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2018 ANNUAL REPORT Gross Profit & Operating Profit

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2018 ANNUAL REPORT Gross Profit & Operating Profit CONTENT 10 01 Letter to shareholders 62 06 Financial Information 12 02 Corporate Overview 1. Five Year Condensed Balance Sheet and 14 03 Corporate Governance Comprehensive Income Statement 2. Five Year Financial Analysis 1. Organization Chart 3. The Audit Committee Report Regarding the most 2. Information on Directors and Management of the Recent Annual Financial Report Company and Various Departments and Branches 4. The Audited Consolidated Financial Report for the 3. Implementation of Corporate governance most Recent Fiscal Year 4. Information on Independent Auditors 5. The Audited Parent Company only Financial Report for 5. Net Change in Shareholdings and in Shares Pledged the most Recent Fiscal Year by Directors, Management and Shareholders Holding 6. Any Cash Flow Difficulties with the Company and its more than a 10% Share in the Company Affiliates During the most Recent Year and as of the 6. Relationships between the Company's Top 10 Largest Date of Publication of the Annual Report Shareholders and Their Shareholding Percentages 7. PCSC, Company directors, management, and directly/ 69 07 Financial Status, Financial Performance and indirectly owned subsidiaries' ownership of shares in Risk Management affiliated enterprises 1. Financial Position Analysis 46 04 Fund Raising 2. Financial Performance Analysis 1. Capital and Shares 3. Cash Flow Analysis 2. Status of Corporate Bonds, Preferred Stock, GDR, 4. Major Capital Expenditures in Recent Years and Impact Employee Stock Option Plan, Employee Restricted on Financial and Business Stock Plans, Mergers, Acquisitions, and Spin-Offs 5. Analysis of Investments in Affiliates in Recent Years 3. Status of Capital Utilization Plan 6. Risk Management Policies and Organizational Structure 50 05 Operating Highlights and Risk Assessment 7. Other Important Items 1. Business Activities 2. Market Analysis and Merchandising 76 08 Specific Notes 3. Human Resources 1. Information About Affiliated Companies 4. Environmental Protection Expenditures 2. Private Placement of Securities 5. Labor-Management Relations 3. PCSC Securities Acquired, Disposed of, or Held by 6. Important Contracts Subsidiaries 4. Other Supplementary Information 5. Situations Described in Article 36, Paragraph 3, ltem 2 of the Securities and Exchange Act ≠^§�≠�≠�3-1.pdf 1 2019/6/10 上午10:35 7-ELEVEN Bo Yuan Store, Taipei 7-ELEVEN Bo Yuan Store, Taipei C M Y CM Lifestyle Stores 7-ELEVEN Tong Jia Store, MY Taipei CY CMY K Unique Experiences 7-ELEVEN Kan Cheng Store, Kaohsiung 7-ELEVEN Kan Cheng Store, Kaohsiung 7-ELEVEN Ban Zhan Store, New Taipei City ≠^§�≠�≠�3-1.pdf 1 2019/6/10 上午10:35 7-ELEVEN Bo Yuan Store, Taipei 7-ELEVEN Bo Yuan Store, Taipei C M Y CM Lifestyle Stores 7-ELEVEN Tong Jia Store, MY Taipei CY CMY K Unique Experiences 7-ELEVEN Kan Cheng Store, Kaohsiung 7-ELEVEN Kan Cheng Store, Kaohsiung 7-ELEVEN Ban Zhan Store, New Taipei City ≠^§�≠�≠�3-2.pdf 1 2019/5/3 上午11:28 !+? CAFE RESERVE C M Y Bakery CM MY CY 7 Premium Selective Products CMY K Diversified Services OPEN Wallet Delivery Service ibon ≠^§�≠�≠�3-2.pdf 1 2019/5/3 上午11:28 !+? CAFE RESERVE C M Y Bakery CM MY CY 7 Premium Selective Products CMY K Diversified Services OPEN Wallet Delivery Service ibon ≠^§�≠�≠�3-3.pdf 1 2019/6/10 上午10:37 Cooperation with well-known restaurant and chef_7-ELEVEN X COCO Curry House C M Y Nitro Coffee CM MY CY Innovative and Tasty CMY K Safe and Healthy Fresh Food Steamed sweet potato Cooperation with well-known restaurant and chef_7-ELEVEN X Taihodien restaurant ≠^§�≠�≠�3-3.pdf 1 2019/6/10 上午10:37 Cooperation with well-known restaurant and chef_7-ELEVEN X COCO Curry House C M Y Nitro Coffee CM MY CY Innovative and Tasty CMY K Safe and Healthy Fresh Food Steamed sweet potato Cooperation with well-known restaurant and chef_7-ELEVEN X Taihodien restaurant Overall Performance (alone) Item / Year (NT$1,000) 2018 2017 YoY Revenue 154,074,731 144,479,880 6.64% Gross Profit 53,012,367 50,639,297 4.69% Operating Profit 7,654,581 6,246,725 22.54% Pre-tax Profit 12,433,790 36,501,051 -65.94% Net Profit 10,206,388 31,017,094 -67.09% EPS(NT$) 9.82 29.83 — Weighted Average Outstanding Shares 1,039,622,255 1,039,622,255 — Financial Ratios 2018 2017 Gross Margin 34.41% 35.05% Operating Expense Ratio 29.44% 30.73% Operating Margin 4.97% 4.32% Net Margin 6.62% 21.47% ROA 10.78% 36.97% ROE 23.77% 78.30% Inventory Turnover 13.28 times 14.22 times Fixed Asset Turnover 17.06 times 16.46 times Total No. of Stores & Revenue (NT$ billion)180 6000 (Store Number) 150 5000 120 4000 90 3000 60 2000 30 1000 No. of stores 0 0 Revenue 2014 2015 2016 2017 2018 Note: Net income in 2017 includes one-off gain from Starbucks transaction. 8 2018 ANNUAL REPORT Gross Profit & Operating Profit (NT$ billion) 60 8 (NT$ billion) 50 7 6 40 5 30 4 3 20 2 10 1 Gross Profit 0 0 Operating Profit 2014 2015 2016 2017 2018 Net Income & EPS (NT$) 50 40 (NT$ billion) 40 30 30 20 20 10 10 EPS 0 0 Net Income 2014 2015 2016 2017 2018 Cash Dividend Yield (%) 12 9 6 3 0 2013 2014 2015 2016 2017 Note: Net income in 2017 includes one-off gain from Starbucks transaction. Note: Net income in 2017 includes one-off gain from Starbucks transaction. 2018 ANNUAL REPORT 9 1 Letter to Shareholders Chairman: President: Lo, Chih-Hsien Huang, Jui-Tien Dear Shareholders, In 2018, the global economy was turbulent, the minimum wage in Taiwan continued to increase, and businesses continued to face significant challenges. Despite an unstable external operating environment, President Chain Store Corporation (PCSC) continued to serve as a creative, convenient, safe, welcoming community center, offering consumers innovative and convenient products and services. Together with the great effort of our domestic and overseas subsidiaries, PCSC achieved consolidated revenue of NT$244.89 billion and net profits of NT$11.74 billion in 2018, was again listed in the Forbes Global 2000, and was selected as one of the top 250 global retailers by Deloitte for years in a row. Operating Performance 7-ELEVEN Taiwan aims to provide customers with an even more comfortable and friendly place to shop. In addition to providing larger, more featured stores, PCSC integrated resources, including beauty, fitness, bakery, fast foods, etc., further launched lifestyle stores to satisfy the needs of the business area and provide customers with a diversified shopping experience. PCSC also introduced a new consumer model and unveiled the future of convenience stores when it opened the doors to "X-Store", the first unmanned store in Taiwan employing state-of-the-art technology to serve customers. To ensure food safety, PCSC formed a product safety committee, set up an internal monitoring mechanism and upgraded the testing capabilities of our product quality testing lab. Together, these initiatives enable PCSC to control the supply chain and create a rigorous food safety net to protect customers. PCSC has worked together in strategic partnerships with well-known restaurant and chef to launch a diverse selection of delicious food products and specialty restaurant cuisine to meet customer needs. PCSC has continued to improve CITY CAFE coffee quality and flavor and introduced premium coffee products to satisfy different target customers. Bubble tea was introduced in stores nationwide, continuing to drive turnover growth. PCSC selects the best products from nations around the world, including Japan and Korea, and is a member of strategic partnerships with notable domestic and overseas brands. By offering these premium and differentiated exclusive products, we attract customers seeking products that reflect their personal style. In addition to physical products, PCSC has leveraged the intensive store network and comprehensive logistics system and equipment to strengthen digital platform applications services. In 2018, we handled pickup and delivery of more than 200 million packages, providing customers with reliable, convenient delivery services. In response to recent trends, PCSC offers a variety of payment options, including OPEN Wallet, a point-accumulation payment system in which points can be collected and redeemed in a variety of channels, PCSC continued to build a convenient digital lifestyle platform for customers. In addition to 7-ELEVEN Taiwan, PCSC has also expanded into other retail businesses both locally and overseas. As of the end of 2018, PCSC operates a total of 9,300 stores. Overseas, the store number of 7-ELEVEN Philippines has reached 2,500 stores. In addition to enhancing in-store product offerings, it is actively strengthening digital services. In Taiwan, Uni-Wonder Corp.(Starbucks Taiwan) continues to infuse new life into the coffee market with innovative services, diversified stores, and brand experiences. Taking advantage of the business opportunity of mobile reading, Books.com offers e-book services, a diversified, quality book-purchasing experience. To meet rapidly growing e-commerce distribution and warehousing needs, 10 2018 ANNUAL REPORT 1 Letter to Shareholders Wisdom Distribution Service Corp. continued to improve efficiency through warehouse integration and concurrent software and hardware upgrades. PCSC and our subsidiaries strive to continue improvement and providing innovative and outstanding services to meet customers' needs. In 2018, Next Magazine gave PCSC and Uni-Wonder Corp. the top Next Top Service Awards in the "Drug and Cosmetics Store and Convenience Store" and "Coffee Shop Chain Store" categories, respectively. X-Store was awarded "Best Experience Innovation" and "Jury Grand Prize" in the 2018 Future Commerce Award sponsored by BusinessNext. Social Responsibilities For many years, PCSC has worked tirelessly to achieve sustainable operations and fulfill our responsibilities in the areas of corporate governance, social engagement, and environmental protection.
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