounts received in Allowances
for bad
party related party (Note 1) Amount Action taken subsequent period debts
Guangzhou
Namchow Co.
Shanghai Qiaoxing
Co.
Subsidiary 582,932 - - 582,932
(As of March 17, 2016)
-
Guangzhou
Namchow Co.
Shanghai
Namchow Co.
Subsidiary 762,509 - - -
(As of March 17, 2016)
-
Tianjin Namchow
Co.
Shanghai Qiaoxing
Co.
Subsidiary 622,386 - - 622,386
(As of March 17, 2016)
-
Note: The transactions within the Group were eliminated in the consolidated financial statements.
ix) Derivative financial instrument transactions: None.
x) Business relationships and significant intercompany transactions:
Unit: thousand dollars
Existing Transaction details
No. Name of company Name of counter-
party
relationship
with the
counter-part
y
Account name Amount
Trading terms
Percentage of the
total consolidated
revenue or total
assets
0 The Company Lucky Co. 1 Sales revenue 228,697 No significant
differences
1.48%
0 The Company Lucky Co. 1 Accounts receivable 46,530 No significant
differences
0.25%
1 Tianjin Namchow Co. Tianjin Yoshi Yoshi Co. 1 Sales revenue 213,808 No significant
differences
1.38%
1 Tianjin Namchow Co. Tianjin Yoshi Yoshi Co. 1 Accounts receivable 26,397 Adjust from capital
dispatching
0.14%
1 Tianjin Namchow Co. Guangzhou Namchow
Co.
3 Sales revenue 11,064 No significant
differences
0.07%
1 Tianjin Namchow Co. Guangzhou Namchow
Co.
3 Accounts receivable 15,267 Adjust from capital
dispatching
0.08%
1 Tianjin Namchow Co. Shanghai Qiaoxing Co. 3 Sales revenue 2,383,423 No significant
differences
15.40%
1 Tianjin Namchow Co. Shanghai Qiaoxing Co. 3 Accounts receivable 622,386 Adjust from capital
dispatching
3.38%
2 Chow Ho Co. The Company 2 Sales revenue 7,653 No significant
differences
0.05%
3 Chow Ho Co. The Company 2 Accounts receivable 1,266 No significant
differences
0.01%
3 Guangzhou Namchow
Co.
Shanghai Qiaoxing Co. 3 Sales revenue 2,988,796 No significant
differences
19.31%
284
Existing Transaction details
No. Name of company Name of counter-
party
relationship
with the
counter-part
y
Account name Amount
Trading terms
Percentage of the
total consolidated
revenue or total
assets
3 Guangzhou Namchow
Co.
Shanghai Namchow Co. 3 Long-term other accounts
receivable-related parties
762,509 Interest calculated in
accordance with the
mutually agreed interest
rate
4.14%
3 Guangzhou Namchow
Co.
Shanghai Qiaoxing Co. 3 Accounts receivable 582,932 Adjust from capital
dispatching
3.77%
4 Tianjin Yoshi Yoshi
Co.
Shanghai Qiaoxing Co. 3 Sales revenue 764,666 No significant
differences
4.94%
4 Tianjin Yoshi Yoshi
Co.
Shanghai Qiaoxing Co. 3 Accounts receivable 31,314 Adjust from capital
dispatching
0.20%
5 Mostro (Thailand) Ltd. Namchow (Thailand)
Ltd.
3 Sales revenue 98,254 No significant
differences
0.63%
5 Mostro (Thailand) Ltd. Namchow (Thailand)
Ltd.
3 Accounts receivable 6,189 No significant
differences
0.03%
Note 1: Company numbering is as follows:
(1) Parent company - 0.
(2) Subsidiary starts from 1.
Note 2: The number of the relationship with the transaction counterparty represents the following:
(1) 1 represents downstream transactions.
(2) 2 represents upstream transactions.
(3) 3 represents sidestream transactions.
(b) Information on investees:
The following is the information on investees for the year 2015 (excluding information on investees in Mainland China):
Unit: thousand dollars Name of Name of Original cost Ending balance Maximum Net income Investment
investor investee Address Scope of business December 31,
2015
December 31,
2014
Shares Percentage
of ownership
Book value investment
amount in 2015
(losses) of
investee
income
(losses)
Remarks
The Company Namchow (Thailand) Ltd. Bangkok, Thailand Manufacturing and selling instant noodles
and rice cracker
1,027,405 1,027,405 9,245 100.00% 1,131,170 1,027,405 245,413 245,413
The Company Mostro (Thailand) Ltd. Bangkok, Thailand Manufacturing and selling food 10,201 10,201 100 100.00% 17,779 10,201 4,951 4,951
The Company Nacia Co. Tortola, British Virgin Islands Holding of investments 343,443 343,443 1 100.00% 5,050,316 343,443 1,102,199 1,102,199
The Company Chow Ho Co. Taipei, Taiwan Catering services, food and beverage
retailing, and frozen food manufacturing
80,000 80,000 8,000 100.00% 2,771 80,000 (3,884) (3,884)
The Company Lucky Co. Taipei, Taiwan Manufacturing, selling and processing
various food and beverage products
938,438 938,438 95,338 99.00% 744,331 938,438 50,683 50,505
The Company Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling
printed publications
763 763 80 80.00% 100 763 25 21
The Company Nankyo Japan Co. Tokyo, Japan Catering services, Bistro and wine-selling 308,530 58,800 -
(note 2)
100.00% 260,986 308,530 (15,913) (15,913)
The Company Namchow Consulting Co. Taipei, Taiwan Catering services, food and beverage
retailing and other consulting
5,000 5,000 500 100.00% 4,940 5,000 (41) (41)
Lucky Co. Namchow BVI Co. Tortola, British Virgin Islands Holding of investments 69,133 69,133 3,000 58.00% 193,931 69,133 120,860 70,267 Note 1
Lucky Co. Dian Shui Lou Co. Taipei, Taiwan Liquor importing and retailing 104,000 104,000 10,400 100.00% 125,185 104,000 5,222 5,222 Note 1
Lucky Co. Namchow Gastronomy
Consulting Co.
Taipei, Taiwan Catering services and food consulting 5,000 5,000 500 100.00% 1,511 5,000 (875) (875) Note 1
Lucky Co. Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling
printed publications
100 100 10 10.00% 100 100 25 -
Nacia Co. Ting Hao Cayman Co. Gayman Islands British West Indies. Holding of investments 2,010,124 378,438 18,500 100.00% 4,999,693 2,010,124 1,063,076 825,227
Nacia Co. Namchow International Co. Cayman Islandls British West Indies. Holding of investments 476,680 476,680 12,770 100.00% 1,787,366 476,680 283,312 283,312
Namchow International
Co.
Ting Hao Cayman Co. Gayman Islands British West Indies. Holding of investments -
(note 3)
363,300 -
(note 3)
- %
(note 3)
-
(note 3)
363,300 1,063,076 237,849
Note 1: Its investment gain and loss are also recognized by Namchow Co.
Note 2: The Company holds the shares in subsidiaries Nankyo Japan Co. totaling 3 shares.
Note 3: According to the Group’s strategy, Namchow International Corp. signed a stock transfer contract with Nacia International Corp. and disposal all the shares of Ting Hao (Cayman Island) stock. The transfer date was October 1, 2015.
(c) Information on investment in Mainland China:
i) Information on investment in Mainland China:
Unit: thousand dollars
Name of investee
Scope of business
Issued capital
Method of
investment
Cumulative
investment (amount)
Investment flow during
current period
Cumulative
investment (amount)
Net income
(losses) of
Direct / indirect
investment
Maximum
investment in
Investment
income (loss)
Book
Accumulated
remittance of
in Mainland China (Note 1) from Taiwan as of
January 1, 2015
Remittance
amount
Repatriation
amount
from Taiwan as of
December 31, 2015
investee holding
percentage
2015 (note 2) value earnings in
current period
Tianjin Namchow Co. Manufacturing and selling of
edible fat
756,875 (3) 372,813 - - 372,813 316,782 100.00% 756,875 316,782
((2)b.)
1,850,573 30,245
Shanghai Qiaohao Co. Holding of investments and
international trade 6,055 (3) - - - - 13,522 100.00% 6,055 15,920
((2)b.) 21,596 -
285
Name of investee
Scope of business
Issued capital
Method of
investment
Cumulative
investment (amount)
Investment flow during
current period
Cumulative
investment (amount)
Net income
(losses) of
Direct / indirect
investment
Maximum
investment in
Investment
income (loss)
Book
Accumulated
remittance of
in Mainland China (Note 1) from Taiwan as of
January 1, 2015
Remittance
amount
Repatriation
amount
from Taiwan as of
December 31, 2015
investee holding
percentage
2015 (note 2) value earnings in
current period
Shanghai Qiaohao
Enterprise Management Co.
Business management and
investment consulting 961 (3) - - - - - 100.00% 961 -
((2)b.) 999 -
Shanghai Namchow Food
Co.
Food packaging, selling and
trading of restaurant equipment
and trading
4,807 (3) - - - - - 100.00% 4,807 -
((2)b.)
4,995 -
Tianjin Yoshi Yoshi Co. Developing , manufacturing, and
selling of dairy products and
related services
121,100 (3) - - - - 133,724 100.00% 121,100 133,724
((2)b.)
312,886 -
Bao Lai Na Co. Multinational eateries, and the
promotion, and management of
self-made beers
112,018 (3) 79,468 - - 79,468 62,139 57.94% 112,018 36,003
((2)c.)
170,105 35,967
Guangzhou Namchow Co. Developing, manufacturing, and
selling of dairy products and
related services
544,950 (3) - - - - 596,066 100.00% 544,950 596,066
((2)b.)
2,377,346 90,736
Shanghai Qizhi Co. Business management and
investment consulting services
4,541 (3) - - - - - 100.00% 4,541 -
((2)b.)
5,167 -
Shanghai Qiaoxing Co. Selling of dairy products, food
retailing and international trade
60,550 (3) - - - - 265,922 100.00% 60,550 253,383
((2)c.)
746,823 60,491
Shanghai Namchow Co. Developing, manufacturing, and
selling of dairy products and
frozen food manufacturing
676,597 (3) - - - - - 100.00% 676,597 -
((1))
717,065 -
Note 1: The method of investment is divided into the following four categories:
(1) Remittance from third-region companies to invest in Mainland China.
(2) Through the establishment of third-region companies then investing in Mainland China.
(3) Through transferring the investment to third-region existing companies then investing in Mainland China.
(4) Other methods: EX: delegated investments.
Note 2: Amount of investment income (loss) was recognized base on:
(1) There is no investment income for the preparatory case.
(2) Investment gains and losses were based on three basic:
a. The financial statements audited by an international accounting from that has a cooperative relationship with accounting firms of the Republic of China.
b. The financial statements audited by the auditors of the parent company.
c. Others: the local accounting firm to check the financial reports and the accounts' working papers were reviewed by the auditors of the parest company review Check local
accountants working papers.
Note 3: The transactions within the Group were eliminated in the consolidated financial statements.
ii) Limitation on investment in Mainland China:
Company name
Accumulated investment
amount in Mainland China as
of December 31, 2015
Investment (amount) approved
by Investment Commission,
Ministry of Economic Affairs
Maximum investment amount
set by Investment Commission,
Ministry of Economic Affairs
The Company 372,813 2,387,466 3,299,891
Lucky Co. 79,468 96,722 2,348,877
iii) Significant transactions with investees in Mainland China:
In 2015, sales to subsidiaries via a third party amounted to $15,826 thousand, and as of December 31, the resulting account receivables
amounted to $1,930 thousand. (All inter-company accounts and transactions were eliminated.)
286
(14) Segment Information
(a) General information
There are six service departments which should be reported: Butter department, detergent department, ice cream
department, food department, beverages department and management and rental revenue department. The
Butter department provides manufacturing and selling of edible oil, detergent department provides
manufacturing and selling of detergent; ice cream department provides manufacturing and selling of variant ice
cream; food department provides manufacturing and selling of instant noodles and rice cracker; beverages
department provides liquor importing and retailing and management and rental revenue department provides
business management and investment consulting services.
A reportable department is a strategic business unit providing different products and services. Because each
strategic business unit requires different kinds of techniques and marketing tactics, it should be separately
managed.
(b) Information on income and loss, assets, liabilities, basis of measurement, and the reconciliation for
reportable segments
The Group uses the internal management report and the chief operating decision maker reviews the basis to
determine allocation of resource and makes a performance evaluation. The internal management report includes
profit before taxation, but not includes any extraordinary activity. Because taxation and extraordinary activity
are managed on a group basis, they are not able to be allocated to each reportable segment. In addition, not all
profit or loss from reportable segments includes significant non-cash items such as depreciation and
amortization. The reportable amount is consistent with the report used by the chief operating decision maker.
The operating segment accounting policies are consistent with those described in note 4 "Significant Accounting
Policies".
The Group treated intersegment sales and transfers as third-party transactions and are measured at market price.
287
Information on reportable segments and reconciliation for the Group is as follows:
2015
Edible and
non-edible
oil products
Detergent
products
Ice cream
products Foods Beverages
Management
and rental
revenue
Adjustments
or
elimination Total
Revenue:
Revenue from external customers $ 9,283,057 603,757 1,100,212 2,660,772 1,823,046 8,699 - 15,479,543
Inter-segment revenues 24,273 - 403 265,282 10,593 108,899 (409,450) -
Total revenue $ 9,307,330 603,757 1,100,615 2,926,054 1,833,639 117,598 (409,450) 15,479,543
Reportable segment profit or loss $ 1,611,826 (21,198) 17,554 207,518 109,817 12,873 17,029 1,955,419
Other revenue 184,129
Other gains and losses (248,047)
Finance costs (150,460)
Net income before tax $ 1,741,041
288
2014
Edible and
non-edible
oil products
Detergent
products
Ice cream
products Foods Beverages
Management
and rental
revenue
Adjustments
or
elimination Total
Revenue:
Revenue from external customers $ 8,592,007 663,843 1,602,322 2,148,618 1,816,640 8,416 - 14,831,846
Inter-segment revenues 7,462 - 20,603 219,010 23,232 92,857 (363,164) -
Total revenue $ 8,599,469 663,843 1,622,925 2,367,628 1,839,872 101,273 (363,164) 14,831,846
Reportable segment profit or loss $ 1,231,427 36,610 115,636 84,533 94,977 8,432 6,326 1,577,941
Other revenue 157,000
Other gains and losses (30,377)
Finance costs (125,961)
Net income before tax $ 1,578,603
i) In 2015 and 2014, inter-segment revenues of $409,450 and $363,164 respectively, should be eliminated from total revenue.
ii) Share of associate profit under equity method amounting to $17,029 and $6,326, respectively, should be eliminated.
289
(c) Information about the products and services
Revenue from the external customers of the Group was as follows:
Products and services 2015 2014
Baking oil, cooking oil and industrial oil $ 9,283,057 8,592,007
Frozen dough, noodles and cooked rice 2,660,772 2,148,618
Restaurant Business 1,823,046 1,816,640
Ice cream products 1,100,212 1,602,322
Others 612,456 672,259
Total $ 15,479,543 14,831,846
(d) Geographical information
In presenting information on the basis of geography, segment revenue is based on the geographical location of
customers, and segment assets are based on the geographical location of the assets.
Geographical information 2015 2014
Revenue from external customers:
China $ 9,429,646 8,935,173
Taiwan 4,305,821 4,302,405
Thailand 1,744,076 1,594,268
Total $ 15,479,543 14,831,846
Geographical information
December 31,
2015
December 31,
2014
Non-current assets:
Taiwan $ 3,585,650 3,492,335
China 3,827,476 3,392,912
Thailand 768,391 823,519
Japan 644,673 584,317
290
Total $ 8,826,190 8,293,083
Non-current assets include investment accounted for under the equity method, property, plant and equipment,
investment property, intangible assets, and other assets, not including financial instruments, deferred tax
assets, pension fund assets, and rights arising from insurance contract (non-current).
(e) Information about major customers
For the years 2015 and 2014, the Group had no major customer who constituted 10% or more of net sales.
291
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Financial Statements
For the Years Ended December 31, 2015 and 2014
(With Independent Auditors' Report Thereon)
Address: No. 100, Yanping. N. Rd., Sec. 4., Taipei, Taiwan R.O.C
Tel: (02)2535-1251
Note to Readers
The accompanying financial statements are intended only to present the financial position, results of operations, and cash flows in accordance with the International Financial Reporting Standards approved by the R.O.C. Financial Supervisory Commission. 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.
292
Independent Auditors’ Report
The Board of Directors
Namchow Chemical Industrial Co., Ltd.:
We have audited the accompanying balance sheets of Namchow Chemical Industrial Co., Ltd. (the Company) as
of December 31, 2015 and 2014, and the related statements of comprehensive income as well as the statements
of changes in equity and of cash flows for the years ended December 31, 2015 and 2014. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the "Regulations Governing Auditing and Certification of Financial
Statements by Certified Public Accountants" and the generally accepted auditing standards in the Republic of
China. Those regulations and standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects,
the financial position of the Company as of December 31, 2015 and 2014, and the results of its operations
and its cash flows for the years ended December 31, 2015 and 2014, in conformity with the "Regulations
Governing the Preparation of Financial Reports by Securities Issuers".
KPMG
March 17, 2016
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Balance Sheets
December 31, 2015 and 2014
(expressed in thousands of New Taiwan dollars)
293
December 31, 2015 December 31, 2014
Assets Amount % Amount %
Current assets:
Cash and cash equivalents (notes 6(a) and (q)) $ 87,031 1 84,016 1
Notes receivable, net (notes 6(c) and (q)) 107,245 1 113,705 1
Accounts receivable, net (notes 6(c) and (q)) 401,383 4 396,375 4
Accounts receivable-related-parties(notes 6(c), (q) and 7) 52,865 1 41,527 -
Other receivables (notes 6(c), (p) and (q)) 5,481 - 25,433 -
Other receivables-related-parties (notes 6(c), (q) and 7) 9,465 - 261,522 3
Current income tax assets 4,994 - - -
Inventories (note 6(d)) 403,539 4 435,113 4
Prepayments 47,611 - 59,599 1
Other current assets 2,367 - 2,166 -
Total current assets 1,121,981 11 1,419,456 14
Non-current assets:
Available-for-sale financial assets-non-current (notes 6(b) and (q)) 10,979 - 11,577 -
Financial assets at cost-non-current (notes 6(e) and (q)) 27,166 - 27,166 -
Investments accounted for under equity method (note 6(f)) 7,212,393 65 5,970,354 59
Property, plant and equipment (notes 6(g), 7, 8 and 9) 2,579,439 23 2,585,502 26
Investment property (note 6(h)) 86,508 1 88,970 1
Deferred income tax assets (note 6(k)) 4,389 - - -
Prepayments for equipment 24,159 - 12,323 -
Other non-current assets (note 8) 10,937 - 12,135 -
Total non-current assets 9,955,970 89 8,708,027 86
Total assets $ 11,077,951 100 10,127,483 100
December 31, 2015 December 31, 2014
Liabilities and Stockholders' Equity Amount % Amount %
Current liabilities:
Short-term borrowings (notes 6(i), (q) and 9) $ 500,000 5 217,012 2
Short-term commercial paper payable (notes 6(i) and (q)) 89,967 1 19,994 -
Current portion of long-term borrowings (notes 6(i), (q) and 8) 202,783 2 260,033 3
Accounts payable (note 6(q)) 126,427 1 152,652 2
Accounts payable-related-parties (note 7) 7,840 - 2,554 -
Other payables (notes 6(l), (o), (p) and (q)) 352,806 3 290,980 3
Other payables-related-parties (notes 6(q) and 7) 20,877 - 11,662 -
Current income tax liabilities - - 17,978 -
Deferred revenue (note 6(n)) 92,977 1 79,496 1
Other current liabilities 16,043 - 16,097 -
Total current liabilities 1,409,720 13 1,068,458 11
Non-current liabilities:
Long-term borrowings (notes 6(i), (q) and 8) 3,326,692 30 3,329,475 33
Deferred income tax liabilities (note 6(k)) 498,559 5 329,458 3
Accrued pension liabilities-non-current (note 6(j)) 342,923 3 318,873 3
Other non-current liabilities 238 - 376 -
Total non-current liabilities 4,168,412 38 3,978,182 39
Total liabilities 5,578,132 51 5,046,640 50
Shareholders' equity (notes 6(b), (j), (k) and (l)):
Common stock 2,941,330 26 2,941,330 29
Capital surplus 520,786 4 424,437 4
Retained earnings:
Legal reserve 308,586 3 213,723 2
Special reserve 512,508 5 512,508 5
Unappropriated earnings 1,686,942 15 1,314,340 13
2,508,036 23 2,040,571 20
Other equities:
Financial statement translation differences for foreign operations 66,204 1 210,304 2
Unrealized gains (losses) on valuation of available-for-sale financial assets (6,423) - (5,685) -
59,781 1 204,619 2
Treasury stock (530,114) (5) (530,114) (5)
Total equity 5,499,819 49 5,080,843 50
Total liabilities and stockholders' equity $ 11,077,951 100 10,127,483 100
294
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Statements of Comprehensive Income
For the years ended December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars)
2015 2014
Amount % Amount %
Revenue (notes 6(n) and 7) $ 2,780,173 100 2,578,036 100
Operating costs (notes 6(d), (g), (j), (l), (o), and 7) 1,773,564 64 1,709,621 66
Gross profit 1,006,609 36 868,415 34
Operating expenses (notes 6(c), (g), (j), (l), (o), and 7):
Selling expenses 593,675 22 488,042 19
General and administrative expenses 372,652 13 357,207 14
Research and development expenses 42,447 2 42,485 2
Total operating expenses 1,008,774 37 887,734 35
Operating profit (2,165) (1) (19,319) (1)
Non-operating income and expenses (notes 6(f), (g), (p) and 7):
Other income 27,253 1 18,143 1
Other gains and losses (7,644) - (33,313) (1)
Finance costs (67,951) (2) (63,684) (2)
Shares of profit from the subsidiaries 1,383,251 50 1,167,875 45
Total non-operating income and expenses 1,334,909 49 1,089,021 43
Net income before tax 1,332,744 48 1,069,702 42
Less: income tax expenses (note 6(k)) 219,894 8 121,068 5
Net income 1,112,850 40 948,634 37
Other comprehensive income (loss):
Items that will not be reclassified subsequently to profit or loss (note 6(j)):
Remeasurements of the defined benefit plans (28,889) (1) (17,658) (1)
Shares of other comprehensive income of subsidiaries accounted for under equity method-items
that will not be reclassified subsequently to profit or loss
1,184 - 6,338 -
Income tax expense related to items that will not be reclassified subsequently - - - -
Total Items that will not be reclassified subsequently to profit or loss (27,705) (1) (11,320) (1)
Items that may be reclassified subsequently to profit or loss (note 6(l)):
Financial statements translation differences for foreign operations (58,483) (2) 30,645 1
Unrealized gains (losses) on valuation of available-for-sale financial assets (598) - (664) -
Shares of other comprehensive income of subsidiaries accounted for under equity method-items
that may be reclassitied subsequently to profit or loss
(85,757) (3) 141,822 6
Income tax expense relating to components of other comprehensive income (loss) - - - -
Total Items that may be reclassified subsequently to profit or loss (144,838) (5) 171,803 7
Other comprehensive income (loss), net of tax (172,543) (6) 160,483 6
Total comprehensive income $ 940,307 34 1,109,117 43
Basic earnings per share (in New Taiwan dollars) (note 6(m)) $ 4.49 3.82
Diluted earnings per share (in New Taiwan dollars) (note 6(m)) $ 4.48 3.82
295
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Statements of Changes in Equity
For the years ended December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars)
Other equity adjustments Financial
statements
Unrealized
gain (loss) on
Retained earnings translation valuation of
Common
stock
Capital
surplus
Legal
reserve
Special
reserve
Unappropriated
earnings
Total
differences for
foreign
operations
available-for-s
ale financial
assets
Total
Treasury
stock Total
Balance at January 1, 2014 $ 2,941,330 332,677 128,287 512,508 1,050,728 1,691,523 37,681 (4,865) 32,816 (530,114) 4,468,232
Appropriations and distributions (note 1):
Legal reserve - - 85,436 - (85,436) - - - - - -
Cash dividends - 91,760 - - (588,266) (588,266) - - - - (496,506)
Net income - - - - 948,634 948,634 - - - - 948,634
Other comprehensive income (loss) - - - - (11,320) (11,320) 172,623 (820) 171,803 - 160,483
Total comprehensive income (loss) - - - - 937,314 937,314 172,623 (820) 171,803 - 1,109,117
Balance at December 31, 2014 2,941,330 424,437 213,723 512,508 1,314,340 2,040,571 210,304 (5,685) 204,619 (530,114) 5,080,843
Appropriations and distributions (note 2):
Legal reserve - - 94,863 - (94,863) - - - - - -
Cash dividends - 96,349 - - (617,680) (617,680) - - - - (521,331)
Net income - - - - 1,112,850 1,112,850 - - - - 1,112,850
Other comprehensive income (loss) - - - - (27,705) (27,705) (144,100) (738) (144,838) - (172,543)
Total comprehensive income (loss) - - - - 1,085,145 1,085,145 (144,100) (738) (144,838) - 940,307
Balance at December 31, 2015 $ 2,941,330 520,786 308,586 512,508 1,686,942 2,508,036 66,204 (6,423) 59,781 (530,114) 5,499,819
Supplemental disclosure:
1: Directors' and supervisors' renumeration, and employee bonuses, amounting to $30,757 and $7,689, respectively, were deducted from profit or loss.
2: Directors' and supervisors' renumeration, and employee bonuses, amounting to $34,151 and $8,538, respectively, were deducted from profit or loss.
296
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Statements of Cash Flows
For the years ended December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars)
2015 2014
Cash flows from operating activities:
Net income before tax $ 1,332,744 1,069,702
Adjustments:
Adjustments to reconcile profit and loss
Depreciation 108,215 102,194
Provisions for bad debt 1,020 1,009
Interest expenses 67,951 63,684
Interest income (1,293) (1,636)
Shares of profit of subsidiaries accounted for under equity method (1,383,251) (1,167,875)
Losses on disposal of property, plant and equipment, net 34 351
Impairment loss on non-financial assets - 20,000
Total adjustments to reconcile profit and loss (1,207,324) (982,273)
Changes in assets / liabilities relating to operating activities:
Net changes in operating assets:
Notes receivable 6,460 (7,157)
Accounts receivable (6,028) (47,856)
Accounts receivable-related-parties (11,338) (3,579)
Other receivables 19,952 (20,000)
Other receivables-related-parties 252,057 (258,434)
Inventories 31,574 (37,457)
Prepayments 11,988 (38,403)
Other current assets (201) (810)
Total changes in operating assets, net 304,464 (413,696)
Net changes in operating liabilities:
Accounts payable (26,225) 31,069
Accounts payable-related-parties 5,286 (2,831)
Other payables 53,652 37,115
Other payables-related-parties 9,215 (1,140)
Other current liabilities (54) 8,807
Net defined benefit liabilities (4,839) (4,282)
Deferred revenue 13,481 3,663
Total changes in operating liabilities, net 50,516 72,401
Total changes in operating assets / liabilities, net 354,980 (341,295)
Total adjustments (852,344) (1,323,568)
Cash provided by operating activities 480,400 (253,866)
Interest income received 1,293 1,636
Interest paid (68,414) (63,422)
Income tax paid (78,154) (42,715)
Net cash provided by (used in) operating activities 335,125 (358,367)
Cash flows from investing activities:
Proceeds from capital reduction of financial assets at cost - 30,666
Acquisition of investments accounted for under equity method (249,730) (63,800)
Acquisition of property, plant and equipment (102,923) (158,594)
Proceeds from disposal of property, plant and equipment - 272
Decrease (increase) in other non-current assets 1,198 (4,091)
Dividend received 344,235 548,063
Net cash provided by (used in) investing activities (7,220) 352,516
Cash flows from financing activities:
Increase in short-term borrowings 2,536,999 3,937,416
Decrease in short-term borrowings (2,254,011) (3,993,852)
Increase (decrease) in short-term commercial paper payable 69,973 (24,957)
Proceeds from long-term borrowings 800,000 3,143,659
Repayment of long-term borrowings (860,033) (2,483,292)
Increase (decrease) in other non-current liabilities (138) 376
Cash dividends paid (617,680) (588,266)
Net cash used in financing activities (324,890) (8,916)
Increase (decrease) in cash and cash equivalents 3,015 (14,767)
Cash and cash equivalents at beginning of period 84,016 98,783
Cash and cash equivalents at end of period $ 87,031 84,016
297
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
December 31, 2015 and 2014
(Expressed in thousands of New Taiwan dollars unless otherwise stated)
(1) Organization and Business Scope
Namchow Chemical Industrial Co., Ltd. (the Company) was incorporated on March 29, 1952 as a
corporation limited by shares under the laws of the Republic of China (R.O.C.). The Company is engaged
in the manufacture, sale, and processing of edible and non-edible oil products and frozen dough, as well
as dish and laundry liquid detergent, It also provides management consulting services.
(2) Financial Statements Authorization Date and Authorization Process
The financial statements were approved by the Board of Directors on March 17, 2016.
(3) New Standards and Interpretations Not Yet Adopted
(a) The effect of the new announcements and revisions of the standards and interpretations endorsed by
the Financial Supervisory Commission ("FSC")
The Company has adopted to prepare financial reports according to IFRSs 2013 endorsed by the FSC
from 2015 onward (not including IFRS 9 Financial Instruments). A summary of the differences
between IFRSs 2013 and 2010 are as follows:
New announcements/revisions/amendments of
standards and interpretations
Effective date per
IASB
Amendment to IFRS 1: Limited Exemption from Comparative IFRS 7
Disclosures for First-time Adopters
July 1, 2010
Amendment to IFRS 1: Severe Hyperinflation and Removal of Fixed Dates for
First-time Adopters
July 1, 2011
Amendment to IFRS 1: Government Loans January 1, 2013
Amendment to IFRS 7: Disclosures – Transfers of Financial Assets July 1, 2011
Amendment to IFRS 7: Disclosures – Offsetting Financial Assets and Financial
Liabilities
January 1, 2013
IFRS 10 Consolidated Financial Statements January 1, 2013
(subsidiaries
effective on
January 1, 2014)
IFRS 11 Joint Arrangements January 1, 2013
IFRS 12 Disclosure of Interests in Other Entities January 1, 2013
IFRS 13 Fair Value Measurement January 1, 2013
Amendment to IAS 1: Presentation of Items of Other Comprehensive Income July 1, 2012
Amendment to IAS 12: Deferred Tax: Recovery of Underlying Assets January 1, 2012
Revision to IAS 19 Employee Benefits January 1, 2013
Revision to IAS 27 Separate Financial Statements January 1, 2013
Amendment to IAS 32: Offsetting Financial Assets and Financial Liabilities January 1, 2014
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine January 1, 2013
2
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
298
Except for the following, The Company assessed that adopting IFRSs 2013 will not have significant
impacts on the financial statements.
i) Amendments to IAS 1-Presentation of Items of Other Comprehensive Income
According to the amendments to IAS 1, items of other comprehensive income will be grouped
into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b)
items that will be reclassified subsequently to profit or loss when specific conditions are met. In
addition, income tax on items of other comprehensive income is also required to be allocated on
the same basis. The aforementioned allocation basis will not be strictly enforced prior to the
adoption of the amendments. The Company has also revised the disclosure of the statement of
comprehensive income in both current and prior periods.
ii) IFRS 13-Fair Value Measurement
IFRS 13 defines the meaning of fair value and sets the method of calculation and the presentation
of measurement of fair value. The Company follows the new amendments to disclose the fair
value measurement, and there is no need to disclose the information of comparable period. As the
adoption will be postponed until 2015, The Company does not expect any significant influence
on its financial condition and performance.
(b) New standards and interpretations not yet endorsed by the FSC
The new standards and amendments issued by the IASB that may have an impact to the financial
statements but not yet endorsed by the FSC are summarized as follows:
New standards and amendments and interpretations
Effective date
per IASB
IFRS 9 "Financial Instruments" January 1, 2018
Amended 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
Amended IFRS 10, IFRS 12 and IAS 28 " Investment Entities-Applying the
Consolidation Exception"
January 1, 2016
Amendments to IFRS 11 "Acquisitions of an Interest in Joint Operation" January 1, 2016
IFRS 14 "Regulatory Deferral Accounts" January 1, 2016
IFRS 15 "Revenue from Contracts with Customers" January 1, 2018
IFRS 16 "Leases" January 1, 2019
Amended IAS 1 "Disclosure Initiative" January 1, 2016
Amended to IAS 7 "Disclosure Initiative" January 1, 2017
Amended to IAS 12 "Recognition of Deferred Tax Assets for Unrealized Losses" January 1, 2017
Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of
Depreciation and Amortization"
January 1, 2016
Amendments to IAS 16 and IAS 41"Bearer Plants" January 1, 2016
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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
New standards and amendments and interpretations
Effective date
per IASB
299
Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" July 1, 2014
Amendments to IAS 27 "Equity Method in Separate Financial Statements" January 1, 2016
Amendments to IAS 36 "Recoverable Amount Disclosures for Non-financial
Assets"
January 1, 2014
Amendments to IAS 39 "Novation of Derivatives and Continuation of Hedge
Accounting"
January 1, 2014
Annual improvements to IFRSs 2010-2012 cycle and to IFRSs 2011-2013 cycle July 1, 2014
Annual improvements to IFRSs 2012-2014 cycle January 1, 2016
IFRIC 21 "Levies" January 1, 2014
The Company is currently evaluating the impact of the abovementioned standards and amendments on
The Company's financial position and operating results. Any related impact will be disclosed when the
evaluation is completed.
(4) Significant Accounting Policies
The 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 financial statements, the Chinese version shall prevail.
The significant accounting policies presented in the financial statements are summarized as follows. The
following accounting policies have been applied consistently throughout the presented periods in the
financial statements.
(a) Statement of compliance
The financial statements have been prepared in accordance with the Regulations Governing the
Preparation of Financial Report by Securities Issuers.
(b) Basis of preparation
i) Basis of measurement
The financial statements have been prepared on a historical cost basis, unless, otherwise stated
(please refer to the summary of the significant accounting policies).
ii) Functional and presentation currency
The functional currency of each individual consolidated entity is determined based on the
primary economic environment in which the entity operates. The Company's financial statements
are presented in New Taiwan dollars, which is Company's functional currency. The assets and
liabilities of foreign operations are translated to The Company's functional currency at the
exchange rates at the reporting date. The income and expenses of foreign operations are
translated to The Company's functional currency at the average rate. Foreign currency differences
are recognized in other comprehensive income. All financial information presented in New
Taiwan dollars has been rounded to the nearest thousand.
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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
300
(c) Foreign currency
Transactions in foreign currencies are translated to the respective functional currencies of 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 remeasured to the functional currency at
the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference
between 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 end of the year.
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 that 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 translation.
Foreign currency differences arising from remeasurement are recognized in profit or loss, except for
the difference resulting from available-for-sale equity investment which is recognized in other
comprehensive income arising from the remeasurement.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither
planned nor likely in the foreseeable future, foreign currency 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.
(d) Classification of current and non-current assets and liabilities
i) 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 period; 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.
ii) 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 even if
refinancing or a revised repayment plan is arranged between the reporting date and the
issuance date of the financial statements; 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.
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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
301
An entity shall classify all other liabilities as non-current.
(e) Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalent refers to short term investments
with high liquidity that are subject to insignificant risk of changes in their fair value and can be cashed
into fixed amount of money. The definition of time deposit is similar to that of cash equivalent;
however, the purpose of holding time deposit is for short term cash commitment rather than
investment.
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
consolidated 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.
i) Financial assets
The Company classifies financial assets into the following categories: available-for-sale financial
assets and loans and receivables.
i. Available-for-sale financial assets
Available-for-sale financial assets are recognized initially at fair value, plus, any directly
attributable transaction cost. Subsequent to initial recognition, they are measured at fair
value, and changes therein, other than impairment losses, dividend income, and foreign
currency differences on available-for-sale debt instruments, are recognized in other
comprehensive income and presented in the fair value reserve in equity. When an
investment is derecognized, the gain or loss accumulated in equity is reclassified to profit or
loss, and is included in non-operating income and expense. The purchase disposal of
financial assets are recognized using trade-date accounting.
Investments in equity instruments that do not have a quoted market price in an active market,
and whose fair value cannot be reliably measured, are measured at amortized cost, and are
included in financial assets measured at cost.
Dividend income is recognized in profit or loss on the date that The Company's right to
receive payment is established. However, in the case of quoted securities, the ex-dividend
date is normally recognized. Such dividend income is included in non-operating income and
expense.
ii. Loans and Receivables
Loans and receivables are financial assets with fixed or determinable payments that are not
quoted in an active market. Receivables comprise trade receivables, other receivables, and
investment in debt security with no active market. Such assets are recognized initially at fair
value, plus, any directly attributable transaction costs. Subsequent to initial recognition,
receivables are measured at amortized cost using the effective interest method, less, any
impairment losses other than insignificant interest on short-term receivables. The purchase
disposal of financial assets are recognized using trade-date accounting.
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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
302
Interest income is recognized in profit or loss, and it is included in non-operating income
and expense.
iii. Impairment of financial assets
A financial asset is impaired if, and only if, there is an objective evidence of impairment as
a result of one or more events that occurred after the initial recognition of the asset (a ‘loss
event') and that loss event (or events) has an impact on the estimated future cash flows of
the financial asset that can be estimated reliably.
The objective evidence that financial assets are impaired includes default or delinquency by
a debtor, restructuring of an amount due to The Company on terms that The Company
would not consider otherwise, indications that a debtor or issuer will enter bankruptcy,
adverse changes in the payment status of borrowers or issuers, economic conditions that
correlate with defaults, or the disappearance of an active market for a security. In addition,
for an investment in an equity security, a significant or prolonged decline in its fair value
below its cost is accounted for as objective evidence of impairment.
The Company considers evidence of impairment for receivables at both a specific asset and
collective level. Receivables that are not individually significant are collectively assessed
for impairment by grouping together receivables with similar risk characteristics.
If objective evidence of an impairment exists, an impairment loss should be recognized.
An impairment loss in respect of a financial asset is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows discounted at the
asset's original effective interest rate. Collateral and proceeds from insurance should also
be considered when determining the estimated future cash flows. Losses are recognized in
profit or loss and reflected in an allowance account against receivables. When a
subsequent event causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss. However, the reversing amount cannot
exceed the amortized balance of the assets assuming no impairment was recognized in prior
periods.
An impairment loss in respect of a financial asset measured at cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash
flows discounted at the current market rate of return for a similar financial asset. Such
impairment loss is not reversible in subsequent periods.
An impairment loss in respect of a financial asset is deducted from the carrying amount,
except for trade receivables, for which an impairment loss is reflected in an allowance
account against the receivables. When it is determined a receivable is uncollectible, it is
written off from the allowance account. Any subsequent recovery of receivable written off
is recorded in the allowance account. Changes in the amount of the allowance account are
recognized in profit or loss.
Impairment losses on available-for-sale financial assets are recognized by reclassifying the
losses accumulated in the fair value reserve in equity to profit or loss.
Impairment losses recognized on an available-for-sale equity security are not reversed
through profit or loss. Any subsequent recovery in the fair value of an impaired
available-for-sale equity security is recognized in other comprehensive income, and
accumulated in other equity.
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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
303
If, in a subsequent period, the fair value of an impaired available-for-sale debt security
increases and the increase can be related objectively to an event occurring after the
impairment loss was recognized, then the impairment loss is reversed, with the amount of
the reversal recognized in profit or loss.
Impairment losses and recoveries are recognized in profit or loss. Recovery and loss on
doubtful debts of account receivables are included in operating expense; others are included
in non-operating income and expense.
iv. Derecognition of financial assets
The Company derecognizes financial assets when the contractual rights of the cash inflow
from the asset are terminated, or when The Company transfers substantially all the risks and
rewards of ownership of the financial assets.
On derecognition of a financial asset in its entirety, the difference between the carrying
amount and the sum of the consideration received or receivables and any cumulative gain or
loss that had been recognized in other comprehensive income and presented in other equity
-unrealized gains or losses from available-for-sale financial assets is recognized in profit
or loss, and included in non-operating income and expense.
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 sum of
the consideration received for the part derecognized, and any cumulative gain or loss
allocated to it that had been recognized in other comprehensive income shall be recognized
in profit or loss, and is included in non-operating income and expense.
A cumulative gain or loss that had been recognized in other comprehensive income is
allocated between the part that continues to be recognized and the part that is derecognized,
based on the relative fair values of those parts.
ii) Financial liabilities and equity instruments
i. Other financial liabilities
Financial liabilities not classified as held-for-trading or designated as at fair value through
profit or loss, which comprise loans and borrowings, and trade and other payables, are
measured at fair value plus any directly attributable transaction cost at the time of initial
recognition. Subsequent to initial recognition, they are measured at amortized cost
calculated using the effective interest method. Interest expense not capitalized as capital cost
is recognized in profit or loss, and is recorded under non-operating income and expenses.
ii. Derecognition of financial liabilities
The Company derecognizes a financial liability when its contractual obligation has been
discharged or cancelled or has expired.
The difference between the carrying amount of a financial liability removed and the
consideration paid (including any non-cash assets transferred or liabilities assumed) is
recognized in profit or loss, and is included in non-operating income and expense.
8
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
304
iii. Offsetting of financial assets and liabilities
The Company presents financial assets and liabilities on a net basis when The Company has
the legally enforceable right to offset, and intends to settle such financial assets and
liabilities on a net basis or to realize the assets and settle the liabilities simultaneously.
iv. Financial guarantee contract
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder of a loss it incurs because a specified debtor fails to make
payment when due in accordance with the original or modified terms of a debt instrument.
A financial guarantee contract not designated as at fair value through profit or loss issued by
The Company is recognized initially at fair value plus any directly attributable transaction
cost. After initial recognition, it is measured at the higher of (a) the contractual obligation
amount determined in accordance with IAS 37; or (b) the amount initially recognized less,
when appropriate, cumulative amortization recognized in accordance with accounting
policies.
(g) Inventories
The cost of inventories consists of all costs of purchase, costs of conversion, and other costs incurred
in bringing the inventories to their present location and condition. The cost of inventories includes an
appropriate share of fixed production overhead based on normal capacity and allocated variable
production overhead based on actual output. However, unallocated fixed production overhead arising
from lower or idle capacity is recognized in cost of goods sold during the period. If actual capacity is
higher than normal capacity, fixed production overhead should be allocated based on actual capacity.
The method of valuing inventories is the weighted-average method.
Inventories are measured at the lower of cost or net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business, less the estimated costs of completion and
selling expenses at the end of the period. When the cost of inventories is higher than the net
realizable value, inventories are written down to net realizable value, and the write-down amount is
charged to current year's cost of goods sold. If net realizable value increases in the future, the cost of
inventories is reversed within the original write-down amount, and such reversal is treated as a
reduction of cost of goods sold.
(h) Investment in subsidiaries
When preparing the Company's financial statements, investments in subsidiaries which are controlled
by the Company using the equity method. Under the equity method, the net income, other
comprehensive income, and equity in the financial statements are equivalent to those attributable to
the shareholders of the parent company in the consolidated financial statements.
Changes in ownership of a subsidiary that do not result in loss of control are accounted for as equity
transactions.
9
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
305
(i) Investment property
Investment property is property held either to earn rental income or for capital appreciation or for both,
but not for sale in the ordinary course of business, or to use in the production or supply of goods or
services or for administrative purposes. Investment property is measured at cost on initial recognition
and subsequently measured under the cost model, and the depreciation expense is calculated using the
depreciable amount. The depreciation method, the useful life, and the residual amount are the same as
those adopted for property, plant and equipment. Cost includes expenditure that is directly attributable
to the acquisition of the investment property.
When the use of an investment property changes such that it is reclassified as property, plant and
equipment, its carrying amount at the date of reclassification becomes its cost for subsequent
accounting.
(j) Property, plant and equipment
i) Recognition and measurement
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, and any borrowing cost that is eligible for capitalization.
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 the
depreciation method of a significant part of an item of property, plant and equipment are the
same as the useful life and depreciation method 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 as non-operating income and expense.
ii) Subsequent cost
Subsequent expenditure is capitalized only when it is probable that the future economic benefits
associated with the expenditure 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
The depreciable amount of an asset is determined after deducting its residual amount from its
original cost and is depreciated using the straight-line method over its useful life. Assets are
evaluated based on their individually significant components, and if the useful life of a
component varies from that of others, then this component should be separately depreciated. The
depreciation charge for each period shall be recognized in profit or loss.
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:
Buildings 5~60 years
Machinery equipment 3~20 years
Other equipment 3~20 years
10
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
306
Depreciation methods, useful lives, and residual values are reviewed at each reporting date. If
expectations differ from the previous estimates, the changes are accounted for as a change in an
accounting estimate.
(k) Leases
i) Lessor
Lease income from an operating lease is recognized in income on a straight-line basis over the
lease term. Initial direct costs incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognized as an expense over the lease term on
the same basis as the lease income. Incentives granted to the lessee to enter into an operating
lease are spread over the lease term on a straight-line basis so that the lease income received is
reduced accordingly.
ii) Lessee
Leases in which The Company assumes substantially all of the risks and rewards of ownership
are classified as finance leases. On initial recognition, the lease asset is measured at an amount
equal to the lower of its fair value or the present of the minimum lease payments. Subsequent
minimum lease payments are attributable to finance cost and the reduction of the outstanding
liabilities, and the finance cost is allocated to each period during the lease term using a constant
periodic rate of interest on the remaining balance of the liability.
Other leases are operating leases and are not recognized in The Company's statement of financial
position. 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 of the total lease expense over the term of
the lease. Any benefit provided by the lessor for the purpose of reaching the agreement is
accounted for as a reduction of lease expense on a straight-line basis.
(l) Impairment-non-financial assets
With regard to non-financial assets (other than inventories, deferred tax assets and employee benefits),
The Company assesses at the end of each reporting period whether there is any indication that an
impairment loss has occurred, and estimates the recoverable amount for assets with an indication of
impairment. If it is not possible to determine the recoverable amount for the individual asset, then The
Company will have to determine the recoverable amount for the asset's cash-generating unit.
Notwithstanding whether indicators exist, recoverability of goodwill and intangible assets with
indefinite useful lives or those not yet in use is required to be tested at least annually.
The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value
less costs to sell or 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. That
reduction is an impairment loss. An impairment loss shall be recognized immediately in profit or loss.
11
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
307
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. If the
carrying amount of the cash-generating units exceeds the recoverable amount of the units, the entity
shall recognize the impairment loss, and the impairment loss shall be allocated to reduce the carrying
amount of each asset in the unit. Reversal of an impairment loss for goodwill is prohibited.
The Company assesses at the end of each reporting period 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. If any such indication exists, the entity shall estimate the recoverable amount of
that asset. Impairment loss is reversed if, and only if, there has been a change in the estimates used to
determine the asset's recoverable amount, increasing the individual asset's or cash-generating unit's
carrying amount to its estimated recoverable amount. The reversal of an impairment loss of an
individual asset or cash-generating unit cannot exceed the carrying amount of the individual asset or
cash-generating unit, less any depreciation or amortization, had it not recognized an impairment loss.
(m) Treasury stock
Under the cost method, the treasury stock account is debited for the after tax cost of The Company's
shares purchased. When the disposal price of treasury stock is greater than the cost, the difference is
credited to capital surplus-treasury stock; otherwise, the excess of the cost over the price is debited to
capital surplus generated from similar treasury stock transactions. If the capital surplus-treasury
stock account is insufficient to cover the excess of the cost over the price, retained earnings should be
debited for the remaining amount. The book value of each share of treasury stock is equal to its
weighted-average cost and is calculated by each group according to the reason for purchase.
When treasury stock is retired, capital surplus and common stock are debited according to the ratio of
retiring treasury stock to total issued stock. When the book value of the retiring treasury stock is
higher than the sum of its par value and capital surplus, the difference is debited to capital surplus
generated from similar treasury stock transactions. If the capital surplus-treasury stock account is
insufficient to cover the difference, retained earnings should be debited for the remaining amount.
When the book value of the retiring treasury stock is lower than the sum of its par value and capital
surplus, the difference is credited to capital surplus generated from similar treasury stock transactions.
The shares that are owned by the Company's subsidiaries are seen as treasury stock.
(n) Revenue
i) Sale of goods
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 discounts 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.
12
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
308
The timing of the transfers of risks and rewards varies depending on the individual terms of the
sales agreement. For export transactions, transfer occurs upon loading the goods onto the relevant
carrier at the port; however, for sales in the domestic market, transfer usually occurs when the
product is received at the customer's warehouse.
Transactions on catering industry are basically completed over-the-counter, and the cash is
collected by the franchisee after authorization is granted. As such, revenue is recognized upon the
provision of goods and services, and booked at the end of the month.
ii) Customer loyalty program
Customer loyalty program of the Company is to provide customer bonus point and rights to
purchase merchandise according to the discount price. The fair value of the consideration
received or receivable was allocated to bonus point and other component of the sale. The amount
allocated to bonus point can be valued according to the fair value of the merchandise sold at
discount price. Revenue is recognized when customers use their bonus points in exchange for a
discount price as complimentary items upon purchasing of any merchandise. Revenue is
calculated based on the estimated volume of the merchandise sold.
iii) Rendering of services
The Company is engaged in providing management services. Revenue from services rendered is
recognized in profit or loss in proportion to the stage of completion of the transaction at the
reporting date and the account collectability can be reasonably estimated.
(o) Employee benefits
i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognized as an
employee benefit expense in profit or loss in the periods during which services are rendered by
employees.
ii) Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan.
The Company’s net obligation in respect of defined benefit pension plans 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 value of any plan assets is deducted. The discount rate is the yield at the reporting date
(market yields of high-quality corporate bonds or government bonds) on 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.
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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
309
When the benefits of a plan are improved, the portion 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
Company can reclassify the amounts recognized in other comprehensive income to retained
earnings.
iii) Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is 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.
(p) Income tax
Income tax expenses include both current taxes and deferred taxes. Except for expenses related to
business combinations or recognized directly in equity or other comprehensive income, all current and
deferred taxes shall be recognized in profit or loss.
Current taxes comprise the expected tax payable or receivable on the taxable income or loss for the
year and any adjustment to tax payable or receivable in respect of previous years. It is measured
using tax rates enacted or substantively enacted at the reporting date.
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 shall not be
recognized for the exceptions below:
i) Assets and liabilities that are initially recognized but are not related to the business combination
and have no effect on net income or taxable gains (losses) during 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 apply 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.
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NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
310
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 fulfills one of the scenarios below:
i. levied by the same taxing authority; or
ii. levied by different taxing authorities, but where each such authority intends to settle tax
assets and liabilities (where such amounts are significant) on a net basis every year of the
period of expected asset realization or debt liquidation, or where the timing of asset
realization and debt liquidation is matched.
A deferred tax asset should be recognized for 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 they can be utilized. Such deferred tax assets shall also be reviewed at each reporting date, and
are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
(q) Earnings per share
The Company discloses the Company's basic and diluted earnings per share attributable to ordinary
equity holders of the Company. The calculation of basic earnings per share is based on the profit
attributable to the ordinary shareholders of the Company divided by the weighted-average number of
ordinary shares outstanding. The calculation of diluted earnings per share is based on the profit
attributable to ordinary shareholders of the Company, divided by the weighted-average number of
ordinary shares outstanding after the adjustment on the effects of all dilutive potential ordinary shares.
Employee bonuses are settled by issuing shares that are yet to be approved at the shareholders'
meeting.
(r) Operating segments
The Company has disclosed information about operating segments in its consolidated financial
statements. Hence no further information is disclosed in the financial statements.
(5) Significant Accounting Judgments and Sources of Estimation Uncertainty
The preparation of the financial statements in conformity with the Regulations Governing the Preparation
of Financial Report by Securities Issuers 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.
Management will continually review the estimates and basic assumptions. Changes in accounting estimates
will be recognized in the period of change and the future period of their impact.
There are no critical judgments in applying accounting policies that have significant effect on the amounts
recognized in the financial statements.
15
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
311
For information about critical judgments in applying accounting policies that have the most significant
effect on the amounts recognized in these consolidated financial statements, please refer to the following
notes:
(a) Note 6(g)-Key assumptions used in discounted cash flow projections.
(b) Notes 6(j)-Measurement of defined benefit obligations
(c) Notes 6(k)-Utilization of tax losses.
(d) Notes 6(n)-Assumption of expecting redeem rate on deferred revenue.
(6) Description of Significant Accounts
(a) Cash and cash equivalents
December 31,
2015
December 31,
2014
Cash on hand $ 2,712 2,748
Savings and checking deposits 84,319 81,268
Cash and cash equivalents pen statements of cash flow $ 87,031 84,016 The Company's exposure to interest rate risk and the sensitivity analysis on the financial instruments
held by the Company are disclosed in note 6(q).
(b) Available-for-sale financial assets!Dnon-current
December 31,
2015
December 31,
2014
Investment in listed securities
Stocks listed on domestic markets $ 10,979 11,577 Please refer to note 6(q) for credit risk, exchange rate risk and interest rate risk.
As of December 31, 2015 and 2014, the Company did not pledge its available-for-sale financial
instruments.
If the market price of the available-for-sale financial assets fluctuates (assuming that all other
variables remain the same), the impact on other comprehensive income will be as follows:
2015 2014
Fluctuation in market
price at reporting date
Other
comprehensive
income (after
tax)
Net income
Other
comprehensive
income (after
tax)
Net income
Increase 1% $ 110 - 116 -
Decrease 1% $ (110) - (116) -
16
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
312
(c) Notes and accounts receivable, and other receivable
December 31,
2015
December 31,
2014
Notes receivable $ 107,245 113,705
Accounts receivable 409,136 404,007
Accounts receivable-related parties 52,865 41,527
Other receivable 5,481 25,433
Other receivable-related parties 9,465 261,522
Less: allowance for impairment 7,753 7,632
$ 576,439 838,562
The Company has not provided the notes and accounts receivable as collateral or factored them for
cash.
The Company's aging analysis of overdue notes and accounts receivable, and other receivable was as
follows:
December 31,
2015
December 31,
2014
Past due 0~60 days $ 19,636 21,383
Past due 61~365 days 270 4,014
Past due over one year 962 768
$ 20,868 26,165
The movement in the allowance for impairment with respect to notes and accounts receivable during
the year was as follows:
Individually
assessed
impairment
Collectively
assessed
impairment
Total
Balance at January 1, 2015 $ 7,632 - 7,632
Impairment loss recognized 1,020 - 1,020
Written off (899) - (899)
Balance at December 31, 2015 $ 7,753 - 7,753
Individually
assessed
impairment
Collectively
assessed
impairment
Total
Balance at January 1, 2014 $ 7,615 - 7,615
Impairment loss recognized 1,009 - 1,009
Written off (992) - (992)
Balance at December 31, 2014 $ 7,632 - 7,632
17
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
313
(d) Inventories
The components of the Company's inventories were as follows:
December 31,
2015
December 31,
2014
Merchandise $ 31,131 32,959
Finished goods 129,724 112,835
Work in progress 30,471 20,910
Raw materials 191,854 244,468
Supplies 20,359 23,941
Total $ 403,539 435,113 As of December 31, 2015 and 2014, the Company's inventories were not provided as pledged assets.
Except for operating costs arising from the ordinary sale of inventories, other gains and losses directly
recorded under operating cost in the years 2015 and 2014 are as follows:
2015 2014
Loss on decline in market value of inventory $ (474) (1,772)
Loss (gain) on physical count (964) (74)
Loss on scrap of inventory 2,952 1,861
Income from sale of scrap (1,022) (946)
Total $ 492 (931) The Company reversed the allowance for loss on inventory for the years ended December 31, 2014
and 2013, when the Company sold or used the inventories for which an allowance had been provided
previously.
(e) Financial assets carried at cost
Percentage
of
ownership
Investment
cost
Book
value
December 31, 2015
Global Securities Finance Corporation, GSF 0.87 $ 27,166 27,166
December 31, 2014
Global Securities Finance Corporation, GSF 0.87 $ 27,166 27,166 The Company holds unlisted stocks on domestic market-Global Securities Finance Corporation. In
September 2014, the Company reduced both its capital and its return of capital of financial assets
using the cost method on a pro rata basis amounting to $30,666.
18
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
314
The aforementioned stocks held by the Company, whose fair value cannot be reliably measured, are
measured at amortized cost. The range of the estimated fair value was significant and cannot be
reasonably evaluated. Therefore, the management of the Company considered it cannot be evaluated
reliably.
As of December 31, 2015 and 2014, the Company's financial assets carried at cost were not provided
as pledged assets.
(f) Investments accounted for under the equity method
The details of the investments accounted for under the equity method at the reporting date were as
follows:
December 31,
2015
December 31,
2014
Subsidiaries $ 7,212,393 5,970,354 Please refer to the consolidated financial statements.
(g) Property, plant and equipment
The cost, depreciation, and impairment of the property, plant and equipment of the Company were as
follows:
Land Buildings Machinery
Other
equipment
Prepayments
for equipment Total
Cost:
Balance at January 1, 2015 $ 1,775,064 476,220 980,424 585,126 13,462 3,830,296
Additions - 8,411 13,097 53,043 17,988 92,539
Disposals - - (7) (637) - (644)
Reclassification - 1,350 3,411 1,810 - 6,571
Balance at December 31, 2015 $ 1,775,064 485,981 996,925 639,342 31,450 3,928,762
Balance at January 1, 2014 $ 1,775,064 393,572 966,364 525,607 115,046 3,775,653
Additions - 63,960 16,391 60,813 6,571 147,735
Disposals - - (2,331) (1,294) - (3,625)
Reclassification - 18,688 - - (108,155) (89,467)
Balance at December 31, 2014 $ 1,775,064 476,220 980,424 585,126 13,462 3,830,296
Depreciation and impairment loss:
Balance at January 1, 2015 $ - 175,554 674,936 394,304 - 1,244,794
Depreciation - 17,880 36,781 50,478 - 105,139
Disposal - - (7) (603) - (610)
Balance at December 31, 2015 $ - 193,434 711,710 444,179 - 1,349,323
Balance at January 1, 2014 $ - 157,216 620,299 348,584 - 1,126,099
Depreciation - 18,338 36,688 46,671 - 101,697
Disposal - - (2,051) (951) - (3,002)
Reclassification - - 20,000 - - 20,000
Balance at December 31, 2014 $ - 175,554 674,936 394,304 - 1,244,794
Carrying value:
December 31, 2015 $ 1,775,064 292,547 285,215 195,163 31,450 2,579,439
December 31, 2014 $ 1,775,064 300,666 305,488 190,822 13,462 2,585,502
19
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
315
i) Impairment loss and subsequent reversal
As of December 2014, since the estimated recoverable amount of certain department of the
Company was lower than its book value, the Company recognized an impairment loss of $20,000.
The discount rate used for estimating the recoverable amount was 11.46% in 2014.
2015 2014
Beginning balance $ 159,021 139,021
Impairment loss recognized - 20,000
Ending balance $ 159,021 159,021
ii) Collateral
Please refer to note 8 for information on pledged property, plant and equipment as of December
31, 2015 and 2014.
(h) Investment property
Buildings
Cost:
Balance as at January 1, 2015 $ 89,467
Additions 614
Balance as at December 31, 2015 $ 90,081
Balance as at January 1, 2014 $ -
Reclassification 89,467
Balance as at December 31, 2014 $ 89,467
Depreciation:
Balance as at January 1, 2015 $ 497
Depreciation 3,076
Balance as at December 31, 2015 $ 3,573
Balance as at January 1, 2014 $ -
Depreciation 497
Balance as at December 31, 2014 $ 497
Carrying value:
Balance as at December 31, 2015 $ 86,508
Balance as at December 31, 2014 $ 88,970
Fair value:
Balance as at December 31, 2015 $ 86,508
Balance as at December 31, 2014 $ 88,970
20
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
316
Investment property comprises a number of factory that are leased to the Company's subsidiary Lucky
Co.. Each of the leases contains an initial non-cancellable period of 1 years. Subsequent renewals are
negotiable with the lessee, and no contingent rents are charged. Please refer to note 6(p) for further
information (including leasing income and direct operating expenses).
Investment property of the Company was acquired in 2014, since the Company considered that the
book value of investment property nearly equal to the fair value of investment property, the Company
is not required to take any valuation from its independent third party as reference.
As of December 31, 2015 and 2014, The Company's investment properties were not provided as
pledged assets.
(i) Short-term and long-term borrowings
The details, terms and clauses of The Company's short-term and long-term borrowings were as
follows:
i) Short-term borrowings
December 31, 2015
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Unsecured loans TWD 1.06~1.17 105 $ 500,000
December 31, 2014
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Unsecured loans USD 1.22 104 $ 32,012
Unsecured loans TWD 1.05~1.15 104 185,000
Total $ 217,012
As of December 31, 2015 and 2014, the unused credit facilities amounted to $2,237,707 thousand
and $2,128,491 thousand, respectively, which included the credit facilities shared with related
parties of $116,429 thousand and $257,031 thousand, respectively.
21
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
317
ii) Short-term commercial paper payable
December 31, 2015
Guarantee or
acceptance institution
Range of
interest rates
(%)
Amount
Commercial paper payable INTERNATIONAL
BILLS FINANCE
CORPORATION
0.61 $ 25,000
Commercial paper payable DAH CHUNG BILLS
CORPORATION
0.77 20,000
Commercial paper payable TA CHING BILLS
FINANCE
CORPORATION
0.61 15,000
Commercial paper payable MEGA BILLS FINANCE
CO., LTD.
0.80 20,000
Commercial paper payable TAIWAN FINANCE 0.90 10,000
CORPORATION
90,000
Less: discount 33
Total $ 89,967
December 31, 2014
Guarantee or
acceptance institution
Range of
interest rates
(%)
Amount
Commercial paper payable INTERNATIONAL
BILLS FINANCE
CORPORATION
0.78 $ 20,000
Less: discount 6
Total $ 19,994 The Company did not pledge assets against the short-term commercial paper payable.
As of December 31, 2015 and 2014, the unused credit facilities amounted to $190,000 thousand
and $320,000 thousand, respectively.
22
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
318
iii) Long-term borrowings
December 31, 2015
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Secured loans TWD 1.79~1.87 105~116 $ 2,254,600
Unsecured loans TWD 1.54~1.85 105~108 1,274,875
Total $ 3,529,475
Current $ 202,783
Non-current 3,326,692
Total $ 3,529,475
December 31, 2014
Currency
Range of interest
rates (%)
Year of
maturity
Amount
Secured loans TWD 1.79~1.80 104~116 $ 1,500,000
Unsecured loans TWD 1.54~1.89 104~108 2,089,508
Total $ 3,589,508
Current $ 260,033
Non-current 3,329,475
Total $ 3,589,508
As of December 31, 2015 and 2014, the unused credit facilities amounted to $0 thousand, and
$800,000 thousand, respectively.
The Company has disclosed the related risk exposure to the financial instruments in note 6(q).
The Company has pledge certain assets against the loans; please refer to note 8 for additional
information.
iv) Commitments of loan contracts
The Company entered into syndicated loan contract amounting to $1,800,000 with Industrial
Bank of Taiwan and nine other banks on October 24, 2014. The main purpose of the loan was to
repay the previous medium-term loan contract and to increase the limit of debt ratio. The
following is a summary of the debt ratio calculated according to the contract:
i. The borrower is obligated to maintain the following financial ratios, which are assessed
annually, within the designated length of the contract:
1) Debt ratio shall not exceed 250%
2) The interest coverage ratio shall not be lower than 2.5 times of the loan interest.
3) The identifiable net worth shall not be less than $3,000,000.
23
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
319
All of the aforementioned financial ratios and obligations are calculated based on the
calculation used in the consolidated financial statements.
ii. Unless a written consent from the lending bank is obtained, the borrower shall not engage in
the following events:
1) Merger, separation, selling, or transferring of the Company's shares.
2) All events outlined in Article 185 of the ROC Company Act.
If there is any breach of the contract, after obtaining the consent from most of the banks, the
credit limit will either be fully or partially cancelled, depending on the decision made by the
banks. Also, The Company will be requested to pay all the remaining balance in an earlier
time, and all the agreement stated in the contract will be considered invalid.
In addition, The Company signed the first supplementary contract on December 16, 2015. The
financial ratio was adjusted as follows:
i. The debt ratio for both 2015 and 2016 shall not exceed 295%; for 2017 and 2018, the debt
ratio shall not exceed 285% and 250%, respectively.
ii. The interest coverage ratio shall not be less than 300%.
iii. The identifiable net worth shall not be less than $4,000,000.
The Company renewed its contracts with Taishin International Bank Co., Ltd., Mega
International Commercial Bank, and Industrial Bank of Taiwan, amounting to $200,000 thousand,
$300,000 thousand, and $200,000 thousand, respectively, in May, June, and November,
respectively, of 2014. The following is a summary of the debt ratio calculated according to the
contract, wherein the borrower is obligated to maintain the following financial ratios which are
assessed annually, within the designated length of the said contracts :
i. Debt ratio shall not exceed 250%
ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.
iii. The identifiable net worth shall not be less than $2,200,000.
In addition, The Company signed a supplementary amounting to $200,000 thousand with
Industrial Bank of Taiwan in October 2015. The financial ratios were adjusted as follows:
i. Debt ratio shall not exceed 295%
ii. The interest coverage ratio shall not be lower than 3 times of the loan interest.
iii. The identifiable net worth shall not be less than $4,000,000.
24
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
320
The Company renewed the loan contract amounting to $200,000 thousand with CTBC Bank on
August 25, 2015. The main purpose of the loan was to repay the previous long-term loan contract.
The borrower is obligated to maintain the following financial ratios, which are assessed
semi-annually, within the designated length of the contract.
i. Debt ratio shall not exceed 250%
ii. The interest coverage ratio shall not be lower than 2.5 times of the loan interest.
iii. The identifiable net worth shall not be less than $2,200,000.
All of the aforementioned financial ratios and obligations are calculated based on the calculation
used in the consolidated financial statements.
The Company was in compliance with the covenants (described above) in 2015 and 2014.
(j) Employee benefits
i) Defined benefit plans
The following table shows a reconciliation between the present value of the defined benefit
obligation and the fair value of plan assets:
December 31,
2015
December 31,
2014
The present value of the defined benefit obligations $ 383,159 355,742
Fair value of plan assets (40,236) (36,869)
The net defined benefit liability $ 342,923 318,873 The Company established the pension fund account for the defined benefit plan in Bank of
Taiwan. The plan, under the Labor Standards Law, provides benefits based on an employee's
length of service and average monthly salary for the six-month period prior to retirement.
i. Composition of 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 funds are
managed by the Bureau of Labor Funds, Ministry of Labors. Minimum annual
distributions of the funds by the Bureau shall be no less than the earnings attainable from
the two-year time deposits with the interest rates offered by local banks.
The Company's Bank of Taiwan labor pension reserve account balance amounted to
$40,236 thousand at the end of the reporting period. 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.
25
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
321
ii. Movements in present value of defined benefit plan obligation
The movements in present value of The Company's defined benefit plan obligation for the
years ended December 31, 2015 and 2014 were as follows:
2015 2014
Defined benefit obligation at 1 January $ 355,742 352,587
Current service costs and interest 9,719 10,988
Remeasurements of the net defined benefit liability
(asset)
-Due to changes in financial assumption of
actuarial (losses) gains
29,675 18,030
Benefits paid by the plan (11,977) (25,863)
Defined benefit obligation at 31 December $ 383,159 355,742
iii. Movements in fair value of defined benefit plan assets
The movements in the fair value of the defined benefit plan assets for the years ended
December 31, 2015 and 2014 were as follows:
2015 2014
Fair value of plan assets, January 1 $ 36,869 47,090
Remeasurements of the net defined benefit liability
(asset)
-Return on plan assets (excluding amounts
included in net interest expense)
355 946
-Due to changes in financial assumption of
actuarial (losses) gains
786 372
Contributions made 14,203 14,324
Benefits paid by the plan (11,977) (25,863)
Fair value of plan assets, December 31 $ 40,236 36,869
iv. Expenses recognized in profit or loss
The expenses recognized on profit or loss for the years ended December 31, 2015 and 2014
were as follows:
2015 2014
Current service cost $ 3,127 4,078
Net interest on the defined benefit liability (asset) 6,238 5,964
$ 9,365 10,042
26
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
322
2015 2014
Operating costs $ 3,110 3,430
Selling expenses 2,317 2,425
General and administration expenses 3,525 3,645
Research and development expenses 413 542
$ 9,365 10,042
v. Actuarial gains and losses recognized in other comprehensive income
The Company's actuarial gains and losses recognized in other comprehensive as at 2015 and
2014 were as follows:
2015 2014
Cumulative amount, January 1 $ 84,506 73,186
Recognized during the period 28,889 17,658
Using the equity method recognized actuarial
gains and loss of subsidiaries
(1,184)
(6,338)
Cumulative amount, December 31 $ 112,211 84,506
vi. Actuarial assumptions
The following are The Company's principal actuarial assumptions at the reporting dates:
December 31,
2015
December 31,
2014
Discount rate 1.63% 2.00%
Future salary increases rate 1.00% 1.00%
The Company expects to make contributions of $14,095 thousand to the defined benefit
plans in the next year starting from the reporting date of 2015.
The weighted average duration of the defined benefit obligation is 13.55 years.
vii. Sensitivity analysis
When calculating the present value of the defined benefit obligation, the Company uses
judgments and estimations to determine the related actuarial assumptions, including
discount rate, employee turnover rates and future salary changes, as of the financial
statement date. Any changes in the actuarial assumptions may significantly impact the
amount of the defined benefit obligation.
27
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
323
As of December 31, 2015, the present value of defined benefit obligation impact was as
follow:
The impact of defined benefit
obligation Increase Decrease
Discount rate (0.25%) $ (8,009) 8,300
Future salary increase rate (0.25%) 8,159 (7,911) Reasonably possible changes at the reporting date to one of the relevant actuarial
assumptions, holding other assumptions remain constant, would have affected the defined
benefit obligation by the amounts shown above. The method used in the sensitivity
analysis is consistent with the calculation of the pension liabilities in the balance sheets.
There is no change in the method and assumptions used in the preparation of the sensitivity
analysis for 2015 and 2014.
ii) Defined contribution plans
The Company and its subsidiaries in Taiwan have made monthly contributions equal to 6% of
each employee's monthly wages to the labor pension personal account at the Bureau of the Labor.
Under this defined contribution plan, The Company contributes a fixed amount to the Bureau of
the Labor Insurance and China Social Security Fund without additional legal or constructive
obligations.
The Company's pension costs under the defined contribution plan were $20,058 thousand and
$18,514 thousand for the years 2015 and 2014, respectively.
(k) Income tax
i) Income tax expenses
The amount of The Company's income tax for the years ended December 31, 2015 and 2014,
were as follows:
2015 2014
Current income tax expense
Current period $ 28,149 48,535
Adjustment for prior periods 27,033 8,150
55,182 56,685
Deferred tax benefit
Origination and reversal of temporary differences 164,712 64,383
Income tax expenses on continuing operations $ 219,894 121,068 No income tax recognized in other comprehensive income for 2015 and 2014.
28
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
324
Reconciliations of The Company's income tax expense and the profit before tax for 2015 and
2014 were as follows:
2015 2014
Income before tax $ 1,332,744 1,069,702
Income tax calculated on pretax accounting income at
statutory rate
$ 226,566 181,849
Adjustment for prior periods 27,033 8,150
Dividend income (104,940) (98,256)
Non-deduction expenses 2,980 4,726
Exempt income (262) (302)
Current year (losses) gain for which no deferred income
tax assets was recognized
42,068 8,029
Changes in temporary differences not recognized 3,972 958
10% surtax on undistributed earnings 22,477 15,914
Total $ 219,894 121,068
ii) Recognized deferred tax assets and liabilities
i. Unrecognized deferred income tax assets
The Deferred income tax assets that have not been recognized by The Company are as
follows:
December 31,
2015
December 31,
2014
Deductible temporary differences $ 4,137 1,395
Impairment loss 19,072 17,842
$ 23,209 19,237 Tax losses are applied to Income Tax Act that can be carried forward for ten years, after
assessed by tax authority, to offset taxable income before apply to tax rate. Deferred
income tax assets have not been recognized in respect of these items because it is not
probable that the future taxable profit will be available, against which, The Company can
utilize the benefits therefore.
29
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
325
ii. Recognized deferred income tax assets and liabilities
Changes in the amount of deferred tax assets and liabilities for 2015 and 2014 were as
follows:
Deferred tax liabilities:
Loss carry
forward
Foreign
investment
income
accounted
for using
equity
method
Land value
increment
tax Total
Balance at January 1, 2015 $ - (90,496) (238,962) (329,458)
Recognized in profit or loss 4,389 (169,101) - (164,712)
Balance at December 31, 2015 $ 4,389 (259,597) (238,962) (494,170)
Balance at January 1, 2014 $ - (26,113) (238,962) (265,075)
Recognized in profit or loss - (64,383) - (64,383)
Balance at December 31, 2014 $ - (90,496) (238,962) (329,458)
iii) Examination and approval
The tax returns of the Company have been examined by the tax authorities through 2013.
iv) Imputation tax information
The components of unappropriated earnings were as follows:
December 31,
2015
December 31,
2014
Derived from year 1997 and prior years $ - -
Derived from year 1998 and thereafter 1,686,942 1,314,340
$ 1,686,942 1,314,340
December 31,
2015
December 31,
2014
Balance of imputation credit account (ICA) $ 73,577 23,225
2015(estimated) 2014(actual)
imputation tax credit ratio of earnings to residents of
ROC 4.35% 7.65%
30
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
326
Effective January 1, 2015, the imputation tax credit of dividends or earnings distributed to
individual shareholder who are residents of the ROC was adjusted to half of the original amount.
Furthermore, the imputation tax credit of dividends or earnings distributed to individual
shareholders resulting from the 10% surtax on unappropriated earnings was also adjusted to half
of the original amount.
Under the integrated income tax system, the above imputation credit account and creditable ratio
were calculated according to the formal interpretation No.10204562810 issued by Taxation
Administration, Ministry of Finance, R.O.C. on October 17, 2013.
(l) Capital and other equity
As of December 31, 2015 and 2014, the total value of authorized ordinary shares amounted to
$4,000,000 thousand, with par value of $10 per share, of which 400,000 thousand shares, 294,133
shares were issued. All issued shares were paid up upon issuance.
A reconciliation of the Company's outstanding shares of the years 2014 and 2013 were as follows:
Unit: thousand shares 2015 2014
Balance at January 1 (Balance at December 31) 294,133 294,133 i) Additional paid-in capital
The components of additional paid-in capital as of December 31, 2015 and 2014, were as
follows:
December 31,
2015
December 31,
2014
Share premium $ 1,280 1,280
Treasury stock 519,506 423,157
$ 520,786 424,437
The Company's subsidiary, Lucky Co. was awarded with cash dividends on August 6, 2015 and
June 25, 2014 amounting in $96,349 thousand and $91,760 thousand, respectively, and they were
recognized as capital surplus-treasury stock transactions.
In accordance with the ROC Company Act in January 2012, realized capital surplus can be used
to increase share capital or to distribute as cash dividends after offsetting losses. The
aforementioned capital surplus includes share premiums and donation gains. In accordance with
the Securities Offering and Issuance Guidelines, the amount of capital surplus to increase share
capital shall not exceed 10 percent of the actual share capital amount.
ii) Retained earnings
As the Company is in a fluctuating business environment and in its growth stage, the dividend
policy states that the distribution of dividends varies depend on the Company's cash position and
reflects its capital budget and working capital demands. However, distribution of earnings shall
be distributed preferably by using stock dividends.
31
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
327
In accordance with the Company's articles of incorporation, the Company must retain 10% of its
after-tax earnings as legal reserve (less deficits of prior years, if any) and then provide a special
reserve for the stockholders' equity account. The remaining amount should be distributed as
follows:
i. Remuneration of directors and supervisors as propose by the Board of Directors;
ii. 1% is distributed as employee bonuses.
iii. 50% to 100% of the remainder, as necessary, should be distributed as dividends, in which
cash dividends should be at least 10% of the total dividends distributed.
The abovementioned distribution of earnings should be proposed by the Board of Directors and is
subject to the stockholders' approval.
For the upcoming three years, The Company plans to distribute all the earnings of each year, and
the ratio of cash and stock distributed is determined in accordance with the policy in The
Company's articles of incorporation and with consideration of The Company's financial situation.
In accordance with the amendments to the Company Act in May 2015, employee bonuses and the
directors' and supervisors' remuneration are no longer part of the appropriations of earnings. The
Board of Directors proposed the amendments on March 17, 2016, which will be approved at the
2016 annual shareholders’ meeting. Please refer to employee benefits expense in Note 6(o).
i. Legal reserve
According to the revised Company Act effective in January 2012 that companies must
retain 10% of their annual net earnings, as defined in the Act, until such retention equals the
amount of issued share capital. When a company incurs no loss, it may, pursuant to a
resolution to be adopted by the shareholders' meeting as required, distribute its legal reserve
by issuing new shares or cash. Only the portion of legal reserve which exceeds 25% of the
issued share capital may be distributed.
ii. Special earnings reserve
As the Company opted for the exemptions allowed under IFRS 1 "First-time Adoption of
International Financial Reporting Standards" during the Company's first-time adoption of
the IFRS as endorsed by the FSC, unrealized revaluation increments and cumulative
translation adjustments of $512,508 thousand, which were previously recognized in
shareholders' equity were reclassified to retained earnings. In accordance with Regulatory
Permit No.1010012865 as issued by the FSC on April 6, 2012, a special reserve is
appropriated from retained earnings for aforementioned reclassification. In addition, during
the use, disposal or reclassifications of relevant assets, this special reserve is reverted to
distributable earnings proportionately. The carrying amount of special reserve amounted to
$512,508 thousand as of December 31, 2015.
For the regulatory permission mentioned above, the Company is also required to set aside
an additional special reserve, as part of the distribution of its annual earnings, equal to the
difference between the amount of above-mentioned special reserve and net debit balance of
the other components of stockholders’ equity.
32
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
328
iii. Distribution of retained earnings
For the years 2014 and 2013, the estimated amounts of employees' bonuses was $8,538
thousand and $7,689 thousand, respectively, and the estimated amounts of directors' and
supervisors' emoluments was $34,151 thousand and $30,757 thousand, respectively. Such
amounts were estimated by multiplying after-tax income by the percentage of distribution of
employees' bonuses and directors' and supervisors' emoluments, and recorded as cost of
sales or operating expenses in the period. The actual amount of employee bonus and
remuneration to the board of directors and supervisors distributed for the year 2014 and
2013 is identical to that estimated in the financial report ended 2014 and 2013, and related
information can be accessed through the Market Observation Post System.
The appropriations of 2014 and 2013 earnings as dividends to stockholders that were
approved by the Company's shareholders during their meetings on June 10, 2015, and June
6, 2014, respectively, were as follows:
2014 2013 Amount
per share
(NT
dollars)
Total
amount
Amount
per share
(NT
dollars)
Total
amount
Dividends distributed to
common shareholders:
Cash $ 2.10 617,680 2.00 588,266
iii) Treasury stock
None shares were purchased by the Company and its subsidiaries during the years 2015 and 2014.
The reason is that the subsidiaries held by long-term of the Company shares previous years. As of
December 31, 2015 and 2014, the subsidiaries held the Company’s shares as follows:
December 31, 2015
Number of
shares (in
Market
price per
Adjusted
cost per
Total
market
Total
treasury Subsidary name thousand) share share value stock
Lucky Co. 46,041 67.90 11.51 $ 3,126,201 530,114 December 31, 2014 Number of
shares (in
Market
price per
Adjusted
cost per
Total
market
Total
treasury Subsidary name thousand) share share value stock
Lucky Co. 46,041 55.30 11.51 $ 2,546,082 530,114
33
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
329
iv) Other equities
Foreign
exchange
differences
arising from
foreign
operation
Available-fo
r-sale
financial
assets Total
Balance as of January 1, 2015 $ 210,304 (5,685) 204,619
Foreign exchange differences arising from
foreign operation
(58,483) - (58,483)
Exchange differences on translation financial
statements of foreign subsidiaries accounted
for using equity method
(85,617) - (85,617)
Unrealized gains (losses) from
available-for-sale financial assets
- (598) (598)
Unrealized gains (losses) on available-for-sale
financial assets, subsidiaries accounted for
using equity method
-
(140)
(140)
Balance as of December 31, 2015 $ 66,204 (6,423) 59,781
Balance as of January 1, 2014 $ 37,681 (4,865) 32,816
Foreign exchange differences arising from
foreign operation
30,645 - 30,645
Exchange differences on translation financial
statements of foreign subsidiaries accounted
for using equity method
141,978 - 141,978
Unrealized gains (losses) from
available-for-sale financial assets
- (664) (664)
Unrealized gains (losses) on available-for-sale
financial assets, subsidiaries accounted for
using equity method
-
(156)
(156)
Balance as of December 31, 2014 $ 210,304 (5,685) 204,619
34
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
330
(m) Earnings per share
The calculation of the Company's basic earnings per share and diluted earnings per share for the years
ended December 31, 2015 and 2014, was as follows:
i) Basic earnings per share
2015 2014
Net income attributable to common shareholders of the
Company $ 1,112,850 948,634
Weighted-average number of common shares 248,092 248,092
Basic earnings per share (in NT dollars) $ 4.49 3.82
ii) Diluted earnings per share
2015 2014
Net income attributable to common shareholders of the
Company (diluted) $ 1,112,850 948,634
Weighted-average number of common shares (basic) 248,092 248,092
Impact of potential common shares
Effect of employee's bonuses 263 266
Weighted-average number of shares outstanding
(diluted) 248,355 248,358
Diluted earnings per share (in NT dollars) $ 4.48 3.82
(n) Revenue
The details of the Company's revenue for the years ended December 31, 2015 and 2014, are as
follows:
2015 2014
Sale of goods $ 2,770,169 2,529,337
Service income 8,599 10,212
Revenue on conversion 1,405 38,487
$ 2,780,173 2,578,036 The Company is in accordance with those of the customer loyalty program, which aim to boost the
sales on all of their liquid products, such as edible and non-edible oil products, as well as dish and
laundry liquid detergent, by providing customers bonus points in exchange for a discount price or
complimentary items upon purchasing of any merchandise. As of December 31, 2015 and 2014, the
Company had deferred income amount to $92,977 thousand and $79,496 thousand. Deferred income
is derived from the fair value of the bonus points or complimentary items which have not been
exchanged by the customers.
35
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
331
(o) Employees' compensation and directors' remuneration
In accordance with the Company's article in March 17, 2016, this has been revised but has not yet
been approved by the shareholders meeting. If there is profit for the year, the Company should
contribute more than 1% of its profit as employee compensation, and less than 5% as directors'
remuneration. However, if the Company has accumulated deficits, the profit should be reserved to
offset the deficit. The amount of remuneration to directors, and compensation to employees had been
approved by the board of directors.
The Company estimated its employee compensation and directors' remuneration amounting to $14,029
thousand and $56,116 thousand for the year 2015, respectively. The estimated amounts mentioned
above are based on the net profit before tax of each respective ending period, multiplied by the
percentage of the employee compensation, and the directors' remuneration, as specified in the
Company's article. The estimations are recorded under operating expenses and cost. The
differences between the estimated amounts in financial statements and actual amounts approved by the
Board of Directors, if any, shall be accounted for as changes in accounting estimates and recognized in
2016.
(p) Non-operating income and expenses
i) Other income
2015 2014
Interest income $ 1,293 1,636
Rental income 16,757 9,285
Other 9,203 7,222
$ 27,253 18,143
The Company recalled and disposed its products because it violated the Act Governing Food
Safety and Sanitation. However, the Company did not inform the Department of Public Health
(DOH), Taoyuan, and has to penalty of $3,000 thousand, which was recognized as loss. However,
the Company appealed to the DOH, Taoyuan regarding the said penalty. As a result, on
December 24, 2015, the DOH, Taoyuan, decided to reduce the amount to $300 thousand instead
of $3,000 thousand, which were recognized as other accounts payable and other accounts
receivable, respectively. Therefore, the difference of $2,700 thousand, which the Company is
expected to receive from the DOH, Taoyuan, was recognized as other gains as of December 31,
2015.
ii) Other gains and losses
2015 2014
Gains (loss) on foreign exchange $ (2,474) (4,470)
Loss on disposal of property, plant and equipment, net (34) (351)
Gains on disposal of investments - (20,000)
Impairment loss on non-financial assets - (7,050)
Handling charges (3,076) (497)
Other (2,060) (945)
$ (7,644) (33,313)
36
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
332
The Company declared its 30 batches of raw materials as industrial materials during the period
from 2013 to August 2014. However, the said materials were not registered with the Food and
Drug Administration (FDA), Ministry of Health and Welfare, which violated the Act Governing
Food Safety and Sanitation. Therefore, On October 15, 2014, the Company was ordered by the
DOH of Taoyuan County Government to temporarily cease its production on all types of edible
oil, as well as recall 123 kinds of its products island-wide. In addition, the Company was
requested to pay the penalty amounting to $30,000 thousand by the DOH of Taipei City
Government. On October 19, 2014, the DOH of Taoyuan City Government gave the Company
the permission on all of its recalled products to be sold again in the market under the condition
that the said products will have to be examined and approved by the FDA for market
consumption. On January 23, 2015, the DOH of Taipei City Government revoked its decision on
the amount the Company has to pay for its penalty; instead of paying the fine of $30,000
thousand, on January 30, 2015, the Company will only have to pay the amount of $7,050
thousand as ordered by the DOH of Taipei City Government. On December 31, 2015, the
Company paid the DOH of Taipei City Government the requested amount in full.
iii) Finance costs
2015 2014
Interest expenses $ 67,951 63,684
(q) Financial instruments
i) Credit risk
i. Credit risk exposure
The maximum credit risk exposure of the Company's financial assets is equal to their
carrying amount.
ii. Concentration of credit risk
The Company's cash and cash equivalents and accounts receivable are the main source of
potential credit risk. The Company deposits its cash and cash equivalents in different
financial institutions and has no concentration of credit risk on an individual customer.
Therefore, the Company concluded that it is not exposed to credit risk.
37
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
333
ii) Liquidity risk
The following are the contractual maturities of financial liabilities, including estimated interest
payments but excluding the impact of netting agreements.
Carrying
amount
Contractual
cash flows
Within a
year
1-2 years
2-5 years
More than 5
years
December 31, 2015
Non-derivative financial liabilities
Secured loans $ 2,254,600 2,374,856 75,873 488,868 1,640,474 169,641
Short-term commercial paper payable 89,967 90,000 90,000 - - -
Short-term borrowings 134,267 134,267 134,267 - - -
Unsecured loans 1,774,875 1,814,297 657,151 1,027,144 130,002 -
Other payable 194,739 194,739 194,739 - - -
$ 4,448,448 4,608,159 1,152,030 1,516,012 1,770,476 169,641
December 31, 2014
Non-derivative financial liabilities
Secured loans $ 1,500,000 1,627,229 95,321 367,519 994,748 169,641
Short-term commercial paper payable 19,994 20,000 20,000 - - -
Short-term borrowings 155,206 155,206 155,206 - - -
Unsecured loans 2,306,520 2,397,156 481,126 1,889,961 26,069 -
Other payable 268,491 268,491 268,491 - - -
$ 4,250,211 4,468,082 1,020,144 2,257,480 1,020,817 169,641
The Company does not expect that the cash flows included in the maturity analysis could occur
significantly earlier or at significantly different amounts.
iii) Currency risk
i. Risk exposure
The Company's financial assets and financial liabilities exposed to significant currency risk
were as follows:
Foreign
currency
Exchange
rate
NTD
December 31, 2015
Financial assets:
Monetary assets:
USD $ 1,387 32.8250 45,531
Financial liabilities:
Monetary liabilities:
JPY $ 37 32.8250 1,230
38
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
334
Foreign
currency
Exchange
rate
TWD
December 31, 2014
Financial assets:
Monetary assets:
USD $ 1,002 31.6500 31,703
Financial liabilities:
Monetary liabilities:
JPY $ 1,439 31.6500 45,529
ii. Sensitivity analysis
The Company's exposure to foreign currency risk arise from cash and cash equivalents,
accounts and other receivables, loans and borrowings, and accounts and other payables that
were denominated in foreign currencies. A 1% appreciation (depreciation) of the TWD
against the USD, and EUR as of December 31, 2015 and 2014, would have increased
(decreased) the net income before tax by $1,121 thousand and $363 thousand, respectively.
iii. Foreign exchange gain and loss on monetary item
2015 2014 Foreign
exchange
gain (loss)
Average
exchange
rate
Foreign
exchange
gain (loss)
Average
exchange
rate
TWD $ (2,474) - (4,470) -
iv) Interest rate risk analysis
Please refer to the note on liquidity risk management for the interest rate exposure of The
Company's financial assets and liabilities.
The following sensitivity analysis is based on the risk exposure to interest rates on derivative and
non-derivative financial instruments on the reporting date. Regarding assets with variable interest
rates, the analysis is on the basis of the assumption that the amount of assets outstanding at the
reporting datewas outstanding throughout the year. The rate of change is expressed as the
increment or decrement by 1% when reporting to the management internally, which also
represents the management's assessment of the reasonable interest rate change.
If the interest rate had increased / decreased by 1%, The Company's net income before tax would
have increased / decreased by $34,191 thousand and $29,602 thousand for the years ended
December 31, 2015 and 2014, respectively, with all other variable factors remaining constant.
39
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
335
v) Fair value and carrying amount
i. Categories and fair value of financial instruments
Except for the followings, carrying amount of The Company's financial assets and liabilities
are valuated approximately to their fair value, and are not based on observable market date
and the value measurements which are not reliable. No additional fair value disclosure is
required in accordance to the Regulations.
December 31, 2015 Fair value Carrying
amount
Level 1 Level 2 Level 3 Total
Available-for-sale financial
assets
Domestic listed stock $ 10,979 10,979 - - 10,979
Financial assets at cost 27,166 - - - -
Subtotal 38,145 10,979 - - 10,979
Loans and receivables
Cash and cash equivalents 87,031 - - - -
Accounts and notes
receivable and other
receivables (including
576,439 - - - -
related parties)
Subtotal 663,470 - - - -
Total $ 701,615 10,979 - - 10,979
Financial liabilities
measured at amortized cost
Short-term borrowings $ 500,000 - - - -
Short-term commercial
paper payable
89,967 - - - -
Accounts payable 134,267 - - - -
Other payables (including
related parties)
194,739 - - - -
Long-term borrowings
(including current
3,529,475 - - - -
portion)
Total $ 4,448,448 - - - -
40
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
336
December 31, 2014 Fair value Carrying
amount
Level 1 Level 2 Level 3 Total
Financial assets at fair value
through profit or loss
Available-for-sale financial
assets
Domestic listed stock $ 11,577 11,577 - - 11,577
Financial assets at cost 27,166 - - - -
Subtotal 38,743 11,577 - - 11,577
Loans and receivables
Cash and cash equivalents 84,016 - - - -
Accounts and notes
receivable and other
receivables (including
838,562 - - - -
related parties)
Subtotal 922,578 - - - -
Total $ 961,321 11,577 - - 11,577
Financial liabilities
measured at amortized cost
Short-term borrowings $ 217,012 - - - -
Short-term commercial
paper payable
19,994 - - - -
Accounts payable 155,206 - - - -
Other payables (including
related parties)
268,491 - - - -
Long-term borrowings
(including current
3,589,508 - - - -
portion)
Total $ 4,250,211 - - - -
ii. Valuation techniques and assumptions used in fair value determination
If there are quoted prices in the active markets for financial instruments, the fair value of
those prices may be based on the quoted market prices. The market prices announced by
Securities Exchange and Over the Counter are the benchmarks of the fair value of equity
instruments and Liability instruments trading in active markets.
Stocks of listed Companies and open ended funds are financial assets possessing standard
provision and trading in active markets. The fair values are determined based on the market
quotes and net assets value, respectively.
41
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
337
(r) Financial risk management
i) Overview
The Company is exposed to the following risks arising from financial instruments:
i. Credit risk
ii. Liquidity risk
iii. Market risk
This note discloses information about the Company's exposure to the aforementioned risks, and
its goals, policies, and procedures regarding the measurement and management of these risks. For
additional quantitative disclosures of these risks, please refer to the notes regarding each risk
disclosed throughout the financial report.
ii) Risk management framework
The Board of Directors has overall responsibility for the establishment and oversight of the risk
management framework.
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 Company's Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit
undertakes both regular and ad hoc reviews of risk management controls and procedures, the
results of which are reported to the Precursory Audit Committee.
iii) Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from The Company's
receivables from customers and investment securities.
i. Trade and other receivables
The Company's exposure to credit risk is influenced mainly by the individual characteristics
of each customer. However, management also considers the demographics of the
Company's customer base, including the default risk of the industry and country in which
customers operate, as these factors may have an influence on credit risk, particularly during
deteriorating economic circumstances. In 2015 and 2014, there was no geographical
concentration of credit risk regarding the Company's revenue.
The Company have established a credit policy under which each new customer is analyzed
individually for creditworthiness before the Company's standard payment and delivery
terms and conditions are offered. Purchase limits are established for each customer, which
represent the maximum open amount without requiring approval; these limits are reviewed
on a periodic basis. Customers that fail to meet the Company's benchmark creditworthiness
may transact with the Company only on a prepayment basis.
42
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
338
The Company set the allowance for bad debt account to reflect the estimated losses for trade,
other receivables, and investment. The allowance for bad debt account consists of specific
losses relating to individually significant exposure and unrecognized losses arising from
similar assets groups. The allowance for bad debt account is based on historical collection
record of similar financial assets..
ii. Investments
The credit risk exposure in the bank deposits, fixed income investment and other financial
instruments is measured and monitored by the Company's finance department. Since those
who transact with the Company are banks and other external parties with good credit
standing, there are no non-compliance issues, and therefore, there is no significant credit
risk.
iii. Guarantees
Pursuant to the Group's policies, it is only permissible to provide financial guarantees to
subsidiaries. As December 31, 2015 and 2014, the Company did not provide any
endorsement and guarantees to preparation of the third-party.
iv) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting 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 far 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 uses activity-based costing to estimate the cost of its products and services, which
assists it in monitoring cash flow requirements and optimizing its cash return on investments.
The Company aims to maintain the level of its cash and cash equivalents and other highly
marketable debt investments at an amount in excess of the expected cash flows on financial
liabilities (other than trade payables) over the succeeding 60 days. The Company also monitors
the level of expected cash outflows on trade and other payables. This excludes the potential
impact of extreme circumstances that cannot reasonably be predicted. The Company has unused
short term bank facilities of $2,427,707 thousand on December 31, 2015.
v) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates,
and equity prices will affect the Company's income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters.
i. Currency risk
The Company is exposed to currency risk on sales, purchases and borrowings that are
denominated in a currency other than the respective functional currencies of the Company's
entities. The currencies used in these transactions are the TWD, USD and THB.
43
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
339
Interest expenses are denominated in the same currency as that of the principal. Generally,
the currency of loans matches that of the Company's operating cash flow, primarily
consisting of TWD, USD and THB.
With regard to monetary assets and liabilities denominated in a foreign currency, when a
short-term risk exposure exists, the Company relies on immediate foreign exchange
transactions to ensure the net exposure to foreign exchange risk is maintained at an
acceptable level.
ii. Interest rate risk
The interest rates of the Company's long-term and short-term borrowings are floating.
Hence, changes in market conditions will cause fluctuations in the effective interest rate of
the aforementioned loans. The Company's finance department monitors and measures
potential changes in market conditions to achieve a fixed interest rate on the Company's
loans.
iii. Other market price risk
The Company does not enter into any commodity contracts other than to meet the
Company's expected usage and sales requirements; such contracts are not settled on a net
basis.
(s) Capital management
The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market
confidence and to sustain future development of the business. Capital consists of ordinary shares,
capital surplus, retained earnings, and non-controlling interests of the Company. The Board of
Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.
The Company's debt-to-adjusted-capital ratio at the end of the reporting period was as follows:
December 31,
2015
December 31,
2014
Total liabilities $ 5,578,132 5,046,640
Less: cash and cash equivalents 87,031 84,016
Net debt $ 5,491,101 4,962,624
Total equity $ 5,499,819 5,080,843
Debt-to-adjusted-capital ratio 99% 98%
As of December 31, 2015, there were no changes in the Company's approach of capital management.
44
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
340
(7) Related-party Transactions
(a) List of subsidiaries
Subsidiary of the Company as follows:
Ownership interest (Shareholdings: %)
Country of
incorporation
December
31, 2015
December 31,
2014 Description
Namchow (Thailand) Ltd. Thailand 100 100
Mostro (Thailand) Ltd. Thailand 100 100
Nacia International Corp. B.V.I. 100 100
Nankyo Japan Co., Ltd. Japan 100 100
Namchow Consulting Company, Ltd. Taiwan 100 100
Chow Ho Enterprise Co., Ltd. Taiwan 100 100
Lucky Royal Co., Ltd. Taiwan 99 99
Navigator Business Publications Co., Ltd. Taiwan 90 90 Note 1
Namchow (British Virgin Island) Ltd. B.V.I. 58 58 Note 2
Dian Shui Lou Restaurant Business Co., Ltd. Taiwan 99 99 Note 3
Namchow Gastronomy Consulting Company,
Ltd.
Taiwan 99 99 Note 3
Shanghai Bao Lai Na Company Limited China 58 58 Note 2
Ting Hao(Cayman Islands)Holding Corp. Cayman 100 100 Note 4
Namchow International Corp. Cayman 100 100
Shanghai Qiaohao Trading Co., Ltd China 100 100
Shanghai Qiaohao Enterprise Management Co.,
Ltd.
China 100 100
Shanghai Qiaohao Food Co., Ltd. China 100 100
Tianjin Namchow Food Co.,Ltd. China 100 100
Guangzhou Namchow Food Co., Ltd. China 100 100
Shanghai Qizhi Business Consulting Co., Ltd. China 100 100
Shanghai Qiaoxing Co., Ltd. China 100 100
Shanghai Namchow Food co., Ltd. China 100 100
Tianjin Yoshi Yoshi Food Co., Ltd. China 100 100 Note 5 Note 1: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 89.97% shares of NBP Co..
Note 2: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 57.94% shares of Namchow (BVI Co.)
and Bao Lai Na Co.
Note 3: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 99.65% shares of Dian Shui Lou Co.
and Namchow Gastronomy Consulting Co.
Note 4: As of December 31, 2015 and 2014, the Company, directly or indirectly, holds 100% shares of Ting Hao Cayman
Co.
Note 5: As of December 31, 2015 and 2014, the Company, directly and indirectly, holds 100% shares of Tianjin Yoshi
Yoshi Co.
45
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
341
(b) Parent company and ultimate controlling party
The Company is the ultimate controlling party of the Company.
(c) Significant transactions with related parties
i) Sales to related parties
Significant sales to related parties were as follows:
2015 2014
Subsidiaries $ 260,054 215,542
The selling prices and collection terms for the sales to related parties are not significantly
different from those of the third-party customers; the terms of receivables are 60 days to 90 days.
The receivables from related parties were not set with collaterals and do not need to recognize
bad debt after estimating.
ii) Management technology service revenue
The Company provided management technology service to subsidiaries recoded under service
revenue and the amounts were as follows:
2015 2014
Subsidiaries $ 8,542 8,285
iii) Rental revenue
The Company rents offices to subsidiaries and the amounts were as follows:
2015 2014
Subsidiaries $ 16,642 9,170
iv) Purchase from related parties
Purchases from related parties were as follows:
2015 2014
Subsidiaries $ 21,100 17,450
The purchase price and payment terms for the purchase from related parties are not significantly
different from those of the third-party vendors.
46
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
342
v) Property transactions disposal of property, plant and equipment
The Company sold its property, plant and equipment to related parties due to operating demand
as follows:
2015 2014
Type of related parties
Disposal
price
Disposal
income or
loss
Disposal
price
Disposal
income or
loss
Subsidiaries $ - - 463 -
vi) Leases
The Company leased buildinds from its subsidiaries due to operating demand as follows:
Type of related parties Object Period 2015 2014
Key management Building 2015.1.1~
2016.12.31
$ 11,052 8,960
vii) Lending to related parties
i. The information for the Company loans to related parties was as follows:
December 31,
2015
December 31,
2014
Subsidiaries $ - 249,730
Interest rate is calculated with 1.5% for the loan. The loan was unsecured; therefore, it need
not be recognized as bad debt after estimation.
ii. Interest revenue
The information on the interest received by the Company from its subsidiaries was as
follows:
2015 2014
Subsidiaries $ 1,253 1,580
47
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
343
viii) Receivable from related parties
The details of the receivables from related parties were as follows:
Accounts
Type of related
parties
December 31,
2015
December 31,
2014
Accounts receivable-related
parties
Subsidiaries $ 52,865 41,527
Other receivables-related parties Subsidiaries 9,465 261,522
$ 62,330 303,049
ix) Payable to related parties
The details of the Group's payable to related parties were as follows:
Accounts
Type of related
parties
December 31,
2015
December 31,
2014
Accounts payable-related parties Subsidiaries $ 7,840 2,554
Other payables-related parties Subsidiaries 20,877 11,662
$ 28,717 14,216
x) Guarantees
As of December 31, 2015 and 2014, the Company provided the amounts of $1,355,644 thousand
and $2,438,724 thousand, respectively, guarantees to its related parties.
(d) Personnel transactions from key management
The compensation of the key management personnel comprised as the following:
2015 2014
Short-term employee benefits $ 181,776 89,853
Post-employments benefits 2,672 1,952
$ 184,448 91,805
48
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
344
(8) Pledged Assets
The carrying values of pledged assets were as follows:
Pledged assets
Object
December 31,
2015
December 31,
2014
Other non-current assets:
Time deposits Operating lease deposits $ 408 408
Property, plant and equipment:
Land Short-term and long-term
borrowings
1,707,574 1,707,574
Buildings Short-term and long-term
borrowings
269,431 285,088
equipment borrowings
$ 1,977,413 1,993,070
(9) Significant Commitments and Contingencies
Major contracts not recognized the commitment:
(a) The Company's unrecognized contractual commitments were as follows:
December 31,
2015
December 31,
2014
Acquisition of property, plant and equipment $ 10,668 6,829
(b) The Company's unused letters of credit for purchases of materials:
December 31,
2015
December 31,
2014
Unused letters of credit for purchases of materials $ 28,681 31,621
(c) Long-term letters of credit guarantee bill:
December 31,
2015
December 31,
2014
Long-term letters of credit guarantee bill $ 392,000 392,000
(10) Significant Losses from Calamity: None.
(11) Significant Subsequent Events: None.
49
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
345
(12) Others
The employee benefit expenses, depreciation and amortization, categorized by function, were as follows:
By function 2015 2014
By nature
Operating
costs
Operating
expenses
Total
Operating
costs
Operating
expenses
Total
Employee benefits
Salary 182,665 399,158 581,823 164,917 325,507 490,424
Labor and health insurance 20,092 27,939 48,031 18,527 25,440 43,967
Pension 10,790 18,633 29,423 10,535 18,021 28,556
Others 12,436 9,304 21,740 12,746 10,392 23,138
Depreciation 72,762 32,377 105,139 72,845 28,852 101,697
Amortization - - - - - - As of December 31, 2015 and 2014, the depreciation expenses recognized under "non operating income
and expenses-other gains and losses" amounted to $3,076 thousand and $497 thousand, respectively.
As of December 31, 2015 and 2014, the Company had 804 and 743 employees, respectively.
50
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
346
(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:
i) Loans extended to other parties:
Unit: thousand dollars
No.
Name of
Name of
Financial
statement
account
Related
party
Highest balance
of financing to
other parties
Ending Amount
actually
drawn
Range of
interest
rates
Purposes of fund
financing for the
borrowers
Transaction
amount for
business between
Reasons for
short-term
financing
Allowance
for bad
debt
Collateral Financing limit
for each
borrowing
Maximum
financing
limit for the
lender borrower during the year balance (Note 7) two parties Item Value company lender
1 The company Nankyo Japan
Co.
Other accounts
receivable-
related parties
Yes 249,730 - - - 2 - Capital need
for operation
- - 2,199,928
(Note 1)
2,199,928
(Note 1)
2 Guangzhou
Namchow Co.
Shanghai
Namchow Co.
Other
long-term
accounts
receivable-
related parties
Yes 750,000 750,000 750,000 4% 2 - Capital need
for operation
- - 2,377,346
(Note 2)
2,377,346
(Note 2)
Note 1: Base on the Company’s guidelines, the allowable aggregate amount of financing provided to others cannot exceed 40% of the Company’s stockholder’s equity; the maximum financing provided to an individual company
cannot exceed 40% of the Company’s stockholder’s equity.
Note 2: Base on the Guangzhou Namchow Co.’s guidelines, the allowable aggregate amount of financing provided to others and the maximum financing provided to an individual company cannot exceed 100% of the Guangzhou
Namchow Co’s stockholder’s equity.
Note 3: The transactions within The Company were eliminated in the consolidated financial statements.
ii) Guarantees and endorsements for other parties:
Unit: thousand dollars
Name
Counter-party of guarantee
and endorsement
Limitation on
amount of
guarantees and
Highest balance
for guarantees
and
Ending
balance of
guarantees
Amount
Property
pledged on
guarantees
Ratio of accumulated
amounts of guarantees
and endorsements to
Maximum
allowable
amount for
Parent company
endorsement /
guarantees to
Subsidiary
endorsement /
guarantees to
Endorsements/
guarantees to
third parties on
No.
of
company
Name Relationship
with the
company
endorsements
for one party
endorsements
during the year
and
endorsements
actually
drawn
and
endorsements
(Amount)
net worth of the latest
financial statements
guarantees
and
endorsements
third parties
on behalf of
subsidiary
third parties
on behalf of
parent company
behalf of
company in
Mainland China
0 The
Company
Nacia Co. 2 5,499,819 356,700 310,300 117,160 - 5.64% 5,499,819 Y
0 The
Company
Ting Hao Cayman
Co.
3 5,499,819 884,500 493,000 435,000 - 8.96% 5,499,819 Y
0 The
Company
Tianjin Namchow
Co.
3 5,499,819 429,200 - - - - % 5,499,819 Y Y
0 The
Company
Guangzhou
Namchow Co.
3 5,499,819 435,000 - - - - % 5,499,819 Y Y
0 The
Company
Nankyo Japan Co. 2 5,499,819 552,344 552,344 434,824 - 10.04% 5,499,819 Y
1 Lucky Co. Dian Shui Lou
Co.
2 3,914,795 76,000 46,000 6,214 - 1.18% 3,914,795
Note 1: The guarantee's relationship with the guarantor is as follows:
(1) Ordinary business relationship.
(2) A subsidiary whose common stock is more than 50% directly owned by the guarantor.
(3) An investee whose common stock is more than 50% owned by the parent company and its subsidiary in aggregate.
(4) The parent company owns, directly or indirectly via subsidiaries, more than 50% of the guarantor's common stock.
(5) A company in the same trade that is mutually guaranteed pursuant to the covenants of a construction contract upon contracting a project.
(6) A company that is guaranteed proportionately according to the guarantor's ownership percentage due to co-investment by various investors.
Note 2: According to Namchow Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Namchow Co.’s net worth, while the total guarantees and endorsements for an individual party
not exceed 100% of Namchow Co.’s net worth.
Note 3: According to Lucky Co.’s guarantee and endorsement policies, the total guarantee and endorsement not exceed 100% of Lucky Co.’s net worth, while the total guarantees and endorsements for an individual party not
exceed 100% of Namchow Co.’s net worth.
Note 4: The transactions within The Company were eliminated in the consolidated financial statements.
iii) Securities held as of December 31, 2015 (excluding investment in subsidiaries, associates and joint ventures):
Unit: thousand dollars
Nature and name Relationship Ending balance
Name of holder of security with the security issuer Account name Number of
shares
Book value
Holding
percentage
Market value
(Note 1)
Remarks
The Company Global securities Financial Corporation
Investee accounted for by cost method
Financial assets carries at cost-noncurrent
3,504 27,166 0.87 % 27,166
The Company
Stock:
Capital Co., Ltd
-
Available-for-sale financial
asset-noncurrent
1,108
10,979
0.05
%
10,979
Lucky Co.
Stock:
The Company
-
Available-for-sale financial asset-noncurrent
46,041
3,126,201
15.65 %
3,126,201
Note 2
Lucky Co.
Stock:
Capital Co., Ltd
-
Available-for-sale financial
asset-noncurrent
259
2,570
0.01
%
2,570
Note 1: For financial assets carried at cost-non-current in listed companies, market value is determined by the latest monthly average sales price. Market value of unlisted companies is the net worth or the book value prevailing on the balance sheet date.
Note 2: The stated book value is after subtraction of the amount being reclassified treasury stock.
iv) Accumulated holding amount of a single security in excess of $300 million or 20% of Namchow Co.'s issued share capital:
None.
51
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
347
v) Acquisition of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.
vi) Disposal of real estate in excess of $300 million or 20% of Namchow Co.'s issued share capital: None.
vii) Sales to and purchases from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:
Unit: thousand dollars
Name of
Transaction details
Status and reason for
deviation from arm's-
length transaction
Account / note receivable
(payable)
company Counter-party Relationship Purchase /
Sale
Amount
Percentage of
total purchases /
sales
Credit
period
Unit price
Credit period
Balance
Percentage of total
accounts / notes
receivable (payable)
Remarks
The Company Lucky Co. Subsidiary (Sales) (228,697) 8 % Note - 46,530 8%
Tianjin Namchow
Co.
Shanghai Qiaoxing
Co.
Subsidiary (Sales) (2,383,423) 87 % Note - 622,386 94%
Guangzhou
Namchow Co.
Shanghai Qiaoxing
Co.
Subsidiary (Sales) (2,988,796) 99 % Note - 582,932 100%
Tianjin Yoshi Yoshi
Co.
Shanghai Qiaoxing
Co.
Subsidiary (Sales) (764,666) 98 % Note - - -%
Tianjin Namchow
Co.
Tianjin Yoshi Yoshi
Co.
Subsidiary (Sales) (213,808) 8 % Note - 26,397 4%
Note 1: Depending on capital movement motor adjustment.
viii) Receivables from related parties in excess of $100 million or 20% of Namchow Co.'s issued share capital:
Unit: thousand dollars
Name of related
Counter-party
Relationship
Balance of
receivables from
Turnover Overdue amount Amounts received in
subsequent period
Allowances
for bad
party related party rate Amount Action taken (Note 2) debts
Guangzhou
Namchow Co.
Shanghai Qiaoxing
Co.
Subsidiary 582,932 - - 582,932
(As of March 17, 2016)
-
Guangzhou
Namchow Co.
Shanghai
Namchow Co.
Subsidiary 762,509 - - -
(As of March 17, 2016)
-
Tianjin Namchow
Co.
Shanghai Qiaoxing
Co.
Subsidiary 622,386 - - 622,386
(As of March 17, 2016)
-
ix) Derivative financial instrument transactions: None.
(b) Information on investees:
The following is the information on investees for the year 2015 (excluding information on investees in Mainland China):
Unit: thousand dollars
Name of Name of Original cost Ending balance Net income Investment
investor
investee
Address Scope of business December 31,
2015
December 31,
2014
Shares Percentage of
ownership
Book value (losses) of
investee
income
(losses)
Remarks
The Company Namchow (Thailand)
Ltd.
Bangkok, Thailand Manufacturing and selling instant
noodles and rice cracker
1,027,405 1,027,405 9,245 100.00% 1,131,170 245,413 245,413 Subsidiary
The Company Mostro (Thailand) Ltd. Bangkok, Thailand Manufacturing and selling food 10,201 10,201 100 100.00% 17,779 4,951 4,951 Subsidiary
The Company Nacia Co. Tortola, British Virgin Islands Holding of investments 343,443 343,443 1 100.00% 5,050,316 1,102,199 1,102,199 Subsidiary
The Company Chow Ho Co. Taipei, Taiwan Catering services, food and
beverage retailing, and frozen food
manufacturing
80,000 80,000 8,000 100.00% 2,771 (3,884) (3,884) Subsidiary
The Company Lucky Co. Taipei, Taiwan Manufacturing, selling and
processing various food and
beverage products
938,438 938,438 95,338 99.00% 744,331 50,683 50,505 Subsidiary
The Company Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling
printed publications
763 763 80 80.00% 100 25 21 Subsidiary
The Company Nankyo Japan Co. Tokyo, Japan Catering services, Bistro and
wine-selling
308,530 58,800 -
(note 2)
100.00% 260,986 (15,913) (15,913) Subsidiary
The Company Namchow Consulting
Co.
Taipei, Taiwan Catering services, food and
beverage retailing and other
consulting
5,000 5,000 500 100.00% 4,940 (41) (41) Subsidiary
Lucky Co. Namchow BVI Co. Tortola, British Virgin Islands Holding of investments 69,133 69,133 3,000 58.00% 193,931 120,860 70,267 Lucky Co.'s
Subsidiary
Lucky Co. Dian Shui Lou Co. Taipei, Taiwan Liquor importing and retailing 104,000 104,000 10,400 100.00% 125,185 5,222 5,222 Lucky Co.'s
Subsidiary
Lucky Co. Namchow Gastronomy
Consulting Co.
Taipei, Taiwan Catering services and food
consulting
5,000 5,000 500 100.00% 1,511 (875) (875) Lucky Co.'s
Subsidiary
Lucky Co. Chi Zhi Co. Taipei, Taiwan Publishing, distributing and selling
printed publications
100 100 10 10.00% 100 25 - Lucky Co.'s
Subsidiary
2,010,124 378,438 18,500 100.00% 4,999,693 1,063,076 825,227 Nacia Co.'s
Subsidiary
Nacia Co. Namchow International
Co.
Cayman Islandls British West
Indies.
Holding of investments 476,680 476,680 12,770 100.00% 1,787,366 283,312 283,312 Nacia Co.'s
Subsidiary
Namchow
International Co.
Ting Hao Cayman Co. Gayman Islands British West
Indies.
Holding of investments -
(note 3)
363,300 -
(note 3)
- %
(note 3)
-
(note 3)
1,063,076 237,849 Nacia Co.'s
Subsidiary
51
NAMCHOW CHEMICAL INDUSTRIAL CO., LTD.
Notes to the Financial Statements
348