AIRMATE - Audit Report / Information 2018

Stock Code: 1626

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) AIRMATE (CAYMAN) INTERNATIONAL CO LIMTED AND SUBSIDIARIES Consolidated Financial Statements With Independent Auditors’ Report

December 31, 2018 and 2017

Company Address: The office of Codan Trust Company (Cayman) Limited, Century Yard, Cricket Square, Hutchins Drive, P.O.Box 2681 GT, George Town, Grand Cayman, British West Indies. Contact Info: 8675527655988

The independent auditors’ review report and the accompanying consolidated financial statements are the English translation of the Chinese version prepared and used in the Republic of China. If there is any conflict between, or any difference in the interpretation of the English and Chinese language independent auditors’ review report and consolidated financial statements, the Chinese version shall prevail.

Table of Content

Table of Content
Items I. Cover Page II. Table of Content III. Representation Letter IV. Independent Auditors’ Report V. Consolidated Balance Sheets VI. Consolidated Statements of Comprehensive Income VII. Consolidated Statements of Changes in Equity VIII. Consolidated Statements of Cash Flows IX. Notes to Consolidated Financial Statements (I) Overview (II) Approval Date and Procedures of the Consolidated Financial Statements (III) New Standards, Amendments and Interpretations Adopted (IV) Summary of Significant Accounting Policies (V) SignificantAccounting Assumptions and Judgments, and Major Sources of Estimation Uncertainty (VI) Explanation of Significant Accounts (VII) Related Party Transaction (VIII) Pledged Assets (IX) Significant Commitments and Contingencies (X) Material Disaster Losses (XI) Subsequent Events (XII) Others (XIII) Note Disclosure 1. Information on Significant Transactions 2. Information on Investees 3. Information of Investment in Mainland China (XIV) Segment Information	Pages
	1 2 3 4-9 10 11 12 13-14 15 15 15-22 22-41 42-43 43-78 79-80 80 81 82 82 82-84 84-88 88 88-89 89-91

Table of Content

Items
I.
Cover Page
II.
Table of Content
III.
Representation Letter
IV.
Independent Auditors’ Report
V.
Consolidated Balance Sheets
VI.
Consolidated Statements of Comprehensive Income
VII.
Consolidated Statements of Changes in Equity
VIII. Consolidated Statements of Cash Flows
IX.
Notes to Consolidated Financial Statements
(I)
Overview
(II)
Approval Date and Procedures of the Consolidated Financial
Statements
(III)
New Standards, Amendments and Interpretations Adopted
(IV)
Summary of Significant Accounting Policies
(V)
SignificantAccounting Assumptions and Judgments, and Major Sources of
Estimation Uncertainty
(VI)
Explanation of Significant Accounts
(VII) Related Party Transaction
(VIII) Pledged Assets
(IX)
Significant Commitments and Contingencies
(X)
Material Disaster Losses
(XI)
Subsequent Events
(XII) Others
(XIII) Note Disclosure
1.
Information on Significant Transactions
2.
Information on Investees
3.
Information of Investment in Mainland China
(XIV) Segment Information

Pages

1
2
3
4-9
10
11
12
13-14
15
15
15-22
22-41
42-43
43-78
79-80
80
81
82
82
82-84
84-88
88
88-89
89-91

Representation Letter

The entities that are required to be included in the combined financial statements of AIRMATE (CAYMAN) INTERNATIONAL CO LIMITED as of and for the year ended December 31, 2018 under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports, and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with International Financial Reporting Standards No. 10 endorsedby the Financial Supervisory Commission, "Consolidated Financial Statements. " In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, AIRMATE (CAYMAN) INTERNATIONAL CO LIMITED and Subsidiaries do not prepare a separate set of combined financial statements.

Hereby Declared by

Company name: AIRMATE (CAYMAN) INTERNATIONAL CO LIMITED

Chairman: Rui-Bin Shih Date: March 4, 2019

Independent Auditors’ Report

Presented to Board of Director, Airmate (Cayman) International Co Limited

Opinion

The consolidated balance sheets of Airmate (Cayman) International Co Limited and Subsidiaries (hereinafter referred to as Airmate Group) as of December 31, 2017 and 2018, consolidated statements of comprehensive income as of 2018 and from January 1 to December 31, 2017, consolidated statements of changes in equity, consolidated statements of cash flows, and the notes of consolidated financial statements (including summary description of significant accounting policies) have been audited by the accountant.

Based on our review, the above Consolidated Financial Statements have been compiled in accordance with Regulations Governing the Preparation of Financial Reports, IFRSs and IAS with relevant interpretations and announcement approved and published by Financial Supervisory Commission. These financial statements are sufficient in presenting the Consolidated Financial Position of Airmate Group as of December 31, 2017 and 2018 and the Consolidated Financial Performance and the Consolidated Cash Flow for the period of January 1 to December 31, 2017 and 2018.

Basis of Audit Opinion

We conducted our audit in accordance with the Regulations Governing Auditing and Attestation of Individual Financial Statements by Certified Public Accountants and Generally Accepted Auditing Standards (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Airmate Group in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The accountant believes that sufficient and appropriate evidences for the audit have been obtained as the basis for expressing opinion.

Key Audit Matters

Key audit matters refer to most vital matters in the process of auditing of 2018 Consolidated Financial Statement of Airmate Group based on our professional judgment. These matters have been dealt with in the process of auditing the overall consolidated financial report and forming a review opinion. The accountant does not express separate opinions on these matters. The accountant's judgment should communicate the key audit matters on the audit report as follows:

I. Revenue recognition

For the accounting policy of revenue recognition, please refer to the revenue of the customer contract in Note 4 (16) of the consolidated financial statements. For the description of the revenue and expected return assessment, please refer to rights of pending returning products in Note 6 (9), refund liabilities in Note 6 (11), and revenue from customer contracts in Notes 6 (20) of the consolidated financial statements.

Description of Key Audit Matters:

Airmate Group is principally engaged in the sales of household appliances made in-house, and its operating revenue is one of the important items in the financial statement and is a matter of concern to users or recipients of the financial statement. Thus, revenue recognition is one of the important evaluated items when the accountant is auditing Airmate Group. In response to the auditing procedures:

The main review procedures for the above-mentioned key audit matters performed by the accountant, including the accounting policies for assessing revenue recognition, are handled in accordance with the relevant communiques and have properly disclosed revenue information; The relevant manual control of the sales and collection operations cycle were tested, and the sales system data and general ledger entry were audited and amended; The sales contracts and terms between the important affiliated companies of the Group and customers are reviewed, the consistency with accounting policies was tested, and the accounting treatment and disclosure of expected sales returns were considered; A biennial analysis of the product categories and revenues from top ten customer was conducted to assess whether there is any significant abnormality; The sales return amount estimated by the management of the Group was obtained to compare with relevant internal or external data to assess the rationality of relevant parameters and key assumptions; The correctness of the sales return amount in the previous year was reviewed to assess whether there is any significant abnormality in the sales return amount estimated by the management; Sales transactions for a period of time before and after the balance sheet date were selected to audit the relevant internal and external information and evaluate whether sales revenues are covered in the appropriate period.

II.

Note receivables and account receivables and impairment evaluation

For the accounting policies of impairment evaluation of account receivables, please refer to financial tools in Note 4 (17) of the consolidated financial statements; For the descriptions of accounting estimates of the allowances loss for accounts receivables and uncertainty of the assumptions, please refer to Note 5 (1) of the consolidated financial statements; For the impairment evaluation of accounts receivables and the transfer of obligations for note receivables, please refer to Note 6 (III) and 9 (2) of the consolidated financial statements. Description of Key Audit Matters:

Airmate Group reserves expected credit losses in accordance with the stipulated accounts receivable allowance for bad debt policy. The reserves are conducted based on customer's credit risk and historical credit loss experience and reasonable expectations of customers' future economic conditions. In addition, Airmate Group discounts its notes receivables, or

transfers the notes receivables to the supplier as payment in accordance with transaction practice. The discounted and transferred notes receivables are all bank acceptances. It is not expected that the financial institution will refuse to pay the payment. Therefore, the discounted and transferred notes receivables are presented as a deduction for the notes receivables. In summary, the evaluation of the notes receivables and the impairment evaluation of accounts receivable is one of the important evaluation items for the accountant to audit the consolidated financial statement.

In response to the auditing procedures:

The accountant's main audit procedures for the above key auditing matters include understanding the accounting policies of Airmate Group in relate to notes receivables and account receivables and their impairments; Perform sampling procedures to check the correctness of the aging of accounts receivable and analyze the changes in the age of accounts receivable in each period; Review the status of collections after the accounts receivables came due to assess the reasonableness of the allowance for impairment losses and the amount of the allowance; Obtain and review the accounts receivable and sales contract, audit the relevant documents, confirm whether the contracts have right of recourse and send a letter of inquiry to understand the rights and obligations of Airmate Group and determine whether the nature of the transaction is a sale or secured loan.

III. Inventory Valuation

For the accounting policies of inventories, please refer to Note 4 (8) of the consolidated financial statements; For the accounting estimates of the inventory evaluation and the description of the uncertainty of the assumptions, please refer to Note 5 (2) of the consolidated financial statements; For the description of important accounting items in inventories, please refer to Note 6 (5) of the consolidated financial statements. Description of Key Audit Matters:

Inventory is measured by the lower of cost and net realizable value. Since the inventories of Airmate Group are mainly household appliances such as electric fans and electric heaters, the characteristics of its products are affected by weather changes, which will result in unsalable inventory. The Group may sell its products at a lower price to reduce inventory. This may induce a risk that the cost of investory is higher than net realizable value. Therefore, inventory evaluation is one of the important evaluation items in accountant's auditing on the financial review of Airmate Group.

In response to the auditing procedures:

The accountant understood the recognition policies of inventory depreciation loss of Emmett Group and assessed whether its inventory evaluation has been implemented in accordance with established accounting policies, including the implementation of sampling procedures to check the correctness of inventory age, and to analyze the changes in inventory age of each period; The reasonableness of past reserves for inventory depreciation loss

withheld by the management was reviewed and was compared with the methods and assumptions on the reserves for inventory depreciation loss for the current period to assess whether the valuation method and assumptions of the reserves for inventory depreciation loss for the current period are appropriate. The inventory sales status after the period is reviewed to assess the reasonableness of the estimation of the reserves for inventory depreciation loss.

Responsibility of the management and the governing body for the Consolidated Financial Statements

The responsibilities of management are to prepare an appropriately expressed consolidated financial report in accordance with Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards, International Accounting Standards, and standing interpretation recognized and published by Financial Supervisory Commission, and maintain the necessary internal controls related to the preparation of the consolidated financial statements to ensure that the consolidated financial report does not contain significant misrepresentation due to fraud or error.

In preparing the Consolidated Financial Statements, the responsibility of management includes assessing Airmate Group ability to continue as a going concern, disclosing going concern matters, as well as adopting going concern accounting, unless the management intends to liquidate Airmate Group or terminate the business, or no practicable measure other than liquidation or termination of the business can be taken.

The governing bodies of Airmate Group (including the Audit Committee) have the responsibility to oversee the procedures for financial reporting.

Accountant's responsibility in auditing consolidated financial statement

The purpose of our audit is to provide reasonable assurance that the Consolidated Financial Statements as a whole contains no material misstatements, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Generally Accepted Auditing Standards (GAAS) will always detect a material misstatement in consolidated financial statements when it exists. Misstatement may be caused by fraud or error. If it could be reasonably anticipated that the misstated individual amounts or aggregated sums could have influence on the economic decisions made by the users of the consolidated financial statements, they will be deemed as material.

When the accountant is auditing in accordance with generally accepted auditing standards, the accountant uses professional judgment and maintains professional suspicion. The accountant will also perform the following duties:

Identifying and assessing the risk of material misstatement in a consolidated financial statement due to fraud or error; Moreover, obtain sufficient and appropriate audit evidence as

the basis for the auditing. The risk for not being able to detect misstatement that is caused by fraud is higher than that caused by mistakes because fraud may involve conspiracy, forgery, intentional omission, false statement or overstepping internal control.

Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of Airmate Group.

Evaluating the appropriateness of the accounting policy adopted by the management and the reasonableness of the accounting assessment and related disclosures made accordingly.

4.

5.

6.

Concluding on the appropriateness of the management’s use of going concern basis of accounting, and determining whether there existed events or circumstances that might cast significant uncertainty over Airmate Group’s ability to continue as a going concern. If the accountant believes that there are material uncertainties in the events or circumstances, it is necessary to remind the users of the consolidated financial statements to pay attention to the relevant disclosures of the consolidated financial statements in the audit report, or to amend the audit opinions when the disclosure is inappropriate. The accountant's conclusions are based on the audited evidence obtained as of the date of the audit report. However, future events or circumstances may cause Airmate Group to no longer have the capacity to function as a going concern.

Evaluating the overall expression, structure, and contents of the consolidated financial statements (including related notes) and whether the consolidated financial statements could appropriately express related transactions and events.

Obtained adequate and appropriate audit evidence regarding financial information of members of the Group so as to express opinions for the Consolidated Financial Statements. The CPA is responsible for the guidance, supervision, and implementation of Airmate Group's audit and responsible for forming audit opinions on Airmate Group.

Items that have been communicated by the accountant to the governance bodies, including the planned scope and timing of the audit, as well as major audit findings (including significant internal control deficiencies identified during the audit).

We have also provided the statement pertaining to our accounting firm's personnel under governance of independence to the governance unit, and communicated with governance unit over relations and other items (including relevant protective measures) that could affect the CPA's independence.

From the matters communicated with the governing bodies, we determined the key audit matters for Airmate Group’s Consolidated Financial Statements for 2018. The accountant has stated those items in the audit report unless the law does not allow public disclosure of certain matters, or under extreme rare cases, the accountant decided not to communicate specific matters in the audit report because it can be reasonably assume the negative impact of communication is greater than the promoted public interest.

The engagement partners on the audit resulting in this independent auditors’ report are Tzu-Hui Lee and Kuan-Wen Lu.

KPMG Taipei, Taiwan (Republic of China) March 4,2019

Note to Readers

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries

Consolidated Balance Sheets December 31, 2018 and 2017

Unit: thousand NT$


Asset Current Asset: 1100 Cash and cash equivalents (Note 6 (1)) 1110 Financial Assets at Fair Value Through Profit or Loss - Current (Note 6 (2)) 1150 Amount of Notes Receivables, Net (Note 6 (3), 8) 1170 Amount of Account Receivables, Net (Note 6 (3)) 1180 Account Receivable from Related Parties, Net (Note 7) 130X Inventories (Note 6 (5)) 1470 Other Current Assets (Note 6 (4) (9) and 8) Total Current Assets Noncurrent Asset: 1550 Investment accounted for Using the Equity Method (Note 6 (6)) 1600 Property, Plant and Equipment (Note 6 (7), 8 and 12(3)) 1780 Intangible Asset (Note 6 (8)) 1840 Deferred income tax assets (Note 6 (17)) 1900 Other Non-current Assets (Note 6 (9), 8) Total Non-current Assets	2018.12.31 Amount % $ 417,768 5 129,526 2 482,292 6 1,173,297 14 101,447 1 2,130,614 25 544,740 7	2017.12.31 Amount % 300,850 4 243 - 163,405 2 1,190,060 15 45,030 1 2,477,652 32 254,837 3
	4,979,684 60	4,432,077 57
	30,045 - 2,206,928 26 20,033 - 161,209 2 968,253 12	34,854 - 2,426,397 31 31,775 - 65,394 1 842,639 11
	3,386,468 40	3,401,059 43

$ 8,366,152 100 7,833,136 100

Total assets

Liabilities and Equities Current Liabilities: 2100 Short-TermBorrowings(Note 6 (10), 8) 2120 Financial Liabilities at Fair Value Through Profit or Loss - Current (Note 6 (2) (14)) 2131 Sales Revenue Received in Advance 2150 Notes Payable (Note 6 (11), 8) 2170 Accounts Payable 2200 Other Payables (Note 6 (11)) 2220 Other Payables to Related Parties (Note 7) 2230 Current Tax Liabilities 2250 Provisions-Current (Note 6 (12)) 2300 Other Current Liabilities (Note 6 (11)) 2321 Bonds Payable or Put Option Execution - Current Portion (Note 6 (2) (14)) 2322 Long-Term Borrowings - Current Portion (Note 6 (13)) Total Current Liabilities Non-current Liabilities: 2500 Financial Liabilities at Fair Value Through Profit or Loss - Non-liquid (Note 6 (2) (14)) 2530 Bonds Payable (Note 6 (14)) 2540 Long-term borrowings (Note 6 (13)) 2640 Net Defined Benefit Liability - Non-current (Note 6 (16)) 2645 Guarantee Deposits Received 2670 Other Non-current liabilities - Others (Note 6 (11) and 12 (3)) Total Noncurrent Liabilities Total Liabilities Equities Attributable to Owners of Parent Company (Note 6 (18)) 3110 Common Stock 3200 Capital Surplus 3300 Retained Earnings 3400 Other equities 3500 Treasury Shares Equities Attributable to Shareholders of the Company 3600 Non-controlling interests Total Equity Total liabilities and equity	2018.12.31 Amount % $ 1,289,239 15 8,734 - 359,937 4 1,177,486 14 928,657 11 514,676 6 6,320 - 157,993 2 6,871 - 84,138 1 488,687 6 46,066 1	2017.12.31 Amount % 1,071,992 13 - - 159,452 2 832,685 11 1,237,741 16 576,919 7 8,522 - 17,850 - 118,633 2 3,354 - - - - -
	5,068,804 60	4,027,148 51
	- - - - 46,076 1 38,850 - 84,181 1 655,208 8	2,550 - 482,338 6 - - 62,484 1 69,421 1 592,053 8
	824,315 10	1,208,846 16
	5,893,119 70	5,235,994 67
	1,228,436 15 979,283 12 501,835 6 (214,132) (3) (33,051) -	1,228,436 16 979,283 12 500,369 6 (104,764) (1) (20,577) -
	2,462,371 30 10,662 -	2,582,747 33 14,395 -
	2,473,033 30	2,597,142 33
	$ 8,366,152 100	7,833,136 100

(See the attached note for the consolidated financial report) Manager: SHIH, JUI PIN

Chairman of Board: SHIH, JUI PIN

Chief Accountant: ZHANG, ZHI WEI

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Comprehensive Income

For the years ended December 31, 2018 and 2017

Unit: thousand NT$

2018	% 100 83	2017	% 100 83
Amount		Amount 10,024,202 8,284,819
$ 10,614,940 8,805,119
1,809,821 10,393 10,503	17 - -	1,739,383 10,586 7,566	17 - -
1,809,931	17	1,736,363	17
1,159,539 427,149 160,820 (6,014)	11 4 1 -	1,200,820 417,448 164,096 -	12 4 2 -
1,741,494	16	1,782,364	18
68,437	1	(46,001)	(1)
168,544 (55,956) (110,051) 1,293	2 (1) (1) -	142,840 (19,054) (73,115) 2,665	2 - (1) -
3,830	-	53,336	1
72,267 90,350	1 1	7,335 5,981	- -
(18,083)	-	1,354	-
28,224 -	- -	(6,400) -	- -
28,224	-	(6,400)	-
(109,617) -	(1) -	15,183 -	- -
(109,617)	(1)	15,183	-
(81,393)	(1)	8,783	-
$ (99,476)	(1)	10,137
(14,599) (3,484)	- -	4,262 (2,908)	-
$ (18,083)	-	1,354
(95,743) (3,733)	(1) -	13,356 (3,219)	- -
$ (99,476)	(1)	10,137	-
$ (0.12) $ (0.12)			0.03
			0.03

(See the attached note for the consolidated financial report) Chairman of Board: SHIH, JUI PIN Manager: SHIH, JUI PIN Chief Accountant: ZHANG, ZHI WEI

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Changes in Equity For the years ended December 31, 2018 and 2017

Unit: thousand NT$

		Equity attributable to owners of parent company	Equity attributable to owners of parent company	Equity attributable to owners of parent company	Equity attributable to owners of parent company	Equity attributable to owners of parent company			Non-controlling Interests	Total equity 2,706,395
Capital stock	Capital Surplus	Legal reserve 110,770	Retained earnings			Other equity items	Treasury shares	Total owner equity attributable to the parent company
						Exchange differences on translation of foreign financial statements
Common stocks			Special reserve	Undistributed surplus	Total 624,909
$ 1,228,436	966,919 - - - - - - 12,364 - 979,283 - - - - - - - 979,283		182,381	331,758		(120,258)	(11,225)	2,688,781	17,614 (2,908) (311) (3,219) - - - - - 14,395 (3,484) (249) (3,733) - - - - 10,662
- -		- -	- -	4,262 (6,400)	4,262 (6,400)	- 15,494	- -	4,262 9,094		1,354 8,783
-		-	-	(2,138)	(2,138)	15,494	-	13,356		10,137
- - - - -		28,230 - - - -	- 120,258 - - -	(28,230) (120,258) (122,402) - -	- - (122,402) - -	- - - - -	- - - - (9,352)	- - (122,402) 12,364 (9,352)		- - (122,402) 12,364 (9,352)
1,228,436 - -		139,000 - -	302,639 - -	58,730 (14,599) 28,224	500,369 (14,599) 28,224	(104,764) - (109,368)	(20,577) - -	2,582,747 (14,599) (81,144)		2,597,142 (18,083) (81,393)
-		-	-	13,625	13,625	(109,368)	-	(95,743)		(99,476)
- - - -		426 - - -	- - (15,494) -	(426) (12,159) 15,494 -	- (12,159) - -	- - - -	- - - (12,474)	- (12,159) - (12,474)		- (12,159) - (12,474)
$ 1,228,436		139,426	287,145	75,264	501,835	(214,132)	(33,051)	2,462,371		2,473,033

(See the attached note for the consolidated financial report) Manager: SHIH, JUI PIN

Chairman of Board: SHIH, JUI PIN

Chief Accountant: ZHANG, ZHI WEI

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Cash Flows For the years ended December 31, 2018 and 2017

Unit: thousand NT$

Cash flow of operating activities: Profit before tax Adjustment items: Profit expense item Expected credit loss/bad debt expenses reserves Depreciation expense Amortization expense Interest expense Interestrevenue Recognized share of the profit of the affiliated enterprises and joint ventures using equity method Measure net profits and losses of financial assets and liabilities by fair value through profits and losses Loss on disposal of property, plant and equipment Property, plant and equipment expenses transferred Unrealized sales profit Realized sales profit Unrealized foreign exchange profit Other incomes Total income expense items Changes in assets and liabilities related to operating activities: Net changes in assets related to operating activities: Loss in financial assets held for trading Loss in financial assets at fair value through profit or loss (Gain) loss in notes receivable Loss (gain) in accounts receivable Gain in accounts receivable - affiliated Gain (less) in inventories (Gain) less in other current assets Total net changes in assets of operating activities: Net changes in liabilities related to operating activities: Gain (loss) in notes payable Loss in accounts payable Loss in other payables (Loss) Gain in other payables - affiliated Loss in liability reserve Gain in advance Loss in other current liabilities Gain in net defined benefit liabilities Decrease in other non-current liabilities Total net changes in liabilities related to operating activities Total net changes in assets and liabilities related to operating activities Total adjusted items	2018 $ 72,267 (6,014) 457,090 13,062 110,051 (66,896) (1,293) 4,008 6,514 11,811 10,393 (10,503) (1,268) (2,309)		2017 7,335 (8,064) 444,652 15,723 73,115 (55,055) (2,665) 10,375 3,904 83,693 10,586 (7,566) - (2,370)

	524,646		566,328
	- 1,933 (318,887) 34,896 (56,417) 347,038 (2,412)		64,804 - 464,480 (306,503) (39,764) (63,797) 162,098
	6,151		281,318
	344,801 (309,100) (67,328) (2,202) (3,985) 200,485 (26,993) 4,590 -		(200,913) (177,031) (158,246) 2,286 (44,676) 124,427 (19,368) 4,716 (721)
	140,268		(469,526)
	146,419		(188,208)
	671,065		378,120

(See the attached note for the consolidated financial report)

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Cash Flows 2018 and January 1 to December 31, 2017

Unit: thousand NT$

Cash inflow from operations Interest received Interest paid Income tax paid Net cash inflow from operating activities Cash flows from investing activities: Acquisition of financial assets at fair value through profit and loss Acquisition of property, plant and equipment Disposal of property, plant, and equipment Acquisition of intangible assets Gain in other noncurrent assets Gain in other financial assets Gain in other noncurrent liabilities Net cash outflow from investing activities Cash flows from financing activities: Gain in short-term loans Loss in short-term loans Corporate bonds issued Increase in long-term loan Increase (decrease) in guarantee deposits received Cash dividends distributed Cost to repurchase treasury shares Change in non-controlling equities Net cash inflow from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period	2018 743,332 66,896 (98,617) (39,531)	2017 385,455 55,055 (72,233) (15,973)
	672,080	352,304
	(129,040) (401,667) 1,671 (1,549) (273,928) (177,365) 208,046	- (421,150) 17,872 (13,549) (564,124) (110,126) -
	(773,832)	(1,091,077)
	3,488,197 (3,285,728) - 92,285 10,554 (12,159) (12,474) (249)	2,847,207 (2,525,006) 494,578 - (17,812) (122,402) (9,352) (311)
	280,426	666,902
	(61,756)	(10,075)
	116,918 300,850	(81,946) 382,796
	$ 417,768	300,850

(See the attached note for the consolidated financial report)

Chairman of Board: SHIH, JUI PIN Manager: SHIH, JUI PIN

Chief Accountant: ZHANG, ZHI WEI

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese)

Airmate (Cayman) International Co Limited and Subsidiaries Notes of Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

(The unit for all amounts expressed are in thousands of NTD unless otherwise stated)

I. Company History

Airmate (Cayman) International Co Limited (hereinafter as the “Company”) was established in March 2004 as an overseas holding company in the Cayman Islands in the British Virgin Islands. The main businesses of the Company and its affiliated companies (hereinafter as the “Consolidated Company”) are manufacturing household appliances and precision moulds treatment. Please refer to Note 14 for details. The shares of the Company have been listed on the Taiwan Stock Exchange since March 21, 2013.

II. Approval Date and Procedures of Financial Statements

The consolidated financial statements were released on March 4, 2019 by the Board of Directors.

III. Application of Newly Released and modified Guidelines and Interpretations

(I) Impact of adopting newly released and modified guidelines and interpretations by Financial Supervisory Commission

The consolidated company has adopted International Financial Reporting Standards approved by the Financial Supervisory Commission (hereinafter as FSC) since 2018 to prepare the consolidated financial statements. The newly issued, revised and amended guidelines and interpretations are summarized below:

Newly issued/revised/amended guidelines and interpretations Amendment to IFRS 2: "Classification and Measurement of Share-based Payment Transactions" Amendments to IFRS 4 amended by applying IFRS 9 ‘Financial Instruments’ with IFRS 4 ‘Insurance Contracts’ IFRS 9: Financial Instruments IFRS 15: "Revenue from Contracts with Customers" Amendment to IAS 7: "Disclosure Initiative" Amendment to IAS 12: "Recognition of Deferred Tax Assets for Unrealized Losses" Amendments to IAS 40 "Transfers of Investment Property" Annual Improvements to IAS 20142016:- Amendments to IAS 12 Amendments to IFRS 1 and IAS 28 IFRIC 22: "Foreign Currency Transactions and Advance Consideration"	Effective date released by International Accounting Standards Board
	January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2017 January 1, 2017 January 1, 2018 January 1, 2018 January 1, 2018 January 1, 2018

Newly issued/revised/amended guidelines and
interpretations
Amendment to IFRS 2: "Classification and Measurement of
Share-based Payment Transactions"
Amendments to IFRS 4 amended by applying IFRS 9
‘Financial Instruments’ with IFRS 4 ‘Insurance Contracts’
IFRS 9: Financial Instruments
IFRS 15: "Revenue from Contracts with Customers"
Amendment to IAS 7: "Disclosure Initiative"
Amendment to IAS 12: "Recognition of Deferred Tax Assets
for Unrealized Losses"
Amendments to IAS 40 "Transfers of Investment Property"
Annual Improvements to IAS 20142016:-
Amendments to IAS 12
Amendments to IFRS 1 and IAS 28
IFRIC 22: "Foreign Currency Transactions and Advance
Consideration"

Effective date
released by
International
Accounting
Standards Board

January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2017
January 1, 2017
January 1, 2018
January 1, 2018
January 1, 2018
January 1, 2018

Except for the following items, the application of the newly recognized IFRSs will not have a material impact on the consolidated financial statements. The nature and effect of significant changes in the financial statements are described below:

IFRS 15: "Revenue from Contracts with Customers"

The standard replaces "Revenue" of IAS 18 and "Construction Contract" of IAS 11 and the related interpretations. The method that companies recognize revenues, the timing, and the amount are determined based on 5 steps of a single analysis model. The Consolidated Company adopts cumulative effects, which is suitable to IFRS 15. Therefore, the comparative information for the previous period is not required to be restated and it's suitable to IAS 18, IAS 11 and relevant explanation. The cumulative effects of the initial application of IFRS 15 is the adjustment of the retained surplus on January 1, 2018.

The Consolidated Company adopted practice expedient approach for the contracts that had been carried out. This means, contracts that were carried out before January 1, 2018 will not be restated.

The nature and effect of this change in accounting policy are described below:

(1) Sales of goods

For sales of products, revenue was recognized when the product has been delivered to the customer's site in the past. At that point, customer has accepted the product, and the significant risks and rewards of ownership have been transferred to the customer. Revenue is recognized at that point of time because the revenue and costs can be measured reliably at that point in time, the consideration is likely to be recovered, and no longer participates in the management of the products. Under IFRS 15, revenue is recognized when the customer obtains control of the products.

Some contracts allow customers to make a return, the revenue is recognized when the return of products can be reasonably estimated along with fulfilling other recognition conditions. When the return of products can not be reasonably estimated, the revenue recognition will be deferred until the return period has expired or when it can be reasonably estimated. Under IFRS 15, revenue of a contract is recognized under the range that cumulative income height is not likely to face significant reversal. The relevant refund liabilities and the right to return the products of the estimated return under the contract are recognized as refund liabilities under the current liabilities and right to return the products under other current assets

(2) Commission

The commission received by the Consolidated Company in accordance with previous standards is classified as agent rather than the principal in some transactions. Under IFRS 15, the basic evaluation is based on whether

the Consolidated Company has control of the product before it is transferred to the end customer rather than whether the product are exposed under major risks of ownership and remuneration that are related to the sales of products.

(3) Impact on financial statements

The impacts of adopting IFRS 15 on the consolidated financial statements of the Consolidated Group for the year 2018 are described below:

	2018.12.31			2018.1.1
Carrying amount if IFRS 15 is not applied $ 7,934 83,075	Variables impacts in accounting policy 76,204 (76,204)	Carrying amount if IFRS 15 is applied	Carrying amount if IFRS 15 is not applied 3,354 118,633	Variables impacts in accounting policy 107,777 (107,777)
	-			-

	2018
Carrying amount if IFRS 15 is not applied	Variables impacts in accounting policy (31,573) 31,573 - -	Carrying amount if IFRS 15 is applied
$ 4,580 (35,558)		(26,993) (3,985)

2. IFRS 9 "Financial Instruments"

International Financial Reporting Standard 9 "Financial Instruments" (hereinafter as International Financial Reporting Standard No. 9 or IFRS 9) replaces IAS 39 “Financial Instruments: Recognition and Measurement” (hereinafter as International Accounting Standards No. 39 or IAS 39), amend the classification and measurement of financial instruments, loss and hedge accounting.

As the adoption of IFRS 9, the Consolidated Company adopts the modified IAS 1 "Presentation of Financial Statements", which lists the loss of financial assets in the consolidated income statement as a single item whereas the loss of account receivables has been listed in administrative expenses by the Consolidated Company previously. In addition, the Consolidated Company adopted the amended IAS 7 "Financial Instruments: Disclosures" to disclose information on the 2018 information, which is generally not applicable to comparative information.

The following is a summary of significant changes in accounting policies resulting from the adoption of IFRS 9 by the Consolidated Company:

(1) Categorization of financial assets and liabilities

The standard is based on the classification of financial assets at amortised

cost, measured at fair value through other comprehensive income, and financial assets at fair value through other comprehensive income, and the financial assets under IFRS 9 are classified as held-for-sale and are classified as held-to-maturity, loans and receivables and available-for-sale financial assets. Under the standard, if the main contract containing the hybrid contract contains financial assets that are within the scope of the standard, then the embedded derivatives are not separated, and the entire hybrid financial instrument is assessed. For accounting policies recognized by the Consolidated Company for the classification, measurement and related gains and losses of financial assets under IFRS 9, please refer to Note 4 (7).

The adoption of IFRS 9 has no significant impact on the accounting policies of the Consolidated Company for financial liabilities.

(2) Loss of financial assets

The standard is designed to replace the expected credit losses model in order to replace the existing IAS 39 impairment loss model, with the new impairment model being applied to financial assets at amortised cost, contract assets and debt instrument investments measured at FVTOCI, but not applicable for equity instruments. Under IFRS 9, an impairment loss is recognised in accordance with the recognition criteria set out in Note 4(7).

(3) Transition

IFRS 9 is usually applied retroactively except for the following items:

The difference in carrying amount financial assets arising from the application of the IFRS 9 is recognized as retained earnings and other equity items on January 1, 2018. The information expressed in 2017 will not reflect IFRS 9 accordingly. Thus, the information disclosed in the application of IFRS 9 in 2018 is not comparable.
The following items are assessed on the basis of the facts and circumstances prevailing on the date of first application:
Determining financial assets were held in which business model.
Designation and cancellation of financial assets and financial liabilities previously designation as at fair value through profit or loss.
Partial non-holding of equity instrument investments for trading is specified at fair value through other comprehensive gains and losses.
If the credit risk of debt securities investments on the initial application date of the IFRS 9 is low, the Consolidated Company assumes that the credit risk of the asset has not increased significantly since the original

recognition date.

(4) Classification of financial assets on the first application date of IFRS 9.

Financial assets that are applicable under IAS 39 assessment type are converted to financial assets under IFRS 9 assessment type. The new assessment type, carrying amount and description of the financial assets as of January 1, 2018 (the assessment type of financial liabilities and the book value have not changed):

have not changed):
Financial assets Cash and Cash Equivalents Derivative Net receivables and other receivables Other financial assets	IAS 39		IFRS 9
	Assessment type Loans and Receivables Financial assets held for trade Loans and receivables (Note 1) Loans and receivables	Carrying Amount	Assessment type Amortized cost Mandatory measured at FVTPL Amortized cost Amortized cost	Carrying Amount
		300,850 243 1,425,293 188,281		300,850 243 1,425,293 188,281

Note 1: When IAS 39 is applicable, notes receivable, accounts receivable and other accounts receivable are classified as loans and receivables, which is now classified as financial assets assessed by amortized cost. When IFRS 9 is first applicable, the retained earning as of January 1, 2018 is not affected in accordance with transition policy of the standard.

Amendment to IAS 7: "Disclosure Initiative"

The amendments require companies to provide disclosures that enable users of financial statements to assess changes in liabilities from financing activities, including changes in cash flows and non-cash changes.

The Consolidated Company has adjusted the beginning and end balances of the liabilities from the financing activities in Note 6 (27) to meet the above new requirements.

(II) Impacts for yet to adopt IFRS recognized by FSC

The aforementioned public listed companies shall fully adopt IFRS recognized by FSC and became effective on 2019 in accordance with Decree No. 1070324857 of FSC which is published on July 17, 2018. The newly issued, revised and amended guidelines and interpretations are summarized below:

and interpretations are summarized below:
Newly issued/revised/amended guidelines and interpretations IFRS 16: "Leases" IFRS 23 "Uncertainty of Income Tax Treatment" Amendments to IFRS 9, "Prepayment Features with Negative Compensation" Amendments to IAS 19 "Plan correction, reduction or settlement" Amendments to IAS 28, "Long-term Interests in Associates and Joint Ventures" Annual Improvements to IFRS 20152017-	Effective date released by International Accounting Standards Board
	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

IFRS 16: "Leases"

The standard will replace the existing IAS 17 "Leases", IRFS 4 "Determination of Whether A Certain Arrangement Contains Lease", IRFS 15 "Operation Lease: Cause" and IRFS 27 "Evaluation of Essential Nature of Legal Form of Lease"

The standard adopts single accounting treatment mode for lessees to recognize lease transaction into the balance sheet, and represents their right of using underlying assets with right-of-use assets and the obligation of paying lease with lease liability. Besides, the lease-related expenses will be represented in the form of recognizing rent on the basis of straight line by using depreciation and interest to replace current operation lease. There is additional provision of recognition exemption for short-term lease and low-value underlying asset lease. The accounting treatment for lessers is similar to the current standard, that is, the lessers shall still classify lease into operation lease and financing lease.

(1) Judgement of whether contract contains lease

During the transition to new standards, the consolidated company has to choose:

Definition of lease for all contracts applicable to the new standard

Adoption of practical expediency method instead of re-evaluating whether the contract is or contains lease.

The consolidated company is expected to adopt practical expediency method to exempt the re-evaluation of the definition of lease, that is, all contracts signed by the consolidated company before December 31, 2018 (included) are applicable to the existing definition of lease.

(2) Transition treatment

For all contracts in which the consolidated company acts as lessee, it has to choose:

complete retrospection; or
modified retrospection and one or more practical expediency methods

The consolidated company is expected to adopt modified retrospection for transition to the new standard, so the cumulative effects will be recognized as opening retained earnings as of January 1, 2019 instead of restating the information of comparative periods.

Upon adopting modified retrospection, contracts classified into operation lease in accordance with the existing standards have to be based on individual ones, and choose whether to adopt one or more practical expediency methods or not at the time of transition. The consolidated company evaluation will adopt the following practical expediency methods:

Single discount rate is adopted for lease portfolio with similar characteristics
For lease ended within 12 months after the date of application for the first time during the lease period, exemption is applicable without recognizing right-of-use assets and lease liabilities;
Original direct cost is not included into the measurement of right-of-use assets on the date of application for the first time;
When the lease contract contains option for extension or termination, hindsight is adopted in determining the lease period.
(3) By far, the consolidated company has evaluated that the application of new standards has no material influence upon the operation lease rented domicile, plant and storage. Besides, the consolidated company expects that the application of new standards will not influence its conformity ability to the maximal leverage percentage agreed on in the borrowing contract. For contracts of intermediary lessers by the consolidated company for sublease transaction,

there is no need for any adjustment after evaluation.

The above estimated influence of adopting new communique may vary with the changes of environment or situation.

(III) The newly released and modified standards and interpretations have not yet gotten the endorsement of FSC

The table below lists the already released and modified standards and interpretations by IASB that are to be endorsed by FSC.

Newly released/amended/modified standards and interpretations

Newly released/amended/modified standards and Effective date of interpretations releases by IASB Amendment to IFRS 3 "Definition of Business" January 1st, 2020 Amendment to IFRS 10 and IAS 28 "Sale or Contribution of To be decided by Assets between an Investor and its Associate or Joint Venture" IASB IFRS 17 "Insurance Contracts" January 1st, 2021 Amendment to IAS 1 and IAS 8 "Definition of Materialness" January 1st, 2020

The above newly released and revised standards and interpretations to be endorsed by FSC have no bearing upon the consolidated company.

IV. Summary Description of Material Accounting Policies

The significant accounting policies applied for the consolidated financial report is as follows. Unless otherwise specified, the following accounting policies are consistently applicable to all expression periods of the consolidated financial report

(I) Compliance to announcement

The consolidated financial report is prepared in accordance with the Securities Issuer Financial Report Preparation Standard (hereinafter referred to "Preparation Standard"), IFRS recognized and released by FSC, IAS, interpretations and announcement (hereinafter referred to as IFRS recognized by FSC).

(II) Basis of Preparation
Basis of measurement

Except for the important items in the following balance sheet, the consolidated financial report is prepared on the basis of historical cost:

(1) Financial assets measured at fair value through profit or loss; and
(2) Net determined benefit liability (or asset), which means the fair value of retirement fund asset less the present value of defined benefit obligations
Functional currency and presentation currency

Every individual entity of the consolidated company takes the currency of the economic environment its operation domiciles are in as the functional currency.

The consolidated financial report presents NT dollar as the functional currency. All financial information represented in NT dollar is in the unit of one thousand TWD.

(III) Basis of consolidation

Principle of consolidated financial report preparation

The preparation subjects of consolidated financial report include the Company and individuals controlled by it (that is, affiliated companies) When the Company is exposed to the varied remunerations participated by investees or is entitled to the varied remunerations and is capable of affecting the remunerations through the authority over the investees, the Company controls the individual entity.

From the date of exercising control over the affiliated company, the financial report will be incorporated into the consolidated financial report, until the control is lost. The transaction, balance and any unrealized income and cost expense among consolidated companies have been eliminated at the time of preparation of consolidated financial report. A subsidiary's total comprehensive income is attributed to the shareholders of the Company and non-controlling interests, even if non-controlling interests become deficit balance in the process.

The financial report of affiliated companies has been reorganized to bring uniformity in the accounting policies with consolidated company.

If change of ownership equity to affiliated companies by consolidated company does not cause lost control over them, it will be considered equity transaction between shareholders. The difference between the adjustment amount of non-controlling interests and the fair value of consideration paid or collected shall be directly recognized in equity attributable to the shareholders of the Company.

Subsidiaries included in the consolidated financial statements were as follows:

Name of investing companies	Name of affiliated companies	Nature of business	Percentage of equity held	Percentage of equity held	Description
			2018.12.31	2017.12.31
	Airmate (Cayman) International Co Limited (hereinafter referred to as Airmate International) Airmate International Co Limited China (Airmate China) Waon Development Company Limited (hereinafter referred to Waon Company (including Taiwan affiliated companies) Airmate Electric Appliances (Shenzhen) Co. Limited (hereinafter referred to as Shenzhen Airmate) Airmate Electric Appliances (Jiujiang) Co. Limited (hereinafter referred to as Jiujiang Airmate) Shenzhen Airmate Technology	Overseas holding company Overseas holding company Transaction business Manufacturing and sales of household appliances and precision mold processing Manufacturing and sales of household appliances and precision mold processing Sales, research and	100% 100% 100% 100% 100% 51%	100% 100% 100% 100% 100% 51%	(Note)
The Company (including Taiwan affiliated companies) Airmate International Airmate China Waon Company (including Taiwan affiliated companies) Waon Company (including Taiwan affiliated companies) / Shenzhen Airmate Shenzhen Airmate

Co. Limited (hereinafter development of referred to as Airmate household appliances Technology)

Note: The Taiwan Affiliated Company of Airmate (Cayman) International Co. Limited completed incorporation and registration on July 10, 2017.

Affiliated companies not included into the consolidated financial report: none

(IV) Foreign currency

1. Foreign currency transaction

Foreign currency transaction is translated into functional currency according to the exchange rate of the transaction date. The foreign currency items at the terminal date of report (hereinafter referred to as reporting date) are translated into functional currency according to the exchange rate of the date. And the exchange profit or loss refers to the amortized cost after pricing with functional currency, the amount after adjusting the effective interest of the current period and making the payment, and the difference in the amount of exchange rate translation of amortized cost on the reporting date after pricing with foreign currency.

Foreign currency items measured at fair value are re-translated into functional currency according to the exchange rate on the date of fair value, and foreign currency non-currency items measured through historical cost will be translated according to the exchange rate on the date of transaction.

Except for the foreign currency exchange difference in translation that will be recognized into other comprehensive income for (available-for-sales) equity instruments at fair value through other comprehensive incomes or financial liabilities designated as net investment hedge for foreign operation or conforming cash flow hedge, the remaining items will be recognized as profit or loss.

Foreign operation

The assets and liabilities of foreign operation, including the business reputation and fair value adjustment are translated into functional currency according to the exchange rate on the reporting date; the profit or loss and cost expense items are translated into functional currency according to the average exchange rate of the period. And the exchange difference amount will be recognized as other comprehensive incomes.

When the disposal of foreign operation leads to loss of control, joint control or material influence, the cumulative exchange difference amount related to them will be re-classified into profit or loss. When partially disposing of affiliated companies containing foreign operation, the cumulative exchange difference amount will be re-attached to non-controlling equity according to proportion. When partially

disposing of affiliated enterprises or joint investments containing foreign operation, the cumulative exchange difference amount will be re-classified into profit or loss according to proportion.

For receivable or payable items in currency of foreign operation, if there is no plan of paying off or it cannot be paid off in the foreseeable future, the foreign currency exchange profit or loss arising therefrom will be deemed as part of net investment of them and hence recognized as other comprehensive income.

(V) Assets and liabilities classified as current and non-current

Any asset meeting one of the following conditions is current asset, and other assets not falling into current asset are noncurrent asset.

The asset is expected to be realized within normal operation cycle, or it is intended to be sold or consumed;
The asset held for the purpose of transaction;
The asset is expected to be realized within twelve months after the reporting period; or
The asset is cash or cash equivalent, but it will be used for exchange or clearing off liability at least twelve months after the reporting period, unless otherwise limited. Any liability meeting one of the following conditions is current liability, and other

liabilities not falling into current liability are noncurrent liability:

Liabilities to be cleared off within the normal operation cycle;
Liabilities held primarily for the purpose of trading;
Liabilities that is due to be settled within twelve months after the reporting period; or
Liabilities whose settlement can be deterred unconditionally for at least twelve months after the reporting period. If the term of liability, at the discretion of transaction party, causes it to be cleared off by issuing equity instruments, the classification will not be influenced
(VI) Cash and cash equivalents

Cash includes inventory cash and current deposit. Cash equivalents refer to the short-term and high-flow investment that can be converted into certain amount of cash at any time with low risk in change of value Time deposits are classified as cash equivalents only when they satisfy the aforementioned definition and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

(VII) Financial instruments

Financial assets (applicable after January 1, 2018 (inclusive))

The financial assets of the consolidated company can be classified as: financial assets measured through amortized cost and financial assets measured at fair value through profit or loss.

The consolidated company only re-classifies the influenced financial assets according to requirements when the operation mode of financial assets management is varied.

(1) Financial assets measured through amortized cost

Financial assets meeting all the following conditions and without being designated for measurement at fair value through profit or loss are to be measured through amortized cost:

The financial assets are held under the operation mode with the purpose of collecting contract cash flow.
The cash flow on certain date arising out of the contract term of the financial assets is completely for paying the capital and the interest of capital circulating outside.

In initial recognition, it is measured at fair value plus corresponding transaction cost; the effective interest rate method is adopted for follow-up measurement according to amortized cost, which has already deducted the impairment loss. Interest income, foreign currency profit or loss and impairment loss are recognized as profit or loss. When derecognition, benefit or loss is recognized as profit or loss.

(2) Financial assets measured at fair value through profit or loss

Financial assets not measured according to the above amortized cost fall into measurement at fair value through profit or loss, including derivative financial assets and accounts receivable. Only accounts measured at fair value through profit or loss are recognized under the accounts receivable. In initial recognition, the consolidated company has to irrevocably designate financial assets conforming to measurement by amortized cost as financial assets measured at fair value through profit or loss, to remove or significantly lower accounting mismatch.

In initial recognition, it is measured at fair value, and transaction cost is recognized as profit or loss upon occurrence; later it is measured at fair value, and the benefit or loss (including relevant dividend income and interest income) arising out of re-measurement is recognized as profit or loss.

(3) Impairments of financial assets

The expected credit loss for financial assets measured through amortized cost by consolidated company (including cash and cash equivalents, financial assets measured through amortized cost, notes receivable, accounts receivable, other receivables, refundable deposit and other financial assets, etc.) is recognized as allowance loss.

The credit risk of bank deposit means measurement of allowance loss with 12 month expected credit loss amount, and the credit risk of financial assets measured through amortized cost is measured through lifetime expected credit losses except for cash and cash equivalents.

Lifetime expected credit loss refers to the expected credit loss out of all possible defaults during the expected survival period of financial instruments

12 month expected credit loss refers to the expected credit loss of financial instruments out of possible defaults within 12 month after the reporting date (or within shorter period, if the expected duration of financial instruments is shorter than 12 months).

The longest period for measurement of expected credit loss is the same with the longest contract period in which the consolidated company is exposed to credit risk.

In judging whether the credit risk has significantly increased after initial recognition, the consolidated company will consider reasonable and verifiable information (without the need of transition cost or input), including qualitative and quantitative information as well as analysis based on historical experience, credit evaluation and prospective information.

If the contract payment is overdue for more than ninety days, the consolidated company will assume that the credit risk of financial assets has significantly increased.

If the contract payment is overdue for more than one year, or the borrower is not likely to perform its credit obligation by making full payment to the consolidated company, the consolidated company deems that there is default for the financial asset.

Expected credit loss refers to the weighted estimate of credit loss probability during the expected survival period of financial instruments. Credit loss is measured by the current value of all cash deficiency, namely difference between cash flow receivable by consolidated company according to contract and the cash flow expected to be received by consolidated company. Expected credit loss is discounted at the effective interest rate of financial assets.

The consolidated company evaluates whether there is credit impairment in measuring financial assets through amortized cost on every reporting date. When there is one or more events arising that will bring unfavorable influence to expected future cash flow, there is already credit impairment to the financial asset. The evidences for credit impairment of financial assets include the observable data for the following events:

Material financial hardship for borrower or issuer;
Default, such as arrearage or delinquency for more than ninety days;
Compromise made by consolidated company to borrower that would not be considered before, because of economic or contract reason related to borrower's financial difficulty;
The borrower is most likely to file for bankruptcy or conduct other financial arrangement; or
Disappearance of active market for the financial asset due to financial difficulty.

The allowance loss of financial assets measured through amortized cost is deducted from the carrying amount of assets.

When consolidated company fails to carry out reasonable expectation of recovery of financial assets in part or whole, the total carrying amount of the financial assets directly decreases. It normally refers to that the consolidated company judges that the asset or income source of debtor can not produce sufficient cash flow to pay back the writeoff amount. However, already written-off financial assets can still be mandatorily executed to conform to the procedure of the consolidated company in recovering overdue amount.

(4) Derecognition of financial assets

The consolidated company derecognizes financial assets when the contractual rights to the cash flow of the asset expire or when the transferred financial asset and the risk and reward related to its ownership have been transferred to other enterprise.

Financial assets (applicable before December 31, 2017 (inclusive))

The financial assets of the consolidated company can be classified as: financial assets, loans and receivables.

(1) Financial assets measured at fair value through profit or loss

This type of financial assets refers to financial assets held for transaction or designated to be measured at fair value through profit or loss.

The acquisition or occurrence of financial assets held for transaction are for

the purpose of sales or repurchase within short term. Except for the financial assets held for transaction, the consolidated company designates as measurement at fair value through profit or loss under one of the following conditions:

Elimination or significant decrease of inconsistency in measurement or recognition arising out of different bases adopted for measurement of assets or liabilities and recognition of related benefits and losses.
Financial assets take fair value as the basis to evaluate performance.
Hybrid instrument includes embedded derivative instrument.

This type of financial assets are measured at fair value in initial recognition, and the transaction cost is recognized as profit or loss upon occurrence; later, it is measured as fair value, and the benefit or loss (including relevant dividend income or interest income) arising out of re-measurement is recognized as profit or loss and further reported under nonoperating income and expense "financial assets impairment at fair value through profit or loss". When purchasing or selling financial assets according to transaction practice, accounting treatment on the transaction date is adopted.

(2) Loans and receivables

Loans and receivables are financial assets with open quotation in nonactive market and with fixed or determinable payment amount, including receivables, other receivables and liability instrument investment in nonactive market. In initial recognition, it is measured at fair value plus corresponding transaction cost; the effective interest rate method is adopted for follow-up measurement according to amortized cost, which has already deducted the impairment loss, except for non-materialness of interest recognition of short-term receivables. When purchasing or selling financial assets according to transaction practice, accounting treatment on the transaction date is adopted.

Interest income is recognized under the nonoperating income and expense "interest income".

(3) Impairments of financial assets

Financial assets not measured at fair value through profit or loss are evaluated for impairment on every reporting date. When there is objective evidence showing that there arise one or more events after initial recognition of financial assets leading to loss of estimated future cash flow, there is already impairment to the financial asset.

The objective evidence for financial assets impairment includes material

financial hardship of issuer or debtor, default (arrearage or non-payment of interest or capital), increasing possibility of debtor going into bankruptcy or other financial reorganization, disappearance of the financial asset at active market due to financial hardship.

Accounts receivable, if found no impairment in some evaluation, will be evaluated on group basis for impairment. Evidence of objective impairment of accounts receivable portfolio may include the consolidated company's fund collection experience, overdue payments above the average period, and observable changes in national or regional economic conditions related to accounts receivable arrears.

The impairment loss of all financial assets is directly deducted from the carrying amount of financial assets, and only for accounts receivable is the carrying amount adjusted through allowance accounts. When it is judged that accounts receivable cannot be recovered, the allowance accounts will be written off. For payment previously written off yet later collected, the allowance accounts are credited. Changes in carrying amount of allowance accounts are recognized as profit or loss.

The bad account loss and recovery of accounts receivable are recognized under the operation expense "promotion expense". The impairment loss and recovery of financial assets except for accounts receivable are recognized under nonoperating income and expense "financial assets impairment loss and financial assets less return benefit".

(4) Derecognition of financial assets

Financial liabilities and equity instruments
(1) Classification of liabilities or equities

The consolidated company classifies its issuance of debts and financial instruments as financial liabilities or equity in accordance with the definition of financial liabilities and equity instruments, as well as the contractual substance.

Equity instruments refer to any contracts containing the consolidated company’s residual interest after subtracting liabilities from assets. Equity instruments issued by the consolidated company are recognized as the net of proceeds less direct issuance costs.

The composite financial instruments issued by the consolidated company refer to corporate bonds for which holders enjoy the option to convert them into capital, and the number of issued shares will not change with variation of fair value.

For the components of composite financial instruments liability, the originally recognized amount is measured at fair value through similar liability of equity conversion option. For the components of equity, the originally recognized amount is measured by the difference between fair value of overall composite financial instruments and fair value of components of liability. Any directly attributable transaction cost will be amortized to liability and equity components according to the carrying amount ratio of original liability and equity.

After initial recognition, the liability components of composite financial instruments are measured through amortized cost with effective interest rate method. The components of composite financial instruments will not be re-measured after initial recognition.

Interest and loss or benefit related to financial liability are recognized as profit or loss, and recognized under the nonoperating income and expense "interest expense".

Financial liability is re-classified as equity upon conversion, and it does not produce any profit or loss.

(2) Financial liabilities measured at FVTPL

This type of financial liabilities refers to the financial liabilities held for transaction or designated to be measured at fair value through profit or loss.

The acquisition or occurrence of financial liabilities held for transaction are for the purpose of sales or repurchase within short term. Except for the financial assets held for transaction, the consolidated company designates as measurement at fair value through profit or loss under one of the following conditions.

Elimination or significant decrease of inconsistency in measurement or recognition arising out of different bases adopted for measurement of assets or liabilities and recognition of related benefits and losses.
Financial liabilities take fair value as the basis to evaluate performance
Hybrid instrument includes embedded derivative instrument.

This type of financial liabilities is measured at fair value in initial recognition, and the transaction cost is recognized as profit or loss upon

occurrence; later, it is measured as fair value, and the benefit or loss (including relevant interest expense) arising out of re-measurement is recognized as profit or loss and further reported under nonoperating income and expense "financial liabilities impairment at fair value through profit or loss".

(3) Other financial liabilities

Financial liabilities not falling to the category of holding for transaction and being designated to be measured at fair value through profit or loss (including long and short-term loan, accounts payable and other payables) are measured by fair value plus directly attributable transaction cost upon initial recognition; later effective interest rate method is adopted for measurement after amortized cost. Interest expense uncapitalized into capital cost is recognized as profit or loss and further reported under nonoperating income and expense "interest expense".

(4) Derecognition of financial liabilities

The consolidated company derecognizes financial liabilities when the contract obligations have been performed, cancelled or expired.

In derecognizing financial liabilities, the difference between the carrying amount and the paid or payable consideration total amount (including any transferred non-cash assets or undertaken liabilities) is recognized as profit or loss, and further reported under nonoperating income and expense "other incomes" and "assorted expenses".

(5) Offsetting of financial assets and liabilities

Financial assets and financial liabilities are only offset when the consolidated company has the legal right and the intention for netting settlement or realization of assets and liabilities clearing happen at the same time, and the net amount is represented in the balance sheet.

Derivative financial instruments and hedge accounting (applicable after January 1, 2018 (inclusive))

The consolidated company holds derivative financial instruments to avoid risks of foreign currency and interest rate. In initial recognition, it falls into measurement at fair value, and transaction cost is recognized as profit or loss; later it is measured at fair value, and the benefit or loss arising out of re-measurement is recognized as profit or loss, and further reported under nonoperating income and expense; for designated derivative instruments for effective avoidance of risk, its recognition is determined by the hedge relationship at the timing of profit or loss. When the fair value of derivative instruments is positive, they are recognized as financial assets;

when it is negative, they are recognized as financial liabilities.

The risk and characteristics of embedded derivative instruments are not closely related to those of non-financial assets main contract, and when the main contract is not measured at fair value through profit or loss, the derivative instrument is deemed as independent derivative instrument.

Derivative financial instruments and hedge accounting (applicable before December 31, 2017 (inclusive))

Except for the following items applicable before December 31, 2017 (inclusive), the remaining ones are consistent with accounting policies applicable after January 1, 2018 (inclusive).

For risk avoidance of all cash flows, including hedged expected transaction recognized as non-financial assets or non-financial liabilities, it was previously recognized as other comprehensive income and included into equity amount, which will further be re-classified into profit or loss during the same period when the hedged expected cash flow influences profit or loss. Besides, the application to cash flow risk avoidance has been suspended before December 31, 2017 (inclusive), so the fair value change in future parts will directly be recognized as profit or loss.

(VIII)

Inventory

Inventory is measured by cost or net realized value, whichever is lower. Cost includes cost and other costs for acquisition, manufacturing or processing to reach the usable place and status, and is calculated through weighted averaging. Cost of finished products and manufactured products inventory includes the manufacturing expenses amortized according to normal productivity in certain ratio.

(IX)

The NRV is the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale. Investment in the associates

Associates refer to those for which the consolidated company has material influence upon their financial and operation policies but without controlling or joint controlling.

The consolidated company adopts equity method for handling the equity of associates. Under equity method, it is recognized through cost in original acquisition, and investment cost includes transaction cost. The carrying amount of invested associates includes identified business reputation at original investment less any cumulative impairment loss.

The consolidated financial report includes recognition of profit or loss and other comprehensive income amount of invested associates by consolidated company according to equity ratio after adjustment for consistency of accounting policies from the

date of material influence to the date of losing such influence. When associates undergo non-equity or other comprehensive income equity changes without influencing the shareholding proportion of the consolidated company, the consolidated company will recognize the equity change in the share of affiliated enterprises attributable to it as capital reserve according to shareholding proportion.

The unrealized benefit arising out of the transaction between consolidated company and associates is eliminated within the equity scope of the consolidated company in the invested company. The elimination method of unrealized loss is the same with unrealized benefit, but only limited to where there is no impairment evidence.

When the loss share of associates to be recognized by consolidated company is equal to or over the its equity in them, the recognition of the loss is suspended, and only in the case of legal obligations, constructive obligations or within the scope of making payment for the invested company, additional loss or relevant liability will be recognized.

(X) Property, plant and equipment

Recognition and measurement

The recognition and measurement of property, plant and equipment adopt the cost mode, and are measured by the amount of cost less cumulative depreciation and cumulative impairment. Cost includes directly attributable expenses of acquiring the assets.

When the service years of property, plant and equipment varies, they are deemed as independent items (main components) for treatment.

When property, plant and equipment contain different components, and it is more appropriate to adopt different depreciation rate or method when it is significant when compared with the total cost, they are deemed as independent items (main components) for treatment.

The disposal profit or loss of property, plant and equipment is determined by the difference between carrying amount and disposal amount, and recognized under the item of profit or loss as net amount "other benefit and loss".

Subsequent cost

If the subsequent expected future economic benefits of property, plant and equipment are most likely to flow into the consolidated company and the amount can be reliably measured, this expense will be recognized as part of the carrying amount, and the restated part of carrying amount will be derecognized. The daily service cost of property, plant and equipment is recognized as profit or loss upon occurrence.

Depreciation

The depreciation is calculated in straight line method by capital cost less scrap value based on service years, and evaluated according to individual material components. If the service years of one component are different from other parts, this part will be separately recognized as depreciation. Depreciation is recognized as profit or loss.

There is no need to recognize land into depreciation.

Estimated service years of current period and comparative periods are as follows:

(1) House and building: 5-50 years
(2) Machinery and equipment: 5-10 years
(3) Transportation equipment: 3-6 years
(4) Office facilities: 2-5 years
(5) Other equipment: 5 years

Main components of house and building include main structures, electromechanical equipment and works which are respectively recognized into depreciation according to their service years.

The consolidated company has to check the depreciation method, service years and scrap value at least on the reporting date every year. If the expected value and previous estimate vary, appropriate adjustment has to be made if necessary. And the change will be treated according to accounting provisions on estimated changes.

(XI)

Lease

1. Lesser

The operation lease is recognized as income on straight line basis during the lease period. The original direct cost arising out of operation lease for negotiation and arrangement is added into the carrying amount of lease assets, and recognized into expenses on straight line basis during the lease period. The incentive total benefits provided for lessee to reach the lease arrangement is recognized as decrease in lease income through straight line method during the lease period.

Contingent rent payments are recognized as revenue when the adjustments are determined.

2. Lessee

According to the rent conditions the consolidated company undertakes almost all risks and rewards of the leased asset ownership, it is classified into financial lease. In initial recognition, the leased asset is measured by fair value or lowest lease payment current value, whichever is lower. Later, it is treated by accounting policies related to the asset.

The lowest lease payment of financing lease is amortized to financial cost in

ratio and to lower the unpaid liability. The financial cost is amortized to each lease period according to the interest rate of fixed intervals based on liability balance.

Other lease falls into operation lease, which is not recognized into the balance sheet of consolidated company.

The rent payment for operation lease (excluding service cost like insurance and maintenance) is recognized into expense on straight line basis during the lease period. The incentive total benefits provided by lesser to reach the lease arrangement is recognized as decrease in rent expense in straight line method during the lease period.

Contingent rent payments are recognized as expense when the adjustments are determined.

(XII) Intangible assets

Other intangible assets

Other intangible assets acquired by the consolidated company is measured by cost less cumulative amortization and cumulative impairment.

Subsequent expenses

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenses are recognized as profit or loss upon occurrence.

Amortization

In amortization, the amount of capital cost less scrap value is the amortizable amount.

Except for intangible assets like business reputation and those without determined service years, intangible assets are amortized in straight line method according to the following estimated service years, and the number of amortization is recognized as profit or loss:

(1) Computer software and network engineering works: 5 years
(2) Golf license:10 years.

The consolidated company has to audit the residual value, amortization period, and amortization method for an intangible asset at least annually on the reporting date every year. Any change shall be accounted for as a change in accounting estimate.

(XIII) Impairments of non-financial assets

For non-financial assets except for assets arising out of inventory, deferred income tax assets and employees welfare, the consolidated company has to evaluate at the ending date of every reporting period whether there is impairment, and estimate the

recoverable amount of asset with traces of impairment. If the recoverable amount of individual asset cannot be determined, the consolidated company will have to determine the recoverable amount for the asset's cash-generating unit (CGU) for impairment assessment.

The recoverable amount for an individual asset or a cash-generating unit is the higher of its fair value, less costs to sell, and its value in use. If the recoverable amount of individual asset or cash generating unit is lower than the carrying amount, then the carrying amount is reduced to the recoverable amount and recognized into impairment loss. Impairment loss is immediately recognized as current profit or loss.

The consolidated company has to re-assess on every reporting date whether there are traces indicating that the impairment loss of non-financial assets except for business reputation no longer exists or lowers when compared with the year before. If there is any change to the estimate for determining the recoverable amount, the impairment loss will be returned, to increase the carrying amount of individual asset or cash generating unit to the recoverable amount; under the condition of not exceeding the unrecognized impairment loss of it the year before, the carrying amount after depreciation or amortization has to be deducted.

(XIV) Liability provision

The recognition of liability provision means current obligation for past events, so that in the future the consolidated company is most likely to outflow resources with economic benefits to settle it, and the amount of the obligation can be reliably estimated. Liability provision is discounted by the before tax discounting rate of reflecting the current market to the time value of currency and evaluation of certain risk in liability, and the amortization of discount is recognized as interest expense.

Warranty

Warranty liability provision is recognized at selling product or service. The liability provision is measured by relevant probability weight according to historical warranty data and all possible results.

Sales return provision

Sales return provision is recognized at selling product. The provision is possible product return according to estimate based on historical experience.

(XV) Treasury stock

The issued stock recovered by consolidated company is recognized as "treasury stock" as after-tax net amount according to the consideration paid at repurchase (including directly attributable cost), as the deduction of equity. If the disposal price of treasury stock is higher than the carrying amount, the difference is recognized as capital

reserve-treasury stock transaction; if the disposal price is lower than the carrying amount, the difference will offset the capital reserve arising out of transaction of the same type of treasury stock; if insufficient, the retained earnings will be debited. The carrying amount of treasury stock is calculated by weighted averaging according to reason of recovery

In writing off treasury stock, the capital reserve will be debited according to equity ratio-for shares issuance premium and capital, if the carrying amount is higher than the sum of face value and shares issuance premium, the difference will offset the capital reserve arising out of the same type of treasury stock; if insufficient, the retained earnings will be offset; if the carrying amount is lower than the sum of face value and shares issuance premium, the capital reserve arising out of transaction of the same type of treasury stock will be credited.

(XVI) Income of customer contract (applicable after January 1, 2018 (included))

The income is measured by the expected consideration in transferring product or labor. The consolidated company recognizes the income when the control over product or labor is transferred to customer meeting the performance of obligation. The main income items of consolidated company are described as follows:

Sales of products

The consolidated company recognizes the income upon transfer of control over product. The transfer of control over product means delivery of product to customer, and complete decision by customer for the sales channel and price, without influencing the unperformed obligation for the customer to accept the product. Delivery means conveying the product to designated place, whereby its outdatedness and loss risk has been transferred to customer, and the customer has accepted the product according to sales contract while the acceptance inspection term goes invalid, or the consolidated company has objective evidences to believe that all acceptance inspection conditions have been met.

The consolidated company grants sales return period to customer, so expected return part has to be adjusted in recognizing income and return liability and right of product to be returned are recognized as well. The consolidated company estimates expected return at the timing of sales by adopting cumulative past experience. The consolidated company re-evaluates the estimate of expected return on every reporting date.

The consolidated company undertakes the obligation of defect refund for provision of standard warranty, and the obligation is recognized as warranty liability provision. Please refer to Note 6 (12) for details.

The consolidated company recognizes accounts receivable upon delivery of

goods, because it enjoys the entitlement of collecting consideration unconditionally at this timing.

Financial components

The interval between expected time of transferring commodity or labor to customer by consolidated company and the time of customer in making payment for the commodity or labor cannot exceed one year, so the consolidated company will not adjust the time value of currency for transaction price.

(XVII) Income recognition (applicable before December 31, 2017 (included)) Sales of goods

In normal activities, the income arising out of selling commodity is measured by the fair value of received or receivable consideration after considering the return, business discount or quantity discount. The income is only recognized through reliable measurement of existence of convincing evidences (normally signed sales agreement), material risk and reward of ownership transferred to buyer, possible recovery of payment, reliable estimate of relevant cost and possible commodity return, non-continued participation in commodity management and income amount. If the discount is most likely to happen and the amount can be reliably measured, it will be recognized upon sales recognition as deduction of income.

The timing of risk and reward transfer is determined by the individual term of sales contract.

(XVIII) Cost of customer contract (applicable from January 1, 2018)

Incremental cost of acquiring contract

If the consolidated company expects to recover the incremental cost for acquiring the customer contract, the cost will be recognized as asset. The incremental cost of acquiring contract is cost that will arise in acquiring customer contract and will not arise otherwise The contract acquisition cost no matter the contract will happen or not is recognized as expense, unless the cost is explicitly collectable from customer no matter the contract is acquired or not.

If the increment cost of acquiring contract is recognized by asset and the asset amortization period is within one year by consolidated company using practical expediency method, the incremental cost will be recognized as expense upon occurrence.

Cost of performing contract

If the cost arising out of performing customer contract falls out of the scope of other standards (IAS 2 "inventory", IAS 16 "property, plant and equipment", or IAS 38 "intangible assets"), the consolidated company only recognizes the cost as asset

when the cost is directly related to contract or explicitly identifiable expected contract, will produce or enhance resources for future satisfaction (continuous satisfaction) of obligations, and expected to be recoverable.

Common management cost, cost of wasted materials, manpower and other resources not reflected on contract price, cost related to satisfied (or partially satisfied) obligation, and cost related to unidentifiable and unsatisfied obligation or satisfied (or partially satisfied) obligation are recognized as expense upon occurrence.

(XIX) Employee benefits

1. Defined promotion plan

The promotion obligation of determining promotion and retirement fund plan is recognized as employees benefit expense under profit or loss during the period of employees provision of labor service.

2. Defined benefit plan

Retirement benefit plan not falling to defined promotion plan is a defined benefit plan. The consolidated 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 unrecognized previous service cost and various plan assets should be deducted. The discount rate is mostly the yield at the reporting date on government bonds that have maturity dates approximating the terms of the consolidated company's obligations and that are denominated in the same currency in which the benefits are expected to be paid.

The corporate net obligation is calculated by qualified actuary every year. When the calculation result is favorable to the consolidated company, the recognition of asset is limited by the total amount of obtainable economic benefits current value through returned fund from the plan or decreased promotion of the plan in the future. 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 consolidated company. If one benefit can be realized within the plan period or upon planned clearing of liabilities, it has economic benefit to the consolidated company.

When the benefit in the plan improves, the relevant expense for the part of incremental benefit for previous services by employees is immediately recognized as profit or loss.

The number of remeasurement of net defined benefit liabilities (assets) includes (1) actuarial profit or loss; (2) planned asset rewards, excluding the amount contained in net interest of net defined benefit liability (asset); and (3) any change in upper limit influence number of asset, excluding amount contained in net interest of net defined benefit liability (asset). The number of re-measurement of net defined benefit liability (asset) is recognized under the item of other comprehensive income. The consolidated company recognizes the number of re-measurement of defined benefit plan into retained earnings.

The consolidated company recognizes gains or losses on the curtailment or settlement of a defined benefit plan when the curtailment or settlement occurs. The gains or losses on the curtailment or settlement include any change in fair value of planned assets and current value of defined benefit obligations.

Short-term employee benefits

The obligation for short-term employee benefits is measured on undiscounted basis, and recognized as expense at the time of provision of relevant services.

For expected payment amount under short-term cash bonus or bonus plan, if the consolidated company undertakes current obligation of legal or constructive payment for the previous provision of services by employees and the obligation can be reliably estimated, the amount is recognized as liability.

(XX) Income taxes

Income taxes include current and deferred income taxes. Except for items related to the consolidated company and directly recognized into equity or other comprehensive incomes, current and deferred income taxes shall be recognized as profit or loss.

Current income taxes include the expected payable income taxes or receivable tax refunds based on the levy duty gain (loss) of the year calculated according to the legal tax rate on reporting date or fundamental legislative tax rate, and any adjustment made to the payable income tax for the year before.

Deferred income tax is measured and recognized through the temporary difference between the carrying amount of liabilities and assets for the purpose of financial reporting and the levy duty basis. The temporary difference for the following conditions will not be recognized as deferred income tax:

Originally recognized asset or liability not falling to transaction of corporate consolidation, without influencing accounting profit and levy duty gain (loss) at transaction.
Any difference that arises out of investment affiliated companies and joint venture equity, and is most likely not to be returned in foreseeable future.

Initial recognition of business reputation.

The deferred income tax is measured by the tax rate of the period of expected asset realization or liability clearing off based on the legal tax rate or fundamental legislative tax rate on reporting date.

The consolidated company only offsets the deferred income tax asset and deferred income tax liability for meeting the following conditions at the same time.

The entity has the legal right to settle tax assets and liabilities on a net basis; and
The deferred income tax asset and liability is related to one of the tax-paying subjects of income tax for the same tax authority.
(1) Same tax-paying subject; or
(2) 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.

At the late period of unused levy duty loss and unused income tax deduction, the deductable temporary difference is recognized as deferred income tax asset within the usable scope of mostly likely future levy duty gain. It is re-evaluated on every reporting date, and adjusted within the possibly realizable scope of relevant income tax benefits.

(XXI) Earnings per share

The consolidated company presents the basic and diluted earnings per share of shareholders of common stock equity. The consolidated company's basic earnings per share signifies that the profit and loss of the common shareholders of the Company divided by the weighted average number of common shares outstanding during the period. The diluted earnings per share is calculated by adjusting the influence of all potential diluted common shares with profit or loss of the Company's common stock holders and weighted average number of common shares outstanding. The potential diluted common stock of consolidated company includes convertible bonds.

(XXII) Department information

Operation department, as part of the consolidated company, is engaged in operation activities for gaining income or incurring expense (including income and expense related to transaction with other departments in the company). The operation results of all operation departments are regularly re-checked by major operation decision-makers of the consolidated company, to make decisions on resources allocation and assess the performance. Every operation department possesses independent financial information.

V. The Primary Sources of Uncertainties in Major Accounting Judgments, Estimates, and Assumptions

When preparing the consolidated financial statements according to preparation standards and IFRS recognized by FSC, the management may have to make judgement, estimate and assumption, which may influence the adoption of accounting policies, and the reporting amount of assets, liabilities, incomes and expenses. Therefore, actual results and estimates may have disparities.

The management has to continuously check the estimate and basic assumptions, and the accounting estimate is recognized during the period of change and during future influenced period.

In the uncertainties of assumption and estimate, relevant information about material adjustment for significant risk is as follows:

(I) Allowance loss of accounts receivable

The allowance loss of accounts receivable for the consolidated company is estimated on the basis of assumption upon default risk and expected loss rate. The consolidated company judges upon the adoption of assumption and selection of input in calculating impairment by considering historical experience, current market status and prospective estimate on every reporting date. Please refer to Note 6 (3) for details of relevant assumptions and input.

(II) Inventory Valuation

As inventory shall be measured based on the cost or realizable value, whichever is lower; if on the consolidated company's evaluation report date, the inventory has suffered normal wear and tear, is outdated or has no market value, the inventory cost shall be offset to net realizable value. The assessment of this inventory valuation is mainly based on the product requirements within a specific future period. Hence, it may have significant changes. See Note 6 (5) for details of inventory valuation.

The accounting policy and disclosure of the consolidated company include adopting fair value to measure financial, non-financial assets and liabilities. The consolidated company has established internal control system for fair value measurement. It includes establishing a valuation team to take charge of the re-checking of all material fair value measurement (including third level fair value) and the team will directly report to the chief financial officer. The valuation team will regularly re-check major input and adjustment that are unobservable. If the input for measurement of fair value is to apply third-party information (such as broker or pricing service institution), the valuation team will evaluate the evidence for supporting the input provided by the third party, so as to determine whether the valuation and fair value level classification conform to the provisions of IFRS. The valuation team will report major valuation topics to the audit

committee of the consolidated company.

In measuring the assets and liabilities, the consolidated company will try its best to use market observable input. The level of fair value is classified as follows according to the input used by valuation technique.

(I) First level: open quotation of same asset or liability on active market (without adjustment).
(II) Second level: except for the open quotation covered by first level, the input parameters of assets or liabilities is directly (price) or indirectly (obtained through price deduction) observable.
(III) Third level: the input parameters of assets or liabilities is not based on observable market data (unobservable parameters).

If there is any transition event or situation among the levels of fair value, the consolidated company shall recognize it on the reporting date.

See Note 6 (24), Financial Instruments, for details about assumptions adopted for measurement of fair value.

VI. Description of major accounting items

(I) Cash and Cash Equivalents

Cash in treasury Cheque and demand deposit Fixed term deposit Cash and cash equivalents listed in consolidated cash flow statement	2018.12.31		2017.12.31
	$ 1,354 416,414 - $ 417,768		1,311 195,957 103,582 300,850

Please refer to Note 6 (24) for the disclosure of interest rate risk and sensitivity analysis of financial assets and liabilities of the consolidated company.

(II) Financial Assets and Liabilities Measured at FVTPL

Financial assets mandatory at FVTPL-current Non-break even financial products Financial assets held for transaction - current Derivative instruments - forward exchange contract Financial assets at FVTPL Financial liabilities held for transaction - current Derivative instruments - forward exchange contract Financial liabilities at FVTPL - current Corporate bonds reverse repurchase right and redemption right (note 6 (14)) Financial liabilities at FVTPL - noncurrent Corporate bonds reverse repurchase right and redemption right (note 6 (14)) Financial liabilities at FVTPL Current Noncurrent Total	2018.12.31	2017.12.31 - 243 243 - - - (2,550) (2,550) 243 (2,550) (2,307)
	$ 129,526 - $ 129,526 $ (1,234) (7,500) - - $ (8,734) $ 120,792 - $ 120,792

Engagement in transaction of derivative financial instruments is for avoiding the risks in exposed exchange rate in operating activities and price changes in materials market. The details of derivative instruments for financial assets and liabilities held for transaction for no application of hedge accounting reporting were as follows (financial assets mandatory at FVTPL reported on December 31, 2018; financial assets held for transaction reported on December 31, 2017):

2018.12.31	2018.12.31	2018.12.31	Maturity period
Contract amount (NT$		Type of currency
	thousand)		2019.4~2019.7 2019.4 Maturity period
Contract amount (NT$		Type of currency
	thousand)		2018.1~2018.5

By December 31, 2018 and 2017, there is no provision of pledge guarantee for financial assets at FVTPL in the consolidated company.

(III) Notes Receivable and Accounts Receivable

Notes receivable - arising out of operation Accounts receivable - measured through amortized cost Less: Allowance loss	2018.12.31		2017.12.31
	$ 482,292 1,231,146 (57,849) $ 1,173,297		163,405 1,255,073 (65,013) 1,190,060

The consolidated company adopted simplified method to estimate expected credit loss for notes receivable and accounts receivable from December 31, 2018, namely measurement through expected credit loss during the survival period. For this purpose of measurement, the notes receivable and accounts receivable are grouped by the joint credit risk characteristics of the ability of paying due amount according to contract term of representative customers, and incorporated into prospective information like historical credit loss experience and reasonable expectation of future economic conditions. The expected credit loss analysis of notes receivable and accounts receivable of the consolidated company as of December 31, 2018 was as follows:

Not overdue Overdue for 1-90 days Overdue for 91-180 days Overdue for 181-270 days Overdue for 271-365 days Overdue for more than 366 days	Carrying amount of notes receivable and accounts receivable $ 1,457,303 179,765 16,462 10,019 4,660 45,229 $ 1,713,438	Weighted average expected credit loss rate 25% 50% 75% 100%	Expected credit loss of allowance survival
			- - 4,116 5,009 3,495 45,229 57,849

Already occurred credit loss mode was adopted to consider the allowance for bad debts of accounts receivable and notes receivable on December 31, 2017. The aging analysis of overdue yet non-impaired notes receivable and accounts receivable of the consolidated company as of December 31, 2017 was as follows:

Overdue for less than 30 days Overdue for 31-60 days Overdue for 61-90 days	2017.12.31
	$ 311,172 64,365 1,220 $ 376,757

The allowance loss change statement of notes receivable and accounts receivable of the consolidated company was as follows:

2018 $ 65,013 -		2017	Total 79,807 51,121 (59,185) (6,730)
	Impairment loss of individual evaluation 18,600 - - 438 19,038	Impairment loss of group evaluation
		61,207 51,121 (59,185) (7,168) 45,975
65,013 82,348 (88,362) (1,150)
$ 57,849			65,013

The average credit granting period for commodity sales of consolidated company is 60 days. From the date of invoice issuance, there is no interest accrual for accounts receivable. Already occurred credit loss mode was adopted to consider the allowance for bad debts of accounts receivable and notes receivable on December 31, 2017; in determining the recoverability of accounts receivable and notes receivable, the consolidated company will consider any changes in credit quality of them from the original credit granting date to the reporting date. Historical experience shows that accounts receivable and notes receivable with an age of over 365 days cannot be recovered, so the consolidated company has recognized 100% of the accounts receivable and notes receivable over 365 dyas as bad debts. For accounts receivable and notes receivable with an age between 91 to 365 days, the allowance for bad debts is the amount that cannot be recovered by reference to the past default record of the other transaction party and analysis of its current financial status.

The consolidated company believes that except for the above situations, there is no need to recognize receivable payment into allowance impairment loss based on historical default rate in the case of being not overdue or overdue within 90 days.

Please refer to Note 6 (24) for details of remaining credit risk information.

As of December 31, 2018 and 2017, the consolidated company had NT$ 302,287 thousand and NT$ 191,014 thousand of notes receivable discount as well as NT$ 1,108,856 thousand and NT$ 1,059,073 thousand notes receivable transferred to suppliers that were not due. The notes receivable for the discount and transfer are bank acceptance bills submitted by customers; without any expectation of rejecting to make payment by financial institutions, the notes payable for the discount and transfer are

recognized as deduction of notes receivable.

The accounts receivable factoring contract without right of recourse signed between the consolidated company and financial institutions stipuates that the former does not need to bear the risk of non-recoverableness of accounts receivable, so it meets the condition of financial assets derecognition. Relevant information about undue factoring accounts receivable on the reporting date was as follows:

2018.12.31

						2018.12.31
								Provision
Underwriter	Resale amount		Underwriting limit		Advanced amount	Contract	Interest rate	Guarantee	Material transfer	Derecognized
						period	range	items	terms	amount
Chinatrust	USD323,428		USD1,000,000		USD230,404	2018.06.05~	-	-	Underwriting ‧	USD 323,428
Commercial					(NT$ 7,066 thousand)	2019.05.31			without right of	(NT$ 9,892 thousand)
Bank Hong									recourse
Kong Branch									Handling fee 0.6% ‧
									Financing percentage ‧
									85%
									Underwriting ‧
									percentage 90%
						2017.12.31
								Provision
Underwriter	Resale		Underwriting	Advanced amount		Contract period	Interest rate	Guarantee	Material transfer	Derecognized
	amount	limit					range	items	terms	amount
Chinatrust	USD296,976		USD1,000,000		USD250,000	2017.05.05~	-	-	Underwriting ‧	USD296,976
Commercial				(NT$ 7,440 thousand)		2018.04.30			without right of	(NT$ 8,838 thousand)
Bank Hong									recourse
Kong Branch									Handling fee 0.6% ‧
									Financing ‧
									percentage 85%
									Underwriting ‧
									percentage 90%

The above amount of accounts receivable for factoring was derecognized from accounts receivable; besides, the difference between derecognized amount and advanced amount as of December 31, 2018 and 2017 was respectively USD 93,024 (NT$ 2,826 thousand) and USD 46,976 (NT$ 1,398 thousand), and shifted to be recognized under the items of "Other current assets-other receivables".

As of December 31, 2018 and 2017, there was no situation where the consolidated company provided pledge guarantee to notes receivables and accounts receivable. (IV) Other Receivables

Other receivables - others Less: Allowance loss	2018.12.31		2017.12.31
	$ 82,344 52,953 $ 29,391		80,952 54,154 26,798

Other receivables are measured for impairment through expected credit loss during the survival period. The situations of whether there was credit impairment in allowance loss recognized on December 31, 2018 were as follows:

loss recognized on December 31, 2018 were	as follows:	as follows:	as follows:	as follows:
Not overdue Overdue for more than 361 days Total carrying amount	2018.12.31
	Expected loss during the survival period - non-impaired		Expected loss during the survival period - impaired
		$ 29,391 - 29,391		- 52,953 52,953

Allowance loss

Amortized cost (namely carrying amount)

(52,953) $ 29,391 -

The changes in allowance loss for other receivables in 2018 were as follows:

Opening balance (IAS No.39) Adjustment of IFRS N0.9 for first application Foreign currency translation gain or loss Closing balance (IFRS No.9)			2018	2018
	Credit loss during the survival period-no credit impairment		Credit loss during the survival period-credit impairment			Total
		$ - - - $ -		54,154 - (1,201) 52,953		54,154 - (1,201) 52,953

The allowance loss change statement of other receivables from January 1, 2017 to December 31, 2018 of the consolidated company was as follows:

Balance as of January 1, 2017 Foreign currency translation gain or loss Balance as of December 31, 2017	Impairment loss of individual evaluation $ 53,124 1,030 $ 54,154	Impairment loss of group evaluation - - -	Total
			53,124 1,030 54,154

(V) Inventory

Raw materials Supplies Products being processed Finished products	2018.12.31		2017.12.31
	$ 330,271 5,971 368,410 1,425,962 $ 2,130,614		339,570 6,144 441,431 1,690,507 2,477,652

The inventory cost recognized as sales cost from January 1 to December 31, 2018 and 2017 was respectively NT$ 8,806,310 thousand and NT$ 8,283,250 thousand, and the main items were sold, of which the inventory was previously included into the cost measured. Due to the improvement of factors that caused inventory net realized value to be lower than cost in 2018, the net realized value increased and the lowered sales cost recognized was NT$ 1,191 thousand; in 2017, the inventory written down to net realized value recognition causing inventory price drop loss of NT$ 1,569 thousand, which was already recognized as sales cost.

As of December 31, 2018 and 2017, there is no provision of pledge guarantee for inventory in the consolidated company.

(VI) Investments Accounted for Using Equity Method

1. Affiliated enterprises

Affiliated enterprises in which the consolidated company adopts equity method

are individual non-material ones, whose financial information was as follows:

2018.12.31 The carrying amount of equity at the end of the period of individual non-significant affiliated enterprises $ 30,045 2018 Share attributable to the consolidated company: Total comprehensive revenue amount of continuous operation units 1,293	2018.12.31		2017.12.31
			34,854 2017

	1,293		2,665

2. Guarantee

As of December 31, 2018 and 2017, there was no situation where the consolidated company provided pledge guarantee to investments accounted for using equity method.

(VII) Poperty, Plant and Equipment

The details of cost, depreciation and impairment loss changes of property, plant and equipment in 2018 and 2017 for the consolidated company were as follows:

House and building Cost or identified cost: Balance as of January 1, 2018 $ 1,308,722 Addition 35,319 Re-classification (210,751) Shifted expense - Disposal (6,884) Influence of exchange rate change (29,338) Balance as of December 31, 2018 $ 1,097,068 Balance as of January 1, 2017 $ 1,303,666 Addition 14,258 Re-classification 14,932 Shifted expense - Disposal (4,166) Influence of exchange rate change (19,968) Balance as of December 31, 2017 $ 1,308,722	Machinery and equipment	Transportation equipment	Office facility	Other equipment	Equipment to be inspected and construction inprogress	Total
	1,392,610 65,869 (766) - (37,572) (63,586)	61,434 3,710 - - (6,180) (1,442) 57,522 59,587 6,025 997 - (4,151) (1,024) 61,434	252,476 16,030 (1,399) - (8,542) (6,052)	2,560,383 220,884 39,055 - (73,801) (114,238)	48,789 59,855 (40,012) (11,811) - (2,036)	5,624,414 401,667 (213,873) (11,811) (132,979) (216,692)
$ 1,097,068	1,356,555		252,513	2,632,283	54,785	5,450,726
	1,570,578 20,294 8,071 - (158,524) (47,809)		252,038 17,013 5,129 - (9,966) (11,738)	2,668,056 65,767 216,696 - (319,960) (70,176)	75,972 297,793 (240,083) (83,351) - (1,542)	5,929,897 421,150 5,742 (83,351) (496,767) (152,257)
$ 1,308,722	1,392,610		252,476	2,560,383	48,789	5,624,414

Machinery and equipment 772,323 104,619 - (882) (31,972) (49,954)	Transportation equipment	Office facility	Other equipment	Equipment to be inspected and construction inprogress	Total
	39,268 6,598 - - (5,872) (948) 39,046 37,247 6,677 - (3,972) (684) 39,268 18,476 22,340 22,166	186,424 23,672 - (1,208) (8,095) (4,921)	1,800,988 291,833 - (500) (76,855) (98,755)	- - - - - -	3,198,017 457,090 - (122,600) (124,794) (163,915)
794,134		195,872	1,916,711	-	3,243,798
851,566 102,990 - (138,975) (43,258)		183,241 23,140 - (9,415) (10,542)	1,895,005 277,707 342 (321,487) (50,579)	- - - - -	3,338,408 444,652 342 (474,991) (110,394)
772,323		186,424	1,800,988	-	3,198,017
562,421		56,641	715,572	54,785	2,206,928
719,012		68,797	773,051	75,972	2,591,489
620,287		66,052	759,395	48,789	2,426,397

The consolidated company's old plant land development project at the Shenzhen industrial zone has commenced the demolition of superstructures after obtaining the "Application Form for Renovation Execution Subject Confirmation" approved by the local government on July 10, 2018. Therefore, the consolidated company shifted the carrying amount of RMB 20,435 thousand (NT$ 91,273 thousand) to deferred development cost. Please refer to Note 6 (11) and Note 12 (3) for details.

Please refer to Note 8 for details of short-term loan and financing limit guarantee as of December 31, 2018 and 2017.

(VIII) Intangible Assets

The details of cost, amortization and impairment loss of intangible assets in 2018 and 2017 of the consolidated company were as follows:

Cost: Balance as of January 1, 2018 Acquisition for the period Re-classification Influence of exchange rate change Balance as of December 31, 2018 Balance as of January 1, 2017 Acquisition for the period Influence of exchange rate change Balance as of December 31, 2017	Computer software and network $ 147,801 1,549 (18,903) (3,275) $ 127,172 $ 136,337 13,549 (2,085) $ 147,801	Computer software and network		Golf license		Total
				19,573 - - (433) 19,140 19,875 - (302) 19,573		167,374 1,549 (18,903) (3,708) 146,312 156,212 13,549 (2,387) 167,374

Amortization and impairment loss: Balance as of January 1, 2018 Amortization for the period Re-classification Influence of exchange rate change Balance as of December 31, 2018 Balance as of January 1, 2017 Amortization for the period Influence of exchange rate change Balance as of December 31, 2017 Carrying amount: December 31, 2018 January 1, 2017 December 31, 2017	Computer software and network $ (118,336) (12,462) 19,287 2,702 $ (108,809) $ (104,927) (14,795) 1,386 $ (118,336) $ 18,363 $ 31,410 $ 29,465	Computer software and network		Golf license		Total
				(17,263) (600) - 393 (17,470) (16,573) (928) 238 (17,263) 1,670 3,302 2,310		(135,599) (13,062) 19,287 3,095 (126,279) (121,500) (15,723) 1,624 (135,599) 20,033 34,712 31,775

Recognition of amortization and impairment

Amortization expense of intangible assets in 2018 and 2017 was respectively

recognized under the following items of consolidated comprehensive revenue statement:

Operating cost Operating cost-various amortization	2018		2017
	$ 2,175 10,887 $ 13,062		1,830 13,893 15,723

Guarantee

As of December 31, 2018 and 2017, there was no provision of pledge guarantee for intangible assets in the consolidated company.

(IX) Other Current Assets and Other Noncurrent Assets

Other receivables Income tax assets for the period Advance payment Advanced payment for goods Advanced payment for fees Retained tax amount Other financial assets-current Provisional payment Right of products to be returned Total of other current assets	2018.12.31		2017.12.31
	$ 29,391 3,962 22,566 38,246 107,078 287,491 144 55,862 $ 544,740		26,798 12,764 38,906 40,518 135,705 - 146 - 254,837

Advance payment for equipment Refundable deposit Long-term advance payment of rent Other financial assets - noncurrent Advance payment for land use right Others Total of other noncurrent assets	2018.12.31		2017.12.31
	$ 20,927 87,540 50,176 - 803,954 5,656 $ 968,253		34,820 78,155 62,166 110,126 548,117 9,255 842,639

Other financial assets - current and noncurrent

Bank loan restricted

Please refer to Note 8 for details of guarantee for the consolidated company to use assets to pledge corporate bonds to ensure limit, bank loan and notes payable as of December 31, 2018 and 2017.

Long-term advance payment of rent

The consolidated company has signed agreement respectively with Shenzhen Land Resources Bureau and Administrative Bureau of House Property Baoan Branch to acquire the land at the Huangfengling indsutrial zone for the construction of plants and employee dormitories. The land use right transfer amount was NT$ 85, 541 thousand. Besides, the land at the center of North Point City King's Road Hong Kong is used as domicile with Hong Kong Land Registry. The land use right transfer amount was NT$ 14,693 thousand, and the use period expires fifty years later from the year of acquisition.

The consolidated company's old plant land development project at the Shenzhen industrial zone has commenced the demolition of superstructures after obtaining the "Application Form for Renovation Execution Subject Confirmation" approved by the local government on July 10, 2018. Therefore, the consolidated company shifted the carrying amount of RMB RMB 1,159 thousand (NT$ 9,643 thousand) to deferred development cost. Please refer to Note 6 (11) and Note 12 (3) for details.

Please refer to Note 8 for details of guarantee for bank acceptance bill, short-term loan, financing limit and endorsement as of December 31, 2017.

Advance payment for land use right

The consolidated company and Jiujiang economic development zone signed a business solicitation project contract, to the commitment that from 2015 the sales revenue of Airmate in the territory of China should not be less than RMB 1.4 billion, and the settlement share of marketing sales for domestic sales of products should

increase every year, all should be transferred from Shenzhen to Jiujiang, and the cumulative sales revenue of RMB 4.5 billion for domestic sales in the territory of China should be realized. If the above conditions were met, Jiujiang economic and technological development management committee agreed to transfer the plant and land use right at RMB 360 million with a period of 50 years; if otherwise, relevant preferences for the consolidated company will be cancelled.

As of December 31, 2018, the amount of RMB 180 million (NT$ 803,954 thousand) had been paid. Please refer to Note 9 (1) for relevant material unrecognized contract commitment.

(X) Short-term Loan

Credit loan Pledge loan Total Loan limit not used Interest rate range	2018.12.31			2017.12.31
	$ 998,922 290,317 $ 1,289,239 $ 1,027,488 2.87%~6.09%			871,016 200,976 1,071,992 1,085,988 0.72%~5.30%

Please refer to Note 6 (24) for details of critical risk information like interest rate, exchange rate and mobility risk.

Please refer to Note 8 for details of guarantee for the consolidated company to use assets to pledge for bank loan.

(XI) Notes Payable, Other Payables and Other Current Liabilities

Notes payable Payable salary Payable employee dividend and remuneration for directors and supervisors Payable tax Payable contribution expense Payable transportation expense Payable vacation payment Other expenses payable Other payables Total of other payables Advances received Refund liability Total of other current liabilities Other compensation Long-term deferred revenue Other noncurrent liabilities - total of others	2018.12.31 $ 1,177,486	2017.12.31
		832,685
	$ 131,349 5,515 13,879 159,212 42,868 2,510 122,295 37,048	177,130 740 19,468 188,341 33,930 9,633 116,365 31,312
	$ 514,676	576,919
	$ 7,934 76,204	3,354 -
	$ 84,138	3,354
	$ 614,554 40,654	548,117 43,936
	$ 655,208	592,053

Notes payable

As of December 31, 2018 and 2017, the notes payable were respectively NT$ 1,170,175 thousand and NT$ 830,955 thousand, guaranteed or accepted by financial institutions.

The above notes payable and other payables are expected to be settled within one year.

2. Refund liability

The sales of goods return provision of the consolidated company is mainly related to domestic sales of electric appliances by distributors at Mainland China, and it is estimated according to the historical return data of similar products and services. The consolidated company estimates that the liability is mostly happening in the following year of sales.

Other compensation

Advance collection of compensation for old plant land development at Shenzhen industrial zone. Please refer to Note 12 (3) for details.

(XII) Liability provision - current

Balance as of January 1, 2018 Newly increased liability provision for the period Used liability provision for the period Balance as of December 31, 2018 Balance as of January 1, 2017 Newly increased liability provision for the period Used liability provision for the period Balance as of December 31, 2017	Warranty	Sales of goods return - - - - 140,884 328,319 (361,426) 107,777	Total 10,856 86,824 (90,809) 6,871 163,309 432,427 (477,103) 118,633
	$ 10,856 86,824 (90,809) $ 6,871 $ 22,425 104,108 (115,677) $ 10,856

The warranty and sales of goods return liability provision of the consolidated company as of December 31, 2017 were mainly related to domestic sales in Mainland China and export sales of electric appliances by distributors, and they were estimated according to the historical warranty and return data of similar product and service. The consolidated company estimates that the liability is mostly happening in the following year of sales.

(XIII)

Please refer to Note 6 (11) for details of sales of goods return liability provision amount as of December 31, 2018, in the refund liability under other current liabilities. Long-term Loan

The details, conditions and terms for long-term loan of consolidated company were as follows:

	2018.12.31	2018.12.31
Type of currency	Interest rate range	Due year	Amount
USD	3.64143%	2020	$ 92,142 (46,066)
			$ 46,076
			$ -

Please refer to Note 8 for details of guarantee for the consolidated company to use assets to pledge for bank loan.

(XIV) Corporate Bonds Payable

The information about the guaranteed convertible corporate bonds issued by the consolidated company was as follows:

Total amount of issuing convertible corporate bonds Less: unamortized payable corporate bond discount Payable corporate bond balance at the end of the period Less: part for which reverse repurchase right can be executed within one year (Note 1) Embedded derivative instruments-repurchase right and reverse repurchase right (recognized into financial liability at FVTPL) Less: part for which reverse repurchase right can be executed within one year Equity components - conversion right (recognized into capital reserve - subscription right) Embedded derivative instruments - reverse repurchase right/redemption right evaluation benefits (recognized into financial liability loss at FVTPL) Interest expense (effective interest rate is 0.1090%)	2018.12.31 $ 500,000 (11,313) 488,687 (488,687) $ - 2018.12.31	2017.12.31 500,000 (17,662) 482,338 - 482,338 2017.12.31 2,550 - 2,550 12,364 2017 1,100 1,574
	$ 7,500 (7,500) $ - $ 12,364 2018
	$ 4,950 $ 6,349

Note 1: The Company has issued guaranteed convertible corporate bonds for the second time at home, and according to the provisions of corporate bonds issuance term, the holders can exercise the reverse repurchase right on September 30, 2019 (two years after issuance). Therefore, the Company shifted the convertible corporate bonds balance into "Corporate bonds for which the reverse repurchase right can

be executed within one year"; relevant embedded derivative financial instruments were also shifted under the item of current liability.

The Company issued for the second time the guaranteed convertible corporate bonds amounting to NT$ 500,000 thousand within the territory of the Republic of China to pay back bank loan and enrich the operation fund, and the main issuance terms were as follows:
(1) Issuance period: three years, from September 30, 2017 to September 30, 2020.
(2) Total amount of issuance and book value of every bond: NT$ 500,000 thousand, and NT$ 100 thousand for the book value of every bond; it is issued in sufficient face amount, and the number is 5,000.
(3) Face interest rate: 0%.
(4) Conversion right and object: creditors, in accordance with the provisions of this method, request to the Company to convert the convertible corporate bonds based on face amount and convert into common stock of the Company based on the conversion price at the time of conversion. The Company will perform its conversion obligation by issuing new shares.
(5) Conversion period: from the next day following three months after issuance of convertible corporate bonds (January 1, 2018) to the due date (September 30, 2020).
(6) Conversion price and adjustment:
- A. Conversion price at issuance was NT$ 28.3.
- B. If the number of issued common stock increases after issuance of convertible corporate bonds, the Company has to adjust the conversion price according to the formula listed on the issuance method.
(7) Bonds redemption and reverse repurchase method:
- A. Redemption method:

From the next day following three months after issuance of convertible corporate bonds (January 1, 2018) to forty days before expiry of the issuance period (August 21, 2020), if the closing price of common stock of the Company at the over-the-counter market of judicial person Republic of China Securities goes over 30% (included) over the conversion price of convertible corporate bonds at the time, or the circulating balance of convertible corporate bonds is lower than 10% of the total amount of issuance, redemption right will be exercised according to the provisions of the conversion method. If the Company executes redeem request, the convertible corporate bonds shall be redeemed from holders with cash according to face amount within five operation days after the bonds redeem

base date.

B. Reverse repurchase method:

Two years after issuance of convertible corporate bonds (September 30, 2019) is the reverse repurchase base date for creditors' reverse repurchase of convertible corporate bonds in advance. Creditors may require the Company for redemption of held convertible corporate bonds according to face amount plus interest compensation, and the interest compensation for two years is 101.0025% face amount (reverse repurchase right yield rate 0.50%). If the Company executes redeem request, the convertible corporate bonds shall be redeemed from holders with cash according to face amount within five operation days after the bonds redeem base date.

Please refer to Note 8 for details of guarantee for the consolidated company to use assets to pledge for guarantee limit.

2. Situations of redemption and reverse repurchase

As of December 31, 2018, there has been no reverse repurchase of convertible corporate bonds for the second time.

(XV) Operation Lease

The payable rent payment situations for irrevocable operation lease:

Within one year 1-5 years	2018.12.31		2017.12.31
	$ 29,172 9,914 $ 39,086		64,406 2,482 66,888

The consolidated company accepts lease of warehouse through operation lease. The lease period is normally one year, with renewal right upon expiry.

The expenses of operation lease in 2018 and 2017 for profit and loss were respectively NT$ 73,426 thousand and NT$ 67,558 thousand.

(XVI) Employee benefits

Defined benefit plan

The present value of defined benefit obligations and the fair value adjustments of the plan assets for the Company were as follows:

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liabilities (assets)	2018.12.31	2017.12.31
	$ 41,963 (3,113) $ 38,850	65,398 (2,914) 62,484

Defined benefit plan of the consolidated company is contributed to the pension fund account at Bank of Taiwan that provides pensions for employees upon

retirement. The plans covered by the Labor Standards Act entitle a retired employee to receive retirement benefits based on years of service and average salary for the six months prior to retirement.

(1) Components of plan assets

The retirement fund contributed by the consolidated company in accordance with the Labor Standards Act is managed by the Bureau of Labor Funds Utilization, Ministry of Labor (hereinafter referred to as Bureau of Labor Funds), and utilized according to the provisions of "Regulations on Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund"; with regard to the utilization of the funds, lowest earnings in final settlement shall not be less than the earnings attainable from two- year time deposits with interest rates offered by local banks.

By the reporting date, the balance at the special account of employee retirement provision fund at Bank of Taiwan for the consolidated company was NT$ 3,087 thousand. The data for utilization of employee retirement fund includes fund yield rate and fund asset allocation. Please refer to the information released on the website of Bureau of Labor Funds for details.

(2) Change in present value of defined benefit obligation

The changes in present value of defined benefit obligation in 2018 and 2017 of the consolidated company were as follows:

Defined benefit obligation on January 1 Current service cost and interest Remeasurements of the net defined benefit liability (asset) Actuarial gains or losses arising out of experience adjustments (excluding current interests) Actuarial gains or losses arising out of changes in demographic assumptions Actuarial gains or losses arising out of changes in financial assumptions Conversion difference of foreign plan Defined benefit obligation as of December 31	2018		2017
	$ 65,398 3,469 269 (29,003) 85 1,745 $ 41,963		60,558 2,866 5,686 713 - (4,425) 65,398

(3) Changes in fair value of plan assets

The changes in fair value of defined benefit plan assets of the consolidated

company in 2018 and 2017 were as follows:

Fair value of plan assets on January 1 Remeasurements of the net defined benefit liabilities (assets) Return on plan assets (excluding current interest) Amount contributed to plan Expected return on plan assets Conversion difference of foreign plan Fair value of plan assets on December 31	2018		2017
	$ 2,914 83 84 33 (1) $ 3,113		2,790 (5) 96 32 1 2,914

(4) Change of asset upper limit impacts

In 2018 and 2017, the consolidated company saw no impact from the asset upper limit of defined benefit plan.

(5) Expenses recognized as profit or loss

The details of recognition of gain or loss in 2018 and 2017 of the consolidated company were as follows:

Service cost for the period Net interest of net defined benefit liability (asset) Expected return on plan assets Amortization expense Management expense	2018		2017
	$ 2,727 742 (33) $ 3,436 $ 338 3,098 $ 3,436		2,220 646 (32) 2,834 583 2,251 2,834

(6) Re-measurements of the net defined benefit liability recognized as other

comprehensive revenue

Re-measurements of net defined benefit liability recognized as other comprehensive revenue was as follows:

Cumulative balance on January 1 Recognition (return) for the period Cumulative balance on December 31		2018 $ (1,963) 28,224		2017 4,437 (6,400)

		$ 26,261		(1,963)

(7) Actuarial assumption

The main actuarial assumptions adopted by Waon Company at the closing financial reporting date were as follows:

2018 2017

Discount rate	1.125%	1.125%
Future salary increase	2.00%	2.00%

The main actuarial assumptions adopted by Waon Company Taiwan Branch at the closing financial reporting date were as follows:

Discount rate Future salary increase	2018 1.000% 2.00%	2017 1.125% 2.00%

The expected contribution to be made by the consolidated company to the defined benefit plans within one year after 2018 reporting period is NT$ 2,587 thousand.

The weighted average survival period of defined benefit plan is 9-12 years.

(8) Sensitivity analysis

As of 2018 and December 31, 2017, the influence of changes in actuarial assumptions on the present value of the defined benefit obligations was as follows:

December 31, 2018 Discount rate Future salary increase December 31, 2017 Discount rate Future salary increase December 31, 2018 Discount rate Future salary increase December 31, 2017 Discount rate Future salary increase	Influence of Waon Company upon defined benefit obligation	Influence of Waon Company upon defined benefit obligation
	Increase by0.25% Decrease by 0.25% $ (704) 728 710 (690) (999) 1,032 1,008 (980) Influence of Waon Company Taiwan Branch upon defined benefit obligation	Decrease by 0.25%
	Increase by0.25% $ (169) 170 (207) 208	Decrease by 0.25%
		175 (165) 214 (203)

The above sensitivity analysis is based on analyzing the influence of single assumption change with others remaining the same. In practice the change of many assumptions may be serial. Sensitivity analysis is conducted in the same

method of calculating the net retirement fund liability in the balance sheet.

The method and assumptions used in preparing the sensitivity analysis for the period are the same as before.

2. Defined contribution plan

Waon Company Taiwan Branch, in determining the contribution plan, follows the provisions of employee retirement fund ordinance by paying 6% monthly salary to the individual special account with Bureau of Labor Insurance; the retirement fund payment obligation of Shenzhen Airmate falls into definite contribution system by contribution of insurance fund every month from the company to be deposited into the individual pension insurance special account. This account is completely detached from the company, and will be transferred upon dimission. The amount to be contributed is recognized as expense for the period; Waon Company also contributes retirement fund to special account of accumulation fund according to local ordinance of Hong Kong. Under this defined contribution plan, the consolidated company allocates a fixed amount to the Bureau of Labor Insurance without additional legal or constructive obligation.

The retirement fund expenses under the definite contribution of retirement fund method in 2018 and 2017 of the consolidated company were respectively NT$ 96,210 thousand and NT$ 127,333 thousand, which were already contributed to the Bureau of Labor Insurance.

(XVII) Income Taxes

1. Income tax expenses

The details of expenses (gains) of the consolidated company in 2018 and 2017 were as follows:

were as follows:
Income tax expenses (gains) for the period Generation for the period Income tax for the period at the prior period of adjustment Deferred income tax expense (gains) Occurrence and return of temporary difference Change in income tax rate Income tax expense Net profit before tax	2018	2017 8,407 - 8,407 (2,426) - (2,426) 5,981 2017 7,335
	117,469 68,696 186,165 (58,910) (36,905) (95,815) 90,350 2018
	$ 72,267

Income tax calculated according to the domestic tax rate where the Company is located Impact of tax rate difference in foreign administrative areas Change in income tax rate Verified difference Non-creditable expense Temporary difference of unrecognized deferred income tax asset Levy duty loss of using previous unrecognized ones Previous undervaluation Others Income tax expense	- 13,522 (36,905) 52,884 10,228 67,225 (37,033) 15,812 4,617 $ 90,350	- 2,315 - - - - - - 3,666 5,981

Deferred income tax asset and liability
(1) Unrecognized deferred income tax asset; the items the consolidated company

has not recognized as deferred income tax asset were as follows:

Deductible temporary difference Levy duty loss Loss of unused levy duty	2018.12.31		2017.12.31
	$ 65,889 - $ 65,889		- 36,297 36,297

(2) Recognized deferred income tax assets

The changes in deferred income tax asset and liability in 2018 and 2017 were as follows:

Deferred income tax asset:

January 1, 2018 (Debit) credit revenue statement December 31, 2018 Balance as of January 1, 2017 (Debit) credit revenue statement Balance as of December 31, 2017	Receivable payment impairment loss recognition	Unrealized inventory price drop Slow-moving loss 29,419 12,888 42,307 26,839 2,580 29,419	Other compensation - 88,125 88,125 - - -	Others 18,364 (10,926) 7,438 20,916 (2,552) 18,364	Total 65,394 95,815 161,209 62,968 2,426 65,394
	$ 17,611 5,728 $ 23,339 $ 15,213 2,398 $ 17,611

3. Situations of income tax verification

The corporate income tax of Waon Company, Shenzhen Airmate and Jiujiang Airmate had been reported to local tax authority up to 2017; the report of profitable business income tax for Waon Company Taiwan Branch had been reviewed by tax

authority up to 2016.

4. Income tax administrative relief

The consolidated affiliated company Shenzhen Airmate started to engage in export sales in 1998 of its own brands through the consolidated affiliated company Waon Company, generating transferred pricing related income tax of RMB 5,497 thousand (NT$ 25,049 thousand). Shenzhen tax authority verified on April 18, 2018. Shenzhen Airmate had also adjusted the entry and made supplementary payment.

Given that the consolidated affiliated company Waon Company and Hong Kong Tax Bureau had different views on the offshore transaction identification for 2002 to 2006, the former was asked to make a supplementary payment of taxes. Relevant income tax expense had been recognized upon estimate at the time of supplementary payment, reply was given to Hong Kong Tax Bureau to withdraw the offshore tax exemption application on February 28, 2018, and objection to some taxable years was unconditionally recalled to terminate the long-standing disputes on taxes.

Besides, on October 6, 2017, Waon Company didn't obtain deduction for the paid commission from 2002 to 2003 according to provisions. The consolidated company had deliberated over the previously verified facts and reasons, actively provided relevant data and entrusted Hong Kong accountant to communicate with Hong Kong Tax Bureau. Hong Kong Tax Bureau issued the letter of decision, decision reasons and statement of facts against the objection raised by Waon Company on June 13, 2018. As for the decision, Waon Company had authorized Hong Kong accountant to make an appeal to the tax appellate committee on July 13, 2018, and make adjusted entry of the undervaluated income tax HKD 7,237 thousand (NT$ 27,835 thousand)y Hong Kong Tax Bureau. As of March 4, 2019, the case is still being reviewed by the Tax Appellate Committee.

(XVIII) Capital and other equity

On December 31, 2017 and 2018, the total number of authorized capital stock of the Company was NT$ 2,162,500 thousand, the face amount of every share was NT$ 10, and the number of shares was 216,250,000. The above authorized capital stock was only common stock, and the issued stock was all common stock with a number of 122,844,000 shares. The stock capital for issued stock had been all collected.

1. Capital reserve

The details of capital reserve were as follows:

Share premium Subscription right to convertible corporate	2018.12.31		2017.12.31
	$ 966,919 12,364		966,919 12,364

bonds

$ 979,283

979,283

In accordance with the Company Act, realized capital reserves can only be reclassified as share capital or distributed as cash dividends after offsetting losses. The above-mentioned realized capital reserve includes overage from shares issuance over the face amount and acceptance of bestowal. In accordance with the processing standards regarding issuers collecting and issuing negotiable securities, the capital reserve for capital has to be appropriated, and the total amount of appropriation every year shall not exceed 10% of the paid-in capital.

Retained earnings

In accordance with the Articles of Association of the Company, during the period of over-the-counter transaction or the period listed at stock exchange as well as in making the proposal for allocation of earnings by the Board of Directors, the following has to be recognized in advance from the earnings of every accounting year:

(i) Payment for provision of tax of relevant accounting period;
(ii) Amount to offset previous loss;
(iii) 10% earned surplus;
(iv) Special earned surplus required by securities regulatory authority in accordance with the rules and regulations of companies with public issuance.

If there is surplus, it shall be combined with cumulative undistributed surpluses in part or whole over the previous years to be distributed to shareholders as dividend according to shareholding ratio in accordance with the previously formulated dividend policy confirmed by the Board of Directors under the precondition of following the Cayman Company Law, after the rewards to employees and bonuses to directors are contributed. Dividends distributed to shareholders are in the forms of share dividends and cash dividends, and the cash dividends shall not be less than fifty percent (50%) shareholders dividends distributed according to the above. Unless otherwise resolved by the Board of Directors and the Shareholders' Meeting, any remaining profit, which shall not be less than twenty-five percent (25%) of the after-tax earnings of the year, is distributed as shareholders dividends in accordance with Cayman Company Law and rules and regulations of companies with public issuance after considering factors of finance, business and operation.

(1) Legal reserve

In accordance with provisions of Company Law, the Company shall contribute 10% after-tax net profit as legal reserve until equalization with the total amount of capital. When there is no loss in the Company, the legal reserve will be used to issue

new shares or cash upon resolution by the Shareholders' Meeting, to the limit of the part of the reserve that has exceeded 25% of the paid-in amount.

(2) Special reserve

The amount of interest arising out of retained earnings of cumulative translation adjustment generated due to financial statement translation of foreign operation under the item of shareholders equity by the Company when applying the exemption item in IFRS No.1 "First-time Adoption of International Financial Reporting Standards" was NT$ 185,271 thousand. Besides, in accordance with the provision of FSC No. 1010012865 on April 6, 2012, the net increase of retained earnings generated from the adoption of IFRS recognized by FSC was recognized as special reserve, and when relevant assets are used, handled and re-classified, the earnings are distributed according to the ratio of original recognized special reserve.

If the net amount of deduction of other shareholders' equity occurred in 2014 was lower than the balance of "special reserve recognized for first time application of IFRS" as of December 31, 2014 of the Company in accordance with the provision of FSC No. 1010012865 issued on April 6, 2012, supplementary recognition of special reserve was not necessary; and the balance of recognized special reserve on December 31, 2014 over the balance of "special reserve recognized for the first application of IFRS" was returned to undistributed earnings through special reserve amounting to NT$ 2,890 thousand through regular Shareholders' Meeting on June 29, 2015. As of December 31, 2018 and 2017, the balance of the special reserve was NT$ 182,381 thousand.

In accordance with the above provisions, in distributing distributable earnings by the Company, the difference between the net amount recognized of other shareholders equity deduction occurred in the year and the special reserve balance mentioned above is supplementarily recognized as special reserve from current gain or loss and previous undistributed earnings; amount of other shareholders' equity deduction through previous cumulation is supplementarily recognized as special reserve that couldn't be distributed from previous undistributed earnings. Afterward, if other shareholders' equity deduction has been reversed, the reversal shall be applicable to earnings distribution. The undistributed earnings (reversal) and recognized special capital reserve passing the resolution of regular Shareholders' Meeting in 2017 and 2018 were respectively NT$ 15,494 thousand and NT$ 120,258 thousand.

(3) Earnings distribution

The Company had passed the earnings distribution plan for 2017 and 2016

through resolution by the Shareholders' Meeting on June 15, 2018 and May 22, 2017, and the amount distributed to owners as dividend was as follows:

2017 Shares allotment rate (NT$) Dividend distributed to common stock owners Cash dividend $ 0.1000	2017	Amount 12,159	2016
	Shares allotment rate (NT$)		Shares allotment rate (NT$)		Amount
			1.0026		122,402

Treasury stock
(1) The changes of treasury stock in 2018 and 2017 of the Company were as follows (unit: thousand shares):

Reason of recovery						2018
	Opening number of shares	Opening amount $ 20,577	Opening amount	Number of increased shares	Increased amount	Holding purpose conversion	Decreased amount	Closing number of shares	Closing amount
Treasury stock transferred to employees Reason of recovery	758			500	12,474	- 2017	-	1,258	33,051

	Opening number of shares	Opening amount $ 11,225 -	Opening amount	Number of increased shares	Increased amount	Holding purpose conversion	Converted amount	Closing number of shares	Closing amount
To maintain company credit and shareholders' equity 442 Treasury stock transferred to employees - 442				- 316 316	- 9,352 9,352	(442) 442 -	(11,225) 11,225 -	- 758 758	- 20,577 20,577
		$ 11,225

Note: The Company repurchased the shares of the Company within the limit of 1,000 thousand shares through the Board of Directors on November 4, 2016, and repurchased 442 thousand shares during the reporting execution period. The original purpose lied in "maintain company credit and shareholders' equity", and it was varied to "transfer to employees" for repurchase of treasury stock on March 6, 2017 for considering the limited cancellation benefits.

(2) In accordance with the provisions of Securities Transaction Law, the repurchase rate of shares by the Company shall not be more than the 10% total number of shares issued by it; the total amount of repurchased shares shall not be more than the amount of retained earnings plus share premium and realized capital reserve. The date September 30, 2017 and 2016 was taken as the calculation basis for 2018 and 2017; the maximal upper limit of number of shares to be repurchased by the Company was 12,284 thousand shares, and the maximal

upper limit of amount of shares to be repurchased was NT$ 1,216,997 thousand and NT$ 1,335,883 thousand.

(3) In accordance with the provisions of Securities Transaction Law, the treasury stock held by the Company cannot be pledged, and before transfer no right of shareholders shall be enjoyed.
Other equity

January 1, 2018 Exchange differences in translation of foreign currency (after-tax net amount) Consolidated company Balance as of December 31, 2018 January 1, 2017 Exchange differences on translation of foreign currency (after-tax net amount) Consolidated company Balance as of December 31, 2017	Exchange differences on translation of foreign financial statements
	$ (104,764) (109,368) $ (214,132) Differences in translation of financial statements of institutions running overseas
	$ (120,258) 15,494 $ (104,764)

(XIX) Earnings per Share

The net profit (loss) of basic earnings per share of the consolidated company attributable to common stock holders in 2018 and 2017 was respectively NT$ 14,599 thousand and NT$ 4,262 thousand, and the weighted average number of shares circulating outside for common stock was respectively 121,614 thousand shares and 121,852 thousand shares as basis for calculation. Relevant calculation was as follows:

Basic earnings per share Net profit (loss) attributable to the Company for the period Net profit attributable to the common stock holders of the Company Weighted average number of shares circulating outside for common stock Basic earnings per share (NT$) Diluted earnings per share Net profit (loss) attributable to the Company for the period Influence of potential common stock with diluting effect Net profit attributable to the common stock holders of the Company Weighted average number of shares circulating outside for common stock	2018		2017
	$ (14,599) $ (14,599) 121,614 $ (0.12) $ (14,599) (14,599) 121,614		4,262 4,262 121,852 0.03 4,262 4,262 121,852

Influence of potential common stock with diluting effect Influence of employees’ share bonus Influence of convertible corporate bonds Weighted average number of shares circulating outside for common stock (after adjusting the impact of diluting potential common stock) Diluted earnings per share (NT$)	- - 121,614 (0.12)	317 - 122,169 0.03

The employee stock dividend and convertible corporate bonds with diluting effect in 2018 and 2017 of the consolidated company were not recognized into diluted earnings per share for calculation for anti-diluting effect.

(XX) Revenue of Customer Contract

1. Details of revenue

Main regional markets Mainland China Other countries Main products: Electric fan Electric heater Others	2018
	$ 5,847,769 4,767,171 $ 10,614,940 $ 6,778,857 2,922,860 913,223 $ 10,614,940

Please refer to Note 6 (21) for details of revenue amount for 2017.

Contract balance

Accounts receivable Less: allowance loss Total	2018.12.31		2018.1.1
	$ 1,231,146 (57,849) $ 1,173,297		1,255,073 (65,013) 1,190,060

Please refer to Note 6 (3) for details of accounts receivable and the impairment.

(XXI) Revenue

The details of revenue of the consolidated company in 2017 were as follows:

Sale of goods Others Sales discount Sales return	2017 $ 10,556,909 44,356 (253,772) (323,291) $ 10,024,202	2017

Please refer to Note 6 (20) for details of revenue amount in 2018.

(XXII) Remunerations for employees and directors

In accordance with the Company's Articles of Association, the Company has to contribute profit (defined afterwards), if any, in general final settlement for employees' and directors' remunerations, unless otherwise stipulated by Cayman Company Law, rules and regulations of companies with public issuance or the Articles of Association;

only when there is cumulative loss in the Company, it shall be retained to fill the amount of loss.

Five percent (5%) to ten percent (10%) as employees' remunerations (hereinafter referred to "employees' remunerations"), including employees in affiliated companies; and

Less than and equal to three percent (3%) as directors' (excluding independent directors) remunerations (hereinafter referred to as "directors' remunerations"); the employees and directors remunerations plan shall be executed after being agreed upon by more than half directors at the board meeting where two thirds directors have to attend, and reported to meeting of shareholders. However, when there is cumulative loss to the Company, it shall be retained to fill the amount, and then contributed for employees' and directors' remunerations at the percentage mentioned above. The above "profit" refers to the net profit before tax of the Company. To eliminate doubt, net profit before tax refers to the amount before contribution to remunerations for employees and directors.

Without violating the provisions of prevalent law, the above mentioned employees' remunerations shall be in cash or shares.

The estimated amount for employees' remunerations in 2018 and 2017 of the Company were respectively NT$ 4,026 thousand and NT$ 617 thousand, and that for directors' remunerations were respectively NT$ 749 thousand and NT$ 123 thousand. The estimate was based on the amount of net profit before tax without deduction for employee and director remunerations multiplied by the percentage for the same, and it was recognized as the operating cost or operating expense in 2018 and 2017. Relevant information can be inquired into at public information observation stations.

There was no difference between the amount of employees' and directors' remunerations distributed according to the resolution of the Board Meeting and the estimated amount in the consolidated financial report of 2017.

(XXIII) Nonoperating Revenue and Expense

Other revenues

The details of revenue of the consolidated company in 2018 and 2017 were as follows:

follows:
Interest revenue Government subsidy revenue Other revenues Total other revenues		2018 $ 66,896 52,617 49,031 $ 168,544	2017
			55,055 29,238 58,547 142,840

2. Other gains and losses

The details of other gains and losses of the consolidated company in 2018 and

2017 were as follows: Gain (loss) from disposal of property, plant and equipment Gain (loss) from conversion of foreign currency Gain (loss) on financial assets (liabilities) at FVTPL Miscellaneous expenses Net amount of other gain and loss		2018 $ (6,514) 7,978 (4,008) (53,412) $ (55,956)	2017
			(3,904) 4,716 (10,375) (9,491) (19,054)

Financial cost

The details of financial costs of the consolidated company in 2018 and 2017 were as follows:

were as follows:
Interest expense		2018 $ 110,051	2017
			73,115

(XXIV) Financial Instrument

Credit risk
(1) Credit risk exposure

The carrying amount of financial assets represents the maximal amount of credit risk exposure. The maximal amount of credit risk exposure as of December 31, 2018 and 2017 was respectively NT$ 2,712,858 thousand and NT$ 1,927,577 thousand.

(2) Credit risk concentration

The credit risk exposure of the consolidated company is influenced by the conditions of every individual customer. The management also considers the statistical data on the basis of consolidated company customers, including the default risk of industry and country, because these factors can also influence credit risk. The sales to single transnational customer in revenue of the consolidated company for 2018 and 2017 didn't each 10%; and 55% and 59% were concentrated in the region of Mainland China.

(3) Please refer to Note 9 (2) for details of credit risk the consolidated company

might be exposed to for compliance with bank operation practice in China.

2. Liquidity risk

The following table presents the due date of financial liability contract, including estimated interest to the exclusion of influence of net amount

agreement.

December 31, 2018 Non-derivative financial liabilities Short-term loan Notes payable Accounts Payable Other payables (including related party) Payable corporate bonds Long-term loan (long-term loan due within one year) Derivative financial liabilities Financial liabilities at FVTPL - current	Carrying Amount	Contract cash flow 1,301,418 1,177,486 928,657 520,996 505,013 92,586 8,734 4,534,890	Within 1 year 1,301,418 1,177,486 928,657 520,996 505,013 46,510 8,734 4,488,814	12years- - - - - - 46,076 - 46,076	23years-	More than 3 years - - - - - - - -
	$ 1,289,239 1,177,486 928,657 520,996 488,687 92,142 8,734 $ 4,505,941				- - - - - - - -

December 31, 2017
Non-derivative financial liabilities
Short-term loans	$	1,071,992	1,072,302	1,072,302	-	-	-
Notes payable		832,685	832,685	832,685	-	-	-
Accounts payable		1,237,741	1,237,741	1,237,741	-	-	-
Other payables (including related party)		585,441	585,441	585,441	-	-	-
Payable corporate bonds		482,338	505,013	-	505,013	-	-
Derivative financial liabilities
Financial liabilities at FVTPL -
noncurrent		2,550	2,550	-	2,550	-	-
	$	4,212,747	4,235,732	3,728,169	507,563	-	-

The consolidated company does not expect that the occurrence timing of cash flow analyzed on due date would arrive significantly earlier, or the actual amount would significantly vary.

3. Exchange rate risk

(1) Exchange rate risk exposure

The financial assets and liabilities (including monetary items of non-functional monetary valuation already written off in the consolidated financial report) of the consolidated company exposed to material exchange rate risk were as follows:

Financial assets Monetary items USD JPY HKD Financial liabilities Monetary items USD JPY HKD		2018.12.31			2017.12.31
	Foreign currency	Exchange rate	NTD	Foreign currency	Exchange rate	NTD
	$ 36,577 27,012 545,937 35,318 120,044 129	30.7150 0.2782 3.9210 30.7150 0.2782 3.9210	1,123,458 7,515 2,140,619 1,084,792 33,396 506	26,470 16,157 377,039 23,461 122,753 351	29.7600 0.2642 3.8070 29.7600 0.2642 3.8070	787,754 4,269 1,435,387 698,199 32,431 1,336

(2) Sensitivity analysis

The exchange rate risks of the consolidated company mainly come from cash and cash equivalents valuated in foreign currency, accounts receivable and other receivables, loan, accounts payable and other payables, which will generate foreign currency conversion impairment upon translation. If the NTD depreciated or appreciated 5% to USD, HKD or JPY on December 31, 2018 and 2017, with other factors remaining the same, the net gain (loss) after tax would respectively increase or decrease by NT$ 6,995 thousand and NT$ 9,203 thousand. The analysis for the two periods adopted the same basis.

(3) Conversion impairment of monetary items

Given that the consolidated company has various types of functional currency, summation is adopted to reveal the conversion impairment information of monetary items. The foreign currency conversion gain (loss) (realized and unrealized) in 2018 and 2017 of the company were respectively NT$ 7,978 thousand and NT$ 4,716 thousand.

Interest rate analysis

The interest rate risk exposure of financial assets and financial liabilities of the consolidated company is described in the liquidity risk management of this Note.

The following sensitivity analysis is determined by the interest rate risk exposure of derivative and non-derivative instruments on the reporting date. For floating interest rate liabilities, the analysis is based on the assumption that the liability amount circulating outside on the reporting date has been circulating outside all year round. In reporting the interest rate to senior management, the rate of change adopted is 50 basic points increase or decrease over the interest rate, which also represents the management evaluation of reasonable possible change scope of interest rate.

If the interest rate increased or decreased by 0.5% (50 basic points), with the other variables remaining the same, the net profit in 2018 and 2017 of the consolidated company would respectively decrease or increase by NT$ 128 thousand and NT$ 172 thousand, this is mainly due to the variable interest rate of the loans.

Fair value
(1) Type and fair value of financial instruments

The financial assets and liabilities at FVTPL of the consolidated company are measured at fair value on the basis of repetition. The carrying amount and fair value of various financial assets and financial liabilities

(including fair value level information; the carrying amount of financial instruments not measured at fair value is the reasonable approximate of fair value, and the fair value information of equity instruments investment without quotation at active market that cannot be reliably measured at fair value does not have to revealed according to provisions) are listed as follows:

		2018.12.31	2018.12.31
Carrying amount $ 129,526		Fair value
	Level 1 -	Level 2 129,526	Level 3	Total
			-	129,526
$ 1,234 7,500	- -	1,234 7,500	- -	1,234 7,500
$ 8,734	-	8,734	-	8,734
$ 488,687	-	493,250	-	493,250
		2017.12.31
Carrying amount $ 243		Fairvalue
	Level 1 -	Level 2 243	Level 3	Total
			-	243
$ 2,550	-	2,550	-	2,550
$ 482,338	-	487,800	-	487,800

(2) Fair value evaluation technique of financial instruments at fair value

A. Non-derivative financial instruments

If there is open quotation to financial instruments at active market,

then the open quotation will be taken as fair value. The market price released by the central government bonds over-the-counter market for popular bonds as judged by major stock exchange serves as the basis for the fair value of public (counter) equity instruments and liability

instruments with open quotation at active market.

If the open quotation can be timely and regularly obtained from stock exchange, broker, underwriter, industrial union, pricing service institution or competent authority, and the price represents actual and regular transaction at fair market, then the financial instrument is deemed to have open quotation at active market. If the above conditions are not met, the market is deemed not active. Generally speaking, large difference in buying and selling price, significant increase of buying and selling price, and few transactions are indexes of market not active.

If the financial instruments held by the consolidated company fall into the active market, the type and nature according to fair value are listed as follows:

The public redeemable corporate bonds are financial assets and financial liabilities traded on active market according to standard terms and conditions, and the fair value is determined by reference to market quotation.

Except for the financial instruments at active market, the fair value of remaining financial instruments is obtained through evaluation technique or reference to the quotation of the other transaction party. The fair value obtained through evaluation technique can refer to the current fair value, cash flow discount method or other evaluation techniques for financial instruments with similar conditions and characteristics in essence, including utilization of market information model for calculation on the consolidated reporting date (for example, the over-the-counter market can refer to the yield rate curve and average quotation of Reuters commercial promissory note interest rate).

B. Derivative financial instruments

It is evaluated with evaluation model widely accepted by market users, such as discount method and option pricing model. Forward exchange contract is evaluated according to current forward exchange rate.

There is no event of fair value level shift of financial assets and financial liabilities in 2018 and 2017.

(XXV) Financial Risk Management
Overview

The consolidated company is exposed to the following risks due to use of financial instruments:

(1) Credit risk

(2) Liquidity risk

(3) Market risk

The Note represents the above risk exposure information, objectives of risk measurement and management, policies and procedures. Please refer to the Note in consolidated financial report for further quantitative information.

2. Risk management framework

The financial management department of consolidated company provides service to businesses, plans and coordinates operations in domestic and international financial market, and supervises and manages financial risks related to operation according to internal risk report of risk degree and risk exposure. The consolidated company avoids risk exposure through derivative financial instruments, to ease the influence. The utilization of derivative financial instruments is regulated by policies passed by the board meeting of the consolidated company, which serve as the written principle for utilization of exchange rate risk, interest rate risk, credit risk, derivative financial instruments and non-derivative financial instruments as well as investment of remaining working capital. Internal audit staff will continuously review the conformity to policies and risk exposure limit. The consolidated company hasn't conducted any transaction of financial instruments (including derivative financial instruments) for the purpose of speculation.

3. Credit risk

Credit risk refers to the risk of financial loss arising out of the failure to perform contract obligations on the part of customer or the other transaction party of financial instruments, mainly from accounts receivable from customers.

(1) Accounts receivable and other receivables

The financial department will establish credit granting policy with market department, and conduct analysis of credit rating of every individual customer before the consolidated company makes standard payment and delivery conditions and terms. The consolidated company review includes external ratings, if any, and under some conditions, bank note. The procurement limit is established for individual customers, namely the maximal uncollected amount without the approval from general manager. The limit is regularly reviewed. Customers not conforming to the standard credit rating of the Group can only conduct transaction with the consolidated company on the receivable in advance basis.

In monitoring the credit risk of customers, the consolidated company will group according to the credit characteristics of customers, including whether they are individual person or legal person; whether they are dealer,

retailer or final customer; and operation scale, goal realization rate of dealers, whether there is delayed payment. The main subject for accounts receivable and other receivables of the consolidated company is Group dealers. Customers rated with high risk will be included into the list of restricted customers and put under the monitoring of market department, and future sales with this type of customers will be conducted on the receivable in advance basis.

The consolidated company sets up allowance impairment loss account to reflect the estimated incurred cost in accounts receivable and other receivables. The main components of allowance account include specific loss components related to individual material risk exposure and portfolio loss components for already incurred yet unidentified loss in similar asset group. The portfolio loss allowance account is determined by historical payment statistical data of similar financial assets.

(2) Investment

The credit risks of bank deposit, fixed-revenue investment and other financial instruments are measured and monitored by the financial department of the consolidated company. Given that the transaction subject and other contract performing parties are banks with sound credit, financial institutions with investment level or above, corporate organizations and government authorities, there is no material credit risk for no material doubt about contract performance.

(3) Guarantee

The policy of consolidated company stipulates that financial guarantee can only be provided to fully-owned affiliated companies and companies with business interaction. Please refer to Note 13 (1) for details of endorsement or guarantee information for others by the consolidated company as of December 31, 2018.

4. Liquidity risk

Liquidity risk refers to the risk of the consolidated company failure to deliver cash or their financial assets to settle financial liabilities, or failure to perform relevant obligations. The method of the consolidated company in management of liquidity lies in ensuring as much as possible sufficient working capital to pay for due liabilities under normal and pressuring conditions, instead of undergoing unacceptable loss or risk of business reputation damage.

The consolidated company uses activity-based costing method to estimate the cost of its product and service, to assist in monitoring the cash flow demand

and most suitable investment cash return. Generally speaking, the consolidated company ensures to have sufficient cash to pay for expected operation expense demand for 60 days, including performance of financial obligations, but the potential influence that cannot be reasonably expected under extreme conditions is excluded, such as natural disaster. Besides, the unused loan limit as of December 31, 2018 and 2017 of the consolidated company was respectively NT$ 1,027,488 thousand and NT$ 1,085,988 thousand.

5. Market risk

Market risk refers to the risk of the value of revenue or held financial instruments being influenced by market price changes, such as exchange rate, interest rate, changes in price of equity instruments. The objective of market risk management lies in optimizing the investment return by controlling the market risk exposure within the bearable scope.

The consolidated company engages in transaction of derivative instruments to manage market risk, hence generating financial liabilities. The execution of all transactions must abide by the designated and authorized staff by the board of directors.

(1) Exchange rate risk

The consolidated company is exposed to exchange rate risk arising out of sales, procurement and loan transaction through functional currency valuation of the Group enterprises. The functional currency of the Group enterprises is mainly NTD, followed by RMB and HKD. The main valuation currency for this type of transaction includes NTD, JPY, USD and HKD.

To avoid decrease of foreign currency asset value and fluctuation of future cash flow caused by exchange rate change, the consolidated company uses short-term loan and derivative financial instruments to avoid it. The use of this type of derivative financial instruments can assist the consolidated company in lowering but not completely eliminating the influence caused by foreign exchange rate change. In recent years, 50% sales regions of the consolidated company come from China in valuation with RMB while the other 50% come from Europe, America, Japan and South Korea in valuation with USD and JPY; however, the purchase is mostly valuated with RMB, so apart from the natural hedge between sales and purchase for RMB, there is same effect for changes of exchange rate in different currencies. Apart from the natural hedge, the consolidated company still needs forward exchange transaction for hedge. However, with future growth of operation, the holding part of foreign currency by the consolidated company will continue to increase, and the domestic financing and future distribution of dividend to domestic investors will also need conversion in USD, so there will arise the

exchange rate change risk of USD to NT$. Therefore, the consolidated company will enhance the control over foreign exchange, and the possible measures were as follows:

A. Continue to enhance the concept of exchange hedge among financial staff, make judgement upon the exchange rate trend through online real-time system over exchange rate and relation with financial institutions as the basis for reference.
B. Use the sales revenue in the same currency as much as possible to support the expenditures for procurement and other expenses, to reach the effect of independent hedge.
C. Decide whether to adopt derivative financial instruments with hedge nature to avoid exchange rate risk according to the Company's operation status.
(2) Interest rate risk

The interest rate risk of the consolidated company mainly comes from fixed-interest rate loan. Although the interest rate at the currency market slowly climbs in recent years, it is still in the low end, so the loan interest rate of the consolidated company doesn't have material change. Only if the interest rate trend sees material fluctuation in the future and the consolidated company has continuous demand for loan, the consolidated company, apart from adopting other financing instruments at the capital market, has to also select fixed-interest rate or floating interest rate loan to avoid the risk of interest rate fluctuation.

(XXVI) Capital Management

The objective of capital management of the consolidated company lies in perfecting fundamental basis, maintaining the confidence of investors, creditors and market, and supporting the development of future operation. Capital includes the stock capital, capital reserve, retained earnings and other equity of the consolidated company. The Board of Directors controls the capital return rate and the common stock dividend level.

The capital management strategy of the consolidated company in 2018 was the same as in 2017. The liability capital ratio as of December 31, 2018 and 2017 was as follows:

follows:
Total amount of liability Less: cash and cash equivalents Net liability Total equities Liability capital ratio	2018.12.31	2017.12.31
	$ 5,893,119 (417,768) $ 5,475,351 $ 2,473,033 221.40%	5,235,994 (300,850) 4,935,144 2,597,142 190.02%

(XXVII)Financing Activities for Non-cash Transaction

The adjustment of liability for self-financing activities in 2018 of the consolidated company was as follows:

Short-term loan Long-term loan (including long-term loan due within one year) Refundable deposit Total amount of liability out of self-financing activities	2018.1.1	Cash flow 202,469 92,285 10,554 305,308	Non-cash changes Changes in exchange rates 14,778 (143) 4,206 18,841	2018.12.31 1,289,239 92,142 84,181 1,465,562
	$ 1,071,992 - 69,421 $ 1,141,413

VII. Transaction among Related Party

(I) Parent Company and Ultimate Controller

The Company is the ultimate controller of the consolidated company.

(II) Name and Relation of Related Party

Relationship with the consolidated

Name of related party company Zhejiang Airmate Electric Appliances Affiliated enterprise invested by the Sales Co Limited (hereinafter referred consolidated company through equity to as Zhejiang Airmate) method Tung Fu Electric Co Limited (hereinafter Its chairman of board is the same for the referred to Tung Fu Electric) Company.

All directors, supervisors, main management like general manager and deputy general manager of the consolidated company

(III) Substantial Transaction with Related Party

Operation revenue

The substantial sales amount of the consolidated company to related party were as follows:

Affiliated enterprises Zhejiang Airmate Other related party Tung Fu Electric	2018		2017
	170,085 181,896 351,981		184,561 62,056 246,617

There is no significant difference between the sales conditions and general sales prices from consolidated company to related party. There is no significant difference between the payment collection period and general dealers. Payment receivable among related party, for which no collateral security has been received, does not need to be recognized into impairment loss after evaluation.

2. Payment receivable from related party

The details of payment receivable from related party by the consolidated

company were as follows:

Recognition items	Type of related party	2018.12.31 $ 49,817 51,630	2017.12.31 42,380 2,650
Notes receivable and accounts receivable Notes receivable and accounts receivable
	Affiliated enterprises Other related party
		$ 101,447	45,030

3. Advance paid to related party

Relevant expenses arising from services provided by related party to the consolidated company were as follows:

Transaction amount	Transaction amount	Other payable payment to related party	Other payable payment to related party
2018	2017	2018.12.31	2017.12.31
$ 12,231 68 $ 12,299	12,750 51	6,312 8 6,320	8,516 6 8,522
	12,801

The outstanding balance with this type of related party shall be settled with cash three days within the reporting date, and for common expenses the payment has to be made in that same month. There is no significant difference between the transaction price and general transaction.

For the financing from financial institutions as of December 31, 2018 and 2017 by the consolidated company, its main management and other related party act as the joint guarantor.

(IV) Major Managerial Personnel Transactions

Remuneration of major managers includes:

Short-term employee benefits After-retirement benefits	2018	2017 43,576 146 43,722
	$ 31,968 20,245 $ 52,213

VIII. Pledged Assets

The details of carrying value of pledged assets by the consolidated company were as

follows:

Name of assets	Pledge guarantee object	2018.12.31 $ 19,652 61,891 205,932	2017.12.31
Other current assets: Other financial assets-current (account for compensation) Other financial assets-current (account for compensation) Other financial assets-current (pledged	Short-term loan and financing limit Notes payable Corporate bonds guarantee		- - -

deposit and account for compensation) limit Property, plant and equipment Short-term loan and financing limit Advanced rent and long-term advanced rent: Land use right Short-term loan and financing limit Other noncurrent assets Other financial assets-noncurrent (pledged deposit and account for compensation)- Corporate bonds guarantee limit Refundable deposit Long-term loan	290,317 - - 13,843	356,597 9,630 110,126 -
	$ 591,635	476,353

IX. Significant contingent liability and unrecognized contract commitment

(I) Significant unrecognized contract commitement

The consolidated company and Jiujiang economic development zone signed a business solicitation project contract, to the commitment that from 2015 the sales revenue of Jiujiang Airmate in the territory of China should not be less than RMB 1.4 billion, and the settlement share of marketing sales for domestic sales of products should increase every year, all should be transferred from Shenzhen to Jiujiang within three years, and the cumulative sales revenue for domestic sales in the territory of China of RMB 4.5 billion shall be realized. If the above conditions were met, Jiujiang economic and technological development management committee agreed to transfer the plant and land use right at RMB 360 million with a period of 50 years. The transfer payment would be paid in three years starting from July 2017, and by December 31, 2018, the already paid amount reached RMB 180 million (NT$ 803,954 thousand) and was recognized into advance of land use right. Please refer to Note 6 (9) for details.

(II) Contingent Liability
The accepted bank acceptance bills for tri-partisan sales contract signed with the consolidated company followed the bank operation and practice in China. As of December 31, 2018, there was still NT$ 421,266 thousand remaining to obtain the "delivery notice" from bank, hence exposing itself to possible credit risk. If the consolidated company conducts evaluation based on previous operation experience, cooperation practice and credit rating of dealers, there is no high possibility for occurrence of the risk.
Endorsement and guarantee
- (1) The amount of endorsement and guarantee provided by the consolidated company to the Company and affiliated companies was as follows:

2018.12.31 2017.12.31 Endorsement and guarantee limit $ 6,279,328 6,118,066

Actual disbursement amount

$ 3,402,001

2,234,294

(2) The house property mortgage amount by Airmate Electric Appliances
(Shenzhen) Co Limited to Shenzhen Baoan TLC Haichuanggu

Technological Park Development Co Limited for business demand was as follows:

follows:
Endorsement and guarantee limit Actual disbursement amount	2018.12.31	2017.12.31 548,117 548,117
	$ - $ -

X. Material Disaster Loss: None

XI. Material Subsequent Events: None

XII. Others

(I) A summary of personnel costs, depreciation, depletion, and amortization according to

type of function was as follows:

Type of function Type of nature	2018	2018	2018	2017	2017	2017
	Falling into operation cost	Falling into operation expense	Total	Falling into operation cost	Falling into operation expense	Total
Employee benefit expense Salary expense Labor protection expense Retirement fund expense Other employee benefit expenses Depreciation expense Amortization expense	1,478,811 45,184 57,980 3,525 396,154 2,175	407,403 49,964 41,666 12,874 60,936 10,887	1,886,214 95,148 99,646 16,399 457,090 13,062	1,417,179 35,713 96,287 3,002 381,028 1,830	402,910 12,987 33,880 10,146 63,624 13,893	1,820,089 48,700 130,167 13,148 444,652 15,723

(Note): including insurances like local medicare, disemployment, work injury and birth for affiliated companies in Mainland China.

(II) Operation Seasonality:

The consolidated company is mainly engaged in sales of bi-seasonal products like electric fan and electric heater, so it will see seasonal fluctuation for influence of weather. Among them, the sales of electric fan in Q1 every year is unfavorably influenced by winter weather conditions; downstream customers will order in

(III)

advance in Q2 for demand of electric fan in summer and in Q4 for demand of electric heater in winter; in July it will depend on the weather changes; and in August to September, it will maintain. The consolidated company has flexibly adjusted the production of electric fan, electric heater and other categories according to market adjustment, weather changes and customer demand, and attempted to satisfy the supply-demand with inventory management, to lower the seasonal influence. Old plant land development project

The consolidated company signed the Shenzhen industrial zone old plant land development plan with Shenzhen Baoan TCL Haichuanggu Technological Park Development Co Limited (hereinafter referred to as TCL Haichuanggu) and Shenzhen TCL Real Estate Co Limited for joint cooperation and development on June 3, 2016, and would collect compensation of RMB 200 million (NT$ 893,282 thousand), for moving resettlement, transition resettlement, property relocation and production loss. After the agreement came into force and effect, TCL Haichuanggu had already paid the consolidated company RMB 120 million (NT$ 535,969 thousand, recognized into other noncurrent liability-others). The consolidated company had completed all land acquisition and buildings relocation and handover within the demolition scope of old plant by July 10, 2018, signed "application form for renovation execution subject confirmation", and cooperated in handling commissioned notary procedures of property right cancellation and updating the construction application work. Through resolution of meeting of shareholders on January 6, 2018, Shenzhen Luozu Cooperation Co Limited decided to cooperate with TCL Haichuanggu for the Shenzhen industrial zone old plant land development project. It was passed through resolution of meeting of shareholders of Shenzhen Luozu Cooperation Co Limited that within five work days after the consolidated company obtained relevant notarization, TCL Haichuanggu needed to pay demolition compensation of RMB 33,420 thousand (NT$ 149,267 thousand). So on July 20, 2018, remaining compensation was received from TCL Haichuanggu,mounting to RMB 80,000 thousand (NT$ 357,313 thousand), less the demolition compensation of RMB 33,420 thousand (NT$ 149,267 thousand) disbursed by TCL Haichuanggu to Shenzhen Luozu Cooperation Co Limited, making the compensation RMB 46,580 thousand (NT$ 208,046 thousand).

In accordance with the provisions of "accounting disposal doubts about participation in urban upgrading" in IFRS Q&A set released by Accounting Research Development Fund on October 2, 2017, the carrying amount of old buildings and

demolition compensation and resettlement expenses collected from construction company is calculated as right transformation expense to be undertaken (offset by distributed land and building discount after it), and based on returnable building and the land, so it falls into part of urban upgrading with participation of land holders in essence, and enterprise has to adjust it as old land carrying amount. Therefore, the consolidated company after commencement of the development project would expect to collect in advance compensation RMB 200,000 thousand (NT$ 893,282 thousand) from for Shenzhen industrial zone old plant land development project and carrying amount of deferred development cost for fixed assets old building RMB 20,435 thousand (NT$ 91,273 thousand), long-term advanced rent RMB 2,159 thousand (NT$ 9,643 thousand) and the carrying amount of other input cost for relevant development project RMB 39,811 thousand (NT$ 177,812 thousand), which should be represented into other noncurrent liability-others as net amount. Please refer to Note 6 (7), 6 (9) and 6 (11) for details.

XIII. Note of Disclosures

(I) Information about significant transactions:

Relevant information about significant transactions to be re-disclosed by the consolidated company in 2018 in accordance with the securities issuer financial report preparation standards was as follows: 1. Capital loaned to others

Unit: thousand NT$

S/N (Note 1)	Loaned capital Companies	Loan Subject	Transaction Accounts	Whether related or not Person	The most...for the period High amount	At the end of the period Balance	Actual disbursement Outgoing amount	Interest rate Range	Capital Loan Nature (Note 2)	Transaction Incoming amount	Short-term financing capital Main reason	Must be recognized as allowance loss Amount	Collater	alsecurity	Capital loan to some subjects Limit amount (Note 3, 4)	Capital loans Total limit (Note 3, 4)
													Name	Value
1 2 2	Airmate International Co Limited China Waon Development Co Limited Waon Development Co Limited	Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited The Company	Long-term receivable payment - related party Long-term receivable payment-related party Other receivable payment - related party	Yes Yes Yes	617,467 561,215 1,380,000	615,797 535,969 1,000,000	615,797 397,849 892,267	2.5% 2.5% -	2 2 2	- - -	Operating turnover Operating turnover Operating turnover	- - -		- - -	1,837,404 1,529,589 1,223,671	3,674,807 3,059,177 3,059,177

Note 1: The filling method of S/N is as follows:

Fill 0 for company.
The invested company is numbered according to type from the Arabic number 1 in sequence.

Note 2: The filling method of capital loan is as follows:

Fill 1 for business transaction.
Fill 2 for necessary short-term financing capital.
Note 3: The highest limit of capital loan is 40% net value in the latest financial report of the Company, and the limit of capital loan for single enterprise cannot go over 20% net value of the Company. In affiliated companies where the Company directly or indirectly holds voting shares, for the same loan subject the authorization from the chairman has to be obtained for not going over 40% net value of the Company. Among the affiliated company where the Company directly or indirectly holds 100% voting shares, the capital loan and limit are not restricted by the above provision, but the financing amount cannot go over 100% net value in the latest financial statement; only for some subjects, the

financing amount cannot go over 50% net value in the latest financial statement of the loan company to a period of 10 years. In the event of business transactions with the Company, the individual capital loan and amount is limited by the capital loan and business transaction amount in the latest one year or in the same year between the two parties. The business transaction amount refers to the purchase or sales amount between them, whichever is higher.

Note 4: Te above transactions have been written off in preparing the consolidated financial report.

2. Endorsement or guarantee for others

Unit: NT$000

S/N (Note 1)	Endorsement or guarantee Name of certifier company	Subject of endorsement or guarantee(Note 2)	Subject of endorsement or guarantee(Note 2)	Single enterprise Endorsement or guarantee limit (Note 3)	Highest endorsement or guarantee amount for current period Endorsement or guarantee balance	Endorsement at the end of the period Endorsement or guarantee balance (Note 4)	Actual disbursement Disbursed amount	Guarantee with property Endorsement or guarantee amount	Cumulative endorsement or guarantee amount Ratio in net value of latest financial statement	Endorsement or guarantee Highest limit (Note 3)	to parent company Endorsement or guarantee to affiliated companies	to affiliated company Endorsement or guarantee to parent company	to Mainland China Regional endorsement orguarantee
		Name of company	Relation
0 0 0 0 1 2 3	The Compnay The Company the Company The Company Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Waon Development Co Limited	Waon Development Co Limited Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Shenzhen) Co Limited, Airmate Electric Appliances (Jiujiang) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Airmate Electric Appliances (Shenzhen) Co Limited Airmate (Cayman) International Co Limited	2 2 2 2 4 4 3	4,924,742 4,924,742 4,924,742 4,924,742 4,361,414 4,473,164 6,118,354	2,847,860 (USD 92,000 thousand) 186,801 (RMB 40,000 thousand) 56,122 (RMB 12,000 thousand) 44,960 (RMB 10,000 thousand) 1,453,712 (RMB 328,000 thousand) 1,739,767 (RMB 372,000 thousand) 402,507 (NT$ 402,507 thousand)	2,549,345 (USD 83,000 thousand) 178,656 (RMB 40,000 thousand) 53,597 (RMB 12,000 thousand) 44,664 (RMB 10,000 thousand) 1,389,054 (RMB 311,000 thousand) 1,661,505 (RMB 372,000 thousand) 402,507 (NT$ 402,507 thousand)	657,563 156,324 53,597 44,664 699,880 1,387,466 402,507	- - - - - - -	103.53% 7.26% 2.18% 1.81% 63.70% 74.29% 13.16%	12,311,855 12,311,855 12,311,855 12,311,855 10,903,535 11,182,910 15,295,885	Y Y Y Y	Y	Y Y Y Y Y

Note 1: The filling method of S/N is as follows:

Fill 0 for company.
The invested company is numbered according to type from the Arabic number 1 in sequence.
Note 2: The relation between endorsement guarantor and the subject of endorsement or guarantee is as follows:
Companies with business transactions.
Companies where the Company directly or indirectly holds over 50% voting shares.
Companies which directly or indirectly hold over 50% voting shares in the Company.
Among companies where the Company directly or indirectly holds over 90% voting shares.
Companies endorsement guaranteed by all contributing shareholders according to their shareholding ratio for joint investment relation.
Mutually guaranteed companies among counterparts or co-constructors based on the need for undertaking projects.
Joint and several guarantee for performance in engaging in preselling house contract among counterparts in accordance with consumer protection law.
Note 3: For companies with business transaction, the ceiling of endorsement or guarantee is 40% net value in the latest financial report of the Company, and for individual subjects it is the amount of business transaction; the total amount of endorsement or guarantee for companies where the Company directly or indirectly holds over 50% voting shares, it is limited by 40% net value of the Company, and for individual subjects, it is limited by the investment amount. Among the affiliated companies 100% invested by the Company, the endorsement or guarantee limit is 500% net value in the latest financial report, and for individual subjects it is 200% net value in the latest financial report. For those with business transaction with the Company, individual endorsement or guarantee amount is limited by the amount of business transaction among them. The above mentioned amount of business transaction refers to purchase or sales amount, whichever is higher.
Note 4: exchange rate in financial report: USD:NTD=1:30.7150, RMB:HKD=1:1.1391, HKD:NTD=1:3.9210 in translation.

Holding of negotiable securities at the end of the period (excluding the part of invested affiliated companies, associated enterprises and joint ventures equity): none.
Cumulative amount of buying or selling negotiable securities to reach NT$ 300 million or over 20% of acutually received capital: none.
The amount of acquiring property to reach NT$ 300 million or over 20% of actually received capital: none.
The amount of disposing of property to reach NT$ 300 million or over 20% of actually received capital: none.
The amount of purchase and sales with related party to reach NT$ 100 million or over 20% of actually received capital:

Unit: NT$ thousand

Purchase (sales) companies	Transaction subject Name	Relation	Transaction situation	Transaction situation	Transaction situation	Transaction situation	Situation and reason for difference between transaction condition and common transaction	Situation and reason for difference between transaction condition and common transaction	Situation and reason for difference between transaction condition and common transaction	Notes and accounts receivable (payable)	Notes and accounts receivable (payable)	Note
			Purchase (sales)	Amount	Ratio of total purchase (sales)	Credit granting period	Unit price	Credit granting period	Balance		Ratio in total notes and accounts receivable (payable)
Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Waon Development Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Zhejiang Airmate Electric Appliances Sales Co Limited Airmate Electric Appliances (Shenzhen) Co Limited	Waon Development Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Zhejiang Airmate Electric Appliances Sales Co Limited Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Shenzhen) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Airmate Electric Appliances (Jiujiang) Co Limited	Parent-subsidiary company Affiliated companies Invested companies where the affiliated companies hold 40% equity Affiliated companies Parent-subsidiary company Affiliated companies Invested companies where the affiliated companies hold 40% equity Affiliated companies	Sales Sales Sales Sales Purchase Purchase Purchase Purchase	(4,257,750) (922,417) (170,085) (97,040) 4,257,750 922,417 170,085 97,040	(80) % (17) % (3) % (1) % 99 % 32 % 88 % 3 %	Collection according to operation status Collection according to operation status Monthly payment 30-90 days Collection according to operation status Collection according to operation status Collection according to operation status Monthly payment 30-90 days Collection according to operation status	- - - - - - - -		1,977,978 201,303 49,816 - (1,977,978) (201,303) (49,816) -		89% 9% 4% -% (91)% (27)% (52)% -%

Note: The above transactions, except for Zhejiang Airmate Electric Appliances Sales Co Limited, had been written off in preparing the consolidated financial report.

The receivables from related party to reach NT$ 100 million or 20% of actually received capital amount:

Unit: NT$ thousand

Recognition of receivables Company	Transaction subject Name	Relation	Receivable related party Payment balance (Note): including insurances like local medicare, disemployment, work injury and birth for affiliated companies in Mainland China.	Turnover rate	Overdue receivables from related party	Overdue receivables from related party	Accounts receivable from related party Recovered amount after the period	Recognition of allowance Lost amount
					Amount	Disposal means
Waon Development Co Limited Waon Development Co Limited Airmate International Co Limited China Airmate Electric Appliances (Shenzhen) Co Limited	the Company Airmate Electric Appliances (Jiujiang) Co Limited Airmate Electric Appliances (Shenzhen) Co Limited Waon Development Co Limited	Parent-subsidiary company Parent-subsidiary company Parent-subsidiary company Parent-subsidiary company	892,267 397,849 615,797 1,977,978	-% -% -% 215.26%	- - - -	- -	- - - -	- - - -

Note: the above transactions had been written off in preparing the consolidated financial report.

Engagement in derivative instruments transaction:

Please refer to Note 6 (2) for details of consolidated financial report.

10. Parent-subsidiary company business relation and important transactions:

S/N	Name of transactionparty	Transaction subject	Transaction Relation		Transaction	Transaction
				Accounts	Amount	Transaction condition	Ratio in total revenue or assets
0 1 1 2 2 2 2 2 3 3 3 3 3 4	The Company Airmate China Airmate China Airmate Shenzhen Airmate Shenzhen Airmate Shenzhen Airmate Shenzhen Airmate Shenzhen Waon Company Waon Company Waon Company Waon Company Waon Company Airmate Jiujiang	Waon Company Airmate Shenzhen Airmate Shenzhen Airmate Jiujiang Airmate Jiujiang Airmate Jiujiang Waon Company Waon Company Airmate International Airmate China Airmate Shenzhen Airmate Shenzhen Airmate Jiujiang Airmate Shenzhen	1 1 1 3 3 3 2 2 2 2 1 1 1 3	Other receivables Long-term receivables Interest revenue Other receivables Sales Other revenues Sales Accounts receivable Other receivables Other receivables Accounts payable Other payables Long-term receivables Sales	892,267 615,797 11,899 121,299 922,417 60,057 4,257,750 1,977,978 270 237 1,977,978 162,490 397,849 97,040	Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection Collection according to its own collection	11% 7% -% 1% 8% 1% 40% 24% -% -% 24% 2% 5% 1%

Note 1: The filling method of S/N is as follows:

0 represents parent company.
The subsidiaries are coded from "1" in the order presented in the table above.

Note 2: The type of relations with transaction party is marked as follows:

Parent company to subsidiary.
Subsidiary to parent company.

  3. Subsidiary to subsidiary.

Note 3: For business relations and important transactions between parent-subsidiary companies, only the date about sales and accounts receivable is disclosed, to the exclusion of the other party's sales and accounts receivable.
(II) Relevant information about reinvestment business

The information about reinvestment business of the consolidated company in

2018 (excluding invested companies in Mainland China) is as follows:

Unit: thousand NT$/thousand shares

Investment companies Name	Invested companies Name	Location Region	Main business Project	Initial invest	ment amount	Holding at	the end of t	he period	Highest during the period Shareholding or Contribution	Invested companies Profit or loss for the period (Note 4)	Recognized for this period Investment profit or loss (Note 2)	Note
				At the end of the period (Note 1)	End of last yea (Note 1)	r Number of shares	Ratio	Carrying amount (Note 2)
The Company Airmate International Holding Co Limited Airmate International Co Limited China	Airmate International Holding Co Limited Airmate International Co Limited China Waon Development Co Limited	Virgin Islands Virgin Islands Hong Kong	Controlling company Controlling company Trading company	1,964,977 (USD 63,974 thousand) 2,142,716 (USD 69,761 thousand) 3,216,389 (HKD 820,298 thousand)	1,964,977 (USD 63,974 thousand) 2,142,716 (USD 69,761 thousand) 3,216,389 (HKD 820,298 thousand)	63,974 69,761 -	100.00% 100.00% 100.00%	3,674,605 3,674,807 3,059,177	100.00% 100.00% 100.00%	66,242 66,313 35,605	66,242 i s c t 66,313 i s c t 35,605 i s c t	Directly nvested ubsidiary ompanies of he Company Directly nvested ubsidiary ompanies of he Company Directly nvested ubsidiary ompanies of he Company
	Note 1: The exchange rate on financial reporting date: USD:NTD1.30.7150, RMB:HKD1:1.1391,HKD:NTD=1:3.9210 in translation. Note 2: The above transactions had been written off in preparing the consolidated financial report.

(III) Mainland China investment information:

Relevant information about name, main business itens of invested companies in

Mainland China

Unit: NT$ thousand

Invested companies in Mainland China Name of company	Main business Item	Actual receipt Capital amount (Note 4)	Investment Mode (Note 1, 5)	Cumulative remittance from Taiwan at the beginning of the period Cumulative investment amount (Note 2)	Remitted or recovered investment amount for the period	Remitted or recovered investment amount for the period	Cumulative remittance from Taiwan at the end of the period Cumulative investment amount (Note 2)	Invested companies Profit or loss for the period	Direct or indirect investment by the Company Shareholding ratio	Highest during the period Share holding or Contribution	Investment recognized for the period Profit or loss (Note 3, 6)	Investment at the end o the period Carrying amount of capital Value (Note 6)	f Repatriation by the end of the period Investment return
					Remittance	Recovery
Airmate Electric Appliances (Shenzhen) Co Limited Zhejiang Airmate Electric Appliances Sales Co Limited Airmate Electric Appliances (Jiujiang) Co Limited Shenzhen Airmate Technology Co Limited	Manufacturing and sales of household appliances and processing precision mold Sales of electric appliances Manufacturing and sales of household appliances and processing precision mold Sales, research and development of household appliances	NT$ 982,880 (USD 32,000 thousand) 46,897 (RMB 10,500 thousand) 2,236,052 (USD 72,800 thousand) NT$ 44,664 thousand (RMB 10,000 thousand)	(II) (III) (II) (III) (III)	- - - -	- - - -	- - - -	- - - -	(34,664) 3,234 4,918 (7,072)	100.00% 40.00% 100.00% 51.00%	100.00% 40.00% 100.00% 51.00%	(34,664) 1,293 4,918 (3,607)	2,180,707 30,045 2,236,582 11,009	- - - -

2. Investment ceiling in Mainland China

2. Investment ceiling	in Mainland China
Cumulative investment amount remitted from Taiwan to Mainland China at the end of the period	Investment amount approved by Investment Review Committee of Ministry of Economy	Investment ceiling in Mainland China according to provisions of Investment Review Committee of Ministry of Economy
(Note2)	(Note2)	(Note2)
Note 1: Investment modes can be divided into the following three types: 1. Going directly to Mainland China for investment. 2. Reinvestment in Mainland China through a third region (Waon Development Co Limited). 3. Others Note 2: The Company is an overseas company, so it is not bound by the limitations of "review principles on investment or technological cooperation in Mainland China". Note 3: The financial reports audited by CPAs of the invested company during the same period will be recognized. Note 4: Exchange rate on financial reporting date: USD:NTD1:30.7150, RMB:HKD=1:1.1391, HKD:NTD=1:3.9210 in translation. Note 5: For the above transactions, the invested mode of Airmate Electric Appliances (Jiujiang) Co Limited included: (II) reinvestment in Mainland China through a third region (Waon Development Co Limited) and (III) other modes (reinvestment through Airmate Electric Appliances (Shenzhen) Co Limited). Note 6: The above transactions, except for Zhejiang Airmate Electric Appliances Sales Co Limited, had been written off in preparing the consolidated financial report.

3. Substantial transactions:

Please refer to the description of "relevant information about substantial transactions" and "business relation and substantial transactions between parent-subsidiary companies" for direct or indirect substantial transaction between the consolidated company and invested companies in Mainland China in 2018.

XIV. Department Information

(I) General information

The consolidated company has two report departments: domestic sales market and export sales market, with the former responsible for sales in Mainland China. The latter is responsible for sales in Northeast Asia, Europe and America.

(II) Information involving profit or loss, asset, liability and measurement basis and adjustment of report department

The consolidated company takes the departmental before-tax profit or loss (excluding income tax, non-frequently occurring profit or loss, financial asset (liability) profit or loss at fair value and exchange profit or loss) in internal management report reviewed by major operation decision-makers as te basis for resources allocation and evaluation of performance by the management. Because the income tax, non-frequently occurring profit or loss, financial asset (liability) profit or loss at fair value and exchange profit or loss are managed on the Group basis, so the consoliated company has not apportioned them to report departments. The reported

amount is consistent with report used by operation decision-makers.

The accounting policies of operation department are the same as the "summary description of substantial accounting policies" in Note 4. Transfer pricing among departments of the consolidated company is based on similar conventional transaction with a third party.

The information and adjustment of operation department of the consolidated company were as follows:

	2018	2018
Domestic sales market	Export sales market	Adjustment and elimination	Total
			10,614,940 - 66,896
$ 6,037,995 1,019,458 56,541	4,576,945 4,257,988 22,254	- (5,277,446) (11,899) (5,289,345) 11,899 - - 3,970
$ 7,113,994	8,857,187		10,681,836
$ (86,270)	(35,680)		(110,051)
$ (289,076)	(181,076)		(470,152)
$ 1,293	-		1,293
$ 103,591	(35,294)		72,267

	2017	2017
Domestic sales market	Export sales market	Adjustment and elimination	Total
			10,024,202 - 55,055
$ 5,945,645 2,283,801 53,367	4,078,557 3,962,131 12,379	- (6,245,932) (10,691) (6,256,623) 10,690 - - (5,659)
$ 8,282,813	8,053,067		10,079,257
$ (67,419)	(16,386)		(73,115)
$ (293,903)	(166,472)		(460,375)
$ 2,665	-		2,665
$ 19,245	(6,251)		7,335

The total revenue amount of report department in 2018 and 2017 should eliminate inter-departmental revenue 5,289,345 thousand NT$ and 6,256,623 thousand NT$, respectively; the profit or loss adjustment item of report department in 2018 and 2017 was financial asset net loss at fair value and exchange gain (loss) amounting to respectively NT$ 3,970 thousand and NT$ 5,659 thousand.

(III) Information of product category

The information of revenue from external customers for the consolidated

company was as follows:

(IV)	Product name Electric fan Electric heater Others Regional information Region Revenue from external customers: Mainland China Japan South Korea Other countries Total Noncurrent Assets: Mainland China and Hong Kong	2018		2017
		$ 6,778,857 2,922,860 913,223 $ 10,614,940 2018		6,584,020 2,399,374 1,040,808 10,024,202 2017


		$ 5,847,769 1,662,518 1,144,974 1,959,679 $ 10,614,940 $ 3,225,259		5,804,660 1,449,474 1,210,317 1,559,751 10,024,202 3,225,539

The noncurrent assets include investments accounted using equity method, properties, plants and equipment, intangible assets and other assets, to the exclusion of financial instruments and deferred income tax assets.

(V) Information of major customers

Customer of export sales market department	2018		2027
	$ 834,022		752,633

AI assistant

AIRMATE — Audit Report / Information 2018

51888_rns_2018-11-05_61da37b1-6858-451a-bc35-e9ee04bea911.pdf

Table of Content

Representation Letter

Independent Auditors’ Report

Opinion

Basis of Audit Opinion

Key Audit Matters

I. Revenue recognition

II.

Responsibility of the management and the governing body for the Consolidated Financial Statements

Accountant's responsibility in auditing consolidated financial statement

4.

5.

6.

Note to Readers

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries

Consolidated Balance Sheets December 31, 2018 and 2017

Unit: thousand NT$

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Comprehensive Income

For the years ended December 31, 2018 and 2017

Unit: thousand NT$

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Changes in Equity For the years ended December 31, 2018 and 2017

Unit: thousand NT$

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Cash Flows For the years ended December 31, 2018 and 2017

Unit: thousand NT$

(English Translation of Consolidated Financial Statements and Report Originally Issued in Chinese) Airmate (Cayman) International Co Limited and Subsidiaries Consolidated Statement of Cash Flows 2018 and January 1 to December 31, 2017

Unit: thousand NT$

Airmate (Cayman) International Co Limited and Subsidiaries Notes of Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

(The unit for all amounts expressed are in thousands of NTD unless otherwise stated)

I. Company History

II. Approval Date and Procedures of Financial Statements

III. Application of Newly Released and modified Guidelines and Interpretations

(2) Commission

(3) Impact on financial statements

2. IFRS 9 "Financial Instruments"

(1) Categorization of financial assets and liabilities

(4) Classification of financial assets on the first application date of IFRS 9.

IV. Summary Description of Material Accounting Policies

(III) Basis of consolidation

(IV) Foreign currency

1. Foreign currency transaction

(3) Impairments of financial assets

(4) Derecognition of financial liabilities

(VIII)

(IX)

(XI)

1. Lesser

2. Lessee

(XIX) Employee benefits

1. Defined promotion plan

2. Defined benefit plan

V. The Primary Sources of Uncertainties in Major Accounting Judgments, Estimates, and Assumptions

VI. Description of major accounting items

(II) Financial Assets and Liabilities Measured at FVTPL

(V) Inventory

(VI) Investments Accounted for Using Equity Method

1. Affiliated enterprises

2. Guarantee

(VII) Poperty, Plant and Equipment

(VIII) Intangible Assets

(X) Short-term Loan

2. Refund liability

(XIII)

B. Reverse repurchase method:

2. Situations of redemption and reverse repurchase

(1) Components of plan assets

(2) Change in present value of defined benefit obligation

(4) Change of asset upper limit impacts

(5) Expenses recognized as profit or loss

(7) Actuarial assumption

(8) Sensitivity analysis

2. Defined contribution plan

(XVII) Income Taxes

1. Income tax expenses

3. Situations of income tax verification

4. Income tax administrative relief

(XVIII) Capital and other equity

AIRMATE Audit Report / Information 2018