Financial Report
January 1 to June 30, 2008 and 2007
(Stock Code 2912)
Company address: 8F, No. 8, Dongxing Rd., Taipei
Telephone: (02)2747-8711
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President Chain Store Corporation
Financial Statements of January 1 ~ June 30, 2008 and 2007
Index
Item / PageI.Cover / 1
II.Index / 2 ~ 3
III.Independent Auditor’s Report / 4 ~ 5
IV.Balance Sheet / 6
V.Income Statement / 7
VI.Statement of Change in Shareholders’ Equity / 8
VII.Statement of Cash Flow / 9 ~ 10
VIII.Notes to Financial Statements
(I)Company History / 11
(II)Notes to principal accounting policy / 11 ~ 17
(III)Reasons and effect of change in accounting principle / 17
(IV)Notes to major account titles / 17 ~ 27
(V)Related Party Transactions / 28 ~ 35
(VI)Pledged Assets / 35
(VII)Major undertaking and contingency / 35
(VIII)Loss from major accidents / 36
(IX)Materiality after the period / 36
(X)Miscellaneous / 36 ~ 40
(XI)Supplementary Disclosure / 41 ~ 58
1. Information on major trade / 41 ~ 45
2. Information on direct investment / 45 ~ 56
3. Information on investment in Mainland China / 56 ~ 58
(XII)Financial Information on Departments / 58
IX.Accounting accounts table / 59 ~ 69
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Independent Auditor’s Report(97) Chai.Shen.Bao.Tzi No. 08000735
To: President Chain Store Corporation
We have audited the accompanying balance sheet of President China Store Corporation as of June 30, 2008 and 2007 and the related statements of income, shareholders equity and cash flows for the period of January 1~June 30, 2008 and 2007. The preparation of financial statements are the responsibility of the management. Our responsibility is to express an opinion on the financial statements based on our audits.
We conducted the audit in accordance with the “Standards on the Audit of Financial Statements” and the accounting principles generally accepted in the Republic of China except those specified in subsequent paragraphs. These principles and standards required the undersigned to 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 disclosure in financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The Company’s investment gain and loss amount of the long-term equity investment in the first half of 2008 and 2007 and the information disclosed in Note 11 are assessed and disclosed in accordance with the invested company’s un-audited financial statements. The said business entities’ total equity investment amounted to NT$7,644,155 thousand and NT$7,100,425 thousand on June 30, 2008 and 2007, respectively. Investment loss was recognized for an amount of NT$35,786 thousand in the first half of 2008 and investment gain was recognized for an amount of NT$108,207 thousand in the first half of 2007.
In our opinion, except for the influence from the adjustment and disclosure of the aforementioned equity investment while the audited financial statements of the said period are available, the financial statements referred to above present fairly, in all material respects, the financial position of President Chain Store Corporation as of June 30, 2008 and 2007, and the results of its operations and its cash flows in the period of January 1~June 30, 2008 and 2007 in conformity with the “Guidelines Governing the Preparation of Financial Reports Security Issuers,” “Business Accounting Law,” Business Accounting Guidelines and Finance Accounting Standards,” and generally accepted accounting principles.
As stated in Note III to the financial statements, President Chain Store Corporation has adopted the Accounting Research & Development Foundation (96) Kee.Mi.Tzi No. 052 Letter “Accounting Process for Employee bonus and Remuneration to Directors and Supervisors” on January 1, 2008 to have the estimated cost of employees bonus and remuneration to Directors and Supervisors recognized as expense and liabilities upon accrual by law or by assumption and the amount can be estimated reasonably.
We have issued a review report with a qualified opinion stated on the financial statements for the first half of 2008 and 2007 that were prepared by President Chain Store Corporation.
Pricewaterhouse CoopersCPA
Tsai Ching-pao, CPA
Chang Ming-Huei, CPA
Approval Document issued by Securities and Futures Commission (now Securities and Futures Bureau) of Ministry of Finance: / ： / (76) Tai-chai-Jen (I) No. 11412
(81) Tai-chai-Jen (VI) No. 79059
August 19, 2008
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President Chain Store Corporation
Balance Sheet
June 30, 2008 and 2007
Currency unit: NT$1,000
June 30. 2008 / June 30. 2007 / June 30. 2008 / June 30. 2007Amount / % / Amount / % / Amount / % / Amount / %
Assets / Liabilities and Shareholders’ Equity
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President Chain Store Corporation
Income Statements
January 1 ~ June 30, 2008 and 2007
Currency unit: NT$1,000
(EPS: NT$)
January 1 ~ June 30, 2008 / January 1 ~ June 30, 2007Amount / % / Amount / %
Operating revenue
4110 / Sales revenue / $47,709,567 / 96 / $49,636,551 / 97
4800 / Other operating revenue (Note V) / 1,782,892 / 4 / 1,702,956 / 3
4000 / Total operating revenue / 49,492,459 / 100 / 51,339,507 / 100
Cost of operation
5110 / Cost of goods sold (Note V) / (33,836,180) / (68) / (36,112,593) / (70)
5910 / Gross Profit / 15,656,279 / 32 / 15,226,914 / 30
Operating expense (Notes IV(XIX) & V)
6100 / Selling expense / (12,432,264) / (25) / (11,879,410) / (23)
6200 / General and administration expense / (1,218,582) / (3) / (1,321,916) / (3)
6000 / Total operating expense / (13,650,846) / (28) / (13,201,326) / (26)
6900 / Operating profit / 2,005,433 / 4 / 2,025,588 / 4
Non-operating revenue
7310 / Gain on valuation of financial assets / 4,730 / - / 5,683 / -
7121 / Investment income recognized under equity method (Note IV(VI)) / - / - / 108,207 / -
7122 / Dividend Income / 103,744 / - / 10,928 / -
7140 / Gain on disposal of investments / 8,411 / - / 106,297 / -
7480 / Miscellaneous income (Note V) / 491,383 / 1 / 361,747 / 1
7100 / Total non-operating income & interests / 608,268 / 1 / 592,862 / 1
Non-operating expenses and losses
7510 / Interest expense / (77,087) / - / (28,044) / -
7521 / Investment loss (Equity Method) (Note IV(VI)) / (35,786) / - / - / -
7630 / Impairment loss(Note IV (5)) / (30,176) / - / - / -
7880 / Miscellaneous expense / (41,899) / - / (31,298) / -
7500 / Total non-operating expense and loss / (184,948) / - / (59,342) / -
7900 / Income before tax / 2,428,753 / 5 / 2,559,108 / 5
8110 / Income tax expense (Note IV(XV)) / (497,268) / (1) / (437,504) / (1)
9600 / Net Income After Tax / $1,931,485 / 4 / $2,121,604 / 4
Before taxation / After taxation / Before taxation / After taxation
Basic EPS
9750 / Net Income After Tax / $2.65 / $2.11 / $2.80 / $2.32
Diluted earnings per share
9850 / Net Income After Tax / $2.65 / $2.11 / $2.80 / $2.32
Please refer to the notes to the financial statements enclosed and the independent auditor’s report of
Tsai Ching-pao, CPA and M.H. Chang, CPA, at Price waterhouse Coopers dated August 19, 2008.
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President Chain Store Corporation
Statement of Change in Shareholders’ Equity
January 1 ~ June 30, 2008 and 2007
Currency unit: NT$1,000
Retained earningsCommon stock /
Leagal reserve
/ Special reserve / Unallotted retained earnings / Unrealized revaluation gains / Cumulative translation adjustments / TotalJanuary 1 ~ June 30, 2007
Balance at Jan 1,2007 / $9,151,604 / $2,543,649 / $531 / $3,921,243 / $359,191 / $6,956 / $15,983,174
Appropriation and distribution of retained earnings in 2006:
Legal reserve / - / 382,233 / - / ( / 382,233 / ) / - / - / -
Reversion of special reserve / - / - / ( / 531 / ) / 531 / - / - / -
Appropriation of bonus to employees / - / - / - / ( / 275,250 / ) / - / - / ( / 275,250 / )
Remuneration to Directors & Supervisors / - / - / - / ( / 34,406 / ) / - / - / ( / 34,406 / )
Cash dividends / - / - / - / ( / 3,203,062 / ) / - / - / ( / 3,203,062 / )
January 1~June 30, 2007 / - / - / - / 2,121,604 / - / - / 2,121,604
Unrealized revaluation gains / - / - / - / - / 96,677 / - / 96,677
Balance at 30.06.07 / $9,151,604 / $2,925,882 / $- / $2,148,427 / $455,868 / $6,956 / $14,688,737
January 1 ~ June 30, 2008
Balance at Jan 1, 2008 / $9,151,604 / $2,925,882 / $- / $3,649,236 / $469,191 / $58,567 / $16,254,480
Appropriation and distribution of retained earnings in 2007:
Legal reserve / - / 362,241 / - / ( / 362,241 / ) / - / - / -
Appropriation of bonus to employees / - / - / - / ( / 260,814 / ) / - / - / ( / 260,814 / )
Remuneration to Directors & Supervisors / - / - / - / ( / 32,602 / ) / - / - / ( / 32,602 / )
Cash dividends / - / - / - / ( / 2,928,513 / ) / - / - / ( / 2,928,513 / )
January 1~June 30, 2008 / - / - / - / 1,931,485 / - / - / 1,931,485
Unrealized revaluation gains / - / - / - / - / 26,996 / - / 26,996
Adjustments of conversion from foreign long-term investments / - / - / - / - / - / ( / 121,732 / ) / ( / 121,732 / )
Balance at June 30, 2008 / $9,151,604 / $3,288,123 / $- / $1,996,551 / $496,187 / ( / $63,165 / ) / $14,869,300
Please refer to the notes to the financial statements enclosed and the independent auditor’s report of
Tsai Ching-pao, CPA and M.H. Chang, CPA, at Price waterhouse Coopers dated August 19, 2008.
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President Chain Store Corporation
Statement of Cash Flow
January 1 ~ June 30, 2008 and 2007
Currency unit: NT$1,000
January 1 ~ June 30, 2008 / January 1 ~ June 30, 2007Cash flow from operating activities
Net Income / $1,931,485 / $2,121,604
Adjustment items
Loss (Gain) on valuation of financial assets / (4,730) / (5,683)
Allowance for bad debt debited to income / - / 168
Gain from inventory in valuation and obsolence / - / (9,437)
Expense on depreciations / 884,053 / 854,015
Depreciation of leased assets / 7,085 / 7,085
Amortizations / 1,178 / 49,017
Capital gain from disposal of financial assets estimated on the basis of cost / - / (119,747)
Financial assets measured at cost- impairment losses / 30,176 / -
Investment loss (gain) with Equity Method / 35,786 / (108,207)
Cash dividend from long-term investment under the Equity Method / 57,090 / -
Net loss (gain) from the disposal of fixed assets / (109,147) / 12,671
Change in asset and liability account titles
Accounts receivable / (18,418) / (58,964)
Other receivables / (372,826) / (42,758)
Inventories / 260,230 / (47,832)
Prepayments / 99,539 / (66,052)
Deferred income tax assets / 1,210 / (17,647)
Other current assets / 24,132 / 5,799
Notes payables / 3,490,333 / 210,692
Accounts payables / 187,827 / 1,457,767
Income tax payable / (111,730) / (142,741)
Accrued expenses / (898,363) / (446,560)
Other payables / 157,320 / 749,625
Advance receipts / 132,853 / (62,277)
Accrued pension liabilities / 173 / 690
Net cash inflow from operating activities / 5,785,256 / 4,341,228
Cash flow from investing activities
Increase in current financial assets whose changes in fair value are recognized in earnings / (3,770,796) / (1,415,826)
Acquisition of Financial assets measured at cost / - / (269,055)
Proceeds from disposal of financial assets estimated measured at cost / - / 361,415
Acquisition of long-term investment-equity method / (1,150,560) / (639,709)
Decrease of bond investment / - / 20,000
Cash purchase of property, plant and equipment / (1,177,014) / (1,368,244)
Proceed from disposition of fixed assets / 267,135 / 6,957
Cost of computer software purchased / (41,995) / -
Increase from refundable deposits / (12,500) / (30,667)
Increase in other assets - others / (6,129) / (4,457)
Net cash provided by investing activities / (5,891,859) / (3,339,586)
(To be continued)
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President Chain Store Corporation
Statement of Cash Flow
January 1 ~ June 30, 2008 and 2007
Currency unit: NT$1,000
January 1 ~ June 30, 2008 / January 1 ~ June 30, 2007Cash flow from financing activities
Increase in long-term loans / $2,500,000 / $ -
Payback of corporate bond / (1,100,000) / (900,000)
Increase in guarantee deposits received / 74,105 / 120,128
Remuneration to Directors & Supervisors / (32,602) / (34,406)
Net cash inflows (outflows) from financing activities / 1,441,503 / (814,278)
Net increase in cash and cash equivalent / 1,334,900 / 187,364
Balance of cash and cash equivalence at the beginning / 5,878,691 / 3,238,414
Balance of cash and cash equivalence at the end / $7,213,591 / $3,425,778
Supplementary disclosure on cash flow
Interest payment in the current period / $86,687 / $51,206
Income tax payment in the current period / $607,789 / $597,892
Investing and financing activities of partial payment in cash
Purchase of fixed assets / $1,107,145 / $1,347,998
Add: beginning balance of accounts payable on equipment / 387,355 / 278,844
Less: ended balance of account payable on equipment / (317,486) / (258,598)
Cash disbursement in the current period / $1,177,014 / $1,368,244
Financing activity that does not affect cash flow
Announced but not yet distributed cash dividend / $2,928,513 / $3,203,062
Please refer to the notes to the financial statements enclosed and the independent auditor’s report of
Tsai Ching-pao, CPA and M.H. Chang, CPA, at Price waterhouse Coopers dated August 19, 2008.
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President Chain Store Corporation
Notes to Financial Statements
June 30, 2008 and 2007
Currency unit: NT$1,000
(Except otherwise specified)
I.Company History
1.The Company was incorporated on June 10, 1987 according to the Company Law of the Republic of China for the investment and business operation of chain stores, the retailing and trade of canned goods and books/newspaper/magazines, and the importing/exporting agency/distribution/trade of the aforementioned products. The Company’s stock shares were authorized for listing and trade at Taiwan Stock Exchange in August 1997.
2.Uni-President is the parent company and ultimate parent company of the Company.
3.There were 8,470 employees (including part-time) on the payroll of the Company on June 30, 2008.
II.Notes to principal accounting policy
The financial statements were prepared in accordance with the “Guidelines Governing the Preparation of Financial Reports By Securities Issuers”, “Business Accounting Law”, “Business Accounting Guidelines” and accounting principles generally accepted in the Republic of China. The major accounting policies are enumerated as follows:
(I)Classification of assets and liabilities as current and nonconrrent
1.Assets that qualify any of the following are classified as current assets; assets other than current assets are classified as noncurrent assets:
(1)Assets for business operation that are to be cashed in, consumed, or for sale throughout the business cycle;
(2)Assets held for the purpose of trade;
(3)Assets that are to be cashed in twelve months after the Balance Sheet date;
(4)Cash and cash equivalent, except for the cash and cash equivalent used for exchange and debt liquidation or restricted cash and cash equivalent for over twelve months after the Balance Sheet date;
2.Liabilities that qualify any of the following are classified as current liabilities; liabilities other than current liabilities are classified as noncurrent liabilities:
(1)Liabilities from business operation that are to be liquidated in the business cycle;
(2)Liquidities held for the purpose of trade;
(3)Liabilities that are to be liquidated in twelve months after the Balance Sheet date;
(4)Liabilities that cannot be postponed unconditionaly for over twelve months after the Balance Sheet date;
(II)Cash equivalent
Cash equivalent is a short-term investment with high liquidity that is in conformity with the following:
1.It can be converted to a rated amount of cash at any time.
2.It will be due soon and the fluctuation of interest rate has little effect on the value.
The Statement of Cash Flow of President Chain Store Corp. is prepared on the basis of cash and cash equivalent.
(III)Transaction in foreign currencies
1.The accounts of the Company in bookkeeping are expressed in NT Dollars. Transactions in foreign currencies shall be converted into NT Dollars on the basis of the spot exchange rate as of the day of transactions for bookkeeping. Differences resulting from the exchange are recognized as current gains or losses.
2.The balances of foreign currency assets or liabilities at the end of the accounting period shall be adjusted on the basis of the spot exchange rate as of the balance sheet day. Differences resulting from the exchange are recognized as current gains or losses. Differences resulting from the exchange between the Company and foreign investees through advances for payment shall be recognized as adjustments to shareholders’ equity.
3.The foreign non-monetary assets or liabilities that are valued at the fair value and with the fluctuation booked in Income Statement are adjusted at yearend according to the spot exchange rate on the Balance Sheet date and with the difference of exchange from the adjustment debited or credited to Income Statement. The foreign non-monetary assets or liabilities that are valued at the fair value and with the fluctuation debited or credited to Shareholder’s Equity are adjusted at yearend according to the spot exchange rate on the Balance Sheet date and with the difference of exchange from the adjustment debited or credited to Shareholder’s Equity. The foreign non-monetary assets or liabilities that are not valued at the fair value are valued according to the historical exchange rate on the transaction date.
(IV)Financial instruments whose changes in fair values are recognized as gains or losses
1.The accounting for equity is based on the transaction date; the accounting for beneficiary certificate is based on the delivery date. Financial instrument is valued at the fair value for preliminary recognition.
2.Financial assets whose changes in fair value are recognized as gains or losses shall be estimated on the basis of fair value and the changes are recognized as gains or losses. For stocks with public quotations in centralized markets, the fair value shall be closing price as of the balance sheet day. For open-ended funds, the fair value shall be the net asset value of the funds as of the balance sheet day.
(V)Financial assets available for sales
1.The accounting for equity investment is based on the transaction date. Financial instrument is valued at the fair value for preliminary recognition including transaction cost for acquisition or issuance.
2.Financial assets available for sales are estimated on the basis of fair value. Any change in the value is recognized as adjustments to shareholders’ equity. The fair value of the listed (OTC) stock shares is the closing price in the open market on the Balance Sheet date.
3.Recognize as impairment loss with incriminating evidence. Should there be decrease in the amount of subsequent impairment, recognize as adjustments to shareholders’ equity for the decrease in impairment of equity items.
(VI)Investments in bonds with no public quotations in open market
1.The accounting for the financial instrument valued at the cost is based on the transaction date. Financial instrument is valued at the fair value for preliminary recognition including transaction cost for acquisition or issuance.
2.Bond investment without public quotation available is valued at the cost net of amortization.
3.Recognize as impairment loss with incriminating evidence. Should there be decrease in the amount of subsequent impairment and it is obviously related to events occurred after the recognition of impairment losses, reverse as current gains or losses. Such reversal shall not cause the book value to exceed the cost after amortization without the recognition of impairment loss.
(VII)Financial instrument valued at the cost
1.The accounting for the financial instrument valued at the cost is based on the transaction date. Financial instrument is valued at the fair value for preliminary recognition including transaction cost for acquisition or issuance.
2.Recognize as impairment loss with incriminating evidence. The amount of impairment loss cannot be reversed.
(VIII)Derivatives
1.Derivatives for trade: Options are recognized at the fair value on the transaction date. For derivatives other than option, the fair value on the transaction date is zero. Estimation on derivatives trade shall be based on the fair value as of the balance sheet day; any change in fair value shall be recognized as assets or liabilities and current gains and losses.
2.Derivatives for hedge: Once the terms and conditions of hedging accounting are complied with, recognize the effect of gain/loss from the change in fair value of the hedge tool and the hedged item by writing off against one another according to the relation of hedge.
(1)Fair value hedge:Hedge tool is valued at the fair value and the gain/loss of book value from the exchange rate must be recognized as an income or loss of the year. The gain/loss of the hedged item from the risk is debited or credited to the book value of the hedged item and recognized as an income or loss of the year.
(2)Cash flow hedge: Gain/loss of hedge tool is credited or debited to Shareholder’s Equity.
(IX)Allowance for uncollectible accounts
Allowance for uncollectible accounts is determined on the basis of review of the collectibility of individual receivables at the end of the period with reference to their balances.
(X)Inventory
Bookkeeping of inventories is made on the basis on the actual cost and costing is made on the basis of the retailing method. Appropriate allowance for loss has been provided for idle inventory and inventory that might be obsolete. Inventory obsolete loss is recognized as the loss in the period.
(XI)Long-term equity investments (Equity method)
1.The Company adopts the equity method in the accounting of investees where the Company holds more than 20% of their voting shares or where the Company has significant influence. If the cost of investments exceeds the fair value of identifiable net assets, the spread can be recognized as goodwill and be subject to impairment test yearly. Spread being amortized in previous years cannot be adjusted retrospectively. The Company adopts the equity method in the accounting of investees where the Company holds more than 50% of their voting shares or where the Company has significant influence with semiannual consolidated financial statements and annual consolidated financial instruments composed. Quarterly consolidated financial statements have been composed in the first quarter and third quarter since January 1, 2008.