Altek - Annual Report 2018 | FinancialReports.eu

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I. Letter to Shareholders .......................................................................................................... 1 II. Company Profile ................................................................................................................... 3 2.1 Date of Incorporation ..................................................................................................... 3 2.2 Company History ............................................................................................................ 3 III. Corporate Governance Report ............................................................................................ 5 3.1 Organization ................................................................................................................... 5 3.2 Directors and Management Team ................................................................................. 6 3.3 Remuneration of Directors, Supervisors, President, and Vice President .................... 13 3.4 Implementation of Corporate Governance.................................................................. 20 3.5 Information of Audit Fee ............................................................................................. 51 3.6 Information of replacement of CPA ............................................................................. 52 3.7 Altek’s Chairman, President, Chief Financial Officer, or managers in charge of its finance and accounting operations hold any position in the Company’s independent auditing firm or its affiliates in 2018 ...................................................... 52 3.8 Equity Transfer and Changes in Equity Pledge of Directors, Supervisors, Managers and Shareholders Holding More than 10% of the Shares ........................................... 53 3.9 Relationship among the Top Ten Shareholders ........................................................... 54 3.10 Ownership of Shares in Affiliated Enterprises ........................................................... 55 IV. Capital Overview ............................................................................................................... 56 4.1 Capital and Shares ........................................................................................................ 56 4.2 Bonds ............................................................................................................................ 60 4.3 Preferred Stock. ............................................................................................................ 60 4.4 Global Depository Receipts. ......................................................................................... 60 4.5 Employee Stock Options .............................................................................................. 61 4.6 Restricted Employee Shares ......................................................................................... 63 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions. .......... 64 4.8 Financing Plans and Implementation ........................................................................... 64 V. Operational Highlights ....................................................................................................... 65 5.1 Business Activities ........................................................................................................ 65 5.2 Market and Sales Overview .......................................................................................... 68 5.3 Human Resources ......................................................................................................... 75

5.4 Environmental Protection Expenditure ....................................................................... 75 5.5 Labor Relations ............................................................................................................. 76 5.6 Important Contracts ..................................................................................................... 79 VI. Financial Information ........................................................................................................ 80 6.1 Five-Year Financial Summary ....................................................................................... 80 6.2 Five-Year Financial Analysis .......................................................................................... 84 6.3 Audit Committee’s Review Report for the Most Recent Year ..................................... 87 6.4 Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017 ............................................................................................................................. 88 6.5 Separate Financial Statements for the Years Ended December 31, 2018 and 2017 . 157 6.6 Difficulty in Financial Turnover of the Company and its Affiliated Companies ......... 158 VII. Review of Financial Conditions, Financial Performance, and Risk Management ......... 159 7.1 Analysis of Financial Status ........................................................................................ 159 7.2 Analysis of Financial Performance ............................................................................. 160 7.3 Analysis of Cash Flow ................................................................................................. 161 7.4 Major Capital Expenditure Items and Impact on Finance and Business. ................... 161 7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year .............................. 161 7.6 Analysis of Risk Management .................................................................................... 161 7.7 Other Important Items ............................................................................................... 164 VIII. Special Disclosure ......................................................................................................... 165 8.1 Profile of Affiliated Companies .................................................................................. 165 8.2 Private Placement of Securities in the Most Recent Years ........................................ 172 8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years........................................................................................................................... 172 8.4 Other Mentionable Items. .......................................................................................... 172 8.5 Any Event Having a Material Impact on Shareholders' Rights and Interests or Securities Prices stipulated in Subparagraph 2, Paragraph 3, Article 36 of the Securities and Exchange Act ...................................................................................... 172

I. Letter to Shareholders

2018 was a challenging year for Altek that confronted with the fast change in transforming technologies, innovations of applications and services, and the new consumer behaviors and corporate business models. Moreover, the market competitions are even more severe due to the rise of national protectionism that will cause the weaken growth in developed countries and the political risk is still existing in emerging markets. The climate change, strict labor regulations, and rising wages are also the uncertainties in the near future. With all of the supports from all shareholders and colleagues, Altek has continued to transform and escalate on specialized territory of digital imaging fields in recent years. The consolidated revenue was NT$11.2 billion in 2018, representing an increase of approximately 6% YoY growth rate. The net income was NT$130 million with NT$0.48 per share which showed a significant growth comparing the year of 2017.

Altek has been deeply developing in digital imaging fields more than 20 years with complete software and hardware solutions, ASIC chip design, and algorism capabilities. Altek has defined as the Vision AI company and the market has proclaimed as "biometric application" since last year. The AI intelligent identification technology with deep learning is gradually spreading over various industries, such as smart home, retails, manufacturing, and medicals etc. Altek is already to participate the trend of AI through cooperating with major international giant players such as Qualcomm, Microsoft, and Amazon. We also cooperate with domestic leading software company CyberLin to provide Edge Vision AI solutions for diversified industry applications. Altek is ready to launch various AI related products which include AI surveillance system for home and industry, Vision AI Chip, and 3D sensing solutions. We are optimistic to gain market attentions by Altek‘s capabilities, strategic partnerships and the wide-spread usage for the applications of vison AI. Furthermore, medical electronic devices have been developing for many years in Altek, such as glucose meters, insulin injection system and disposable endoscope that would ensure the steady growth in this year.

Looking to the future, Altek will continue to bring up the vision AI field to strengthen its technology capabilities, competitiveness, and collaboration with customers and suppliers to

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gain more market shares. The company's management team and all employees are going to make the best efforts to face the challenges, strengthen execution to increase the growth and profitability. Altek is expecting to achieve higher shareholders’ value.

One more time we would like to thank our shareholders for your kindly supports and encouragement to the Company.

Chairman & CEO

Alex Hsia

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II. Company Profile

2.1 Date of Incorporation

December 24, 1996.

2.2 Company History

1996 Founded as “Asia Imagination corporation” to engage in the design, production and sales of digital cameras.
1997 Renamed as “Altek Corporation” and established its first corporate headquarters located in 3F, No. 10 Li-Hsin Road, Science-Based Industrial Park, Hsinchu City, Taiwan.
1998 Introduced Taiwan’s first 1.0 million pixels autofocus fixed lens digital camera.
2002 Listed on the Taiwan Stock Exchange.
2003 Issued convertible bonds of US$60,000 thousands and listed on Luxembourg Stock Exchange.
2006 Published domestic convertible bonds of NT$1,500,000 thousand and listed on Taiwan Stock Exchange.
2007 Monthly DSC shipment achieved two million units, ranked No.1 in the digital camera ODM market with the 10% market share
2008 Introduced the world's first GPS digital camera.
2010 The first smartphone/camera featuring communication, triple zooming lens and 12.2 million pixels received CommunicAsia’s Award of Ten Best Products in Singapore Telecom Show. Established the new headquarters at No.12, Li-Hsin Road, Science-Based Industrial Park, Hsinchu City, Taiwan.
2013 Transforming itself to an image solution provider with focuses on smartphone camera and consumer image products.
2014 Image signal processor and dual-camera solutions were applied to flagship smartphones of global manufacturers. Completed the capital decrease of NT$1,182,475 thousands.
2015 More customers in China and India launched more smart phones with Altek imaging solutions.
2016 Altek in-depth computing chips were applied to dual-camera smartphones and tablets of global manufacturers.
2017 State-of-the-art 3D-Depth Sensing Chip AL6100 debuted at CES 2018. Altek became the first ODM to deliver reference designs based on the Qualcomm Vision Intelligence Platform.

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2018 The vision AI solution, developed in collaboration with Microsoft, was presented at Microsoft WinHEC Taipei 2018.

IPC603, a commercial intelligence surveillance camera prototype, was unveiled at Amazon's annual conference to support its AWS (Amazon Web Services) in the Amazon Cloud.

Completed the development of insulin injection system and started the shipment.

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III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

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3.1.2 Major Corporate Functions

Department	Functions
Audit Office	Carry out the audit operation for the implementation of the internal control system and also for the performance evaluation and decision makingof management.
Product Planning Division	Analyze market trends and plan product strategies.
CEO Office	1. Assist CEO in planning, integrating, and coordinating medium and long-term business and operational strategies. 2. Handle investors andpublic relationhips.
Business Division	Engage in sales of products and services, business development, and formulation and execution of sales strategies.
Research & Development Division	Design and develop competitive technologies and products.
Project & Quality Control Division	Deal with quality improvement, document management, product safetyandproduct test engineering
Strategy Purchasing Division	Engage in group procurement
Finance & Information Technology Division	Plan, organize, and apply financial resources and management information system in line with business and operational goals.
Legal Affairs Division	Tackle legal affairs related to contracts and intellectual property rights
Human Resources Division	Handle human resources planning.

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Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship	Relation	None	-	None	-	None	None	None
	Name	None	-	None	-	None	None	None
	Title	None	-	None	-	None	None	None
Other Position		Executive Director of Altek (Kunshan) Co., Ltd.	-	Director of Altek Biotechnology Corp.	-	Independent Director of eGalax_EMPIA Technology Inc.	President, Gold Jasper Management Co., Ltd	-
Experience (Education)		(Note 2)	-	(Note 3)	-	(Note 4)	(Note 5)	(Note 6)
Shareholding by Nominee Arrangement	% (Note 1)	0.00	-	0.00	-	0.00	0.00	0.00
	Shares	0	-	0	-	0	0	0
Current Shareholding of Spouse or Minor Children	% (Note 1)	0.34	-	0.00	-	0.00	0.00	0.00
	Shares	943,051	-	0	-	0	0	0
Current Shareholding	% (Note 1)	0.33	5.09	0.10	5.09	0.00	0.00	0.00
	Shares	897,934	13,956,100	265,790	13,956,100	0	0	0
Shareholding when Elected	% (Note 1)	0.28	5.09	0.19	5.09	0.01	0.00	0.00
	Shares	757,934	13,946,100	520,790	13,946,100	20,000	0	0
Date First	Elected	1996.12.20	2014. 06.19	2016. 03.19	2014. 06.19	2017.06.16	2017.06.16	2017.06.16
Term (Years)		3 years	3 years	3 years	3 years	3 years	3 years	3 years
Date Elected		2017.06.16	2017.06.16	2017.06.16	2017.06.16	2017.06.16	2017.06.16	2017.06.16
Gender		Male	Yitsang International Co., Ltd.	Male	Yitsang International Co., Ltd.	Female	Female	Male
Name		Alex Hsia		Representative: David Lin		Representative: Belle Liang	Sophia Chen	Ching Jen Hu
Nationality/ Country of Origin		R.O.C	R.O.C	R.O.C	R.O.C	R.O.C	R.O.C	R.O.C
Title		Chairman		Director		Director	Director	Independent Director

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Executives, Directors or Supervisors Who Are Spouses or within Two Degrees of Kinship	Relation	None	None
	Name	None	None
	Title	None	None
Other Position		Executive Director of First Wealth Management Limited, Hong Kong Branch	-
Experience (Education)		(Note 7)	(Note 8)
Shareholding by Nominee Arrangement	% (Note 1)	0.00	0.00
	Shares	0	0
Current Shareholding of Spouse or Minor Children	% (Note 1)	0.00	0.00
	Shares	0	0
Current Shareholding	% (Note 1)	0.00	0.00
	Shares	0	0
Shareholding when Elected	% (Note 1)	0.00	0.00
	Shares	0	0
Date First	Elected	2017.06.16	2017.06.16
Term (Years)		3 years	3 years
Date Elected		2017.06.16	2017.06.16
Gender		Female	Male
Name		Ying Chih Hsieh	Mori Shorei
Nationality/ Country of Origin		R.O.C	Japan
Title		Independent Director	Independent Director

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B. Director that is an institutional shareholder, its main shareholders
(1)Major shareholders of the institutional shareholders

April 15, 2019

	April 15, 2019
Name of Institutional Shareholders	Major Shareholders
Yitsang International Co., Ltd.	Jingcai International Investment Co., Ltd. (74.74%) and BaiyingCo.,Ltd.(24.97%)

(2)Major shareholders of Altek’s Major Institutional Shareholders

2)Major shareholders of Altek’s Major Institutional Shareholders	2)Major shareholders of Altek’s Major Institutional Shareholders
April 15,2019
Name of Institutional Shareholders	Major Shareholders
Jingcai International Investment Co., Ltd.	Yun-Hsing Lin and other shareholders (100%)
Baiying Co., Ltd.	Jade Star Investment Co., Ltd (100%)

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Number of Other Public	Companies in Which the Individual is Concurrently Serving as an Independent Director	0	0	1	0	0	0	0
Independence Criteria (Note 1)	10	�			�	�	�	�
	9	�	�	�	�	�	�	�
	8	�	�	�	�	�	�	�
	7	�	�	�	�	�	�	�
	6	�	�	�	�	�	�	�
	5	�	�	�	�	�	�	�
	4	�	�	�	�	�	�	�
	3	�	�	�	�	�	�	�
	2					�	�	�
	1				�	�	�	�
Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	�	�	�	�	�	�	�
	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University
	Criteria Name	Chairman Alex Hsia	Director David Lin	Director Belle Liang	Director Sophia Chen	Independent Director Ching Jen Hu	Independent Director Ying Chih Hsieh	Independent Director Mori Shorei

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Managers who are Spouses or within Two Degrees of Kinship	Relation	None	None	None	None	None	None	None
	Name	None	None	None	None	None	None	None
	Title	None	None	None	None	None	None	None
Other Position		Executive Director of Altek System (Kunshan) Co., Ltd.	Director of Altek Biotechnology Corp.	None	Director of Altek Japan	None	Independent Director of eGalax_eMPIA Technology Inc.	None
Education/Experience		M.S. of Electronics Engineering, UCLA; V.P. of Microtek Co.	B.A. of Business Administration, Tamkang University; V.P. of Microtek Co.	B.A. of Electronics, National Taiwan University of Science and Technology ; V.P. of Ulead Co.	B.A. of International Trade, National Taiwan University; Deputy of A.V.P., of Teco Image System	M.S. of Telecommunications Engineering, National Chiao Tung University; Special Assistant of Quanta Computer	MBA of Finance, National Taiwan University; Special Assistant to Chairman of THSR Corporation	B.A. of Department of Psychology, Soochow University; Assistant General Manager of
Shareholding by Nominee Arrangement	% (Note 1)	0.00	0.00	0.00	0.00	0.00	0.00	0.00
	Shares	0	0	0	0	0	0	0
Spouse & Minor Shareholding	% (Note 1)	0.34	0.00	0.00	0.00	0.00	0.00	0.00
	Shares	943,051	0	0	0	0	0	0
Shareholding	% (Note 1)	0.33	0.10	0.02	0.01	0.00	0.00	0.00
	Shares	897,934	265,790	60,747	15,747	0	0	0
Date Effective		1996.12.28	2016.03.19	2019.01.01	2014.11.10	2014.11.10	2017.01.25	2018.10.25
Gender		Male	Male	Male	Male	Male	Female	Male
Name		Alex Hsia	David Lin	Rick Han	Vincent Kao	Kenny Li	Belle Liang	Jeremy Ko
Nationality/ Country of Origin		R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.	R.O.C.
Title		CEO	SVP	SVP (Note 2)	VP	VP	VP	VP (Note 3)

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Managers who are Spouses or within Two Degrees of Kinship	Relation		None	None	None
	Name		None	None	None
	Title		None	None	None
Other Position			None	Director of Altek Semiconductor Corp.	None
Education/Experience		CTBC Bank	B.A. of Accounting, National Chung Hsing University; Finance Director and Spokesperson of Tera Xtal Technology Co., Ltd.	M.S. of UC Berkeley; Design Manager of Xerox.	M.S. of Human Resource, National Central University; A.V.P. of Lite-on IT Corporation
Shareholding by Nominee Arrangement	% (Note 1)		0.00	0.00	0.00
	Shares		0	0	0
Spouse & Minor Shareholding	% (Note 1)		0.00	0.00	0.00
	Shares		0	0	0
Shareholding	% (Note 1)		0.00	0.00	0.00
	Shares		0	0	0
Date Effective			2018.02.14	2018.02.01	2014.11.10
Gender			Female	Male	Male
Name			Peggy Hsu	Simon Law	Morgan Chiu
Nationality/ Country of Origin			R.O.C.	USA	R.O.C.
Title			Accounting Executive	SVP (Note 4)	VP (Note 5)

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(%)	(%)	All Companies in the Consolidated Financial Statements					5.60
		The Company					5.60
Remuneration of Directors	Allowances (D)	All Companies in the Consolidated Financial Statements					350
		The Company					350
	Bonus to Directors (C) (Note 1)	All Companies in the Consolidated Financial Statements					3,961
		The Company					3,961
	Severance Pay (B)	All Companies in the Consolidated Financial Statements					0
		The Company					0
	Base Compensation (A)	All Companies in the Consolidated Financial Statements					3,000
		The Company					3,000
		Name	Alex Hsia	Yitsang International Co., Ltd.	David Lin	Belle Liang	Sophia Chen	Ching Jen Hu	Ying Chih Hsieh	Mori Shorei
		Title	Chairman	Director	Representative Director	Representative Director	Director	Independent Director	Independent Director	Independent Director

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Remuneration from invested companies except for those companies in the consolidated statement	Remuneration from invested companies except for those companies in the consolidated statement	Remuneration from invested companies except for those companies in the consolidated statement	Remuneration from invested companies except for those companies in the consolidated statement					0
Ratio of Total Remuneration (A+B+C+D) to Net Income (%)		All Companies in the Consolidated Financial Statements						21.06
		The Company						14.43
Relevant Remuneration Received by Directors Who are Also Employees	Employees’ Profit Sharing Bonus (G) (Note 1)	All Companies in the Consolidated Financial Statements	Stock					0
			Cash					3,000
		The Company	Stock					0
			Cash					3,000
	Severance Pay (F)	All Companies in the Consolidated Financial	Statements					216
		The Company						108
	Salary, Bonuses and Allowances (E) (Note 2)	All Companies in the Consolidated Financial	Statements					16,967
		The Company						8,426
		Name		Alex Hsia	Yitsang International Co., Ltd.	David Lin	Belle Liang	Sophia Chen	Ching Jen Hu	Ying Chih Hsieh	Mori Shorei
		Title		Chairman	Director	Representative Director	Representative Director	Director	Independent Director	Independent Director	Independent Director

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Total of (A+B+C+D+E+F+G)	Companies in the Consolidated Financial Statements	Yitsang International Co., Ltd., Sophia Chen, Ching Jen Hu, Ying Chih Hsieh, Mori Shorei	Belle Liang	Alex Hsia, David Lin	�	8
	The Company	Yitsang International Co., Ltd., David Lin, Sophia Chen, Ching Jen Hu, Ying Chih Hsieh, Mori Shorei	Belle Liang	Alex Hsia	�	8
Total of (A+B+C+D)	Companies in the Consolidated Financial Statements	Alex Hsia, Yitsang International Co., Ltd., David Lin, Belle Liang, Sophia Chen, Ching Jen Hu, Ying Chih Hsieh, Mori Shorei	�	�	�	8
	The Company	Alex Hsia, Yitsang International Co., Ltd., David Lin, Belle Liang, Sophia Chen, Ching Jen Hu, Ying Chih Hsieh, Mori Shorei	�	�	�	8
Range of Remuneration		Under NT$ 2,000,000	NT$2,000,001 ~ NT$5,000,000	NT$5,000,001 ~ NT$10,000,000	Over NT$10,000,000	Total

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Remuneration from invested companies except for those companies in the consolidated statement	Remuneration from invested companies except for those companies in the consolidated statement	Remuneration from invested companies except for those companies in the consolidated statement	0	0	0	0	0	0	0
Ratio of Total Compensation (A+B+C+D) to Net Income (%)	Companies in the Consolidated Financial Statements		24.55
	The Company		19.17
Employees’ Profit Sharing Bonus (D) (Note 5)	Companies in the Consolidated Financial Statements	Stock	0
		Cash	6,000
	The Company	Stock	0
		Cash	6,000
Bonuses and Allowances (C)	Companies in the Consolidated Financial	Statements	4,007
	The Company		4,007
Severance Pay (B)	Companies in the Consolidated Financial	Statements	425
	The Company		425
Salary (A) (Note 4)	Companies in the Consolidated Financial	Statements	21,617
	The Company		14,598
	Name		Alex Hsia	VincentKao	Kenny Li	Belle Liang	Jeremy Ko	Simon Law	Morgan Chiu
	Title		CEO	VP	VP	VP	VP (Note 1)	SVP (Note 2)	VP (Note 3)

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Companies in the Consolidated Financial Statements	Jeremy Ko	Simon Law , Vincent Kao, Kenny Li, Belle Liang, Morgan Chiu	Alex Hsia	�	7	Ratio of Total Amount to Net Income (%)	4.60%	4.60%	4.60%	4.60%	4.60%
						Total	0
						Employee Bonus in Cash	6,000
The Company	Simon Law, Jeremy Ko	Alex Hsia, Vincent Kao, Kenny Li, Belle Liang, Morgan Chiu	�	�	7
						Employee Bonus in Stock	0
						Name	Alex Hsia	Vincent Kao	Kenny Li	Belle Liang	Jemery Ko
Range of Remuneration	Under NT$ 2,000,000	NT$2,000,001 ~ NT$5,000,000	NT$5,000,001 ~ NT$10,000,000	Over NT$10,000,001 ~	Total
						Title	CEO	VP	VP	VP	VP

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			209.74% 276.07% 24.21% 34.07% President and Vice Presidents Note : As of the date of this Annual Report, the earnings distribution of Year 2018 is subject to approval of the shareholders’ meeting to be held on June 13, 2019. Employees’ Profit Sharing Bonus paid to management team is estimated and will be reviewed by the remuneration committee and approved by the board of directors. Explanation: (1).The directors remunerated according to the Company Articles and profits. (2).The remunerations of the directors, President and Vice Presidents were reviewed and passed by the remuneration committee and the board of directors. (3).The remunerations received by the Director's concurrent employee and President and Vice Presidents includes the salary costs recognized by IFRS2 "Share-based payment".
2018(Note )	Companies in the Consolidated Financial Statements		34.07%
	The Company		24.21%
2017	Companies in the Consolidated Financial Statements		276.07%
	The Company		209.74%
	Title	Directors	President and Vice Presidents

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Payment Policy for President and Vice Presidents	Payment Policy for President and Vice Presidents	(1) Altek has set up the Remuneration Committee to evaluate the individual performance and enact the policies, standards and portfolios for the payments. (2) The payment portfolios include salary, bonus and compensation. The payment will be distributed according to the individual experience, contribution and performance as well as the liability burdened with reference to the normal standard of the industry.
Directors and Independent Directors	Allowance Policy for Directors	The Company may pay the allowance with reference to the normal standard of the industry and subject to the attendance rate.
	Remuneration Policy for Directors and Independent Directors	The remuneration is paid for the services Directors provided to the Company subject to Article 21 of the Articles of Incorporation. The remuneration is measured based on the personal achievements, contribution and participation made to the business operation with reference to the normal standard of the industry.
	Compensation Policy for Directors	According to the Articles of Incorporation, if the Company has earnings after the annual final accounts, after making up losses of the previous years, no more than 2% of balance of the earnings shall be distributed as compensation to the Directors.

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3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

A total of 5 meetings of the Board of Directors were held in 2018.

The attendances of director were as follows:

Title	Name	Attendance in Person	Attendance Rate(%)	Note
Chairman	Alex Hsia	5	100%	�
Director	Yitsang International Co., Ltd. Representative: David Lin	5	100%	�
Director	Yitsang International Co., Ltd. Representative: Belle Liang	5	100%	�
Director	Sophia Chen	5	100%	�
Independent Director	Ching Jen Hu	5	100%	�
Independent Director	Ying Chih Hsieh	5	100%	�
Independent Director	Mori Shorei	5	100%	�

Other mentionable items:

A. Items listed in Article 14-3 in Securities and Exchange Act or Board resolutions independent directors have dissenting opinions or qualified opinions with notes in minutes of the directors meetings:
a. Item listed in Article 14-3

Date of Board of Directors	Resolutions of Board of Directors	Any Independent Director had Dissenting opinion orqualified opinions
2018.03.23 4thmeeting of the 8th Board	Approved the appointment of the company's accounting executive.	None
	Approved the issuance of restricted shares for employees' bonus.	None
	Approved the cancellation of restricted shares issued for employees' bonus through capital reduction.	None
	Approved the CPAs’ appointment and remuneration.	None
	Approved the establishment of Hejing AI Science and Technology Fund (tentative) through the wholly-owned subsidiary Altek EMS (Kunshan) Co., Ltd. within the amount of RMB 100 million.	None
2018.04.23 5thmeeting of the 8th Board	Approved the issuance of new common shares in private placement and/or issuance of domestic or overseas convertible bonds in privateplacement.	None
2018.05.08 6thmeeting of the 8th Board	Approved the cancellation of restricted shares issued for employees' bonus through capital reduction.	None
2018.08.10 7thmeeting of	Approved the company's subsidiary, Altek Semiconductor (Cayman) Co., Ltd. to issue the Employee Share Option Plan	None

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the 8th Board	Approved the capital increase basic date for Employee Share Option Plan to be exchanged for shares of common stock.	None
2018.11.09 8thmeeting of the 8th Board	Approved the capital increase basic date for Employee Share Option Plan to be exchanged for shares of common stock.	None
	Approved the cancellation of restricted shares issued for employees' bonus through capital reduction.	None

b. Other written or otherwise recorded resolutions on which independent directors had dissenting opinion of qualified opinion: None.
B. The implementation of the directors’ avoiding conflicts of interest�Directors abstained from voting and participating in discussions about their remuneration.
C. Goals to enhance the Board’s operations:
a. Altek has set up athe audit committee to assist the Board of Directors in fulfilling its supervisory duties.
b. Altek's Directors perform self-assessment of the overall board operation with respect to participation in company operations, enhancement of the quality of board decisions, composition and structure of the board of directors, appointment/election of directors and continuing education, and internal controls in accordance with the rule of Performance Assessment of Board of Directors. Members of the board also conduct self-assessment of their familiarity with Company goals and missions, knowledge of director's responsibilities, personal participation in company operations, internal relationship management and communications, professional knowhow and continuing education, and internal controls. The staff in charge of board meeting affairs compiled the self-assessment results and submits the results to the Board of Directors. According to the results of the overall assessment in the year of 2018, the overall operation of the board of directors of Altek is still considered to be sound and in line with corporate governance.

D. The attendances of the independent directors were as follows: (V: Attend in Person�©: By Proxy; #: Absence)

Year 2018	1st	2nd	3rd	4th	5th
	4th meeting of the 8th Board	5th meeting of the 8th Board	6th meeting of the 8th Board	7th meeting of the 8th Board	8thmeeting of the 8th Board
Ching Jen Hu	V	V	V	V	V
Ying Chih Hsieh	V	V	V	V	V
Mori Shorei	V	V	V	V	V

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3.4.2 Audit Committee:

A total of 5 meetings of the Audit Committee were held in 2018.

The attendances of Independent director were as follows:

Title	Name	Attendance in Person	Attendance Rate(%)	Note
Independent Director	Ching Jen Hu	5	100%	�
Independent Director	Ying Chih Hsieh	5	100%	�
Independent Director	Mori Shorei	5	100%	�

Other mentionable items:

A. Any action regulated by Securities and Exchange Act 14-5, or any resolution not approved by the Audit Committee but approved by two thirds or more of all directors instead:

a. Item listed in Article 14-5

Date of Audit Committee	Resolutions of Audit Committee	The processing when Independent directors hold the dissenting opinion or the reservation, and the corporate handling the Independent director’s opinion
2018.03.23 3rdmeeting of the 1st Audit Committee	Approved the effectiveness statement of the 2017 internal control system.	None
	Approved the appointment of the company's accounting executive.	None
	Approved the 2017 annual business report and financial report.	None
	Approved the cancellation of restricted shares issued for employees' bonus through capital reduction.	None
	Approved the CPAs’ appointment and remuneration.	None
	Approved the establishment of Hejing AI Science and Technology Fund (tentative) through the wholly-owned subsidiary Altek EMS (Kunshan) Co., Ltd. within the amount of RMB 100 million.	None
	Approved the issuance of restricted shares for employees' bonus.	None
2018.04.23 4thmeeting of the 1st Audit Committee	Approved the issuance of new common shares in private placement and/or issuance of domestic or overseas convertible bonds in private placement.	None
2018.05.08 5thmeeting of the 1st t Audit Committee	Approved the cancellation of restricted shares issued for employees' bonus through capital reduction.	None
2018.08.10	Approved the 2nd quarter of 2018 financial report.	None

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6thmeeting of the 1st t Audit Committee	Approved the company's subsidiary, Altek Semiconductor (Cayman) Co., Ltd. to issue the Employee Share Option Plan	None
	Approved the capital increase basic date for Employee Share Option Plan to be exchanged for shares of common stock.	None
2018.11.09 7thmeeting of the 1st Audit Committee	Approved the capital increase basic date for Employee Share Option Plan to be exchanged for shares of common stock.	None
	Approved the cancellation of restricted shares issued for employees' bonus through capital reduction.	None

b. If there are resolutions not approved by the Audit Committee but approved by two thirds or more of all directors instead: None.
B. If there is independent directors’ avoidance of motions in conflict of interest, the independent directors’ names, contents of motion, causes for avoidance and voting should be specified: None.
C. Communications of Independent Directors with Internal Audit Supervisor and CPAs:
a. Other than submitting the audit reports to the independent directors every month, the Chief internal Auditor also reports to the Audit Committee in each quarter’s meeting according to the annual audit plan and actual implementation.
b. CPAs attends Audit Committee and communicates and interacts with independent directors on issues relating to the review or check of financial reports or on issues related to finance, taxation or internal control.
c. The independent directors can contact with internal audit and CPAs directly, and the communication is in good condition.

Communications of Independent Directors with Internal Audit Supervisor and CPAs in 2018:

Date of Audit Committee	Issue	Result
2018.03.23 3rd meeting of the 1st Audit Committee	Report and communication of internal audit business for the 4th quarter of 2017	Submitted to the Board of Directors after review and approval
2018.05.08 5th meeting of the 1st Audit Committee	Report and communication of internal audit business for the 1st quarter of 2018	Submitted to the Board of Directors after review and approval
2018.08.10 6th meeting of the 1st Audit Committee	Report and communication of internal audit business for the 2nd quarter of 2018	Submitted to the Board of Directors after review and approval
2018.11.09 7th meeting of the 1st Audit Committee	Report and communication of internal audit business for the 3rd quarter of 2018	Submitted to the Board of Directors after review and approval

Communications of Independent Directors with CPAs in 2018:

Date of Audit Committee	Issue	Result
2018.03.23 3rd meeting of the1st Audit Committee	The accountant explained the 2017 consolidated and individual financial reports and communicated with the Independent Directors.	The accountant attended the audit committee in person, and answered the questions raised by the Independent Directors.
2018.08.10 6th meeting of the 1st Audit Committee	The accountant explained the consolidated financial reports for the 2nd quarter of 2018 and communicated with the Independent Directors.	The accountant attended the audit committee in person, and answered the questions raised by the Independent Directors.

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3.4.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
1. Does Company follow “Taiwan Corporate Governance Implementation” to establish and disclose its corporate governance practices?	V		1. The Board of Directors has established the Code of Best Practice. All operations are performance in accordance with the Code. Up to now, there is no significant difference.	None.
2. Shareholding Structure & Shareholders’ Rights (1) Does Company have Internal Operation Procedures for handling shareholders’ suggestions, concerns, disputes and litigation matters. If yes, has these procedures been implemented accordingly? (2)Does Company possess a list of major shareholders and beneficial owners of these major shareholders? (3) Has the Company built and executed a risk management system and “firewall” between the Company and its affiliates?	V V V		(1) Altek has set up the spokesperson and deputy spokesperson to handle shareholders’ suggestions or concerns. Altek has entrusted the Stock Transfer Agent and has set up the website to handle shareholders’ suggestions or disputes. (2) In addition analysis the shareholder status base on shareholder list after book clousure stating date, Altek handle a list of major shareholders and ultimate controllers. Altek reported the changes in the data in accordance with related laws. (3) Altek and its affiliates perform the operations and financial affairs independently. Altek has set up the written regulations to control financial and operational information.	None. None. None.

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Assessment Item			Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(4) Has the Company established internal rules prohibiting insider trading on undisclosed information?	V		(4) Altek has set up the procedures for handling material Inside Information to avoid the improper leakage of information and to establish proper information handling and disclosure mechanisms, so as to ensure the consistence and correctness of publication. The regulations are disclosed on the Company’s website.	None.
3. Composition and Responsibilities of the Board of Directors (1) Has the Company established a diversification policy for the composition of its Board of Directors and has it been implemented accordingly?	V		(1) A.Altek has specified in the “Code of Best Practice for Corporate Governance” that the composition of the board of directors should be considered diversified. B.The implementation of the board diversity policy of Altek is as follows: a.There are three females of seven directors. b.There is one Japanese of seven directors c.Among the directors, Alex Hsia and Mori shorei are specialized in business management, leadership decision-making and industry knowledge; Sophia Chen is specialized in business management, leadership decision-making and financial accounting�Ying Chih Hsieh and Belle Liang are specialized in financial accounting. David Lin and ChingJen Hu are specialized in	None.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			industrial knowledge. C.Altek has fully implemented the board diversity policy.
(2) Other than the Compensation Committee and the Audit Committee which are required by law, does the Company plan to set up other Board committees? (3) Has the Company established methodology for evaluating the performance of its Board of Directors, on an annual basis? (4) Does the Company regularly evaluate its external auditors’ independence?	V V	V	(2) Altek has established the Compensation Committee and the Audit Committee. Other functional committees will be set up based on the scale of operations and business needs. (3) Altek has published the Rule of Performance Assessment of Board of Directors, Altek's directors perform self-assessment every year and report to the Board, and the 2018 performance appraisal of the Board of Directors has been submitted to the Board of Directors on March 15, 2019. Please refer to 3.3.1 Board of Directors for the assessment. (4) Altek regularly assesses the CPA’s independence each year in accordance with the principles of “Integrity, Objectivity and Independence” in the Bulletin No.10 of “The Norm of Professional Ethics for Certified Public Accountant of the Republic of China” issued by the National Federation of Certified Public Accountant Associations of the Republic of China (NFCPAAROC) to verify whether the CPA is a Company’s director, shareholder or employee and confirm whether the CPA is a non-stakeholder, and then reports the assessment	Same as explanation. None. None.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			results to the Board of Directors. The results of the last two years were submitted on March 23, 2018 and March 15, 2019 respectively.
4. Does the Company established a full- (or part-) time corporate governance unit or personnel to be in charge of corporate governance affairs (including but not limited to furnish information required for business execution by directors, handle matters relating to board meetings and shareholders’ meetings according to laws, handle corporate registration and amendment registration, produce (or record?) minutes of board meetings and shareholders meetings, etc.	V		Altek appointed Finance Division as the full-time corporate governance unit to tackle corporate governance affairs, protect shareholders' rights and strengthen the functions of the Board of Directors. Our corporate governance personnel have 9 years of experience in handling stock affairs for the publicly traded company. Their duties include mainly providing information required by the Directors to execute their business, organizing board meetings and shareholders’ meetings, producing minutes of board meetings and shareholders’ meetings, and conducting corporate registration and registration amendment. In 2018, Altek's corporate governance-related affairs were handled and executed in accordance with laws. The main implementations are as follows: 1. Assisting Directors and Independent Directors in performing their duties: (1) Board members are regularly informed of the latest laws and regulations related to the Company's business areas and corporate governance. (2) Independent Directors conduct financial business-related	None.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			communications with internal audit supervisors and accountants in accordance with the Corporate Governance Best-Practice Principles. 2. Assisting in the Board of Directors and shareholders' meeting procedures and resolutions: (1) Following laws and regulations and implementing internal and internal control - planning appropriate corporate system and organizational structure to promote board independence and corporate transparency. (2) Preparing and setting an agenda before the board meeting, and informing all the Directors 7 days prior to the meeting so that they can learn about the contents of the relevant proposals; if the content of the proposal is related to the interested parties and should be appropriately avoided, a reminder will be given and the minutes of the board meeting will be completed within 20 days after the meeting. (3) After the meeting, major news release of important resolutions made by the Board will be inspected, ensuring that the information is legal and correct so as to protect the investor's information equality on transaction. (4) Revising various measures to report to the Board in accordance with the latest laws and regulations of the competent authorityand the actual

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			operational needs of the Company. (5) Handling the pre-registration of the date of the shareholders' meeting according to law; producing the meeting notice, annual report, meeting handbook, and proceedings in the statutory time limit; handling registration changes when the company's articles of incorporation are amended or the directors are re-elected.
5. Has the Company established a means of communicating with its Stakeholders (including but not limited to shareholders, employees, customers, suppliers, etc.) or created a Stakeholders Section on its Company website? Does the Company respond to stakeholders’ questions on corporate responsibilities?	V		5. Depending on different situations, Altek appoints the spokesperson, deputy spokesperson, or stock transfer unit to communicate with stakeholders. The contact information of the spokesperson, deputy spokesperson, and related business units is disclosed on the Company’s website.	None.
6. Has the Company appointed a professional registrar for its Shareholders’ Meetings?	V		6. Altek has appointed Sinopac Securities to handle related affairs.	None.
7. Information Disclosure (1) Has the Company established a corporate website to disclose information regarding its financials, business and corporate governance status? (2) Does the Company use other information disclosure channels(e.g.	V V		(1) Altek has established a corporate website(http://www.altek.com.tw) to disclose information regarding its financials, business and corporate governance status. (2) Altek maintains a multi-language website (Traditional Chinese, Simplified Chinese and English),	None. None.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation	Status of Operation	Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
maintaining an English-language website, designating staff to handle information collection and disclosure, appointing spokespersons, webcasting investor conference etc.)?			designates the staff to handle information collection and disclosure, and appoints the spokesperson. Altek also sets up its news contact and investor contact information on the website to provide the latest news and channels of communication.
8. Has the Company disclosed other information to facilitate a better understanding of its corporate governance practices (e.g. including but not limited to employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ training records, the implementation of risk management policies and risk evaluation measures, the implementation of customer relations policies, and purchasing insurance for directors)?	V		For more information on employee rights, employee wellness, investor relations, supplier relations, rights of stakeholders, directors’ training records, and purchasing insurance for directors, please refer to Page 30~32.		None.
9.The improvement status for the result of Corporate Governance Evaluation announced by Taiwan Stock Exchange Evaluation indicators Priorities and measures Does the company set up a special (part-time) unit to promote corporate social responsibility and corporate integrity management and to explain the operation and implementation of the said unit in the annual report and companywebsite and report to The Company works on the description of the operation and implementation of the special (part-time) units (such as member composition introduction, work plan and management) and reports to the Board of Directors on a regular basis.
Evaluation indicators				Priorities and measures
Does the company set up a special (part-time) unit to promote corporate social responsibility and corporate integrity management and to explain the operation and implementation of the said unit in the annual report and companywebsite and report to				The Company works on the description of the operation and implementation of the special (part-time) units (such as member composition introduction, work plan and management) and reports to the Board of Directors on a regular basis.

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Assessment Item	Status of Operation	Status of Operation	Status of Operation
	Yes	No	Summary
the Board of Directors on a regular basis?
Does the company's website or annual report disclose the integrity management policies formulated and specify specific practices and programs to prevent dishonesty?			The Company works on some specific practices to implement the integrity management policy and the program to prevent dishonest behaviors, such as the integrity of business education and training (including at least course topic, hours and number of participants)and other specific measures.

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Number of Other Public	Companies in Which the Individual is Concurrently Serving as a Remuneration Committee Member	0	0	0
Independence Criteria (Note 1)	8	�	�	�
	7	�	�	�
	6	�	�	�
	5	�	�	�
	4	�	�	�
	3	�	�	�
	2	�	�	�
	1	�	�	�
Meet One of the Following Professional Qualification Requirements, Together with at Least Five Years’ Work Experience	Have Work Experience in the Areas of Commerce, Law, Finance, or Accounting, or Otherwise Necessary for the Business of the Company	�	�	�
	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialist Who Has Passed a National Examination and Been Awarded a Certificate in a Profession Necessary for the Business of the Company
	An Instructor or Higher Position in a Department of Commerce, Law, Finance, Accounting, or Other Academic Department Related to the Business Needs of the Company in a Public or Private Junior College, College or University
	Criteria Name	Ying Chih Hsieh	Ching Jen Hu	Mori Shorei
	Title	Independent Director	Independent Director	Independent Director

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Note	�	�	�	Other mentionable items: 1. If the Board of Directors declines to adopt or modifies a recommendation of the Remuneration Committee, it should specify the date of the meeting, session, content of the motion, resolution by the Board of Directors, and the Company’s response to the Remuneration Committee’s opinion (e.g., the remuneration passed by the Board of Directors exceeds the recommendation of the Remuneration Committee, the circumstances and cause for the difference shall be specified): None. 2. Resolutions of the Remuneration Committee objected to by members or subject to a qualified opinion and recorded or declared in writing, the date of the meeting, session, content of the motion, all members’ opinions and the response to members’ opinion should be specified: None.
Attendance Rate (%)	100%	100%	100%
By Proxy	0	0	0
Attendance in Person	2	2	2
Name	Ying Chih Hsieh	Ching Jen Hu	Mori Shorei
Title	Convener	Committee Member	Committee Member

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3.4.5 Social Responsibility Implementation Status as Required by the Taiwan Financial

Supervisory Commission

Supervisory Commission
Assessment Item	Implementation Status			Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
1. Implementation of Corporate Governance (1) Does the Company have a corporate social responsibility policy and evaluate its implementation? (2) Does the Company hold regular CSR training? (3) Does the Company have a dedicated (or ad-hoc) CSR organization with Board of Directors authorization for senior management, which reports to the Board of Directors?	V V V		(1) Altek has established the Corporate Social Responsibility (CSR) Code of Practice and pays close attention to the development and changes of international CSR systems. (2) Altek holds CSR training from time to time. (3) The “CEO Office” is the Company’s dedicated CSR unit for promoting corporate social responsibility. Chaired by our CEO Alex Hsia, it makes proposals and implements CSR policies or systems, and reports to the Board of Directors as needed. The specific promotion plans and duties include: 1. Social care: Altek upholds the principle of giving back to the society, and our objects of care range from child and adolescent welfare, welfare for the elderly, welfare for the disabled, women's welfare, and social assistance to community development, social work, volunteer service, and community development. 2. Charitable donations: Altek Charitable Foundation has been cooperating with	None. None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(4) Does the Company set a reasonable compensation policy, integrate employee appraisal with CSR policy, and set clear and effective incentive and disciplinary policies?	V		various public welfare organizations for charitable donations and activities over the years. 3. Arts and culture activities: Altek participates in and sponsor various arts and cultural activities. 4. Environmental conservation: The Company incorporates the concept of environmental conservation into corporate policies, pursuing the vision of reducing environmental impact and committed to sustainable development and management. (4) Altek refers to the professional salary surveys, integrates employee appraisal with CSR policy, and implements the performance evaluation systems and incentive and disciplinary policies on a regular basis.	None.
2. Environmentally Sustainable Development (1) Is the Company committed to improving resource efficiency and to the use of renewable materials with low environmental impact?	V		1. The Group adopts the ERP system and electronic approval system to reduce printed mails and official letters. The messages and policies are announced via E-mail to reduce paper consumption. 2. The Company's electricity consumption in 2018 was 1,972 KW(K), and thepower	None.

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Assessment Item			Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			saving ratio was 7.1% in comparison with 2,123 KW (K) consumed in 2017. 3. The Company's liquefied gas consumption in 2018 was 7.0KG (K), and the energy saving ratio was 20.0% in comparison with 8.8KG (K) consumed in 2017. 4. The Company's water consumption in 2018 was 27.2 tons (K), and the water saving ratio was 8.5% in comparison with 29.8 tons (K) consumed in 2017. 5. The Company's wastewater discharge in 2018 was 21.8 tons (K), and the discharge reduction ratio was 8.5% in comparison with 23.8 tons (K) produced in 2017.
(2) Has the Company set an Environmental management system designed from its industry characteristics? (3) Does the Company track the impact of climate change on operations, carry out greenhouse gas inventories, and set energy conservation and greenhouse gas reduction strategy	V V		(2) Altek mainly provides customers with imaging solutions, which cause no waste or pollution. All products are manufactured and sold in accordance with environmental laws and regulations. In addition to obtaining ISO certification, Altek is the green partner of its customers. (3) A. Altek implements energy-saving policies and green procurement voluntarily and continuously pays close attention to its impact on environmental changes and sets up	None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
			strategies for environmental protection. B. Altek's carbon emissions in 2018 were 1,109KG (K), which was lower than 1,196KG (K) in 2017; carbon reduction rate is 7.3%. Altek continued to save energy and reduce carbon, in order to do its best to protect the environment's social responsibility.
3. Promotion of Social Welfare (1) Does the Company set policies and procedures in compliance with regulations and internationally recognized human rights principles?	V		(1)Altek follows the regulations of Labor Standards Act and adheres to international human rights conventions to execute related operations, attaching importance to labor and human rights and implementing human resources management policies without discrimination of gender, ethnicity, age, marital status, family status, etc., installing the employee mailbox, and providing generous employee benefits.	None.
(2)Has the Company established appropriately managed employee appeal procedures? (3) Does the Company provide employees with a safe and healthy working environment, with regular safety and health training?	V V		(2)The employee mailbox is set up as a channel of communication ([email protected]) between the Company and employees. (3) Altek holds the employee health check, occupational safety and health seminars, and fire management training annually to improve the safety and health performance. Altek also organizes various training programs to improve employees’ response to	None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(4) Has the Company established a mechanism for regular communication with employees and use reasonable measures to notify employees of operational changes which may cause significant impact to employees? (5) Has the Company established effective career development training plans?	V V		emergency and awareness of occupational safety. (4) Altek has established the Working Rules based on the Labor Standards Act and reported to the Science Park Bureau. Altek also holds employee communication meetings from time to time to facilitate communication. Subsidiaries in mainland China have established mechanisms for communication with employees based on local laws and labor contracts. (5) Altek has set up the complete career development training system, such as the annual training plan that contains the development priorities and the organization’s focuses, to maximize the effect of training for individuals, business operations, and the organization.	None. None.
(6) Has the Company set polices and consumer appeal procedures in its R&D, purchasing, production, operations, and service processes? (7) Does the Company follow regulations and international standards in the marketing and labelling of its products and services? (8) Does the company evaluate environmental and social track records before engaging with potential suppliers?	V V V		(6)The Customer Service Department has been established to provide immediate services for customers. (7)As Altek’s customers are international manufacturers, Altek provides products and services in accordance with related international regulations and standards. (8)Under the same conditions of the transactions, Altek selects suppliers fulfilling environmental protection and social responsibilities.	None. None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(9) Do the Company’s contracts with major suppliers include termination clauses if they violate CSR policy and cause significant environmental and social impact?	V		(9) Altek establishes long-term partnerships with suppliers in the supply chain. According to the Supplier Management Procedures and the Regulations Governing Management of Environmental Substances, Altek requests its partners to abide by related international laws and regulations, the requirements of the world’s top manufacturers (RoHS, and REACH annex 17), and the commitment to corporate social responsibility, so as to facilitate environmental protection, labor rights and ethics, health and safety, risk management, and the code of ethics.	None.
4. Enhanced Information Disclosure Does the Company disclose relevant and reliable CSR information on its website and the Taiwan Stock Exchange website?	V		Altek has disclosed information on business and financial affairs and corporate activities on its website from time to time.	None.
5. If the company has established its corporate social responsibility code of practice according to “Listed Companies Corporate Social Responsibility Code of Practice,” please describe the operational status and differences. Altek has established the Corporate Social Responsibility (CSR) Code of Practice and has disclosed the Code on the website. We will implement the corporate social responsibility gradually to promote economic, social, and environmental balance and development.
6. Other important information to facilitate better understanding of the company’s implementation of corporate social responsibility: Altek is dedicated to corporate social responsibility, has won a number of environmental certifications and participated in various charitable activities in humanistic care: 1. Environmental certification: Altek's quality system has passed environmental certifications such as ISO9001, ISO13485, ISO/TS16949, ISO14001, OHSAS1800, and SONY Green Partner Certification. Altek is committed to environmental protection. 2. Humanistic care and charitable activities: Altek upholds the purpose of giving back to the community and establishes the “Altek Charity Fund.” Since its establishment, through donations or in-kind donations and activities, Altek has accumulatively contributed over NTD 3 million and in hundreds cameras. There are more than 80 institutions and thousands people benefited. In 2018, Altek donated money to the “Squash Rackets Association of Chinese Taipei” to support the

If the company has established its corporate social responsibility code of practice according to “Listed Companies Corporate Social Responsibility Code of Practice,” please describe the operational status and differences.
Altek has established the Corporate Social Responsibility (CSR) Code of Practice and has disclosed the Code on the website. We will implement the corporate social responsibility gradually to promote economic, social, and environmental balance and development.
Other important information to facilitate better understanding of the company’s implementation of corporate social responsibility:
Altek is dedicated to corporate social responsibility, has won a number of environmental certifications and participated in various charitable activities in humanistic care:
Environmental certification: Altek's quality system has passed environmental certifications such as ISO9001, ISO13485, ISO/TS16949, ISO14001, OHSAS1800, and SONY Green Partner Certification. Altek is committed to environmental protection.
Humanistic care and charitable activities: Altek upholds the purpose of giving back to the community and establishes the “Altek Charity Fund.” Since its establishment, through donations or in-kind donations and activities, Altek has accumulatively contributed over NTD 3 million and in hundreds cameras. There are more than 80 institutions and thousands people benefited.
In 2018, Altek donated money to the “Squash Rackets Association of Chinese Taipei” to support the

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Assessment Item	Implementation Status	Implementation Status	Implementation Status
	Yes	No	Summary
disadvantaged children who love squash, sponsoring them the training and competition expenses and helping them improve their skill standards so that they will be able to participate in international competitions on behalf of Taiwan.
7. Other information regarding “Corporate Responsibility Report” which is verified by certifying bodies: None.

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3.4.6 Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission

Supervisory Commission
Assessment Item		Implementation Status		Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
1. Establishment of Corporate Conduct and Ethics Policy and Implementation Measures (1) Does the company have bylaws and publicly available documents addressing its corporate conduct and ethics policy and measures, and the commitment regarding implementation of such policy from the Board of Directors and the management team? (2) Does the company establish relevant policies which are duly enforced to prevent unethical conduct and provide implementation procedures, guidelines, consequence of violation and complaint procedures in such policies?	V V		(1) The Board of Directors and management perform their duties in good faith based on integrity and honesty. The related policy or system will be established depending on business needs or laws or regulations. (2) Altek has established “Procedures for Ethical Management and Guidelines for Conduct” to prevent infidelity. Established the appeal method and if there is any violation, will be punished in accordance with the rule of rewards andpenalties.	None. None.
(3) Does the company establish appropriate compliance measures for the business activities prescribed in paragraph 2, article 7 of the Ethical Corporate Management Best Practice Principles for TWSE/GTSM Listed Companies and any other such activities associated with high risk of unethical conduct?	V		(3) Altek has established the Procedures for Acquisition or Disposal of Assets and the Procedures for Lending Funds to Other Parties and Endorsement & Guarantee against activities associated with high risks of unethical conduct. The accounting and internal control systems have also been established for internal auditors to check the compliance and prevent unethical conduct.	None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
2. Ethic Management Practice (1) Does the company assess the ethics records of whom it has business relationship with and include business conduct and ethics related clauses in the business contracts? (2) Does the company set up a unit which is dedicated to or tasked with promoting the company’s ethical standards and reports directly to the Board of Directors with periodical updates on relevant matters? (3) Does the company establish policies to prevent conflict of interests, provide appropriate communication and complaint channels and implement such policies properly? (4) To implement relevant policies on ethical conducts, does the company establish effective accounting and internal control systems that are audited by internal auditors or CPA periodically?	V V V V		(1) Altek performs such operations in accordance with related laws and regulations. (2) The “CEO Office” is the Company’s full-time unit dedicated to promoting corporate integrity management. It is led by the Chairman& CEO Alex Hsia, and the internal audit personnel are charged with the duties to regularly review corporate integrity management policies, prevent and supervise the implementation, promote corporate integrity management, and report to the Board of Directors as needed. (3) Altek’s departments perform such operations based on their responsibilities and report to the head of the department through e-mail. (4) Altek has established effective accounting and internal control systems that are audited by internal auditors or CPA periodically. The internal audit results will be reported to the Audit Committee and the Board	None. None. None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(5) Does the company provide internal and external ethical conduct training programs on a regular basis?	V		of Directors. (5) Altek provides training programs on its operating principles from time to time. Courses related to integrity management held in 2018: 1. Introduction to the Business Secrets Act and Judicial Practices: Hours: 3 Date: October 3, 2019 Number of students: 70 2. Corporate Antivirus and Data Leak Prevention Hours: 1 Date: December 19, 2019 Number of students: 19	None.
3. Implementation of Complaint Procedures (1) Does the company establish specific complaint and reward procedures, set up conveniently accessible complaint channels, and designate responsible individuals to handle the complaint received? (2)Does the company establish standard operation procedures for investigating the complaints received and ensuring such complaints are handled in a confidential manner?	V V		(1) Employees may report to the head of unit or CEO directly via e-mail. (2) Altek has set up a reporting mailbox and holds related documents and data confidential. If employees find any violation of ethical corporate management, they may report to internal Audit Office. If the violation is verified to be true, violators will be punished in accordance with related internal polices or laws.	None. None.

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Assessment Item	Implementation Status	Implementation Status	Implementation Status	Deviations from “the Corporate Social Responsibility Best-Practice Principles for TWSE/TPEx Listed Companies” and Reasons
	Yes	No	Summary
(3)Does the company adopt proper measures to prevent a complainant from retaliation for his/her filing a complaint?	V		(3) Altek holds the entire reporting procedures confidential to prevent a complainant from retaliation for his/her filing a complaint.	None.
4. Information Disclosure Does the company disclose its guidelines on business ethics as well as information about implementation of such guidelines on its website and Market Observation Post System (“MOPS”)?	V		The rules had been disclosed on company’s website and Market Observation Post System.	None.
5. If the company has established corporate governance policies based on TSE Corporate Conduct and Ethics Best Practice Principles, please describe any discrepancy between the policies and their implementation: None.
6. Other important information to facilitate better understanding of the company’s corporate conduct and ethics compliance practices: As disclosed above.

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3.4.7 Corporate Governance Guidelines and Regulations

Major Internal Policies		Disclosed at
Article of Incorporation Rules of Procedure for shareholders Meeting Rules for Election of Directors Rules for Procedure for Board od Directors Meetings Audit Committee Charter Regulations Governing the Acquisition and Disposal of Assets Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees Procedures for Handling Matreial Inside Information Remuneration Committee Charter Corporate Governance Best Practice Principles Corporate Social Responsibility Best Practice Principles Rules Governing the Scope of Powers of Independent Directors Self-Evaluation of the Board of Directors Ethical Corporate Management Best Practice Principles Ethical Corporate Management Policies and Prevention Programs		Market Observation Post System/Corporate Governance: http://mops.twse.com.tw/mops/web/index Altek’s Website/Investors: http://www.altek.com.tw/zh-tw/finance/detail/8

3.4.8 Other Important Information Regarding Corporate Governance

A. Employees’ rights and cares

Based on the people-oriented management, Altek fully respects and cares for employees through providing employees’ benefits, training programs, and a better working environment; the pension system is implemented based on the Labor Pension Act and the Labor Standards Act to protect employees’ rights. The group insurance policies for employees and their family members are also planned. The employee health check is held on a regular basis.

B. Investor Service

The investor service department is set up and its contact information is disclosed on Altek’s website. The investor relation department is responsible to handle shareholders’ suggestions and respond to investors’ questions.

C. Supplier relation

Altek maintains a good relationship with suppliers and takes measures to reduce carbon dioxide emissions. According to the Supplier Management Procedures and the Regulations Governing Management of Environmental Substances, Altek requests its partners to abide by related international laws and regulations, the requirements of the world’s top manufacturers (RoHS, REACH, and GP)�RoHS and REACH annex 17 for environmental protection and hygiene and the commitment to corporate social responsibility, so as to facilitate environmental protection, labor rights and ethics, health and safety, risk management, and the code of ethics.

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D. Communication channels for interested parties

Interested parties	Communication channels
Employee	˙CEO talk ˙Labor-management meeting ˙Health check ˙Disaster prevention drill ˙Education &training ˙Confidential complaint
Client	˙Regular meeting Satisfaction survey Supplier seminar ˙Inspection ˙Online communication platform
Supplier	Review meeting Inspection Supplier management system ˙Complaint mailbox
Investor	Shareholders meeting ˙Investor Conference Operation briefingor seminar
Media	˙Press conference Press release

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	hours	3 hours		3 hours	3 hours 3 hours	3 hours	3 hours	3 hours 3 hours	3 hours 3 hours	3 hours	3 hours	3 hours 3 hours
	Title Name Date Institute course	Chairman Alex Hsia 2018.08.09 Securities and Futures Institute How to turn private equity into partners in career transformation and expansion		Key elements of strategy execution in cross-border mergers and acquisitions	Director Sophia Chen 2018.08.09 Securities and Futures Institute How to turn private equity into partners in career transformation and expansion Key elements of strategy execution in cross-border mergers and acquisitions	Director David Lin 2018.08.09 Securities and Futures Institute How to turn private equity into partners in career transformation and expansion Key elements of strategy execution in cross-border mergers and acquisitions		Director Belle Liang 2018.08.09 Securities and Futures Institute How to turn private equity into partners in career transformation and expansion Key elements of strategy execution in cross-border mergers and acquisitions	Independent Director Ching Jen Hu 2018.08.09 Securities and Futures Institute How to turn private equity into partners in career transformation and expansion Key elements of strategy execution in cross-border mergers and acquisitions	Independent Ying Chih 2018.10.18 Chinese National Association of The analysis for newest Company Act	Director Hsieh Industry and Commerce, Taiwan 2018.10.25 The impact of recent labor law reforms on business operations.	Independent Director Mori Shorei 2018.08.09 Securities and Futures Institute How to turn private equity into partners in career transformation and expansion Key elements of strategy execution in cross-border mergers and acquisitions	E. Liability Insurance for directors and independent directors	Insured Insurance Company Insured Amount Period	All directors Chubb US$8 million April 30, 2019~April 30, 2020	F. Managers’ participation in training courses on corporate governance in 2018	Title Name Date Institute course hours	Accounting Executive Peggy Hsu 2018.05.17 Accounting Research and Corporate Governance Practice: Analysis of practical issues in 3 hours	Development Foundation of the operational strategy of supply chain management and trends in	Republic of China application of "Internet of Things"

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3.4.9 Internal Control Systems

A. Internal Control Declaration

Altek Corporation Internal Control Declaration

Date: March 15, 2019
The declaration of the internal control system from January 1, 2018 to December 31, 2018 is made below based on the result of self-inspection. 1. The Company acknowledges that establishing, implementing, and maintain the internal control system is the responsibility of the Company’s Board of Directors and management. The Company has established the internal control system for the purpose of properly assuring the achievements of operational efficacy and efficiency (including profits, performance, and guarantee of asset safety) and reporting that reflect reliability, timeliness, and transparency as well as compliance.
1. The internal control system has its congenital limitations; the effective internal control system, regardless how perfectly it is designed, may only provide proper assurance for the achievements of the above three goals; in addition, due to changes in the environment and the situation, the effectiveness of the internal control system may change as well. The Company’s internal control system is designed with a self-monitoring mechanism. Once a flaw is identified, the Company will take corrective actions immediately.
1. The Company determines whether the design and implementation of the internal control system are effective based on the items stipulated in the Regulations Governing Establishment of Internal Control Systems by Public Companies (the Regulations). Items adopted by the Regulations are five components of the internal control system based on the control process: 1. Control environment; 2. Risk assessment; 3. Control operation; 4. Information and communication; and 5. Monitoring operation. Each component contains several items. For more information on the foregoing items, please refer to the Regulations.
1. The Company has adopted the abovementioned items that determine the effectiveness of the design and implementation of the internal control system.
1. Based on the result of evaluation mentioned above, the design and implementation of the internal control system (including supervision and management of the Company’s subsidiaries) as of December 31, 2018, such as the level of achievement of operational efficacy and efficiency and reporting that reflect reliability, timeliness, and transparency as well as compliance, are considered effective and properly assure the achievement of the above goals.
1. The Declaration will constitute the major content of the Company’s annual report and prospectus and be disclosed. Any falseness or concealment of the abovementioned content will involve legal responsibilities stipulated in Articles 20, 32, 171, and 174 of the Securities and Exchange Act.
1. The Declaration has been approved by the Board of Directors on March 15, 2019. All attended directors agreed on the contents of the Declaration. Altek Corporation Chairman & CEO: Alex Hsia

B. CPA’s Audit Report on the Company’s Internal Control System to be disclosed: N/A.

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3.4.10 Punishments, Major Defects, and Improvements of Violation of the Company’s Internal Control System: None.

3.4.11 Major Resolutions of Shareholders’ Meeting and Board Meetings

A. Resolutions of 2018 general shareholders’ meeting:

Item	Major Resolutions	Implementation
1	Approval of the 2017 business report and financial statements.	Performed in accordance with relevant laws and regulations.
2	Approval of the distribution of 2017 earnings by cash.	Completed on Sep. 14, 2018.
3	To approve the issuance of Restricted Stock Awards ("RSA").	Performed in accordance with relevant laws and regulations.
4	To approve the issuance of new common shares in private placement and/or issuance of domestic or overseas convertible bonds inprivateplacement.	The Fund Raising has yet been executed and it will be due on June 14, 2019. The Board of directors held on May 10, 2019 has resolved to cease the Fund Raising in the remaining period.

B.Resolutions of 2018 board meeting:

Item	Major Resolutions	Implementation
2018.03.23 4th meeting of 8th Board	1. Approved the appointment of the company's accountingexecutive	Notice released on February 13, 2018.
	2. Approved to distribute the compensation of 2017 employees and directors.	Reported at the2018 shareholders' Meeting.
	3. Approved the 2017 annual business report and financial report.	Recognized through the 2018 shareholders' meeting.
	4. Approved to distribute 2017 earnings.	Recognized through the 2018 shareholders' meeting.
	5. Approved the issuance of Restricted Stock Awards("RSA").	Performed in accordance with relevant laws and regulations.
	6. Approved the convening of the 2018 shareholders' meeting	Implemented by resolution.
	7. Approved the accountant's appointment and remuneration	Implemented by resolution.
	8. Approved the establishment of Hejing AI Science and Technology Fund (tentative) through the wholly-owned subsidiary Altek EMS (Kunshan) Co., Ltd. within the amount of RMB 100 million.	Implemented by resolution.
2018.04.23 5th meeting of 8th Board	Approvd the issuance of new common shares in private placement and/or issuance of domestic or overseas convertible bonds in private placement.	The Fund Raising has yet been executed and it will be due on June 14, 2019. The Board of directors held on May 10, 2019 has resolved to cease the Fund Raising in the remaining period.
2018.08.10 7th meeting of 8th Board	Approved the company's subsidiary, Altek Semiconductor (Cayman) Co., Ltd. to issue Employee Share Option Plan	Implemented by resolution
2019.03.15 9th meeting of	1. Approved to distribute the compensation of 2018 employees and directors.	Listed in the 2019 shareholders' meeting report.
8th Board	2. Approved the 2018 annual business report and	Listed in the 2019 shareholders'

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Item	Major Resolutions	Implementation
	financial report.	meeting recognize.
	3. Approved to distribute 2018 earnings.	Listed in the 2019 shareholders' meetingrecognize.
	4. Approved to amend the Articles of Incorporation.	Has been approved by the Board of Directors; it will take effect after the 2019 shareholder resolution is passed, and the new Articles of Incorporation will officially apply to relevant operations bythen.
	5. Approved to amend the Procedures of Acquisition or Disposal of Assets.	Has been approved by the Board of Directors; it will take effect after the 2019 shareholder resolution is passed, and the new Procedures of Acquisition or Disposal of Assets will officially apply to relevant operations bythen.
	6. Approved to amend the Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees.	Has been approved by the Board of Directors; it will take effect after the 2019 shareholder resolution is passed, and the new Regulations Governing Loaning of Funds and Making of Endorsements/Guarantees will officially applyto relevant operations bythen.
	7. Approved to amend the Procedures of Election of Directors.	Has been approved by the Board of Directors; it will take effect after the 2019 shareholder resolution is passed, and the new Procedures of Election of Directors will officially apply to relevant operations bythen.
	8. Approved the issuance of new common shares in private placement and/or issuance of domestic or overseas convertible bonds in private placement.	Has been approved by the Board of Directors; it will be executed after the 2019 shareholder resolution is passed.
	9. Approved the issuance of Restricted Stock Awards ("RSA").	Has been approved by the Board of Directors; it will be executed after the 2019 shareholder resolution ispassed.
	10. Approved the subsidiary, Altek Semiconductor (Cayman) Co., Ltd.’s application for listing of securities in the overseas securities market.	Has been approved by the Board of Directors; it will be executed after the 2019 shareholder resolution ispassed.
	11. Approved the convening of the 2019 shareholders' meeting	Has been approved by the Board of Directors; it will be executed after the 2019 shareholder resolution ispassed.

3.4.12 Major Issues of Record or Written Statements Made by Any Director or Supervisor Dissenting to Important Resolutions Passed by the Board of Directors: None.
3.4.13 Resignation or Dismissal of the Company’s Key Individuals, Including the Chairman, CEO, and Heads of Accounting, Finance, Internal Audit and R&D

Title	Name	Date Effective	Date of Resignation/Dismissal	Reason for Resignation/Dismissal
Head of Accounting	Seiko Chen	2017.03.27	2018.02.14	Job adjustment

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3.5 Information of Audit Fee

3.5.1 Payment to the Audit:

Accounting Firm	Name of CPA	Name of CPA	Period Covered by CPA’s Audit	Note
PricewaterhouseCoopers	Kwok-wah Tsang	Dian-Yi Li	2018.01.01� 2018.12.31	�

Unit: NT$

			Unit: NT$
Range item	Audit Fee	Non-audit Fee	Total
1 Under NT$ 2,000,000		V
2 NT$2,000,00 ~ NT$3,999,999
3 NT$4,000,00 ~ NT$5,999,999	V
4 NT$6,000,00 ~ NT$7,999,999			V
5 NT$8,000,00 ~ NT$9,999,999
6 NT$10,000,000 ~

3.5.2Non-audit fee paid to auditors, the audit firm and its affiliates accounted for more than one-fourth of total audit fee, should disclose the details:

Unit: NT$ thousand

			Unit:	Unit:	Unit:	Unit:	Unit:	NT$ thousand
Accounting Firm	Name of CPA	Audit Fee	Non-audit Fee					Period Covered by CPA’s Audit
			System of Design	Company Registration	Human Resources	Others (Note)	Subtotal
Pricewater- houseCoopers	Kwok-wah Tsang	4,830	0	70	0	1,637	1,707	2018.01.01~ 2018.12.31
	Dian-Yi Li

Note: Consulting fee and Transfer Pricing Research Report.

3.5.3 Replaced the audit firm and the audit fee paid to the new audit firm was less than the payment of previous year: Not applicable.

3.5.4 Audit fee reduced more than 15% year over year: None.

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3.6 Information of replacement of CPA: N/A
3.7 Altek’s Chairman, President, CFO, or managers in charge of its finance and accounting operations hold any position in the Company�s independent auditing firm or its affiliates in 2018: None.

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3.8 Equity Transfer and Changes in Equity Pledge of Directors, Managers and Shareholders Holding More than 10% of the Shares

3.8.1 Changes in shareholdings of directors, managers and major shareholders

Title	Name	2018.01.01~2018.12.31	2018.01.01~2018.12.31	2019.01.01~2019.04.15	2019.01.01~2019.04.15
		Holding Increase (Decrease)	Pledged Holding Increase (Decrease)	Holding Increase (Decrease)	Pledged Holding Increase (Decrease)
Chairman & CEO	Alex Hsia	(10,000)	0	(100,000)	0
Director	Yitsang International Co.,Ltd.	10,000	0	0	0
Director	Yitsang International Co., Ltd. Representative: David Lin	(295,000)	0	38,000	0
Director &VP	Yitsang International Co., Ltd. Representative: Belle Liang	(20,000)	0	0	0
Director	Sophia Chen	0	0	0	0
Independent Director	Ching Jen Hu	0	0	0	0
Independent Director	Ying Chih Hsieh	0	0	0	0
Independent Director	Mori Shorei	0	0	0	0
SVP (Note 1)	Rick Han	NA	NA	60,000	0
VP	Vincent Kao	0	0	0	0
VP	Kenny Li	0	0	0	0
VP (Note 2)	Jemery Ko	0	0	0	0
Accounting Exective	Peggy Hsu	0	0	0	0
SVP (Note 3)	Simon Law	0	0	NA	NA
VP (Note 4)	Morgan Chiu	(10,000)	0	NA	NA

Note 1: Rick Han was incharge as SVP on Jan.01, 2019; the information disclosed above is from on duty date.

Note 2: Jemery Ko was incharge as VP on Oct.25, 2018; the information disclosed above is from on duty date.

Note 3: Simon Law discharged on Oct. 01, 2018. The information disclosed above is as of his last day as SVP. Note 4: Morgan Chiu discharged on Sep. 30, 2018. The information disclosed above is as of his last day as VP.

3.8.2 Shares Trading with Related Parties: None.

3.8.3 Shares Pledge with Related Parties: None.

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3.9 Relationship among the Top Ten Shareholders

April 15, 2019

Name	Current Shareholding	Current Shareholding	Spouse’s/Minor’s Shareholding	Spouse’s/Minor’s Shareholding	Shareholding by Nominee Arrangement	Shareholding by Nominee Arrangement	Name and Relationship between the Company’s Top Ten Shareholders, or Spouses or Relatives within Two Degrees	Name and Relationship between the Company’s Top Ten Shareholders, or Spouses or Relatives within Two Degrees
	Shares	%	Shares	%	Shares	%	Name	Relationship
Tung-Hsin Investment Corp. Representative: Tong-Yi Chang	14,075,000	5.14	0	0.00	0	0.00	None	None
	0	0.00	0	0.00	0	0.00	None	None
Yitsang International Co., Ltd. Representative: Yun-Hsing Lin	13,956,100	5.09	0	0.00	0	0.00	None	None
	0	0.00	0	0.00	0	0.00	None	None
Standard Chartered Bank in custody fo KGI	3,511,001	1.28	0	0.00	0	0.00	None	None
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	3,375,353	1.23	0	0.00	0	0.00	None	None
Citibank Managed Dimension Emerging Markets Evaluation Fund Investment Account	3,117,365	1.14
Unique Technology Co., Ltd. Representative� Chin Fu Liu	3,097,304	1.13	0	0.00	0	0.00	None	None
	715	0.00	0	0.00	0	0.00	None	None
Vanguard Emerging Markets Stock Index Fund, a series of Vanguard International Equity Index Funds	2,882,000	1.05	0	0.00	0	0.00	None	None
Citibank in custody for DFA	2,066,159	0.75	0	0.00	0	0.00	None	None
Altek Charity Fund	1,537,890	0.56	0	0.00	0	0.00	None	None
Bank SinoPac Custodial Account in SinoPac Securities	1,437,960	0.52	0	0	0	0	None	None

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3.10 Ownership of Shares in Affiliated Enterprises

	December 31,2018	December 31,2018	December 31,2018	December 31,2018	December 31,2018	December 31,2018
Affiliated Enterprises	Ownership by the Company		Direct or Indirect Ownership by Directors, Supervisors, Managers		Total Ownership
	Shares	%	Shares	%	Shares	%
Altek Japan Corporation	1,000	100.00	0	0.00	1,000	100.00
Altek International Investment Co., Ltd.	88,662,059	100.00	0	0.00	88,662,059	100.00
Altek Lab Inc.	0	0.00	11,311,875	100.00	11,311,875	100.00
Altek Imaging Technology (Cayman) Co., Ltd.	0	0.00	15,092,410	100.00	15,092,410	100.00
Altek Precision (Kunshan) Co., Ltd.	0	0.00	(Note)	100.00	(Note)	100.00
Leading Tech. Co., Ltd.	0	0.00	45,000,000	100.00	45,000,000	100.00
Altek (Kunshan) Co., Ltd.	0	0.00	(Note)	100.00	(Note)	100.00
Toptek Investment Cayman Co., Ltd.	0	0.00	1,400,000	100.00	1,400,000	100.00
Altek EMS (Kunshan) Co., Ltd.	0	0.00	(Note)	100.00	(Note)	100.00
Altek Trading (Cayman) Co., Ltd.	0	0.00	8,500,000	100.00	8,500,000	100.00
Altek Trading (Shanghai) Co., Ltd.	0	0.00	(Note)	100.00	(Note)	100.00
Altek Optical Technology (Cayman) Co., Ltd.	0	0.00	11,200,000	100.00	11,200,000	100.00
Altek Optical (Kunshan) Co., Ltd.	0	0.00	(Note)	100.00	(Note)	100.00
Altek Semiconductor (Cayman) Co., Ltd.	0	0.00	20,000,000	50.00	20,000,000	50.00
Altek Semiconductor Corp.	0	0.00	10,000,000	50.00	10,000,000	50.00
Altek Semiconductor (Shanghai) Co., Ltd.	0	0.00	(Note)	50.00	(Note)	50.00
Altek Optical (Cayman) Co., Ltd.	0	0.00	4,800,241	100.00	4,800,241	100.00
Altek Investment Co., Ltd.	5,000,000	100.00	0	0.00	5,000,000	100.00
Altek International Holding (BVI) Co., Ltd.	12,865,921	100.00	0	0.00	12,865,921	100.00
Altek Biotechnology Holding (Cayman) Co., Ltd.	0	0.00	12,865,921	100.00	12,865,921	100.00
Altek Biotechnology Corp.	0	0.00	40,100,000	100.00	40,100,000	100.00

Note : No share was issued.

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IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

Unit: Share; NT$ thousand

Month/ Year	Par Value	Authorized Capital	Authorized Capital	Paid-in Capital	Paid-in Capital	Remark	Remark	Remark
		Shares	Amount	Shares	Amount	Source of Capital	Capital Increased by Assets Other than Cash	Other
2014.02	10	500,000,000	5,000,000	385,265,321	3,852,653	Cancellation of TreasuryStock	None	-
2014.08	10	500,000,000	5,000,000	394,158,321	3,941,583	Execution of ESOP	None	-
2014.10	10	500,000,000	5,000,000	275,910,825	2,759,108	Cash Capital Reduction	None	-
2014.10	10	500,000,000	5,000,000	270,135,825	2,701,358	Cancellation of Treasury Stock	None	-
2015.05	10	500,000,000	5,000,000	270,253,825	2,702,538	Execution of ESOP	None	-
2015.12	10	500,000,000	5,000,000	272,693,825	2,726,938	Issuance of RSA	None	-
2016.03	10	500,000,000	5,000,000	273,883,825	2,738,838	Issuance of RSA	None	-
2016.05	10	500,000,000	5,000,000	274,253,825	2,742,538	Issuance of RSA	None	-
2016.08	10	500,000,000	5,000,000	274,063,825	2,740,638	Cancellation of Issued RSA	None	-
2017.04	10	500,000,000	5,000,000	273,908,825	2,739,088	Cancellation of Issued RSA	None	-
2017.08	10	500,000,000	5,000,000	273,738,825	2,737,388	Cancellation of Issued RSA	None	-
2017.11	10	500,000,000	5,000,000	273,818,825	2,738,188	Cancellation of Issued RSA & Execution of ESOP	None	-
2018.04	10	500,000,000	5,000,000	273,788,825	2,737,888	Cancellation of Issued RSA	None	-
2018.05	10	500,000,000	5,000,000	273,728,825	2,737,288	Cancellation of Issued RSA	None	-
2018.08	10	500,000,000	5,000,000	273,928,825	2,739,288	Execution of ESOP	None	-
2018.11	10	500,000,000	5,000,000	274,011,325	2,740,113	Cancellation of Issued RSA & Execution of ESOP	None	-

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April 15, 2019; unit: Share

				April 15, 2019; unit: Share
Type of Share	Authorized Capital			Remark
	Issued Shares	Un-issued Shares	Total Shares
Common shares	274,011,325	225,988,675	500,000,000	Listed stock

B.Information for Shelf Registration: N/A.

4.1.2 Status of Shareholders

April 15,2019	April 15,2019	April 15,2019	April 15,2019	April 15,2019	April 15,2019	April 15,2019
Item	Government Agencies	Financial Institutions	Other Juridical Persons	Domestic Natural Persons	Foreign Institutions & Natural Persons	Total
Number of Shareholders	1	11	140	51,541	117	51,810
Shareholding (shares)	34	1,817,066	31,157,034	209,796,810	31,240,381	274,011,325
Percentage	0.00	0.66	11.37	76.57	11.40	100.00

4.1.3 Shareholding Distribution Status

A. Common Shares

A. Common Shares	A. Common Shares	A. Common Shares	A. Common Shares
April 15,2019
Class of Shareholding	Number of Shareholders	Shareholding (Shares)	Percentage (%)
1� 999	20,299	3,346,853	1.22
1,000� 5,000	23,878	51,743,680	18.88
5,001� 10,000	4,038	32,415,071	11.83
10,001� 15,000	1,180	15,093,891	5.51
15,001� 20,000	801	15,060,958	5.50
20,001� 30,000	603	15,538,288	5.67
30,001� 50,000	494	20,144,844	7.35
50,001� 100,000	292	20,948,489	7.65
100,001� 200,000	144	20,370,837	7.43
200,001� 400,000	44	11,342,180	4.14
400,001� 600,000	13	6,092,280	2.22
600,001� 800,000	6	4,250,756	1.55
800,001�1,000,000	2	1,771,206	0.65
1,000,001 or above	16	55,891,992	20.40
Total	51,180	274,011,325	100.00

B. Preferred Shares: None.

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4.1.4 List of Major Shareholders

April 15,2019	April 15,2019	April 15,2019
Shares Shareholder's Name	Shareholding (Shares)	Percentage
Tung-Hsin Investment Corp.	14,075,000	5.14
Yitsang International Co., Ltd.	13,956,100	5.09
Standard Chartered Bank in custody fo KGI	3,511,001	1.28
JPMorgan Chase Bank N.A., Taipei Branch in custody for Vanguard Total International Stock Index Fund, a series of Vanguard Star Funds	3,375,353	1.23
Citibank Managed Dimension Emerging Markets Evaluation Fund Investment Account	3,117,365	1.14
Unique Technology Co., Ltd.	3,097,304	1.13
Vanguard Emerging Markets Stock Index Fund, a series of Vanguard International EquityIndex Funds	2,882,000	1.05
Citibank in custody for DFA	2,066,159	0.75
Altek Charity Fund	1,537,890	0.56
Bank SinoPac Custodial Account in SinoPac Securities	1,437,960	0.52

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

	Unit: NT$	Unit: NT$	Unit: NT$	Unit: NT$	Unit: NT$
Item	Year		2017	2018	2019 (as of March 31)
Market Price per Share	Highest Market Price		37.90	44.90	29.65
	Lowest Market Price		22.10	18.90	23.25
	Average Market Price		27.06	30.69	27.06
Net Worth per Share	Before Distribution		32.75	32.80	33.30
	After Distribution		32.25	(Note 1)	�
Earnings per Share	Weighted Average Shares (thousand shares)		265,928	270,389	273,365
	Earnings Per Share		0.05	0.48	0.10
Dividends per Share	Cash Dividends		0.50	(Note 1)	�
	Stock Dividends	�	�	�	�
		�	�	�	�
	Accumulated Undistributed Dividends		�	�	�
Return on Investment	Price/Earnings Ratio (Note 2)		541.2	63.96	�
	Price/Dividend Ratio (Note 3)		541.2	(Note 1)	�
	Cash Dividend Yield Rate (Note 4)		1.85	(Note 1)	�

Note 1: The earnings distribution of Year 2017 is subject to approval of the shareholders’ meeting to be held on June 13, 2019.

Note 2: Price / Earnings Ratio = Average Market Price / Earnings per Share.

Note 3: Price / Dividend Ratio = Average Market Price / Cash Dividends per Share.

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Note 4: Cash Dividend Yield Rate = Cash Dividends per Share / Average Market Price.

4.1.6 Dividend Policy and Implementation Status

A. Dividend Policy

Based on the Article of Incorporation, the amount of dividend distributed shall consider the surplus earnings of the year, the accumulated surplus earnings of the previous years and the capital structure as well as the future operation demand. The policy of dividend distribution will take funding demand and dilution of surplus earnings per share into account, and both the stock dividend as well as the cash dividend will be distributed together. The ratio of cash dividend distributed will not be lower than twenty percent (20%) of the total dividend distributed of the year. However, the actual amount of distribution will be determined by shareholders in the shareholders’’ meeting.

B. Proposed Distribution of Dividend

B. Proposed Distribution of Dividend	B. Proposed Distribution of Dividend
		Unit: NT$
Year	Date for BoDs to Approve Distribution of Dividend	Shareholders’ Meeting
		Cash Dividend	Capital Surplus (in Cash)	Share Dividend
2018	2019.03.15	NT$137,005,663 (NT$0.5 per share)	0 (NT$0 per share)	0 (NT$0 per share)

Note: The ratio of distribution per share is calculated based on the outstanding stock on March 7, 2019. It is 274,011,325 shares in total. The distribution will be implemented subject to relevant rules after the resolution of the general shareholders’ meeting on June 13, 2019.

C. Major Change in the Dividend Policy: None.

4.1.7 Impact of Stock Dividend on Business Performance and Earnings per Share: N/A.
4.1.8 Employee Bonus and Directors' Remuneration
A. Information Relating to Employee Bonus and Directors’ Remuneration in the Articles of Incorporation
- (1) 10 %~20% as a bonus for employees.
- (2) Not exceeding 2% as compensation for directors.
B. The Estimated Basis for Calculating the Employee Bonus and Directors’ Remuneration: None.
C. Profit Distribution for Employee Bonus and Directors’ Remuneration for 2018 Approved in Board of Directors Meeting
- (1)The proposal of retained earnings distribution has been approved by the Board of Directors on March 15, 2019, and the compensation for the employees is NT$29,710,271 and the compensation for the directors is NT$3,961,369. It’s proposed to distribute the compensation by cash after the approval of the general shareholders’ meeting. The proposed amount of the compensation for the employees, directors is the same as the estimated amount of recognition fees of the year.
- (2)The Ratio of Employees’ Remuneration by Stock to Net Income after Tax and Employees’ Remuneration in Individual Financial Statements: N/A.
D. Information of 2017? Earnings Set Aside for Employee Bonus and Directors’ Remuneration: None.
4.1.9 Buyback of Treasury Stock

There are no buying back treasury shares in 2018.

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4.2 Bonds: None.

4.3 Preferred Stock: None.

4.4 Global Depository Receipts: None.

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4.5 Employee Stock Options

4.5.1 Issuance of Employee Stock Options

April 15, 2019; unit: NT$

Type of Stock Option	3rdTranche	3rdTranche
Approval Date	2011.06.08
Issue Date	2011.10.28	2012.03.21
Units Issued (Thousand Shares)	3,000	3,000
Shares of Stock Options to Be Issued as a Percentage of Outstanding Shares (Note 1)	0.77%	0.76%
Duration	2011.10.28~2020.12.31	2012.03.21~2020.12.31
Conversion Measures	Issuing new shares	Issuing new shares
Conditional Conversion Periods and Percentages	2 years after issued: could exercise 40% of total outstanding shares; 3 years after issued: could exercise 70% of total outstanding shares; 4 years after issued: could exercise 100% of total outstanding shares;
Converted Shares (Thousand Shares)	600	1,054
Exercised Amount (NT$Thousand)	16,572	26,441
Number of Shares Yet to Be Converted (Thousand Shares)	1,100	841
Adjusted Exercise Price for Those who Have Yet to Exercise Their Rights(NT$)	30.7	30.5
Unexercised Shares as a Percentage of Total Issued Shares (Note 2)	0.40%	0.31%
Impact on Shareholders’ Equity	Attract and retain professionals, improve employees’ coherence and sense of belonging, and create the interests of the Company and shareholders.

Note 1: Calculated according to issued shares on date of issuing the ESOP. Note 2: Calculated according to issued shares on April 15, 2019 (274,011,325 shares).

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Unexercised	Converted Shares as a Percentage of Shares Issued (Note 1)			0.24%			0.35%
	Amount (NT$ Thousand)			19,724			27,284
	Strike Price (NT$) (Note 4)			30.5~30.7			30.5~30.7
	Number of Shares Converted			644			951
Exercised	Converted Shares as a Percentage of Shares Issued (Note 1)			0.04%			0.33%
	Amount (NT$ Thousand)			2,294			24,434
	Strike Price (NT$) (Note 3)			23.9			23.9~34.5
	Number of Shares Converted			96			909
Stock	Options as a Percentage of Shares Issued (Note 1)			0.27			0.68%
	Number of Stock Options			740			1,860
	Name	Alex Hsia	Simon Law	Vincent Kao	Kenny Li	Morgan Chiu (resigned)	(Note 2)
	Title	CEO	SVP	VP	VP	VP	Top 10 Employees
				Management

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4.6 Restricted Employee Shares

4.6.1 Issuance of New Restricted Employee Shares

April 15, 2019; unit: NT$

	April 15, 2019; unit: NT$	April 15, 2019; unit: NT$	April 15, 2019; unit: NT$	April 15, 2019; unit: NT$	April 15, 2019; unit: NT$
Type of New Restricted Employee Shares	The first Tranche of 2015
Date of Effective Registration	2015.06.22
Issue Date	2015.12.08	2016.03.21		2016.05.05
Number of New Restricted Employee Shares Issued(Thousand Shares)	2,440	1,190		370
Issued Price (NT$)	0	0		0
New Restricted Employee Shares as a Percentage of Shares Issued(Note 1)	0.89%	0.43%		0.14%
Vesting Conditions of New Restricted Employee Shares	If the employees are still on duty and the personal performance of the year are at least B plus or more than B plus as well as the employee has followed the relevant working rules of the Company, the ratio for the employees to acquire new restricted employee shares is as follows: One year after issuance: 0% of acquired shares; Two years after issuance: 50% of acquired shares; Threeyears after issuance: 100% of acquired shares.
Restricted Rights of New Restricted Employee Shares	1. If the employees have acquired new restricted employee shares before the fulfillment of the conditions, new restricted employee shares are not able to sell, pledge, transfer, offer as a gift, set the mortgage or dispose in some other ways. 2. The attendance of shareholders’ meeting, voting rights and some other rights of shareholders will be managed by the trust custodian institution.
Custody Status of New Restricted Employee Shares	Trust custodian institution will take care of the shares before the fulfillment of duration mentioned above.
Measures to be Taken When Vesting Conditions Are Not Met	Except the trust custodian limitation mentioned above, the rights of the new restricted employee shares are all the same as the issued common shares of the Company.
Number of New Restricted Employee Shares that Have Been Redeemed or Bought Back(Thousand Shares)	592.5		30		70
Number of Released New Restricted Employee Shares(Thousand Shares)	1,847.5		1,160		150
Number of Unreleased New Restricted Shares(Thousand Shares)	0		0		150
Ratio of Unreleased New Restricted Shares to Total Issued Shares (%) (Note 1)	0.00%		0.00%		0.05%
Impact on Possible Dilution of Shareholdings	The influence on the Company’s EPS is limited, hence there’s no material impact on the shareholder’s equity.

Note 1: Calculated according to issued shares on April 15, 2019 (274,011,325 shares).

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					Top 10 Employees (Note 2) 1,110 0.41% 1,035 0 0 0.38% 75 0 0 0.03% Note 1: Calculated according to issued shares on April 15, 2019 (274,011,325 shares). Note 2: Top ten employees with new restricted employee shares are: Kuo-Chang Chen, Shui-Lin Chen, Shih-Chang Chia, Yong-Fei Chien, Hung-Long Chou, Shi-Chang Han, Kuo-Chun Hung, Qin-Guo Li, Jie-Sheng Lin, Zong-Han Lin, Sheng-De Shih, Bo-Zheng Wu and Cheng-Tao Yang, Yung-Neng Yu (Arrange in last name’s alphabetical order) 4.7 Status of New Shares Issuance in Connection with Mergers and Acquisitions: None. 4.8 Financing Plans and Implementation: None
Unreleased	Unreleased Restricted Shares as a Percentage of Shares Issued (Note 1)		0.00%		0.03%
	Amount (NT$ Thousands)		0		0
	Issued Price (NT$)		0		0
	Number of Shares		0		75
Released	Released Restricted Shares as a Percentage of Shares Issued (Note 1)		0.24%		0.38%
	Amount (NT$ Thousands)		0		0
	Issued Price (NT$)		0		0
	Number of Shares		670		1,035
New	Restricted Shares as a Percentage of Shares Issued (Note 1)		0.24%		0.41%
	Number of New Restricted Shares		670		1,110
	Name	Alex Hsia	Vincent Kao	Kenny Li	(Note 2)
	Title	CEO	VP	VP	Top 10 Employees
			Management

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V. Operational Highlights

5.1 Business Activities

5.1.1 Business Scope

A. Main Business Operations

Altek is a digital imaging solution provider. Our main business operations are the research/development, manufacturing and sales of digital image-related applications. We provide customers with wide-range of integrated solutions including intellectual property (IP) licensing, algorithms, software, chip design (application-specific integrated circuits, ASIC), dual to multi lens camera module, 3D sensing module, and ODM forimage related products.

B. Revenue Distribution

Unit: NT$ thousand	Unit: NT$ thousand	Unit: NT$ thousand
Major Divisions	Total Sales in Year 2017	(%) of Sales
Digital Imaging-related Applications	11,193,569	100.00%

C. New Product Development

(1) AI deep learning chips

(2) Imaging chips

(3) 3D sensing module and 3D sensing chip

(4) AI cameras used in the AIOT (eg. home and commercial surveillance cameras)

(5) High-resolution wide-angle disposable endoscope

5.1.2 Industry Overview

A. Current Status, Development and Competition

As a digital imaging solution provider, Altek is aware that with the changes in consumer habits, digital imaging has long been indispensable for everyone's daily life. In the past, digital imaging was mainly used in cameras and video cameras that emphasized image quality. Today, with the increasing demand for smart home, personal safety, driving safety, precision medical treatment, and the development of IoT and big data, vision intelligence has become a trend. As artificial intelligence (AI) technology has reached maturity, the AI recognition technology with deep learning function has gradually reversed the traditional security control industry, and its innovative applications have expanded to the retail, manufacturing, medical and other markets, which is regarded as the next new blue ocean.

According to the prediction made by Frost & Sullivan, there will be about 50 billion networking devices in the world by 2025, including wearable devices, smart homes, smart factories, smart cities, and other applications of IoT, and due to the huge amount of data received by the IoT devices, cloud computing will be unable to meet the needs of today, so Edge Computing will come into being. Another reason for the birth of Edge Computing is that speed of conventional cloud computing fails to satisfy some of the

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emerging applications such as augmented reality (AR) and virtual reality (VR), in-vehicle

networking, and smart factory IoT 4.0., considering such applications require extremely high bandwidth and immediacy. In addition, it has also been reported over the past year that cloud data centers get hacked resulting in data theft and leaks of trade secret information, which caused enterprises and consumers to have concerns about the security and privacy of cloud computing. As a result, " Edge Computing " has become the buzz word in the IT industry in recent years, and major manufacturers, such as Amazon and Microsoft, have successively launched products and technical solutions corresponding to Edge Computing.

Altek has been constantly transforming and upgrading in recent years and successfully expanded our business scope into Edge Vision AI, 3D sensing module and other solutions. In this industry, Altek is one of the few companies that are capable of providing multi-domain customers, from upstream to downstream, with integrated solutions such as IP licensing, algorithms software, chip design, dual (multi) lens camera module, 3D sensing module, and ODM for system products. However, as the importance of digital imaging is increasing, it also attracts other competitors. Besides independent algorithm companies and chip developers, large-scale brands also started to develop their own technologies.

B. Relevance of Upstream, Midstream, and Downstream

The application of digital imaging products is diversified, and it is gradually developing towards multi-lens and 3D sensing. Some end products, such as smart phones, are equipped with photographing feature because of camera lens modules. The following figure illustrates how the digital imaging industry operates in overall:

==> picture [441 x 178] intentionally omitted <==

C. Product Development Trend

With the evolution of consumer lifestyle, digital imaging has already penetrated into everyone's daily life. From smart phones owned by individuals to cars found in every household, and from home and business surveillance to professional medical diagnosis, digital imaging is everywhere and its applications are springing up. The overall product trend is changed from viewing function that emphasized image quality in the early days to sensing that can make intelligent judgment of various facets such as shape, volume, color, moving speed and distance.

In terms of smart phones, Apple took the lead to launch a dual-lens camera

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smart phone in 2016, and the image quality (such as blur background) is comparable to that of a monocular camera. In 2017, Apple added 3D sensing to offer face recognition. With stricter requirements of drivers and regulations on driving safety and the age of self-driving in the future, automotive image sensing products have become the standard equipment for mainstream vehicles. Due to the advancement of face recognition technology, our security camera has been gradually applied in smart shopping malls, smart buildings, and smart cities in recent years to improve management efficiency and security.

5.1.3 Research and Development
A. Research and Development Expenses

Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Item	2018	2019 (as of March 31)
Total R&D Expense	814,075	192,167
% to Revenue	7%	11%

B. Technologies or Products Developed
(1) 3D sensing computer chips.
(2) Dual-camera module and computing software
(3) New-generation 360-degree VR camera.
(4) AI camera with 4K resolution and smart monitoring
(5) AI commercial surveillance camera
(6) Insulin injection system
(7) New-generation glucose meter
C. Ongoing Research and Development Projects and Expenses

In addition to developing extended products, Altek will constantly pay close attention to the industrial trend and increase the investment in technologies and applications with potential for development. If there is no significant change, it is estimated that the annual consolidated R&D expenses will account for more than 8% of the consolidated turnover. The major R&D projects and progress for 2018 are described as follows:

follows:
OngoingR&D Project	Expected Completion time
AI Deep Learning Chips	Before the end of Q3,2019
ISP Chips	Before the end of Q3, 2019
3D Sensing Module	Before the end of 2019
New-generation Security Surveillance	Before the end of Q3, 2019
High-resolution Wide-angle Disposable	First half of 2020

The expenses of the above R&D projects accounted around 80% of the total R&D expenses.

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5.1.4 Long-term and Short-term Development

A. Short-term Business Development Plan
(1) Strengthen partnership with existing customers, ensure product quality and delivery, and expand product lines
(2) Cooperate with international manufactures through strategic alliances to jointly develop new globalcustomers
(3) Build visibility and reputation by participating actively in major exhibitions
(4) Deeply cooperate with the supply chains to develop cost-effective solutions
B. Mid and Long-term Business Development Plan
(1) Continue to innovate and develop more competitive new- generation products
(2) Strengthen strategic alliances with top manufacturers worldwide to develop various business opportunities
(3) Develop advanced products and technologies to increase differentiation and barriers to entry
(4) Strengthen strategies for international development and increase market visibility and market share
(5) Recruit and retain outstanding talents actively to reserve the capacity for product research and business development

5.2 Market and Sales Overview

5.2.1 Market Analysis

A. Major Sales Region

In 2018, Altek’s major sales region is Asia, accounting for 83% of the consolidated sales, followed by Europe (13%) and North America (4%).

B. Market Share

Altek offers a full range of digital imaging solutions (including IP licensing, algorithm software, chip design, dual (multi-) lens camera modules, and ODM for system products), and there is no data available to estimate the market share by now.

C. Market Supply/Demand and Growth in the Future

Due to the increasing importance of digital imaging, it has attracted competitors suchas algorithm software companies and chip developers to join the market and top brands to develop their own technologies. On the other hand, the authorities in China are supporting their local manufacturers, so the competition among the suppliers of key components such as chips, software and lens modules, is also intense. In the future, Altek has to not only make continuous improvement in product specifications and technology, but increase competitiveness in technical services and cost control as well.

According to the report of Topology Research Institute in March 2018, 3D sensing technology will not only shine on smart phones, but will also be gradually introduced

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into notebooks, TVs, game consoles, drones, autonomous driving, and home automation. From strengthening biometrics, enhancing AR effects to dynamic tracking, it brings more possibilities and business opportunities. The total production of smart phones equipped with 3D sensing modules in 2018 is 197 million sets, of which the output value of sensing modules is estimated to be around USD 5.12 billion. It is estimated that the overall output value will reach USD 10.85 billion by 2020, and the compound growth rate will be 45.6% from 2018 to 2020. Looking ahead, the overall digital imaging products will continue to maintain strong growth momentum.

D. Competitive Niche

(1) In-depth algorithm software

Altek has invested in in-depth algorithm software for many years and obtained various patents in Taiwan, China, and the U.S. Our in-depth imaging technology has won recognition and cooperation from mobile phone manufacturers in China, American semiconductors and major technology manufacturers.

(2) Imaging chips

Altek’s chip design team has developed more than 10 generation imaging chips successfully, including the 3D sensing depth chips commissioned by the US semiconductor manufacturers, and more than 200 million end products have been equipped with our imaging chips.

(3) Optical processing technology and system integration

Altek has developed and produced cameras for international customers for over 20 years. Having been the world’s largest DSC ODM and owning an optical team, Altek provides customized design with strong technical development, system integration and mass production capabilities.

(4) Complete digital imaging solution

Altek offers one-stop shopping customized service and quickly responds to customers’ needs, from product development to mass production, in a timely manner. Altek effectively assists customers to get ahead of the market.

E. Advantages, Disadvantages and Countermeasures for Prospects

(1) Advantages

a. Digital imaging is playing an increasingly important role in various fields, so the industry outlook is promising.
b. The digital image is developing towards 3D sensing and AI in vision applications, and the technical level is improved. Altek’s depth images computing technology is in the leading position in the industry and owns excellent competitiveness.
c. Altek offers a full range of digital imaging solutions and assists customers, from product development to mass production, to lead in the market in a timely manner.
(2) Disadvantages and Countermeasures
a. With the ever-changing development of technology, requirements for specifications and functions are getting higher and higher, causing the pressure

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to cut down prices from time to time and shorter life cycles of products.

Countermeasure:

Altek will actively recruit and retain outstanding talents, enhance its capacities for product R&D and market resilience, and actively develop new technologies and new products with longer life cycles and higher barriers to entry.

b. Intense industrycompetition

As the importance of digital images is increasing, it also attracts other competitors to join the market. In addition to some major European and American manufacturers, China is fostering its local enterprises at the same time, making the competition much more intense.

Countermeasure:

Altek will develop advanced products and technologies to increase differentiation and barriers to entry.

5.2.2 Purpose and Production Process of Major Products

A. Digital Imaging Chip

(1) Major purpose

Digital imaging chips can be applied to general consumer products, smartphone imaging, safety control products, automotive electronics and medical electronics. They have features such as face detection/tracking, face recognition, anti-shake, lens compensation, etc., and will be equipped with deep learning capacities to provide a combination of entry-level to high-end multi-image chips.

(2) Production process

The process of developing each chip from design to finished product is as follows:

==> picture [422 x 122] intentionally omitted <==

----- Start of picture text -----

Lead frame
Wafer
or substrate
CAD Wafer Wafer Packaging
Design Mask Packaging
CAE manufac & testing
testing
-turing
----- End of picture text -----

a. Design procedure

The IC design process is based on product specifications, and the design engineer will convert the circuits into drawings for mass production by means of CAD and other auxiliary tools, which then will be produced by the wafer foundry.

==> picture [347 x 40] intentionally omitted <==

----- Start of picture text -----

Computer
Circuit Circuit Layout CAD
data/tape
design simulation
----- End of picture text -----

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b. Mask procedure

Circuits completed by IC designers are saved in tapes through database and delivered to the mask manufacturers. The production process composes of four stages: Glass Process, Cr Film Coating, Resist Coating and Shipping. Completed masks will be delivered to the wafer foundry for production.

c. Wafer production procedure

Wafer manufacturing is entrusted to professional foundries. After being taken offline, wafers are processed through etching, photo, thin film, and diffusion process areas in the module with masks to complete the fabrication. Completed wafers will be electrically tested, and qualified wafers will then be delivered.

d. Wafer testing procedure

Wafer testing is required for the finished wafer, which mainly tests whether the electrical function is normal, and wafers of good quality or of poor quality will be marked respectively.

e. Packaging procedure

The good-quality tested wafers will be sent for IC packaging. The packaging procedure is as follows:

==> picture [377 x 80] intentionally omitted <==

----- Start of picture text -----

Label Cut Mount Wire Plastic
closures
Stamp
Electroplating Dam-bar/desmear Packaging Deliver
/tin
----- End of picture text -----

B. Dual(Multi)-camera Module

(1) Major purpose

They can be built-in camera modules for smart phones, tablets, surveillance cameras, cars and other devices.

(2) Production process

==> picture [457 x 98] intentionally omitted <==

----- Start of picture text -----

Software /
Camera Dispense firmware Focusing Calibration Quality Packaging/
module integration testing Deliver
----- End of picture text -----

C. Digital Imaging Solution

(1) Major purpose

Images recording, information sharing on social media, webcast, virtual reality, face recognition, security monitoring, etc.

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(2) Production process

==> picture [377 x 259] intentionally omitted <==

----- Start of picture text -----

Specification and functional testing Deliver
Production tool integration Packaging
Module integration Environmental reliability test
Assembly Digital imaging processing
Software/firmware integration Structures & electronic reliability
integration
----- End of picture text -----

5.2.3 Major Suppliers

Altek has maintained a good relationship with major suppliers to control sources of materials, shorten delivery, improve material quality, and reduce risks. Altek also reaches an agreement with major suppliers and according the market supply and demand to review price in order to establish safe inventory for the optimization of quality, delivery, and costs.

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2019 (as of March 31)	Relation with Issuer	None	None	�	None	�
	Percentage (%)	3.45	2.49	�	94.06	100.00
	Amount	43,211	31,162	�	1,179,353	1,253,726
	Name	A	B	C	Other	Total
2018	Relation with Issuer	None	None	None	None	�
	Percentage (%)	13.28	10.98	2.56	73.18	100.00
	Amount	1,190,992	984,913	229,516	6,564,425	8,969,846
	Name	A	B	C	Other	Total
2017	Relation with Issuer	None	�	None	None	�
	Percentage (%)	1.92	�	10.13	87.95	100.00
	Amount	157,495	�	832,751	7,228,249	8,218,495
	Name	A	B	C	Other	Total

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2019 (as of March 31)	Relation with Issuer	None	None	None	None	None	None	None	�
	Percentage (%)	6.25	32.63	1.94	33.92	6.74	1.49	17.03	100.00
	Amount	107,693	562,519	33,412	584,685	116,254	25,607	293,783	1,723,953
	Name	a	b	c	d	e	f	Other	Total
2018	Relation with Issuer	None	None	None	None	None	None	None	�
	Percentage (%)	27.14	20.54	10.57	10.77	8.39	4.04	18.55	100.00
	Amount	3,037,506	2,298,888	1,182,959	1,206,049	939,417	451,848	2,076,902	11,193,569
	Name	a	b	c	d	e	f	Other	Total
2017	Relation with Issuer	None	None	None	None	None	None	None	�
	Percentage (%)	1.75	19.57	�	9.71	17.79	10.96	40.22	100.00
	Amount	184,734	2,064,733	163	1,024,349	1,877,714	1,156,451	4,244,629	10,552,773
	Name	a	b	c	d	e	f	Other	Total

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5.2.5 Production in the Last Two Years

Unit: Thousand; NT$ thousand

				Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand
Year	2017			2018
Output Major Products	Capacity	Quantity	Value	Capacity	Quantity	Value
Digital Imaging-related Applications	See Note			See Note

Note: Such information is the Company’s business secret. To protect shareholder’s benefits, it’s not able to disclose herein.

5.2.6 Shipments and Sales in the Last Two Years

Unit: Thousand; NT$ thousand

					Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand	Unit: Thousand; NT$ thousand
Year	2017				2018
Shipments & Sales Major Products	Local		Export		Local		Export
	Quantity	Amount	Quantity	Amount	Quantity	Amount	Quantity	Amount
Digital Imaging-related Applications	Note	111,431	Note	10,441,342	Note	106,987	Note	11,086,582

Note: Such information is the Company’s business secret. To protect shareholder’s benefits, it’s not able to disclose herein.

5.3 Human Resources

Human Resources	Human Resources
Year		2017	2018	March 31, 2019
Number of Employees	Direct and Indirect	192	191	188
	Management	5	6	8
	Total	197	197	196
Average Age		42.0	43	43.6
Average Years of Service		8.6	8.4	8.7
Education (%)	Ph.D.	0.5	1	1.5
	Master	46.7	47.2	48
	Bachelor’s Degree	48.2	48.2	48.5
	Senior High School	3.6	2.5	1.5
	Below Senior High School	1.0	1	0.5

Note: Exposing only the number of employees in individual entity. Such information is the Company’s business secret. To protect shareholder’s benefits, it’s not able to disclose herein.

5.4 Environmental Protection Expenditure

5.4.1 Total Losses and Penalties

The loss or penalty caused by environmental pollution during the latest year and up to the printing date of this annual report: None.

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5.4.2 Countermeasures and Possible Expenditure

Altek is a high-tech company located in Hsinchu Science Park, consuming very limited pollution. Altek strictly obeys environmental protection regulations. No environmental protection and safety penalty occurred from Altek and its subsidiaries.

5.5 Labor Relations

5.5.1 Implementation and Maintenance of Employee Benefits, Training, and Pension System

and Labor Agreements

A. Employee benefits

Since its establishment, Altek has implemented the people-oriented management by valuing and caring for employees and continuously providing comprehensive benefits based on the Labor Pension Act and the Labor Standards Act.

Altek employees enjoy a comprehensive benefits package and annualsick and maternity leave terms and flexible vacation rights that are significantly above the standard set in the Labor Law. Employees enjoy coverage under national Labor and Health Insurance schemes as well as group insurance coverage – well above Labor Law requirements.

Employees work flexible hours that fit in with their priorities and needs. Altek schedules regular employee health check and provides special monetary disbursements for weddings, births, hospitalization and funerals. Altek employees are also entitled to join in annually organized company outings, sports events and athletic competitions.

Special gifts or ‘red envelopes’ find their way to every employee to help celebrate his or her birthday. Special birthday discounts and awards are also provided by specially designated retailers.

B. Employee Training

Talents are the most important assets of the Company. Thus, developing employees’ knowledge and skills through properly planned resources and improving their productivity is the crucial task for the Company. Altek arranges annual training plans to address the professional needs of its employees, the professional skills training targets of management and the overall strategic objectives of the organization. Training for individuals, jobs and the organization strikes an optimal balance that gives every employee a tailored training schedule that is solid, well-rounded and targeted on enhancing and expanding skill sets. To provide better training quality, a feedback survey is conducted for the reference to subsequent training planning. Meanwhile, Altek also encourages employees to participate in external training programs, such as seminars, professional courses, and advanced study, by providing subsidies, so as to expand employees’ self-development and work potential.

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The number of training programs held in 2018 totaled 2,576.5 hours, with 817 trainees and at the cost of NT$174,850. The results of training programs are shown below:

Unit: NT$

			Unit: NT
Item	Number of Trainees	Hours	Expense
Professional Training	267	811	174,850
Employee Safety and Health Training	55	165
QualityTraining	361	1,081.5
Generic Training	89	229
New Employee Orientation	16	80
External Training	29	210
Total	817	2576.5

Training programs are divided into:

(1) Professional Training

Professional training courses are held to improve employee’s’ professional skills, productivity, and performance.

(2) Employee Safety and Health Training

Employee safety and health training courses are held in accordance with national industrial safety and health regulations to safeguard employees’ health and safety at workplaces.

(3) Quality Training

The quality training courses are held to improve all employees’ awareness of quality and promote the provision of products of the best quality that meets customers’ needs.

(4) Generic Training

The generic training courses are held to improve employees’ language and computer skills and develop their potentials for the purpose of achieving the Company’s overall business objectives.

(5) New Employee Orientation

The new employee orientation is held by Human Resource Division to help new recruits adapt to the Company’s systems, environment, and information security.

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C. Pension System

The pension system is implemented in accordance with the Labor Pension Act and the Labor Standards Act. The labor retirement reserve is appropriated monthly. The pension systems of subsidiaries are implemented according to related local laws and regulations.

Pension System	Old System	New System
Applicable Law	Labor Standards Act	Labor Pension Act
Method of Appropriation	2% of the monthly salary is appropriated and deposited in the Bank of Taiwan in the name of the Supervisory Committee of Business Entities’ Labor Retirement Reserve.	At least 6% of the monthly salary is appropriated to the employee’s personal account in Bureau of Labor Insurance, Ministry of Labor.
Amount of Appropriation	The balance of the labor retirement reserve is NT$42,371thousand.	The pension recognized in 2018 was NT$12,088 thousand.

D. Labor Agreement

The Company and its subsidiaries have established mechanisms and channels of regular communication with employees and hold employee communication meetings from time to time to ensure smooth communication. No labor-related dispute occurs.

The Company has established the Working Rules based on the Labor Standards Act and the Working Rules have been approved by the Hsinchu Science Park Bureau.

E. Code of Conduct or Code of Ethics
(1) Employees shall work in accordance with the Company’s policies and regulations, abide by supervisors’ proper guidance, and have strong willingness to work and deliver good quality; supervisors shall provide guidance for employees in a cordial manner. Employees shall report their duties to their superiors.
(2) Employees shall hold an active, gregarious, and enterprising attitude toward work with a proactive point of view. Employees shall perform their duties reliably without any delay or procrastination. During working hours, employees are not allowed to leave their posts without permission.
(3) Employees shall take self-esteem, self-respect, and self-discipline seriously, act honestly, thriftily, and politely, and show respect to others.
(4) Employees are not allowed to browse documents, letters, technologies, and business that are not under their management without permission.
(5) Employees shall not disclose, tell, deliver, or transfer, or publish or release trade secrets known or held by themselves at their posts; without the Company’s written consent, employees are not allowed to operate or participate in business of their own or any third party that is related or similar to the Company’s business. Rights and liabilities of employment and confidentiality are governed by the Company’s Employment Contract and Confidentiality Contract separately.

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(6) Employees shall not accept rebate or other illegal benefits due to convenience of duties or take advantage of their duties to make profit for themselves or others.
(7) Employees shall not disclose confidential information on personal salaries on purpose or inquire about salaries of others.
(8) Employees shall not bring ammunition, swords, and guns, dangerous goods, contraband or objects irrelevant to the public goods of production to the workplaces or carry away any public goods from the Company without permission.
(9) Employees shall keep the workplace and the surroundings safe and clean in accordance with the occupational safety and health laws and regulations and the Company’s policies and prevent burglary, fire, or other natural disasters from happening.
F. Safeguard for the Workplace and Employees’ Safety
(1) Environmental improvement and maintenance of environmental conditions The maintenance of the facilities and equipment at the workplace will be designed from time to time to create a comfortable and safe working environment.
(2) Safety training

The training course on fire and emergency drills will be carried out annually to minimize the loss of property in case of emergency.

(3) Health management

Cleaning, disinfection, and garbage recycling are carried out at the workplace to avoid the growth of mosquitos and bacteria.

(4) Environment and safety management:

The visitor needs the ID card issued by the company in order to access the control door. The security guard will check the ID card then the visitor is able to enter the Company.

5.5.2 Loss Caused by Labor-related Disputes, Estimations and Countermeasures: None.

5.6 Important Contracts

Agreement	Counterparty	Period	Major Contents	Restrictions
Land Lease	Hsinchu Science Park Bureau, Ministry of Science and Technology	2018.09.19~ 2027.12.31	Renting Scientific Park Land	Need to comply with related management Regulations

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VI. Financial Information

6.1 Five-Year Financial Summary

6.1.1 Condensed Balance Sheet

A. Consolidated Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousand

Year Item	Year Item	2014	2015	2016	2017	2018	March 31, 2019 (Note 1)
Current Assets		9,643,055	9,649,516	10,051,522	10,213,502	11,685,441	10,140,800
Property, Plant and Equipment		5,603,692	5,211,143	4,657,848	4,426,156	4,146,896	4,146,964
Intangible Assets		103,447	93,713	92,917	121,538	100,142	94,368
Other Assets		502,017	445,806	424,845	287,775	337,991	399,045
Total Assets		15,852,211	15,400,178	15,227,132	15,048,971	16,270,470	14,781,177
Current Liabilities	Before Distribution	5,447,625	5,117,961	5,613,869	5,042,892	5,420,670	3,699,523
	After Distribution	5,717,879	5,386,241	5,829,465	5,178,070	(Note 2)	(Note 2)
Non-current Liabilities		724,458	653,365	580,270	520,854	1,188,219	1,304,441
Total Liabilities	Before Distribution	6,172,083	5,771,326	6,194,139	5,563,746	6,608,889	5,003,964
	After Distribution	6,442,337	6,039,606	6,409,735	5,698,924	(Note 2)	(Note 2)
Share Capital		2,701,358	2,726,938	2,739,788	2,738,188	2,740,113	2,740,113
Capital Reserve	Before Distribution	2,063,551	1,975,772	1,862,914	2,256,692	2,262,397	2,262,397
	After Distribution	1,928,424	1,841,632	1,862,914	2,256,692	(Note 2)	(Note 2)
Retained ~~E~~arnings	Before Distribution	4,426,902	4,536,749	4,462,922	4,259,236	4,278,647	4,304,840
	Distribution	4,291,775	4,402,609	4,247,326	4,124,058	(Note 2)	(Note 2)
Other EquityInterest		481,868	414,647	(25,521)	(302,339)	(294,938)	(183,350)
TreasuryStock		�	(129,393)	(129,393)	(96,138)	�	�
Equity Attributable to Owners of the Parent	Before Distribution	9,673,679	9,524,713	8,910,710	8,855,639	8,986,219	9,124,000
	After Distribution	9,403,425	9,256,433	8,695,114	8,720,461	(Note 2)	(Note 2)
Non-controllingInterests		6,449	104,139	122,283	629,586	675,362	653,213
~~T~~otal Equity	Before Distribution	9,680,128	9,628,852	9,032,993	9,485,225	9,661,581	9,777,213
	After Distribution	9,409,874	9,360,572	8,817,397	9,350,047	(Note 2)	(Note 2)

Note 1: The annual financial statements have been audited by CPAs; financial statements as of March 31, 2019 have been reviewed by CPAs.

Note 2: The earnings distribution of Year 2018 is subject to approval of the shareholders’ meeting to be held on June 13, 2019.

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B. Individual Condensed Balance Sheet – Based on IFRS

Unit: NT$ thousand

Year Item	Year Item	2014	2015	2016	2017	2018
Current Assets		3,560,652	3,342,969	2,545,463	1,710,815	1,620,586
Property, Plant and Equipment		2,195,459	2,151,402	2,133,095	2,179,758	2,141,996
Intangible Assets		3,892	3,866	2,505	1,754	1,943
Other Assets		10,308,292	10,217,278	9,766,424	9,630,848	9,771,378
Total Assets		16,068,295	15,715,515	14,447,487	13,523,175	13,535,903
Current Liabilities	Before Distribution	5,670,171	5,544,812	4,989,428	4,195,351	3,425,543
	After Distribution	5,940,425	5,813,092	5,205,024	4,330,529	(Note 2)
Non-current Liabilities		724,445	645,990	547,349	472,185	1,124,141
Total Liabilities	Before Distribution	6,394,616	6,190,802	5,536,777	4,667,536	4,549,684
	After Distribution	6,664,870	6,459,082	5,752,373	4,802,714	(Note 2)
Share Capital		2,701,358	2,726,938	2,739,788	2,738,188	2,740,113
Capital Reserve	Before Distribution	2,063,551	1,975,772	1,862,914	2,256,692	2,262,397
	After Distribution	1,928,424	1,841,632	1,862,914	2,256,692	(Note 2)
Retained Earnings	Before Distribution	4,426,902	4,536,749	4,462,922	4,259,236	4,278,647
	After Distribution	4,291,775	4,402,609	4,247,326	4,124,058	(Note 2)
Other Equity Interest		481,868	414,647	(25,521)	(302,339)	(294,938)
Treasury Stock		�	(129,393)	(129,393)	(96,138)	�
Total shareholders’ Equity	Before Distribution	9,673,679	9,524,713	8,910,710	8,855,639	8,986,219
	After Distribution	9,403,425	9,256,433	8,695,114	8,720,461	(Note 2)

Note 1: The financial data have been audited by CPAs.

Note 2: The earnings distribution of Year 2018 is subject to approval of the shareholders’ meeting to be held on June 13, 2019.

Note3: Altek made a simple merger with its subsidiary, Altek Autotronics, on June 30, 2017. The foregoing transaction belongs to the structural reorganization within the Group, where Altek Autotronics should be considered to be possessed by Altek from the very beginning and was consolidated. The 2017 individual financial statements were retrospectively renumbered when Altek prepared the 2018 individual financial statements. The 2017 financial ratio was calculated based on the reconstructed one.

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6.1.2 Condensed Statement of Comprehensive Income/Condensed Statement of Income

A. Consolidated Condensed Statement of Comprehensive Income–Based on IFRS

Unit: NT$ thousand

Year Item	2014	2015	2016	2017	2018	March 31, 2019
Operating Revenue	15,431,081	12,492,029	11,577,046	10,552,773	11,193,569	1,723,953
Gross Profit from Operations	1,560,966	1,568,786	1,555,744	1,435,042	1,318,548	249,864
Net Operating Income (Loss)	301,251	226,351	45,759	159,446	91,257	(24,962)
Non-operating Income and Expense	9,631	56,160	144,816	(21,884)	209,763	38,507
Income (Loss) before Tax	310,882	282,511	190,575	137,562	301,020	13,545
Income (Loss) for Continued Operations	276,175	274,380	100,108	49,587	173,150	1,042
Income (Loss) from Discontinued Operations	�	�	�	�	�	�
Net Income (Loss)	276,175	274,380	100,108	49,587	173,150	1,042
Other Comprehensive Income(Income after Tax)	458,362	(11,764)	(438,440)	(326,910)	27,123	112,970
Total Comprehensive Income	734,537	262,616	(338,332)	(277,323)	200,273	114,012
Net Income Attributable to Owners of the Parent	275,335	273,643	53,800	13,402	130,562	26,193
Net Income Attributable to Non-controllingInterests	840	737	46,308	36,185	42,588	(25,151)
Comprehensive Income Attributable to Owners of the Parent	733,697	265,898	(382,446)	(306,223)	144,490	136,161
Comprehensive Income Attributable to Non-controllingInterests	840	(3,282)	44,114	28,900	55,783	(22,149)
Earnings (Loss) per Share (NT$)	0.80	1.02	0.20	0.05	0.48	0.10

Note: The annual financial statements have been audited by CPAs; financial statements as of March 31, 2019 have been reviewed by CPAs.

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B. Individual Condensed Statement of Comprehensive Income–Based on IFRS

Unit: NT$ thousand

Year Item	2014	2015	2016	2017	2018
Operating Revenue	11,710,474	9,153,080	4,239,343	4,459,078	3,902,992
Gross Profit from Operations	1,249,827	1,011,509	686,164	438,319	434,572
Net Operating Income (Loss)	354,250	177,508	(327)	(193,822)	(96,122)
Non-operating Income and Expense	(106,917)	72,180	72,282	211,304	260,519
Income (Loss) before Tax	247,333	249,688	71,955	17,482	164,397
Income (Loss) for Continued Operations	275,335	273,643	53,800	13,402	130,562
Income (Loss) from Discontinued Operations	�	�	�	�	�
Net Income (Loss)	275,335	273,643	53,800	13,402	130,562
Other Comprehensive Income (Income after Tax)	458,362	(7,745)	(436,246)	(319,625)	13,928
Total Comprehensive Income	733,697	265,898	(382,446)	(306,223)	144,490
Earnings (Loss) per Share (NT$)	0.80	1.02	0.20	0.05	0.48

Note 1: The financial data have been audited by CPAs.

Note 2: Altek made a simple merger with its subsidiary, Altek Autotronics, on June 30, 2017. The foregoing transaction belongs to the structural reorganization within the Group, where Altek Autotronics should be considered to be possessed by Altek from the very beginning and was consolidated. The 2017 individual financial statements were retrospectively renumbered when Altek prepared the 2018 individual financial statements. The 2017 financial ratio was calculated based on the reconstructed one.

6.1.3 Auditors’ Opinions from 2014 to 2018

Year	CPA	Accounting Firm	Audit Opinion
2014	Yu-Kuan Lin and Fang-Yu Wun (Note)	PricewaterhouseCoopers	Unqualified opinion
2015	Yu-Kuan Lin and Dian-Yi Li (Note)	PricewaterhouseCoopers	Unqualified opinion
2016	Dian-Yi Li and Yu-Kuan Lin	PricewaterhouseCoopers	Unqualified opinion
2017	Dian-Yi Li and Yu-Kuan Lin	PricewaterhouseCoopers	Unqualified opinion
2018	Kwok-wah Tsang and Dian-Yi Li(Note)	PricewaterhouseCoopers	Unqualified opinion

Note: CPAs have been changed based on the job rotation of PricewaterhouseCoopers.

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6.2 Five-Year Financial Analysis

A. Consolidated Financial Analysis – Based on IFRS

Item	Year	2014	2015	2016	2017	2018	March 31, 2019
Financial Structure (%)	Debt Ratio	38.94	37.48	40.68	36.97	40.62	33.85
	Ratio of Long-term Capital to Property,Plant and Equipment	185.67	197.19	206.39	226.07	261.64	267.22
Solvency (%)	Current Ratio (%)	177.01	188.30	179.05	202.53	215.57	274.11
	Quick Ratio (%)	151.85	165.33	149.10	175.91	195.49	244.18
	Interest Earned Ratio (Times)	19.00	14.88	8.39	6.12	13.93	3.20
Operating Performance	Accounts Receivable Turnover (Times)	5.60	5.30	4.57	4.08	3.61	2.48
	Average Collection Period	65.17	68.86	79.86	89.46	101.10	147.18
	Inventory Turnover (Times)	9.98	8.36	6.88	6.46	8.65	5.55
	Accounts Payable Turnover (Times)	5.10	4.08	4.14	4.01	3.91	2.80
	Average Days in Sales	36.57	43.66	53.05	56.50	42.19	65.77
	Property, Plant and Equipment Turnover(Times)	2.74	2.31	2.35	2.32	2.61	0.42
	Total Assets Turnover (Times)	0.98	0.80	0.76	0.70	0.71	0.11
Profitability	Return on Total Assets (%)	1.84	1.86	0.80	0.47	1.24	0.04
	Return on Stockholders' Equity (%)	2.82	2.84	1.07	0.54	1.81	0.01
	Pre-tax Income to Paid-in Capital(%)	11.51	10.36	6.96	5.02	10.99	0.49
	Profit Ratio (%)	1.79	2.20	0.86	0.47	1.55	0.06
	Earnings per Share (NT$)	0.80	1.02	0.20	0.05	0.48	0.01
Cash Flow	Cash Flow Ratio (%)	21.2	6.16	�	16.29	12.98	11.01
	Cash Flow Adequacy Ratio (%)	42.36	62.43	�	36.79	114.82	79.71
	Cash Reinvestment Ratio (%)	9.33	0.36	�	4.96	4.40	3.07
Leverage	Operating Leverage	8.39	10.88	44.05	11.65	18.57	�
	Financial Leverage	1.06	1.10	2.33	1.20	1.39	0.79
The 20% changes in various financial ratios in recent two years: 1. Increase in the interest protection ratio: Mainly due to the increase in pre-tax net income in 2018. 2. Increase in inventory turnover and decrease in average sales days: mainly due to product mix adjustment and shortened production cycle. 3. Profitability ratios and the increase in earnings per share: Mainly due to the increase in pre-tax and after-tax net income in 2018.
4. The decrease in relative cash flow ratios: Mainly due to the decrease operating positive net cash flows in 2018.
5. Increase in cash flow adequacy ratio: mainly due to the decrease in capital expenditure and cash dividends. 6. Increase in operatingand financial leverage: Manlydue to the decrease of operatingincome in 2018.

Increase in operating and financial leverage: Manly due to the decrease of operating income in 2018. Note: The annual financial information has been audited by the accountants, and the financial information for the first quarter of 2018 was reviewed by the accountants.

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B. Individual Financial Analysis – Based on IFRS

Item	Year	2013	2014	2015	2016	2017	2018
Financial Structure (%)	Debt Ratio	38.61	39.80	39.39	38.32	34.52	33.61
	Ratio of Long-term Capital to Property, Plant and Equipment	479.01	473.62	472.75	443.40	427.93	472.01
Solvency (%)	Current Ratio(%)	52.06	62.80	60.29	51.02	40.78	47.31
	Quick Ratio(%)	51.44	61.98	60.12	49.91	40.30	46.78
	Interest Earned Ratio (Times)	�	18.44	13.27	3.80	1.64	8.10
Operating Performance	Accounts Receivable Turnover (Times)	3.84	5.80	5.30	3.48	5.31	5.25
	Average Collection Period	95.02	62.93	68.86	104.89	68.74	69.52
	InventoryTurnover(Times)	125.22	566.87	413.87	57.29	87.23	129.94
	Accounts Payable Turnover(Times)	2.10	2.99	2.36	1.30	2.07	2.22
	Average Days in Sales	2.91	0.64	0.88	6.37	4.18	2.81
	Property, Plant and Equipment Turnover (Times)	4.46	5.27	4.21	1.98	2.07	1.81
	Total Assets Turnover (Times)	0.60	0.73	0.58	0.28	0.32	0.29
Profitability	Return on Total Assets(%)	(1.90)	1.78	1.83	0.50	0.25	1.12
	Return on Stockholders' Equity (%)	(3.31)	2.81	2.85	0.58	0.15	1.46
	Pre-tax Income to Paid-in Capital(%)	(9.84)	9.16	9.16	2.63	0.64	6.00
	Profit Ratio(%)	(3.27)	2.35	2.99	1.27	0.30	3.35
	Earnings per Share (NT$)	(0.88)	0.80	1.02	0.20	0.05	0.48
Cash Flow	Cash Flow Ratio (%)	�	12.24	7.04	�	�	�
	Cash Flow AdequacyRatio(%)	�	�	�	�	�	27.99
	Cash Reinvestment Ratio(%)	�	6.55	1.15	�	�	�
Leverage	OperatingLeverage	5.95	3.20	5.23	�	�	�
	Financial Leverage	1.08	1.04	1.13	0.01	0.88	0.79
The 20% changes in various financial ratios in recent two years:
1. Increase in the interest protection ratio: Mainly due to the increase in pre-tax net income in 2018.
2. Increase in inventory turnover and decrease in average sales days: mainly due to product mix adjustment and
shortened production cycle.
3. Profitability ratios and the increase in earnings per share: Mainly due to the increase in pre-tax and after-tax net
income in 2018.
4. Increase in cash flow adequacy ratio: mainly due to the net cash inflow caused by the total business activities in the
past 5 years.

Note 1: Annual financial information is certified by accountants

Note 2: Altek made a simple merger with its subsidiary, Altek Autotronics, on June 30, 2017. The foregoing transaction belongs to the structural reorganization within the Group, where Altek Autotronics should be considered to be possessed by Altek from the very beginning and was consolidated. The 2017 individual financial statements were retrospectively renumbered when Altek prepared the 2018 individual financial statements. The 2017 financial ratio was calculated based on the reconstructed one.

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International Financial Reporting Standards (IFRS)

Formula for Financial Ratios:

Financial Structure

(1) Debt Ratio�Total Liabilities�Total Assets.

(2) Ratio of Long-term Capital to Property, Plant and Equipment�(Total Shareholders’ Equity�Non-current Liabilities)�Net Property, Plant and Equipment.
Solvency
(1) Current Ratio�Current Assets�Current Liabilities.
(2) Quick Ratio�(Current Assets�Inventory�Prepaid Expenses)�Current Liabilities.
(3) Interest Earned Ratio�Net Profit before Income Tax and Interest Expenses�Current Interest Expenses.
Operating Performance
(1) Accounts Receivable Turnover (including Accounts Receivable and Notes Receivable arising from Business)� Net Sales�Average Accounts Receivable Balance (including Accounts Receivable and Notes Receivable arising from Business) in Each Period.
(2) Average Collection Period�365�Accounts Receivable Turnover.
(3) Inventory Turnover�Cost of Sales�Average Inventory.
(4) Accounts Payable Turnover (including Accounts Payable and Notes Payable arising from Business)� Cost of Sales�Average Accounts Payable Balance (including Accounts Payable and Notes Payable arising from Business) in Each Period.
(5) Average Days in Sales�365�Inventory Turnover.
(6) Property, Plant and Equipment Turnover�Net Sales�Net Average Property, Plant and Equipment. (7) Total Assets Turnover�Net Sales�Average Total Assets.
Profitability
(1) Return on Total Assets��Net Income�Interest Expenses×(1�Tax Rate)��Average Total Assets.
(2) Return on Stockholders' Equity�Net Income�Average Total Shareholders’ Equity.
(3) Profit Ratio�Net Income�Net Sales.

(4) Earnings per Share�(Profits and Losses Attributable to the Owners of the Parent Company�Preferred Dividend)�Weighted Average Number of Shares Issued. 5. Cash Flow (1) Cash Flow Ratio�Net Cash Flow from Operating Activities�Current Liabilities. � (2) Cash Flow Adequacy Ratio Net Cash Flow from Operating Activities over the Last Five Years�(Capital Expenditures�Increase in Inventory�Cash Dividend) over the Last Five Years. (3) Cash Reinvestment Ratio�(Net Cash Flow from Operating Activities�Cash Dividends)�(Gross Property, Plant and Equipment�Long-term Investment�Other Non-current Assets�Working Capital). 6. Leverage � � (1) Operating Leverage (Net Operating Income Variable Operating Costs and Expenses)�Operating Income. � � (2) Financial Leverage Operating Income�(Operating Income Interest Expenses).

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6.3 Audit Committee’s Review Report for the Most Recent Year

Audit Committee’s Review Report

To: The 2019 Annual General Shareholders’ Meeting

The Board of Directors has prepared the Company’s 2018 Business Report, Financial Statements and proposal for allocation of earnings. The CPA firm of PricewaterhouseCoopers was retained to audit Altek’s Financial Statements and has issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, and earnings allocation proposal have been reviewed and determined to be correct and accurate by the Audit Committee members of Altek Corporation. According to relevant requirements of the Securities Exchange Act and the Company Law, we hereby submit this report.

Altek Corporation

Chairman of the Audit Committee Ching Jen Hu

March 15, 2019

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6.4 Consolidated Financial Statements for the Years Ended December 31, 2018 and
2017

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 18000250 (In Thousands of New Taiwan Dollars)

To the Board of Directors and Shareholders of Altek Corporation

Opinion

We have audited the accompanying consolidated balance sheets of Altek Corporation and its subsidiaries (the “Group” ) as at December 31, 2018 and 2017, and the related consolidated statements of comprehensive income, of changes in equity and of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the “Regulations Governing the Preparation of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission.

Basis for opinion

We conducted our audits in accordance with the ”Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants” and generally accepted auditing standards in the Republic of China (ROC GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Professional Ethics for Certified Public Accountants in the Republic of China (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

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Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and, in forming our opinion thereon, we do not provide a separate opinion on these matters.

Key audit matters for the Group’s consolidated financial statements of the current period are stated as follows:

Allowance for inventory valuation losses

Description

Please refer to Note 4(14) for description of accounting policy on inventory valuation. Please refer to Note 5(2) for accounting estimates and assumption uncertainty in relation to inventory valuation. Please refer to Note 6(6) for description of allowance for inventory valuation losses.

The Group is primarily engaged in manufacturing and sales of digital image application products. As the Group is in a rapidly changing industry and the short life cycle of electronic products and the highly competitive nature of the market, there is a higher risk of incurring inventory valuation losses or having obsolete inventory. The Group measures inventories sold at the lower of cost and net realisable value. For inventory that is over a certain age and individually identified obsolete or damaged inventory, the company recognises losses at net realisable value. Aforementioned allowance for inventory valuation losses mainly arises from individually identified obsolete or damaged inventory. Since the value of inventories is significant, involves various types of inventory, and the individual identification of inventory usually involves management judgement which is an area that also needs to be assessed using our judgement during the audit process. Thus, we identified valuation of allowance for inventory losses as one of the key audit matters.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

A. Obtained an understanding and assessed the provision policy on inventory valuation losses.
B. Obtained the statement of individually identified obsolete inventory prepared by management and checked the accuracy of stock age analysis report and relevant information.

-89-

C. Checked the accuracy of net realisable value of inventory, assessed the consistency between valuation of market value decline and its provision policy, and assessed the reasonableness of allowance for valuation losses determined by the Group.

Timing of sales revenue recognition

Description

Please refer to Note 4(29) for accounting policies of revenue recognition. The Company and its subsidiaries’ revenue mainly arises from export sales and the cash amounts are material. As the sales terms vary from customers who are located in Mainland China, Europe and America, the terms in customer orders and contracts needs to be properly assessed. Since this involves judgement in the determination of timing of control transfer, we consider the timing of revenue recognition as a key audit matter.

How our audit addressed the matter

We performed the following audit procedures on the above key audit matter:

A. Assessed the appropriation of policies on sales revenue recognition.
B. Assessed and tested the design of internal controls that are relevant to sales revenue recognition and the effectiveness of execution.
C. Performed cutoff test on sales revenue in specific period around balance sheet date.
D. Performed confirmation and substantive test on the balance of accounts receivable at the end of period to confirm accounts receivable and that relevant sales revenue have been recorded in the proper period.

� Other matter Parent company only financial reports

We have audited and expressed an unqualified opinion on the parent company only financial statements of Altek Corporation as at and for the years ended December 31, 2018 and 2017.

-90-

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the�Regulations Governing the Preparations of Financial Reports by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the Financial Supervisory Commission, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 ROC GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ROC GAAS, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:

A. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

-91-

B. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
D. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
E. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
F. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

-92-

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Tsang, Kwok-Wah Li, Tien-Yi

For and on behalf of PricewaterhouseCoopers, Taiwan

March 15, 2019

The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice.

As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.

-93-

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Assets	December31,2018 AMOUNT % � �� �� � � �� � �� � �� �� �� � �� � �� � �� � �� � �� �� �� � �� � � � �� � �� �� �� � �� � �� � �� � �� �� � �� ��	December31,2017	December31,2017
	AMOUNT � �� � �� �� �� �� �� �� �� �� �� �� �� � �� �� �� �� �� �� �� � ��	AMOUNT � �� �� � �� �� �� �� �� �� �� �� � � �� � �� �� �� �� �� �� � ��	%
Current assets 1100 Cash and cash equivalents 1110 Current financial assets at fair value through profit or loss 1136 Current financial assets at amortised cost, net 1150 Notes receivable, net 1170 Accounts receivable, net 1200 Other receivables 1220 Current income tax assets 130X Inventories, net 1410 Prepayments 1470 Other current assets 11XX Current Assets Non-current assets 1510 Non-current financial assets at fair value through profit or loss 1517 Non-current financial assets at fair value through other comprehensive income 1543 Non-current financial assets at cost 1550 Investments accounted for using equity method 1600 Property, plant and equipment, net 1760 Investment property, net 1780 Intangible assets, net 1840 Deferred income tax assets 1900 Other non-current assets 15XX Non-current assets 1XXX Total assets			�� � � � �� � � � � �
			��
			� � � � �� � � � �
			��
			��

(Continued)

-94-

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

December31,2018
December31,2017
Notes
AMOUNT
%
AMOUNT
%
6(12)
�
��
��
�
��
��
6(13)
�
�
��
�
��
�
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�
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�
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6(17)
��
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�
��
�
��
�
��
��
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��
6(14)
��
�
�
�
6(17)
��
�
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�
6(28)
��
�
��
�
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�
��
�
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��
�
��
��
��
��
6(18)
��
��
��
��
6(19)
��
��
��
��
6(20)
��
�
��
�
��
�
��
�
��
��
��
��
6(21)
�
��
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6(18)
�
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�
��
�
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9
�
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Current liabilities
2100
Short-term borrowings
2110
Short-term notes and bills payable
2150
Notes payable
2170
Accounts payable
2200
Other payables
2230
Current income tax liabilities
2250
Provisions for liabilities - current
2300
Other current liabilities
21XX
Current Liabilities
Non-current liabilities
2540
Long-term borrowings
2550
Provisions for liabilities -
noncurrent
2570
Deferred income tax liabilities
2600
Other non-current liabilities
25XX
Non-current liabilities
2XXX
Total Liabilities
Equity attributable to owners of
parent
Share capital
3110
Common stock
Capital surplus
3200
Capital surplus
Retained earnings
3310
Legal reserve
3320
Special reserve
3350
Unappropriated retained earnings
Other equity interest
3400
Other equity interest
3500
Treasury stocks
31XX
Equity attributable to owners
of the parent
36XX
Non-controlling interest
3XXX
Total equity
Significant contingent liabilities
and unrecognised contract
commitments
3X2X
Total liabilities and equity

The accompanying notes are an integral part of these consolidated financial statements.

-95-

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items

Year ended December 31
2018
2017
Notes
AMOUNT
%
AMOUNT
%
6(22) and 12(5)
�
��
��
�
��
��
6(6)(26)(27)
�
��
��
��
��
��
��
��
��
6(26)(27)
�
��
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12(2)
�
��
�
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6(23)
��
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��
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6(24)
��
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6(25)
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��
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6(28)
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4000
Sales revenue
5000
Operating costs
5900
Net operating margin
Operating expenses
6100
Selling expenses
6200
General and administrative
expenses
6300
Research and development
expenses
6450
Expected credit losses
6000
Total operating expenses
6900
Operating profit
Non-operating income and
expenses
7010
Other income
7020
Other gains and losses
7050
Finance costs
7000
Total non-operating income
and expenses
7900
Profit before income tax
7950
Income tax expense
8200
Profit for the year

(Continued)

-96-

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except earnings per share amounts)

Items

YearendedDecember31
2018
2017
Notes
AMOUNT
%
AMOUNT
%
�
��
��
��
�
�
��
�
�
�
6(28)
�
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6(28)
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6(29)
�
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6(29)
�
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��

Other comprehensive income
Components of other
comprehensive income that will
not be reclassified to profit or
loss
8311
Other comprehensive income,
before tax, actuarial gains
(losses) on defined benefit plans
8316
Unrealised gains from financial
assets measured at fair value
through other comprehensive
income
8349
Income tax related to
components of other
comprehensive income that will
not be reclassified to profit or
loss
8310
Components of other
comprehensive income that
will not be reclassified to
profit or loss
Components of other
comprehensive income that will
be reclassified to profit or loss
8361
Currency translation differences
of foreign operations
8370
Share of other comprehensive
income of associates and joint
ventures accounted for uner
equity method
8399
Income tax relating to the
components of other
comprehensive income
8360
Components of other
comprehensive income (loss)
that will be reclassified to
profit or loss
8300
Total other comprehensive
income (loss) for the year
8500
Total comprehensive income
(loss) for the year
Profit attributable to:
8610
Owners of the parent
8620
Non-controlling interest
Profit for the year
Comprehensive (loss) income
attributable to:
8710
Owners of the parent
8720
Non-controlling interest
Total comprehensive income
(loss) for the year
9750
Basic earnings per share
9850
Diluted earnings per share

The accompanying notes are an integral part of these consolidated financial statements.

-97-

				Total equity		��	��		��	��		�	��	��		�	��		�	��	��		��	�		��	��		��	��		�	�	��	��		�	��	��	��
						�			�	�			�								�		�											�					�	�
			Non-controlling	interest		��	��		��	��		�	�	�		�	�		��	��	��		��	�		��	��		��	��		�	�	�	�		�	�	��	��
						�			�										�		�		�																�	�
				Total		��	��		��	��		�	��	��		�	��		��	�	��		��	�		��	��		��	��		�	�	��	��		�	��	�	��
						�															�		�																	�
									�	�			�																					�
				Treasury stocks		��	�		�	�		�	�	�		�	��		�	�	��		��	�		��	�		�	�		�	�	�	�		�	��	�	�
						��															��		��			�														�
Equity attributable to owners of the parent	Retained Earnings Other equity interest	Currency translation	Unappropriated differences of foreign	Special reserve retained earnings operations Other equity-others		� �� � �� � �� �� ��	� �� � �		� � �� � �� �	� �� � �� �		� � �� � �	� � �� � �	� � � ��		� � � ��	� � � �		� � � �	� � � �	� �� � �� �� �� �� ��		� �� � �� �� �� �� ��	� �� � � ��		�� �� � �� � ��	� �� � �		� �� �� � ��	� �� �� � ��		� � �� � �	�� � �� � �	� � �� � �	� � � ��		� � � ��	� � � �	� � � �	� �� � �� �� �� �� ��
				Legal reserve		��	�		�	�		��	�	�		�	�		�	�	��		��	�		��	�		�	�		��	�	�	�		�	�	�	��
						�															�		�																	�
				Capital surplus		��	�		�	�		�	�	��		��	��		��	�	��		��	�		��	�		�	�		�	�	�	��		��	��	�	��
						�															�		�																	�
																�																					�
				Common stock		��	�		�	�		�	�	��		��	�		�	�	��		��	�		��	�		�	�		�	�	�	��		��	�	�	��
						�										�					�		�														�			�
				Notes				6(21)			6(20)			6(16)(18)(19)(21)	6(16)(18)(19)(21)			6(19)(30)						6(21)				6(21)			6(20)				6(16)(18)(19)(21)	6(16)(18)(19)(21)		6(18)(19)
					2017	Balance at January 1, 2017	Profit for the year	Other comprehensive loss for the	year	Total comprehensive income (loss)	Appropriation of 2016 earnings	Legal reserve	Cash dividends	Share-based payment transactions	Retirement of employee restricted	shares	Sales of treasury shares	Changes in ownership interests in	subsidiaries	Non-controlling interest	Balance at December 31, 2017	2018	Balance at January 1, 2018	Effects of retrospective application	Equity at beginning of period after	adjustments	Profit for the year	Other comprehensive income	(loss) for the year	Total comprehensive income (loss)	Appropriation of 2017 earnings	Legal reserve	Special reserve	Cash dividends	Share-based payment transactions	Retirement of employee restricted	shares	Treasury stock sold to employees	Non-controlling interest	Balance at December 31, 2018

-98-

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax
Adjustments
Adjustments to reconcile profit (loss)
Depreciation (included depreciation of investment
property)
Amortisation
Provison for doubtful accounts
Expected credit losses
Net loss (gain) on financial assets at fair value through
profit or loss
Interest expense
Interest income
Dividend income
Share-based payment compensation cost
Loss (gain) on disposal of property, plant and
equipment
Reversal of impairment loss on investments accounted for
under the equity method
Impairment loss on financial assets
Loss on disposal of investment
Changes in operating assets and liabilities
Changes in operating assets
Financial assets at fair value through profit or loss -
current
Notes receivable
Accounts receivable
Other receivables
Inventories
Prepayments
Other current assets
Changes in operating liabilities
Notes payable
Accounts payable
Other payables
Provisions for liabilities
Other current liabilities
Other non-current liabilities
Cash inflow generated from operations
Interest received
Dividends received
Interest paid
Income tax paid
Net cash flows from operating activities

Notes
2018
2017
�
��
�
��
6(8)(9)(26)
��
��
6(10)(11)(26)
��
��
12(4)
�
�
��
12(2)
��
�
�
��
��
6(25)
��
��
6(23)
�
��
��
6(23)
�
��
��
6(16)(27)
��
��
6(24)
��
�
��
6(24)
�
��
�
6(24) and 12(4)
�
��
6(24)
�
��
��
��
�
��
��
�
��
��
�
��
��
��
��
��
��
��
��
��
��
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��
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��
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(Continued)

-99-

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31

(Expressed in thousands of New Taiwan dollars)

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at amortised cost
Acquisition of financial assets at cost
Loss on disposal of investments accounted for under the
equity method
Proceeds from capital reduction of financial assets at cost
Proceeds from capital reduction of financial assets at fair
value through other comprehensive income
Acquisition of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Increase in intangible assets
Acquisition of investment property
Increase (decrease) guarantee deposits paid
Net cash flows (used in) from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings
Proceeds from issuance of short-term notes and bills
payable
Repayment of short-term notes and bills payable
Increase in long-term borrowings
Increase (decrease) in guarantee deposits received
Cash dividends for capital surplus
Employee stock options exercised
Proceeds from sales of treasury shares
Treasury shares sold to employees
Changes in non-controlling interest
Net cash flows from financing activities
Effect of exchange rate
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

Notes
2018
2017
��
��
�
�
�
�
��
�
��
�
��
��
�
6(32)
�
��
��
��
��
6(32)
�
��
��
�
��
�
�
��
��
�
��
��
�
��
��
6(33)
��
��
�
��
�
6(33)
��
�
6(33)
�
��
��
6(20)
�
��
��
��
��
�
��
��
�
�
��
��
��
��
�
��
��
��
6(1)
��
��
6(1)
�
��
�
��

The accompanying notes are an integral part of these consolidated financial statements.

-100-

ALTEK CORPORATION AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018 AND 2017

(Expressed in thousands of New Taiwan dollars, except as otherwise indicated)

1. HISTORY AND ORGANIZATION

Altek Corporation (the “Company”) was incorporated as a company limited by shares under the provisions of the Company Law of the Republic of China (R.O.C.). The Company and its subsidiaries (collectively referred herein as the “Group”) are primarily engaged in the development, manufacturing and sale of digital image technology application, and related export and import trade.

The Company was listed in the Taiwan Stock Exchange on December 24, 2002, as approved by the TaiTz (91) Letter No. 024976 of the former Securities and Futures Commission, Ministry of Finance, R.O.C., dated September 27, 2002.

2. THE DATE OF AUTHORIZATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL STATEMENTS AND PROCEDURES FOR AUTHORIZATION

These consolidated financial statements were authorized for issuance by the Board of Directors on March 15, 2019.

APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS (1) Effect of the adoption of new issuances of or amendments to International Financial Reporting Standards (“IFRSs”) as endorsed by the Financial Supervisory Commission (“FSC”)

New standards, interpretations and amendments endorsed by the FSC effective from 2018 are as follows:

follows:

New Standards,InterpretationsandAmendments

Effective date by
International Accounting
StandardsBoard

Amendments to IFRS 2, ‘Classification and measurement of share-based
payment transactions’
Amendments to IFRS 4, ‘Applying IFRS 9 Financial instruments with
IFRS 4 Insurance contracts’
IFRS 9, ‘Financial instruments’
IFRS 15, ‘Revenue from contracts with customers’
Amendments to IFRS 15, ‘Clarifications to IFRS 15 Revenue from
contracts with customers’
Amendments to IAS 7, ‘Disclosure initiative’
Amendments to IAS 12, ‘Recognition of deferred tax assets for unrealised
losses’
Amendments to IAS 40, ‘Transfers of investment property’
IFRIC 22, ‘Foreign currency transactions and advance consideration’

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

-101-

New Standards, Interpretations and Amendments Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 1, ‘First-time adoption of International Financial Reporting Standards’ Annual improvements to IFRSs 2014-2016 cycle- Amendments to IFRS 12, ‘Disclosure of interests in other entities’

Annual improvements to IFRSs 2014-2016 cycle- Amendments to IAS 28, ‘Investments in associates and joint ventures’

Effective date by International Accounting Standards Board January 1, 2018 January 1, 2017 January 1, 2018

Except for the following, the above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment. The quantitative impact will be disclosed when the assessment is complete. A. IFRS 9, ‘Financial instruments’

(a) Classification of debt instruments is driven by the entity’s business model and the contractual cash flow characteristics of the financial assets, which would be classified as financial asset at fair value through profit or loss, financial asset measured at fair value through other comprehensive income or financial asset measured at amortised cost. Equity instruments would be classified as financial asset at fair value through profit or loss, unless an entity makes an irrevocable election at inception to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument that is not held for trading.
(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’ approach. An entity assesses at each balance sheet date whether there has been a significant increase in credit risk on that instrument since initial recognition to recognize 12-month expected credit losses or lifetime expected credit losses (interest revenue would be calculated on the gross carrying amount of the asset before impairment losses occurred); or if the instrument that has objective evidence of impairment, interest revenue after the impairment would be calculated on the book value of net carrying amount (i.e. net of credit allowance). The Group shall always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables that do not contain a significant financing component.
B. IFRS 15, ‘Revenue from contracts with customers’
IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction contracts’, IAS 18 ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognized when a customer obtains control of promised goods or services. A customer obtains control of goods or services when a customer has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.
The core principle of IFRS 15 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognizes revenue in accordance with that core principle by applying the following steps:

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Step 1: Identify contracts with customer.

Step 2: Identify separate performance obligations in the contract(s).

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price.

Step 5: Recognize revenue when the performance obligation is satisfied.

Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Under IFRS 15, depending on the nature of licences, they are either (1) a promise to provide a right to access to an entity’s intellectual property as it exists throughout the licence period, or (2) a promise to provide a right to use an entity’s intellectual property as it exists at the point in time when the licence is granted.

Licences that meet all of the following criteria provide access to an entity’s intellectual property,

and revenue is recognized based on the performance obligation's progress towards completion:

(a) the contract requires, or the customer reasonably expects, that the entity will undertake activities that significantly affect the intellectual property to which the customer has rights;
(b) the rights granted by the licence directly expose the customer to any positive or negative effects of the entity’s activities identified above; and
(c) those activities do not result in the transfer of a good or service to the customer as those activities occur.

If licences cannot meet all criteria listed above, the entity provides a right to use the entity’s intellectual property. Revenue shall be recognized at the point in time at which the licence is granted to the customer.

When adopting the new standards endorsed by the FSC effective from 2018, the Group will apply the new rules under IFRS 9 retrospectively from January 1, 2018, with the practical expedients permitted under the statement. Further, the Group expects to adopt IFRS 15 using the modified retrospective approach. The significant effects of applying the new standards as of January 1, 2018 are provided in Note 12(4) and (5).

(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by the Group

New standards, interpretations and amendments endorsed by the FSC effective from 2019 are as follows:

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New Standards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendments to IFRS 9, ‘Prepayment features with negative compensation’ IFRS 16, ‘Leases’ Amendments to IAS 19, ‘Plan amendment, curtailment or settlement’ Amendments to IAS 28, ‘Long-term interests in associates and joint ventures’ IFRIC 23, ‘Uncertainty over income tax treatments’ Annual improvements to IFRSs 2015-2017 cycle	January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019 January 1, 2019

IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with terms of 12 months or less and leases of low-value assets). The accounting stays the same for lessors, which is to classify their leases as either finance leases or operating leases and account for those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

The Group expects to recognise the lease contract of lessees in ine with IFRS 16. However, the Group does not intend to restate the financial statements of prior period (collectively referred herein as the “modified retrospective approach”), on January 1, 2019, it is expected that ’right-of-use asset’ and lease liability will be increased by $107,196.

(3) IFRSs issued by IASB but not yet endorsed by the FSC

New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs as endorsed by the FSC are as follows:

endorsed by the FSC are as follows:
NewStandards,Interpretations and Amendments	Effective date by International Accounting Standards Board
Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets between an investor and its associate or joint venture’ IFRS 17, ‘Insurance contracts’	January 1, 2020 January 1, 2020 To be determined by International Accounting Standards Board January 1, 2021

The above standards and interpretations have no significant impact to the Group’s financial condition and financial performance based on the Group’s assessment.

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4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

(1) Compliance statement

The consolidated financial statements of the Group have been prepared in accordance with the �Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC (collectively referred herein as the “IFRSs”).

(2) Basis of preparation
A. Except for the following items, the consolidated financial statements have been prepared under the historical cost convention:
- (a) Financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
- (b) Financial assets at fair value through other comprehensive income.
- (c) Defined benefit liabilities recognized based on the net amount of pension fund assets less present value of defined benefit obligation.
B. The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.
C. In adopting IFRS 9 and IFRS 15 effective January 1, 2018, the Group has elected to apply modified retrospective approach whereby the cumulative impact of the adoption was recognized as retained earnings or other equity as of January 1, 2018 and the financial statements for the year ended December 31, 2017 was not restated. The financial statements for the year ended December 31, 2017 were prepared in compliance with International Accounting Standard 39 (‘IAS 39’), International Accounting Standard 11 (‘IAS 11’), International Accounting Standard 18 (‘IAS 18’) and related financial reporting interpretations. The significant accounting policies is the same as that in Note 4 of the financial statements for the year ended December 31, 2017.

(3) Basis of consolidation

A. Basis for preparation of consolidated financial statements:
(a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are all entities (including structured entities) controlled by the Group. The Group controls and entity when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases when the Group loses control of the subsidiaries.

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(b) Inter-company transactions, balances and unrealised gains or losses on transactions between companies within the Group are eliminated. Accounting policies of subsidiaries have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
(c) Profit or loss and each component of other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to the owners of the parent and to the non-controlling interests even if this results in the noncontrolling interests having a deficit balance.
(d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary (transactions with non-controlling interests) are accounted for as equity transactions, i.e. transactions with owners in their capacity as owners. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity.
(e) When the Group loses control of a subsidiary, the Group remeasures any investment retained in the former subsidiary at its fair value. That fair value is regarded as the fair value on initial recognition of a financial asset or the cost on initial recognition of the associate or joint venture. Any difference between fair value and carrying amount is recognised in profit or loss. All amounts previously recognised in other comprehensive income in relation to the subsidiary are reclassified to profit or loss, on the same basis as would be required if the related assets or liabilities were disposed of. That is, when the Group loses control of a subsidiary, all gains or losses previously recognised in other comprehensive income in relation to the subsidiary should be reclassified from equity to profit or loss, if such gains or losses would be reclassified to profit or loss when the related assets or liabilities are disposed of.

(Blank below)

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Name of Investor
Name of Subsidiaries
Main Business Activities
December 31, 2018
December 31, 2017
Note
Ownership (%)

Altek Corporation
Altek International Investment Co., Ltd.
Investments and general business operations
100
100
-
"
Altek Japan Corporation
Sales of optical instruments
100
100
-
"
Altek Investment Co., Ltd.
Investments
100
100
Note 5
"
Altek Autotronics Corporation
Research design, manufacture and sales of car electronic
components
-
-
Note 4
"
Altek International Holding (BVI) Co.,Ltd.
Investments and general business operations
100
100
-
Altek International Investment Co., Ltd.
Altek Lab Inc.
Design service
100
100
-
"
Altek Optical (Cayman) Co., Ltd.
Investments and general business operations
100
100
-
"
Altek Semiconductor (Cayman) Co., Ltd.
Investments and general business operations
50
50
-
Note 1
Altek (Kunshan) Co., Ltd.
Manufacture and sales of digital still camera and its
accessories
100
100
-
Note 1
Altek EMS (Kunshan) Co., Ltd.
Manufacture and sales of related engineering services
100
100
-
Note 1
Altek Precision (Kunshan) Co., Ltd.
Manufacture and sales of digital camera parts
100
100
-
Note 1
Altek Trading (Shanghai) Limited
Wholesale, import and export of related electronic and their
associated accessories
100
100
-
Note 2
Altek Biotechnology Corporation
Research and development, manufacture and sales of
medical electronic equipments
100
100
-
Altek Semiconductor (Cayman) Co., Ltd. Altek Semiconductor Corporation
Research design and sales of ASIC
100
100
-
"
Altek Semiconductor (Shanghai) Co., Ltd.
Research design and sales of imaging technologies,
electronic software and hardware
100
100
Note 3
Note 1
Altek Optical Technology (Kunshan) Co.,
Ltd.
Manufacture and sales of related electronic services and its
accessories and optical components
100
100
-
Note 1: Invested by Leading Tech. Co., Ltd., Toptek Investment Cayman Co., Ltd., Altek Imaging Technology (Cayman) Co., Ltd., Altek Trading (Cayman) Co., Ltd., Altek Optical Technology (Cayman) Co., Ltd.,
which are wholly owned by Altek International Investment Co., Ltd.
Note 2: Invested by Altek Biotechnology Holding (Cayman) Co., Ltd., which is wholly owned by Altek International Holding (BVI) Co., Ltd.
Note 3: It was invested by Altek Semiconductor (Cayman) Co., Ltd. and was incorporated in January 2017.
Note 4: On June 30, 2017, Altek Corporation consummated a short-form merger with Altek Autotronics Corporation and the former is the surviving company.
Note 5: The dissolution and liquidate of Altek Investment Co., Ltd. Was resolved by the Board of Directors since December 17, 2018. Moreover, the competent authority approved its dissolution on December 24, 2018.

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C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions: None.
F. Subsidiaries that have non-controlling interests that are material to the Group: None.
(4) Foreign currency translation

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in New Taiwan dollars, which is the Company’s functional and the Group’s presentation currency.

A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are retranslated at the exchange rates prevailing at the balance sheet date. Exchange differences arising upon re-translation at the balance sheet date are recognised in profit or loss.
(c) Non-monetary assets and liabilities denominated in foreign currencies held at fair value through profit or loss are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in profit or loss as part of the fair value gain or loss. Non-monetary assets and liabilities denominated in foreign currencies held at fair value through other comprehensive income are re-translated at the exchange rates prevailing at the balance sheet date; their translation differences are recognised in other comprehensive income. However, non-monetary assets and liabilities denominated in foreign currencies that are not measured at fair value are translated using the historical exchange rates at the dates of the initial transactions.
(d) All other foreign exchange gains and losses based on the nature of those transactions are presented in the statement of comprehensive income within ‘other gains and losses’.
B. Translation of foreign operations
(a) The operating results and financial position of all the group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
- i. Assets and liabilities for each balance sheet presented are translated at the closing exchange rate at the date of that balance sheet;
- ii. Income and expenses for each statement of comprehensive income are translated at average exchange rates of that period; and

iii. All resulting exchange differences are recognised in other comprehensive income.

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(b) When the foreign operation partially disposed of or sold is an associate or joint arrangements, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Group still retains partial interest in the former foreign associate or joint arrangements after losing significant influence over the former foreign associate, or losing joint control of the former joint arrangements, such transactions should be accounted for as disposal of all interest in these foreign operations.
(c) When a foreign operation is partially disposed of or sold, exchange differences that were recorded in other comprehensive income are proportionately reclassified to profit or loss as part of the gain or loss on sale.
(d) Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing exchange rates at the balance sheet date.

(5) Classification of current and non-current items

A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets:
(a) Assets arising from operating activities that are expected to be realised, or are intended to be sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realised within twelve months from the balance sheet date;
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date.

The Group classifies all assets that do not meet the above criteria as non-current assets.

B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities:
(a) Liabilities that are expected to be paid off within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be paid off within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. Terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification.

The Group classifies all liabilities that do not meet the above criteria as non-current liabilities.

(6) Cash equivalents

Cash equivalents refer to short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Time deposits that meet the definition above and are held for the purpose of meeting short-term cash commitments in operations are classified as cash equivalents.

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(7) Financial assets at fair value through profit or loss
A. Financial assets at fair value through profit or loss are financial assets that are not measured at amortised cost or fair value through other comprehensive income.
B. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using settlement date accounting.
C. At initial recognition, the Group measures the financial assets at fair value and recognizes the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognizes the gain or loss in profit or loss.
D. The Group recognizes the dividend income when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(8) Financial assets at fair value through other comprehensive income

A. Financial assets at fair value through other comprehensive income comprise equity securities which are not held for trading, and for which the Group has made an irrevocable election at initial recognition to recognize changes in fair value in other comprehensive income and debt instruments which meet all of the following criteria:
(a) The objective of the Group’s business model is achieved both by collecting contractual cash flows and selling financial assets; and
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognized and derecognized using settlement date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. The Group subsequently measures the financial assets at fair value: The changes in fair value of equity investments that were recognized in other comprehensive income are reclassified to retained earnings and are not reclassified to profit or loss following the derecognition of the investment. Dividends are recognized as revenue when the right to receive payment is established, future economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(9) Financial assets at amortised cost

A. Financial assets at amortised cost are those that meet all of the following criteria:
(a) The objective of the Group’s business model is achieved by collecting contractual cash flows.
(b) The assets’ contractual cash flows represent solely payments of principal and interest.
B. On a regular way purchase or sale basis, financial assets at amortised cost are recognised and derecognised using trade date accounting.
C. At initial recognition, the Group measures the financial assets at fair value plus transaction costs. Interest income from these financial assets is included in finance income using the effective interest method. A gain or loss is recognised in profit or loss when the asset is derecognised or impaired.

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D. The Group’s time deposits which do not fall under cash equivalents are those with a short maturity period and are measured at initial investment amount as the effect of discounting is immaterial.
(10) Accounts and notes receivable
A. Accounts and notes receivable entitle the Group a legal right to receive consideration in exchange for transferred goods or rendered services.
B. The short-term accounts and notes receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
(11) Impairment of financial assets
For debt instruments measured at fair value through other comprehensive income and financial assets at amortised cost including accounts receivable or contract assets that have a significant financing component, lease receivables, loan commitments and financial guarantee contracts, at each reporting date, the Group recognizes the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognizes the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable or contract assets that do not contain a significant financing component, the Group recognizes the impairment provision for lifetime ECLs.
(12) Derecognition of financial assets

The Group derecognises a financial asset when one of the following conditions is met:

A. The contractual rights to receive cash flows from the financial asset expire.
B. The contractual rights to receive cash flows from the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.
C. The Group neither retains nor transfers substantially all risks and rewards of ownership of the financial asset; however, it has not retained control of the financial asset.
(13) Operating leases (lessor)

Lease income from an operating lease (net of any incentives given to the lessee) is recognised in profit or loss on a straight-line basis over the lease term.

(14) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads which are allocated based on normal operating capacity. It excludes borrowing costs. The item by item approach is used in applying the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and applicable variable selling expenses.

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(15) Investments accounted for under the equity method / associates

A. Associates are all entities over which the Group has significant influence but not control. In general, it is presumed that the investor has significant influence, if an investor holds, directly or indirectly 20 percent or more of the voting power of the investee. Investments in associates are accounted for using the equity method and are initially recognised at cost. The Group’s investments in associates include goodwill identified on acquisition, net of any accumulated impairment loss arising through subsequent assessments.
B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred statutory/constructive obligations or made payments on behalf of the associate.
C. When changes in an associate’s equity that are not recognised in profit or loss or other comprehensive income of the associate and such changes not affecting the Group’s ownership percentage of the associate, the Group recognises the Group’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.
D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been adjusted where necessary to ensure consistency with the policies adopted by the Group.
E. In the case that an associate issues new shares and the Group does not subscribe or acquire new shares proportionately, which results in a change in the Group’s ownership percentage of the associate but maintains significant influence on the associate, then ‘capital surplus’ and ‘investments accounted for under the equity method’ shall be adjusted for the increase or decrease of its share of equity interest. If the above condition causes a decrease in the Group’s ownership percentage of the associate, in addition to the above adjustment, the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately on the same basis as would be required if the relevant assets or liabilities were disposed of.
F. Upon loss of significant influence over an associate, the Group remeasures any investment retained in the former associate at its fair value. Any difference between fair value and carrying amount is recognised in profit or loss.
G. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised in other comprehensive income in relation to the associate, are reclassified to profit or loss, on the same basis as would be required if the relevant assets or liabilities were disposed of. If it still retains significant influence over this associate, then the amounts previously recognised in other comprehensive income in relation to the associate are reclassified to profit or loss proportionately in accordance with the aforementioned approach.

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H. When the Group disposes its investment in an associate, if it loses significant influence over this associate, the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss. If it still retains significant influence over this associate, then the amounts previously recognised as capital surplus in relation to the associate are transferred to profit or loss proportionately.

(16) Property, plant and equipment

A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the construction period are capitalised.
B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
C. Land is not depreciated. Other property, plant and equipment apply cost model and are depreciated using the straight-line method to allocate their cost over their estimated useful lives.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful lives differ from previous estimates or the patterns of consumption of the assets’ future economic benefits embodied in the assets have changed significantly, any change is accounted for as a change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’, from the date of the change.

The estimated useful lives of property, plant and equipment are as follows:

Buildings and structures 3 years ~ 40 years Machinery 3 years ~ 10 years Test equipment 3 years ~ 6 years Other equipment 2 years ~ 11 years

(17) Operating leases (lessee)

Lease income from an operation lease (net of any incentives given to the lessor) is recognised in profit or loss on straight-line basis over the lease term.

(18) Investment property

An investment property is stated initially at its cost and measured subsequently using the cost model. Except for land, investment property is depreciated on a straight-line basis over its estimated useful life of 10 to 35 years.

(19) Intangible assets

Intangible assets consist of software and mask costs and they are amortized on a straight-line basis over their estimated useful lives of 3 to 5 years.

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(20) Impairment of non-financial assets

The Group assesses at each balance sheet date the recoverable amounts of those assets where there is an indication that they are impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use. Except for goodwill, when the circumstances or reasons for recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment loss is reversed. The increased carrying amount due to reversal should not be more than what the depreciated or amortised historical cost would have been if the impairment had not been recognised.

(21) Borrowings

A. Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.
B. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.
(22) Notes and accounts payable
A. Accounts payable are liabilities for purchases of raw materials, goods or services and notes payable are those resulting from operating and non-operating activities.
B. The short-term notes and accounts payable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.
(23) Provisions for other liabilities
Provisions (including warranties) are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be reliably estimated. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation on the balance sheet date, which is discounted using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. When discounting is used, the increase in the provision due to passage of time is recognised as interest expense. Provisions are not recognised for future operating losses.

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(24) Employee benefits

A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in respect of service rendered by employees in a period and should be recognised as expenses in that period when the employees render service.

B. Pensions
(a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expenses when they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent of a cash refund or a reduction in the future payments.

(b) Defined benefit plans
- i. Net obligation under a defined benefit plan is defined as the present value of an amount of pension benefits that employees will receive on retirement for their services with the Group in current period or prior periods. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit net obligation is calculated annually by independent actuaries using the projected unit credit method. The rate used to discount is determined by using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability; when there is no deep market in high-quality corporate bonds, the Group uses interest rates of government bonds (at the balance sheet date) instead.
- ii. Remeasurement arising on defined benefit plans are recognised in other comprehensive income in the period in which they arise and are recorded as retained earnings.
- iii. Past - service costs are recognised immediately in profit or loss.
C. Termination benefits
Termination benefits are employee benefits provided in exchange for the termination of employment as a result from either the Group’s decision to terminate an employee’s employment before the normal retirement date, or an employee’s decision to accept an offer of redundancy benefits in exchange for the termination of employment. The Group recognises expense as it can no longer withdraw an offer of termination benefits or it recognized relating restructuring costs, whichever is earlier. Benefits that are expected to be due more than 12 months after balance sheet date shall be discounted to their present value.

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D. Employees’ compensation and directors’ and supervisors’ remuneration
- Employees’ compensation and directors’ and supervisors’ remuneration are recognised as expense and liability, provided that such recognition is required under legal or constructive obligation and those amounts can be reliably estimated. Any difference between the resolved amounts and the subsequently actual distributed amounts is accounted for as changes in estimates. If employee compensation is paid by shares, the Group calculates the number of shares based on the closing price at the previous day of the board meeting resolution.
(25) Employee share based payment
A. For the equity-settled share-based payment arrangements, the employee services received are measured at the fair value of the equity instruments granted at the grant date, and are recognised as compensation cost over the vesting period, with a corresponding adjustment to equity. The fair value of the equity instruments granted shall reflect the impact of market vesting conditions and non-vesting conditions. Compensation cost is subject to adjustment based on the service conditions that are expected to be satisfied and the estimates of the number of equity instruments that are expected to vest under the non-market vesting conditions at each balance sheet date. And ultimately, the amount of compensation cost recognised is based on the number of equity instruments that eventually vest.
B. Restricted stocks:
- (a) Restricted stocks issued to employees are measured at the fair value of the equity instruments granted at the grant date, and are recognized as compensation cost over the vesting period.
- (b) For restricted stocks where those stocks do not restrict distribution of dividends to employees and employees are not required to return the dividends received if they resign during the vesting period, the Group recognized the fair value of the dividends received by the employees who are expected to resign during the vesting period as compensation cost at the date of dividends declared.
- (c) For restricted stocks where employees do not need to pay to acquire those stocks, if the Group will pay the employees who resign during the vesting period to repurchase the stocks, the Group estimates such payment that will be made and recognizes such amounts as compensation cost and liability at the grant date in accordance with the terms of restricted stocks.

(26) Income tax

A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or items recognised directly in equity, in which cases the tax is recognised in other comprehensive income or equity.

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B. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in accordance with applicable tax regulations. It establishes provisions where appropriate based on the amounts expected to be paid to the tax authorities. An additional tax is levied on the unappropriated retained earnings and is recorded as income tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred income tax is recognised, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of goodwill or of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit (loss). Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. At each balance sheet date, unrecognised and recognised deferred income tax assets are reassessed.
E. Current income tax assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the legally enforceable right to offset current tax assets against current tax liabilities and they are levied by the same taxation authority on either the same entity or different entities that intend to settle on a net basis or realise the asset and settle the liability simultaneously.
F. A deferred tax asset shall be recognized for the carryforward of unused tax credits resulting from acquisitions of equipment or technology, research and development expenditures and equity investments to the extent that it is possible that future taxable profit will be available against which the unused tax credits can be utilised.

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(27) Share capital

A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.
B. Where the Company repurchases the Company’s equity share capital that has been issued, the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders. Where such shares are subsequently reissued, the difference between their book value and any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company’s equity holders.
(28) Dividends

Dividends are recorded in the Company’s financial statements in the period in which they are resolved by the Company’s shareholders. Cash dividends are recorded as liabilities.

(29) Revenue recognition
A. Sales of goods
- (a) The Group manufactures and sells digital image technology application products. Sales are recognized when control of the products has transferred, being when the products are delivered to the wholesaler, the wholesaler has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customers’ acceptance of the products. Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customers, and either the customers have accepted the products in accordance with the sales contract, or the Group has objective evidence that all criteria for acceptance have been satisfied.
- (b) Revenue from these sales is recognized based on the price specified in the contract, net of the value-added tax, sales returns, discounts and allowances.
- (c) A receivable is recognized when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. As the time interval between the transfer of committed goods or service and the payment of customer does not exceed one year, the Group does not adjust the transaction price to reflect the time value of money.
B. Technical service revenue
- The Group provides technical support service. Revenue from providing services is recognized in the accounting period in which the services are rendered. For fixed price contracts, revenue is recognized based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. This is determined by the percentage of completion of the service based on actual contractual progress.

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C. Royalty income
- (a) The Group entered into a contract with a customer to grant a licence of patented technology to the customer. Given the licence is distinct from other promised goods or services in the contract, the Group recognizes the revenue from licencing when the licence transfers to a customer either at a point in time or over time based on the nature of the licence granted. The nature of the Group’s promise in granting a licence is a promise to provide a right to access the Group’s intellectual property if the Group undertakes activities that significantly affect the patented technology to which the customer has rights, the customer is affected by the Group’s activities and those activities do not result in the transfer of a good or a service to the customer as they occur. The royalties are recognized as revenue on a straight-line basis throughout the licencing period. In case the abovementioned conditions are not met, the nature of the Group’s promise in granting a licence is a promise to provide a right to use the Group’s intellectual property and therefore the revenue is recognized when transferring the licence to a customer at a point in time.
- (b) Some contracts require a usage-based royalty in exchange for a licence of intellectual property. The Group recognizes revenue when the performance obligation has been satisfied and the subsequent usage occurs. The customers pays the contract price in accordance with the agreed payment schedule. When the service provided by the Group exceeds the customers’ payables, it is recognized as a contract asset. If the customer pays more than the services provided by the Group, it is recognized as a contract liability.
(30) Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision - maker. The chief operating decision - maker is responsible for allocating resources and assessing performance of the operating segments.
CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF ASSUMPTION UNCERTAINTY

The preparation of these consolidated financial statements requires management to make critical judgements in applying the Group’s accounting policies and make critical assumptions and estimates concerning future events. Assumptions and estimates may differ from the actual results and are continually evaluated and adjusted based on historical experience and other factors. Such assumptions and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year; and the related information is addressed below:

(1) Critical judgements in applying the Group’s accounting policies: None.

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(2) Critical accounting estimates and assumptions:

Evaluation of inventories

As inventories are stated at the lower of cost and net realisable value, the Group must determine the net realisable value of inventories on balance sheet date using judgements and estimates. Due to the rapid technology innovation, the Group evaluates the amounts of obsolete inventories on balance sheet date, and writes down the cost of inventories to the net realisable value. Such an evaluation of inventories is principally based on the demand for the products within the specified period in the future. Therefore, there might be material changes to the evaluation.

As of December 31, 2018, the carrying amount of inventories was $999,212.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

Cash and cash equivalents
0 Cash on hand Checking accounts and demand deposits Time deposits Total	December 31,2018 1,070 $ 933,058 5,560,889 6,495,017 $	December 31,2017
		840 $ 411,191 5,462,951
		5,874,982 $

A. The Group transacts with a variety of financial institutions all with high credit quality to disperse credit risk, so it expects that the probability of counterparty default is remote.
B. The Group has no cash and cash equivalents pledged to others.

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

Items Current items: Beneficiary certificates Valuation adjustment Total Non-current items: Unlisted stocks Valuation adjustment Total	December 31,2018 - $ - - $ 12,731 $ 10,952 23,683 $	December 31,2017
		581,745 $ 3,054
		584,799 $
		- $ -
		- $

A. Amounts recognised in profit or loss in relation to financial assets at fair value through profit or loss are listed below:

Equity instruments Beneficiary certificates Total	�� �� � �� �� �	�� � � �� �� �

B. As of December 31, 2018 and 2017, no financial assets measured at cost held by the Group were pledge to others.
C. Information relating to credit risk is provided in Note 12(2).

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D. Information of financial assets at cost as of December 31, 2017 is provided in Note 12(4).

(3) Financial assets at fair value through other comprehensive income

Financial assets at fair value through other comprehensive income
Items Non-current items� Equity instruments Unlisted stocks Valuation adjustment (	December 31,2018
	150,124 $ 35,616)
	114,508 $

A. The Group has elected to classify strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $114,508 as at December 31, 2018.
B. The Group recognized fair value change in other comprehensive loss of $12,016 for the year ended December 31, 2018.
C. As at December 31, 2018, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the financial assets at fair value through other comprehensive income held by the Group was 114,508.
D. As at December 31, 2018, no non-current financial assets at fair value through other comprehensive income held by the Group were pledged to others.
E. Information relating to credit risk is provided in Note 12(2).
F. Information of financial assets at cost as of December 31, 2017 is provided in Note 12(4).

(4) Financial assets at amortised cost

Financial assets at amortised cost
Items Current items: Time deposits with maturity over three months	December 31,2018 261,228 $	December 31,2017
		- $

A. Amounts recognised in profit or loss in relation to financial assets at amortised cost are listed below:

below:
Interest income	2018 1,242 $	2017
		- $

B. The Group has no financial assets at amortised cost pledged to others.

(5) Notes and accounts receivable

Notes receivable Accounts receivable Less: Allowance for uncollectible accounts	December 31,2018 1,387,222 $ 2,430,654 $ 15,879) ( 2,414,775 $	December 31,2017 30,335 $ 2,351,116 $ 8,747) ( 2,342,369 $

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A. The ageing analysis of accounts receivable that were past due but not impaired is as follows:

December	December	31,2017
Notes receivable 1,387,222 $ - - - - 1,387,222 $	Notes receivable 30,335 $ - - - - 30,335 $	Accounts receivable
		2,334,755 $ 334 - 218 15,809
		2,351,116 $

The above ageing analysis was based on past due date.

B. The Group does not hold any collateral as security.
C. As at December 31, 2018 and 2017, without taking into account any collateral held or other credit enhancements, the maximum exposure to credit risk in respect of the amount that best represents the Group’s notes receivable were $1,387,222 and $30,335, respectively. The maximum exposure to credit risk in respect of the amount that best represents the Group’s accounts receivable were $2,414,775 and $2,342,369, respectively.
D. Information relating to credit risk of notes receivables and accounts receivables is provided in Note 12(2).

(6) Inventories

Inventories
Raw materials Work-in-process Finished goods Total Raw materials Work-in-process Finished goods Total		December 31,2018
	Allowance for Cost valuation loss 688,388 $ 34,641) ($ 95,968 7,558) ( 268,788 11,733) ( 1,053,144 $ 53,932) ($ December 31,2017		Book value
			653,747 $ 88,410 257,055
			999,212 $

	Allowance for Cost valuation loss 737,657 $ 48,162) ($ 136,416 5,601) ( 355,434 9,818) ( 1,229,507 $ 63,581) ($		Book value
			689,495 $ 130,815 345,616
			1,165,926 $

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The cost of inventories recognized as expense for the periods:

Cost of goods sold Reversal of decline in market value Total	For the year ended December 31,2018 9,884,670 $ 9,649) ( 9,875,021 $	For the year ended December 31,2017
		9,174,342 $ 56,611) (
		9,117,731 $

The Group reversed from a previous inventory write-down and accounted for as reduction of operating cost because inventory that has been appropriated as loss on decline in market value was partially sold.

(7) Investments accounted for under the equity method

JinJing Optical Technology Co., Ltd. Less: Accumulated impairment loss	December 31,2018 44,524 $ 17,756) ( 26,768 $	December 31,2017
		44,028 $ 44,028) (
		- $

The carrying amount of the Group’s interests in all individually immaterial associates and the Group’s share of the operating results are summarized below:

As of December 31, 2018 and 2017, the carrying amount of the Group’s individually immaterial associates amounted to $26,768 and $0, respectively.

Income (loss) for the year from continuing operations Other comprehensive income - net of tax Total comprehensive income (loss)	For the year ended For the year ended December 31,2018 December 31,2017 113,661 $ 31,537) ($ - 3,847 113,661 $ 27,690) ($

(Blank below)

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			Total		5,891,443 $	2,242,655) (	3,648,788 $		3,648,788 $	18,262	43,189) (	278) (	212,079) (	35,159) (	3,376,345 $		5,505,116 $	2,128,771) (	3,376,345 $
			Others		533,260 $	494,657) (	38,603 $		38,603 $	4,373	344) (	278) (	23,243) (	185) (	18,926 $		461,630 $	442,704) (	18,926 $
Construction in	progress and	prepayment for	equipment		- $	-	- $		- $	10,466	-	-	-	7) (	10,459 $		10,459 $	-	10,459 $
			Test equipment		170,311 $	158,744) (	11,567 $		11,567 $	1,513	848) (	-	6,539) (	47) (	5,646 $		157,605 $	151,959) (	5,646 $
			Machinery		1,366,032 $	903,610) (	462,422 $		462,422 $	-	41,997) (	-	93,536) (	5,508) (	321,381 $		1,089,739 $	768,358) (	321,381 $
		Buildings and	structures		3,353,156 $	685,644) (	2,667,512 $		2,667,512 $	1,910	-	-	88,761) (	29,412) (	2,551,249 $		3,316,999 $	765,750) (	2,551,249 $
			Land	At January 1, 2018	Cost 468,684 $	Accumulated depreciation -	468,684 $	2018	Opening net book amount 468,684 $	Additions -	Disposals -	Reclassifications -	Depreciation charge -	Net exchange differences -	Closing net book amount 468,684 $	At December 31, 2018	Cost 468,684 $	Accumulated depreciation -	468,684 $

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Construction in	progress and	Buildings and prepayment for	Land structures Machinery Test equipment equipment Others Total	At January 1, 2017	Cost 1,042,216 $ 3,522,603 $ 1,443,305 $ 199,899 $ 29,043 $ 678,217 $ 6,915,283 $	Accumulated depreciation - 643,506) ( 840,003) ( 178,950) ( - 594,976) ( 2,257,435) (	1,042,216 $ 2,879,097 $ 603,302 $ 20,949 $ 29,043 $ 83,241 $ 4,657,848 $	2017	Opening net book amount 1,042,216 $ 2,879,097 $ 603,302 $ 20,949 $ 29,043 $ 83,241 $ 4,657,848 $	Additions - 83,646 547 819 - 12,603 97,615	Disposals - - 20,048) ( 186) ( - 635) ( 20,869) (	Reclassifications 573,532) ( 170,018) ( - - 29,043) ( - 772,593) (	Depreciation charge - 87,469) ( 107,743) ( 9,760) ( - 55,132) ( 260,104) (	Net exchange differences - 37,744) ( 13,636) ( 255) ( - 1,474) ( 53,109) (	Closing net book amount 468,684 $ 2,667,512 $ 462,422 $ 11,567 $ - $ 38,603 $ 3,648,788 $	At December 31, 2017	Cost 468,684 $ 3,353,156 $ 1,366,032 $ 170,311 $ - $ 533,260 $ 5,891,443 $	Accumulated depreciation - 685,644) ( 903,610) ( 158,744) ( - 494,657) ( 2,242,655) (	468,684 $ 2,667,512 $ 462,422 $ 11,567 $ - $ 38,603 $ 3,648,788 $	A. For the years ended December 31, 2018 and 2017, there was no capitalisation of borrowing interests attributable to the property, plant and equipment.	B. Information about the property, plant and equipment that were pledged to others as collaterals is provided in Note 8.

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(9) Investment property

At January 1, 2018 Cost Accumulated depreciation 2018 Opening net book amount Depreciation charge Closing net book amount At December 31, 2018 Cost Accumulated depreciation At January 1, 2017 Cost Accumulated depreciation 2017 Opening net book amount Additions - from acquisitions Reclassifications Depreciation charge Closing net book amount At December 31, 2017 Cost Accumulated depreciation	Land 573,532 $ - 573,532 $ 573,532 $ - 573,532 $ 573,532 $ - 573,532 $ Land - $ - - $ - $ - 573,532 - 573,532 $ 573,532 $ - 573,532 $	Buildings and structures 245,710 $ 41,874) ( 203,836 $ 203,836 $ 6,817) ( 197,019 $ 245,710 $ 48,691) ( 197,019 $ Buildings and structures - $ - - $ - $ 9,000 199,061 4,225) ( 203,836 $ 245,710 $ 41,874) ( 203,836 $	Total 819,242 $ 41,874) ( 777,368 $ 777,368 $ 6,817) ( 770,551 $ 819,242 $ 48,691) ( 770,551 $ Total - $ - - $ - $ 9,000 772,593 4,225) ( 777,368 $ 819,242 $ 41,874) ( 777,368 $

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A. Rental income from investment property and direct operating expenses arising from investment property are shown below:

property are shown below:
Rental income from investment property Direct operating expenses arising from the investment property that generated rental income during the year Direct operating expenses arising from the investment property that did not generate rental income during the year	For the year ended December 31,2018 26,127 $ 8,220 $ - $	For the year ended December 31,2017
		17,298 $
		4,752 $
		- $

B. As at December 31, 2018, the fair value of investment property held by the Group all amounted to $870,022. The fair value was valuated by independent valuers. Valuations were made using the comparative approach and income approach of direct capitalization method.
C. There was no capitalisation of borrowing interests attributable to investment property.
D. Information about the investment property that was pledged to others as collaterals is provided in Note 8.

(10) Intangible assets


At January 1
Cost	$	165,921	$	129,020
Accumulated amortisation	(	44,383)	(	36,103)
	$	121,538	$	92,917
For the year ended December 31
Opening net book amount	$	121,538	$	92,917
Additions		4,398		48,637
Amortisation charge	(	27,878)	(	14,319)
Net exchange differences		2,084	(	5,697)
Closing net book amount	$	100,142	$	121,538
At December 31
Cost	$	168,707	$	165,921
Accumulated amortisation	(	68,565)	(	44,383)
	$	100,142	$	121,538

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A. Details of amortisation on intangible assets are as follows:

Operating costs Operating expense	For the year ended December 31,2018 2,507 $ 25,371 27,878 $	For the year ended December 31,2017
		5,296 $ 9,023
		14,319 $

B. The Group has no intangible assets pledged to others.

(11) Long-term prepaid rents ( shown as ‘Other non-current assets’)

0 Land-use right	December 31,2018 31,811 $	December 31,2017
		33,296 $

The Group recognized amortisation expenses for the years ended December 31, 2018 and 2017 amounting to $924 and $913, respectively.

(12) Short-term borrowings

(12)	Short-term borrowings	Short-term borrowings	Short-term borrowings	Short-term borrowings	Short-term borrowings	Short-term borrowings
(13) (14)	Short-term notes and bills payable Long-term borrowings Type of borrowings December 31,2018 Interest rate range Collateral Bank borrowings Unsecured borrowings 1,760,000 $ 1% ~1.0758% None Type of borrowings December 31,2017 Interest rate range Collateral Bank borrowings Unsecured borrowings 2,021,000 $ 1% ~1.19% None December 31,2018 December 31,2017 Commercial paper payable - $ 200,000 $ Less: Discount on short-term notes and bills payable - 203) ( - $ 199,797 $ Interest rate ranges - 0.84% Type of borrowings Borrowing period and repayment term Interest rate range Collateral December 31,2018 Secured borrowings Borrowing period is from August 24, 2018 to May 8, 2021. Revolving credit facility. 1.1%~1.25% Yes (Note) 600,000 $ Less: Current portion - 600,000 $						Collateral
							None Collateral
			$		$ (	200,000 203)
			$		$	199,797
						0.84%
				Interest rate range 1.1%~1.25%		December 31,2018
	Type of borrowings Secured borrowings Less: Current portion
		Borrowing period is from August 24, 2018 to May 8, 2021. Revolving credit facility.				600,000 $ -
						600,000 $

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During the terms of the unsecured borrowing, in accordance with the unsecured borrowing agreements contracted with bank, the Group is required to maintain the consolidated net value over $8 billion and the debt ratio under 100% based on the annual consolidated financial statements and the semi-annual consolidated financial statements.

Note: Information about collateral for long-term borrowings is provided in Note 8.

(15) Pensions

A. (a)The Company and its domestic subsidiaries have a defined benefit pension plan in accordance with the Labor Standards Act, covering all regular employees’ service years prior to the enforcement of the Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to continue to be subject to the pension mechanism under the Act. Under the defined benefit pension plan, two units are accrued for each year of service for the first 15 years and one unit for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are based on the number of units accrued and the average monthly salaries and wages of the last 6 months prior to retirement. The Company contributes monthly an amount equal to 2% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee.

(b) The amounts recognised in the balance sheet are as follows:

	December	31,2018	December	31,2017
Present value of defined benefit obligations	($	49,943)	($	48,728)
Fair value of plan assets		42,370		40,554
Net defined benefit liability	($	7,573)	($	8,174)

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(c) Movements in net defined benefit liabilities are as follows:

	Present value of	Present value of	Present value of	Fair value of	Fair value of
		defined benefit			plan		Net defined
			obligations		assets	benefit liability
2018
Balance at January 1	($		48,728)	$	40,554	($	8,174)
Current service cost			-		-		-
Interest (expense) income	(		536)		446	(	90)
	(		49,264)		41,000	(	8,264)
Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense)			-		1,361		1,361
Change in financial assumptions	(		500)		-	(	500)
Experience adjustments	(		179)		-	(	179)
	(		679)		1,361		682
Pension fund contribution			-		9		9
Pension payments			-		-		-
Balance at December 31	($		49,943)	$	42,370	($	7,573)
	Present value of			Fair value of
		defined benefit			plan	Net defined
			obligations		assets	benefit liability
2017
Balance at January 1	($		54,809)	$	48,564	($	6,245)
Current service cost	(		58)		-	(	58)
Interest (expense) income	(		767)		679	(	88)
	(		55,634)		49,243	(	6,391)
Remeasurements:
Return on plan assets
(excluding amounts included in
interest income or expense)			-	(	163)	(	163)
Change in financial assumptions	(		1,605)		-	(	1,605)
Experience adjustments	(		30)		-	(	30)
	(		1,635)	(	163)	(	1,798)
Pension fund contribution			-		15		15
Pension payments			8,541	(	8,541)		-
Balance at December 31	($		48,728)	$	40,554	($	8,174)

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(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s and domestic subsidiaries’ defined benefit pension plan in accordance with the Fund’s annual investment and utilisation plan and the “Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign financial institutions, investment in domestic or foreign listed, over-the-counter, or private placement equity securities, investment in domestic or foreign real estate securitization products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual distributions on the final financial statements shall be no less than the earnings attainable from the amounts accrued from two-year time deposits with the interest rates offered by local banks. If the earnings is less than aforementioned rates, government shall make payment for the deficit after being authorized by the Regulator. The Company has no right to participate in managing and operating that fund and hence the Company is unable to disclose the classification of plan asset fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2018 and 2017 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.
(e) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	For the year ended December 31,2018 1.00% 3.00%	For the year ended December 31,2017
		1.10%
		3.00%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory. Note: Using the age range as an assessment of classification.

Because the main actuarial assumption changed, the present value of defined benefit obligation is affected. The analysis was as follows:

		Discount rate	Discount rate			Future salaryincreases	Future salaryincreases	Future salaryincreases
.	Increase	0.25%	Decrease	0.25%	Increase 0.25%		Decrease	0.25%
December 31, 2018
Effect on present value of
defined benefit obligations	($	1,235)	$	1,282	$	1,130	($	1,096)
		Discount rate				Future salaryincreases
.	Increase	0.25%	Decrease 0.25%		Increase 0.25%		Decrease 0.25%
December 31, 2017
Effect on present value of
defined benefit obligations	($	1,342)	$	1,396	$	1,245	($	1,206)

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The sensitivity analysis above is based on other conditions that are unchanged but only one assumption is changed. In practice, more than one assumption may change all at once. The method of analysing sensitivity and the method of calculating net pension liability in the balance sheet are the same.

The method and assumptions of analysing sensitivity are the same with the previous period.

(f) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2019 amounts to $12.
B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering all regular employees with R.O.C. nationality. Under the New Plan, the Company and its domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ individual pension accounts at the Bureau of Labor Insurance. The benefits accrued are paid monthly or in lump sum upon termination of employment. For the years ended December 31, 2018 and 2017, the Group had recognized pension costs of $28,919 and $31,847, respectively, under the above pension scheme.
(b) The subsidiaries provided defined contribution plans for its employees. Pursuant to local regulations, such employees and the subsidiaries each make contributions based on a certain percentage based of the salaries and wages to the pension funds. The subsidiaries had recognized pension costs of $26,227 and $26,924 for the years ended December 31, 2018 and 2017, respectively.

(16) Share-based payment

A. As of December 31, 2018 and 2017, the Company’s share-based payment arrangements were as follows:

follows:
Type of arrangement	Grantdate	Quantity granted	Contract period	Vesting conditions
Employee stock options " " " First time issuance of restricted shares to employees " " Treasury stock transferred to employees	June 13, 2008 October 31, 2008 October 28, 2011 March 21, 2012 November 13, 2015 March 18, 2016 May 5, 2016 March 23, 2018	8,000 1,000 3,000 3,000 2,440 1,190 370 3,433	9.6 years 9.2 years 9.2 years 8.9 yesrs 3 years 3 years 3 years -	Note 1 Note 1 Note 1 Note 1 Note 2, Note 3 Note 2, Note 3 Note 2, Note 3 Vested immediately

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Note 1:2 years’ service vest 40%, 3 years’ service vest 70%, 4 years’ service vest 100%.

Note 2:The restricted shares were issued at no consideration to the Company’s existing employees whose service years have reached 2 years and 3 years and who achieved the performance requirement. The vested ratio is 50% and 50%, respectively. If employees who are entitled to receive restricted stocks do not meet the vesting conditions, the Company will redeem at no consideration and retire those shares.
Note 3:The stocks and dividends distributed to employees during the vesting period shall be given by the Company at no consideration. Employees are not required to return the stocks and dividends if they resign during the vesting period.
B. Details of the share-based payment arrangements are as follows:
(a) For the years ended December 31, 2018 and 2017, the information on the share options and the weighted number of average exercise price of compensation plan employee stock options are as follows:

are as follows:
		2018				2017
			Weighted-average				Weighted-average
				exercise price				exercise price
		No. of options	(in dollars)(Note)			No. of options	(in dollars)(Note)
Options outstanding at
beginning of the year		2,453	$	30.62		5,155	$	31.30
Option expired	(	192)		-	(	2,572)		-
Options exercised	(	320)		30.70	(	130)		28.49
Options outstanding at end
of the year		1,941		30.61		2,453		30.62
Options exercisable at end
of the year		1,941		30.61		2,453		30.62
Approved and not yet
issued options at the end
of the year		-				-

Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.
(b) The weighted number of average exercise price was $27.64 in dollars of treasury stock transferred to employees for the year ended December 31, 2018.
(c) The weighted-average stock price of stock options at exercise dates for the years ended December 31, 2018 and 2017 was $31.31 in dollars and $27.74 in dollars, respectively.

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(d) The expiry date and exercise price of stock options outstanding at balance sheet date are as follows:

Issue date approved	Expiry date	December	Exercise price (in dollars) (Note) $ - - 30.7 30.5 31,2018	December	31,2017
		No. of shares (in thousands) - - 1,100 841		No. of shares (in thousands) - - 1,420 1,033	Exercise price (in dollars) (Note)
June 13, 2008 October 31, 2008 October 28, 2011 March 21, 2012	December 31, 2017 December 31, 2017 December 31, 2020 December 31, 2020				$ - - 30.7 30.5

Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.
(e) The fair value of stock options granted is measured using the Black-Scholes option-pricing model. Relevant information is as follows:

Type of arrangement	Grant date	Stock price (in dollars)	Exercise price (Note) (in dollars)	Expected price volatility	Expected option life	Expected dividends	Risk- free interest rate	Fair value per unit (in dollars)
Employee stock options " " "	June 13, 2008 October 31, 2008 October 28, 2011 March 21, 2012	$ 45.50 32.60 30.65 27.85	- $ - 30.7 30.5	24.45% 22.11% 30.27% 33.54%	6 years 6 years 5 years 4.9 years	1.5% 1.5% 1.4% 1.4%	2.40% 1.88% 1.18% 1.08%	$ 10.56 6.54 7.42 7.35

  - Note: The exercise price of stock options was adjusted based on the cash dividends, stock dividends and cash capital reduction per share distributed.

C. Restricted shares to employees:
(a) The information on restricted shares to employees is as follows:

2018 (share in thousands) Shares ungranted beginning balance 3,435 Shares granted 2,592) ( Restricted shares forfeited - retired 128) ( Shares ungranted ending balance 715	2017 (share in thousands)
	3,725 - 290) (
	3,435

(b) As of December 31, 2018, the Company collected 128 thousand shares of restricted shares because certain employees did not meet the vesting condition, and the change of registration has been completed.

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D. Expenses incurred on share-based payment transactions are shown below:

(17)

Provisions
The Group gives warranties on digital image technology application products sold. Provision for
warranty is estimated based on historical warranty data of digital image technology application
products.
For the year ended
For the year ended
December 31,2018
December 31,2017
Equity-settled
16,841
$ 33,806
$ Warranty
At January 1, 2018
123,995
$ Additional provisions
48,993
Reversed during the year
24,071)
(
Exchange differences
424)
(
At December 31, 2018
148,493
$ December 31,2018
December 31,2017
Current
35,378
$ 30,177
$ Non-current
113,115
$ 93,818
$

(18) Share capital

As of December 31, 2018, the Company’s authorized capital was $5,000,000, consisting of 500,000 thousand shares of ordinary stock, and the paid-in capital was $2,740,113 with a par value of $10 (in dollars) per share.

A. Movements in the number of the Company’s ordinary shares outstanding are as follows:

(Expressed in thousands of shares)


At January 1		270,386		269,565
Employee stock options exercised		320		130
Retired restricted shares to employees that
did not meet the vesting conditions	(	128)	(	290)
Treasury stock sold to employees		3,433		-
Sales of treasury shares		-		981
At December 31		274,011		270,386

B. Treasury shares

(a) As of December 31, 2018 and 2017, the reason for share reacquisition and movements in the number of the Company’s treasury shares are as follows:

December 31, 2018�None

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Shares held by	Reason for reacquisition		December 31, 2017 (Expressed in thousands of shares)	December 31, 2017 (Expressed in thousands of shares)	December 31, 2017 (Expressed in thousands of shares)
			Number of shares		Book value
Altek Corporation	To be reissued to employees		3,433		96,138 $

(b) Pursuant to the R.O.C. Securities and Exchange Act, the number of shares bought back as treasury share should not exceed 10% of the number of the Company’s issued and outstanding shares and the amount bought back should not exceed the sum of retained earnings, paid-in capital in excess of par value and realised capital surplus.
(c) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should not be pledged as collateral and is not entitled to dividends before it is reissued.
(d) Pursuant to the R.O.C. Securities and Exchange Act, treasury shares should be reissued to the employees within three years from the reacquisition date and shares not reissued within the three-year period are to be retired. Treasury shares to enhance the Company’s credit rating and the stockholders’ equity should be retired within six months of acquisition.
C. For the years ended December 31, 2018 and 2017, the Company issued 320 and 130 thousands shares for employee stock options exercised and the registration for issuance will be completed pursuant to the regulation.

(19) Capital surplus

Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of par value on issuance of common stocks and donations can be used to cover accumulated deficit or to issue new stocks or cash to shareholders in proportion to their share ownership, provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and Exchange Act requires that the amount of capital surplus to be capitalised mentioned above should not exceed 10% of the paidin capital each year. Capital surplus should not be used to cover accumulated deficit unless the legal reserve is insufficient.

At January 1, 2018 Employee stock options exercised Treasury stock sold to employees Employee restricted share granted Retirement of employee restricted shares At December 31, 2018	Share Employee stock Difference between consideration and carrying amount of subsidiaries acquired or premium options disposed 1,750,223 $ 51,476 $ 1,534 $ 8,998 2,374) ( - - - - 43,438 - - - - - 1,802,659 $ 49,102 $ 1,534 $	Changes in ownership interests in subsidiaries 395,774 $ - - - - 395,774 $	Proceeds from sales of treasury Restricted shares to shares employees 209 $ 57,476 $ - - 1,246 - - 43,438) ( - 2,165) ( 1,455 $ 11,873 $	Total
				2,256,692 $ 6,624 1,246 - 2,165) (
				2,262,397 $

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At January 1, 2017 Employee stock options exercised Proceeds from sale of treasury shares Retirement of employee restricted shares Subsidiaries’ capital increase not participated proportionately to the original shareholding ratio At December 31, 2017	Share Employee stock Difference between consideration and carrying amount of subsidiaries acquired or premium options disposed 1,746,566 $ 52,729 $ 1,534 $ 3,657 1,253) ( - - - - - - - - - - 1,750,223 $ 51,476 $ 1,534 $	Changes in ownership interests in subsidiaries - $ - - 395,774 395,774 $	Proceeds from sales of treasury Restricted shares to shares employees Total - $ 62,085 $ 1,862,914 $ - - 2,404 209 - 209 - 4,609) ( 4,609) ( - - 395,774 209 $ 57,476 $ 2,256,692 $	Total
				2,256,692 $

(20) Retained earnings

A. According to the Company’s Articles of Incorporation, the annual earnings, if any, shall first be used to pay all taxes and offset prior years’ operating losses and then 10% of the remaining amount shall be set aside as legal reserve. Special reserve shall be set aside in accordance with the rules set forth in the Securities and Exchange Act, and distributing the remaining amount as common stockholders’ dividends in accordance with the resolution adopted by the Board of Directors and approved at the stockholders’ meeting.
B. The amount of dividends appropriated is based on the Company’s current year’s net income and prior years’ retained earnings, taking into account the Company’s financial structure and future operating plans. The distribution ratio of cash dividends to stock dividends is based on the Company’s funding status, diluted earnings per share and other factors. According to the dividend policy adopted by the Board of Directors, cash dividends shall account for at least 20% of the total dividends distributed. Dividends appropriation shall be resolved by the stockholders at the stockholders’ meeting.
C. Except for covering accumulated deficit or issuing new stocks or cash to shareholders in proportion to their share ownership, the legal reserve shall not be used for any other purpose. The use of legal reserve for the issuance of stocks or cash to shareholders in proportion to their share ownership is permitted, provided that the balance of the reserve exceeds 25% of the Company’s paid-in capital.
D. (a) In accordance with the regulations, the Company shall set aside special reserve from the debit balance on other equity items at the balance sheet date before distributing earnings. When debit balance on other equity items is reversed subsequently, the reversed amount could be included in the distributable earnings.

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(b) The amounts previously set aside by the Company as special reserve on initial application of IFRSs in accordance with Jin-Guan-Zheng-Fa-Zi Letter No. 1010012865, dated April 6, 2012, shall be reversed proportionately when the relevant assets are used, disposed of or reclassified subsequently. Such amounts are reversed upon disposal or reclassified if the assets are investment property of land, and reversed over the use period if the assets are investment property other than land.
E. The appropriation of 2017 and 2016 earnings had been resolved at the stockholders’ meeting on June 15, 2018, and June 16, 2017, respectively. Details are summarized below:

Legal reserve Special reserve Cash dividends	Dividends per share Amount (inNTdollars) 1,340 $ 283,124 135,178 0.5 $ 419,642 $ 2017	2016	2016
	Amount 1,340 $ 283,124 135,178 419,642 $	Amount 5,380 $ - 215,596 220,976 $	Dividends per share (inNTdollars)
			0.8 $

The appropriation of 2017 and 2016 earnings were the same as that approved by the Board of Directors on March 23, 2018 and March 27, 2017, respectively.

F. The appropriation of 2018 earnings had been resolved at the Board of Directors meeting on March 15, 2019. Details are summarized below:

Legal reserve Special reserve Cash dividends	2018	2018
	Amount 13,056 $ 10,099 137,006 160,161 $	Dividends per share (in NT dollars)
		0.5 $

Above-mentioned appropriation of 2018 earnings is yet to be resolved by the shareholders.

G. For the information relating to employees’ compensation and directors’ and supervisors’ remuneration, please refer to Note 6(27).

-138-

(21) Other equity items

		Foreign currency	Foreign currency		Unrealized
			translation		losses on		Unearned
			adjustment		valuation	compensation			Total
At January 1, 2018	($		283,124)	$	-	($	19,215)	($	302,339)
Effects of retrospective
application			-	(	23,600)		-	(	23,600)
After adjustment	($		283,124)	($	23,600)	($	19,215)	($	325,939)
Valuation adjustment			-	(	12,790)		-	(	12,790)
Currency translation differences:
-Group			26,291		-		-		26,291
Retirement of restricted shares
to employees			-		-		3,440		3,440
Share-based payment transactions			-		-		14,060		14,060
At December 31, 2018	($		256,833)	($	36,390)	($	1,715)	($	294,938)
		Foreign currency			Unrealized
			translation		losses on		Unearned
			adjustment		valuation	compensation			Total
At January 1, 2017	$		35,009	$	-	($	60,530)	($	25,521)
Currency translation differences:					-
-Group	(		319,395)		-		-	(	319,395)
-Associates			1,262		-		-		1,262
Retirement of restricted shares			-		-		7,509		7,509
to employees
Share-based payment transactions			-		-		33,806		33,806
At December 31, 2017	($		283,124)	$	-	($	19,215)	($	302,339)

(22) Operating revenue

Revenue from contracts with customers

		For the year ended
		December 31,2018
	$	11,193,569

A. Disaggregation of revenue from contracts with customers

The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major product lines and geographical regions:

-139-

For the year ended December 31,2018 Revenue from external customer contracts Timing of revenue recognition At a point in time Over time Total	Asia 9,181,159 $ 9,173,464 $ 7,695 9,181,159 $	Europe 1,401,530 $ 1,401,530 $ - 1,401,530 $	America 503,893 $ 503,893 $ - 503,893 $	Taiwan 106,987 $ 106,987 $ - 106,987 $	Total
					11,193,569 $
					11,185,874 $ 7,695
					11,193,569 $

B. Related disclosures for 2017 operating revenue are provided in Note 12(5).

(23) Other income

Interest income: Interest income from bank deposits Interest income from current financial assets at fair value through profit or loss Others Rental revenue Dividend income Other income - others Total	For the year ended December 31,2018 122,476 $ 1,242 27 37,832 915 22,241 184,733 $	For the year ended December 31,2017
		76,612 $ - 35 12,546 3,113 18,370
		110,676 $

(24) Other gains and losses

Other gains and losses
			For the year ended			For the year ended
		December 31,2018			December 31,2017
(Losses) gains on disposal of property, plant and equipment	($		1,358)	$		470
Loss on disposal of investments			-	(		4,191)
Net currency exchange gains (losses)			9,606	(		82,483)
Net gains on financial assets at fair value
through profit or loss			20,018			2,736
Reversal of impairment loss of investments accounted for under equity method			26,272			-
Impairment loss			-	(		17,050)
Other expenses	(		4,011)	(		5,477)
Total	$		50,527	($		105,995)

-140-

(25) Finance costs

(25)	Finance costs
(26) (27)	Expenses by nature Employee benefit expenses Interest expense Employee benefit expenses Depreciation charges on property, plant and equipment Amortisation charges on intangible assets Total Wages and salaries Employee stock options Labour and health insurance fees Pension costs Other personnel expenses Total	For the year ended December 31,2018 25,497 $ For the year ended December 31,2018 1,290,984 $ 218,896 27,878 1,537,758 $ For the year ended December 31,2018 1,122,544 $ 16,841 54,960 55,236 41,403 1,290,984 $	For the year ended December 31,2017
			26,565 $
			For the year ended December 31,2017
			1,307,891 $ 264,329 14,319
			1,586,539 $
			For the year ended December 31,2017
			1,109,349 $ 33,806 62,549 58,917 43,270
			1,307,891 $

A. According to the Articles of Incorporation of the Company, when distributing earnings, the Company shall distribute compensation to the employees and pay remuneration to the directors that account for 10% to 20% and no higher than 2%, respectively, of distributable profit of the current period. If a company has accumulated deficit, earnings should be channeled to cover losses. Employees’ compensation can be distributed in the form of shares or in cash. Employees of subsidiaries that the Company holds more than 50% shareholding are entitled to receive aforementioned stock or cash.

Abovementioned distributable profit of the current period refers to the pre-tax profit before deduction of employees’ compensation and directors’ remuneration. A company may, by a resolution adopted by a majority vote at a meeting of Board of Directors attended by two-thirds of the total number of directors, have the profit distributed as employees’ compensation and directors’ remuneration; and in addition thereto a report of such distribution shall be submitted to the shareholders’ meeting.

Before the establishment of the Audit Committee of the Company, the remuneration of the supervisors and the directors shall be no higher than 2% of distributable profit of the current period.

-141-

B. For the years ended December 31, 2018 and 2017, employees’ compensation was accrued at $29,710 and $3,159, respectively; directors’ and supervisors’ remuneration was accrued at $3,961 and $421, respectively.
- The aforementioned amounts were recognized in salary expenses. Employees’ compensation and directors’ and supervisors’ remuneration for 2017 as resolved by the stockholders were in agreement with those amounts recognized in the 2017 financial statement. Information about employees’ compensation and directors’ and supervisors’ remuneration of the Company as resolved at the meeting of Board of Directors will be posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.
(28) Income tax
A. Income tax expense
- (a) Components of income tax expense:

		For the year ended		For the year ended
	December 31,2018		December 31,2017
Current tax:
Current tax on profits for the year	$	79,467	$	85,553
Tax paid outside of the territory of
the Republic of China		28,154		-
Adjustments in respect of prior years	(	16,782)	(	3,238)
Total current tax		90,839		82,315
Deferred tax:
Origination and reversal of
temporary differences	(	25,870)		5,660
Impact of change in tax rate		62,901		-
Total deferred tax		37,031		5,660
Income tax expense	$	127,870	$	87,975
The income tax charged to other comprehensive income is as follows:
	For the year ended		For the year ended
	December 31,2018		December 31,2017
Changes in fair value of financial assets at
fair value through other comprehensive
income	$	774	$	-
Translation differences of foreign operations	(	6,219)	(	65,160)
Remeasurement of defined benefit
obligations		136	(	306)
Impact of change in tax rate		119		-
	($	5,190)	($	65,466)

(b) The income tax charged to other comprehensive income is as follows:

-142-

B. Reconciliation between income tax expense and accounting profit:

			For the year ended			For the year ended
		December 31,2018			December 31,2017
Tax calculated based on profit before
tax and statutory tax rate	$		122,645	$		84,250
Expense disallowed by tax regulation	(		41,454)	(		23,228)
Estimated 10% corporate income tax
on unappropriated earnings			8,337			2,915
Changes in reassessment of deferred
tax assets	(		40,981)	(		3,743)
Effect from tax credit of investment	(		12,403)			425
Adjustment of income tax expense in
prior years	(		16,782)	(		3,238)
Tax paid outside of the territory of
the Republic of China			45,607			32,129
Tax exempted income by tax regulation			-	(		1,535)
Effect from alternative minimum tax			62,901			-
Income tax expense	$		127,870	$		87,975

C. Amounts of deferred tax assets or liabilities as a result of temporary difference, tax losses and investment tax credit are as follows:

investment tax credit are as follows:
						2018
							Recognised
								in other
				Recognised in comprehensive
		January1		profit	or loss			income		December 31
Deferred tax assets:
Temporary differences
Cost of after-sales service and
other estimated expenses	$		39,167	$	6,297	$		-	$		45,464
Currency translation differences			28,498		-			6,219			34,717
Others			-		235			-			235
Tax credit of investment			14,750		7,530			-			22,280
Subtotal	$		82,415	$	14,062	$		6,219	$		102,696
Deferred tax liabilities:
Gain on foreign investment under
the equity method	($		390,872)	($	53,197)	$		-	($		444,069)
Pension expense	(		1,113)	(	61)	(		255)	(		1,429)
Others	(		2,954)		2,165	(		774)	(		1,563)
Subtotal	($		394,939)	($	51,093)	($		1,029)	($		447,061)
Total	($		312,524)	($	37,031)	$		5,190	($		344,365)

-143-

						2017	2017
						Recognised
							in other
				Recognised in comprehensive
		January1		profit	or loss		income		December 31
Deferred tax assets:
Temporary differences:
Cost of after-sales service and
other estimated expenses	$		53,317	($	14,150)	$	-	$		39,167
Currency translation differences			-		-		28,498			28,498
Tax losses			280	(	280)		-			-
Tax credit of investment			16,185	(	1,435)		-			14,750
Subtotal	$		69,782	($	15,865)	$	28,498	$		82,415
Deferred tax liabilities:
Gain on foreign investment under
the equity method	($		404,469)	$	13,597	$	-	($		390,872)
Pension expense	(		980)	(	439)		306	(		1,113)
Currency translation differences	(		36,662)		-		36,662			-
Others	(		1)	(	2,953)		-	(		2,954)
Subtotal	($		442,112)	$	10,205	$	36,968	($		394,939)
Total	($		372,330)	($	5,660)	$	65,466	($		312,524)

D. According to the Act for Industrial Innovation, details of the amount the Group is entitled as investment tax credit and unrecognised deferred tax assets amount are as follows:

Qualifyingitems				December 31,2018
		Unused tax credits 7,932 $ 14,348 22,280 $	Unrecognised deferred tax assets - $ - - $ December31,2017	Unrecognised deferred tax assets	Expiry year
Research and development Research and development Qualifyingitems Research and development Research and development				- $ -	2019 2020 Expiry year 2018 2019
				- $
	Unusedtaxcredits 6,944 $ 7,806 14,750 $		Unrecognised deferredtaxassets - $ - - $

E. The Group expiration dates of unused tax losses and amounts of unrecognized deferred tax assets are as follows�None.
F. The Company has not recognized taxable temporary differences associated with investment in subsidiaries as deferred tax liabilities�None.

-144-

G. As of December 31, 2018, the Company’s income tax returns through 2014 have been assessed and approved by the Tax Authority.
H. Under the amendments to the Income Tax Act which was promulgated by the President of the Republic of China in February, 2018, the Company’s applicable income tax rate was raised from 17% to 20% effective from January 1, 2018. The Group has assessed the impact of the change in income tax rate.

(29) Earnings per share

For	theyear ended December 31,2018	theyear ended December 31,2018
Amount after tax 130,562 $ 130,562 $ 130,562 $ For	Weighted average number of ordinary shares outstanding Earnings per share (share in thousands) (in dollars) 270,389 0.48 $ 1,660 1,228 273,277 0.48 $ theyear ended December 31,2017	Earnings per share (in dollars)
		0.48 $
		0.48 $
Amount after tax 13,402 $ 13,402 $ 13,402 $	Weighted average number of ordinary shares outstanding (share in thousands) 265,928 2,712 228 268,868	Earnings per share (in dollars)
		0.05 $
		0.05 $

-145-

(30) Transactions with non-controlling interest

Grandson Altek Semiconductor (Cayman) Co., Ltd., a second-tier subsidiary of the Group, increased capital by issuing new shares on June 9, 2017 and July 11, 2017. The Group did not acquire shares proportionally to its interest. As a result, the Group decreased its share interest to 21.43%. The transaction increased non-controlling interest by $513,046 and increased the equity attributable to owners of parent by $395,774. The effect of changes in interests in Altek Semiconductor (Cayman) Co., Ltd. on the equity attributable to owners of the parent as of 2017 is shown below:

Cash Carrying amount of non-controlling interest Capital surplus-Changes in ownership interests in subsidiaries	For the year ended December 31,2017
	908,820 $ 513,046) ( 395,774 $

(31) Operating leases

The Group leased part of the Taipei office building with operating leases. Contingent rents of $26,127 and $17,298 were recognized for these leases in profit or loss for the years ended December 31, 2018 and 2017, respectively. The future aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:

		December 31,2018		December 31,2017
Not more than 1 year	$	28,921	$	28,921
More than 1 year but not more than 5 years		9,640		38,561
	$	38,561	$	67,482
The Group leases land, office buildings and		company cars for operational needs under non-
cancellable operating lease agreements. These lease terms are between 2018 and 2027. Most of the
lease agreements are renewable at the market		price at the end of the lease period. The future
aggregate minimum lease payments receivable under non-cancellable operating leases are as follows:
		December 31,2018		December 31,2017
Not more than 1 year	$	8,333	$	3,448
More than 1 year but not more than 5 years		20,810		13,794
Over 5 years		15,087		17,243
	$	44,230	$	34,485

-146-

(32) Supplemental cash flow information

Investing activities with partial cash payments

Acquisitions of property, plant, and equipment Add: Property and equipment and construction billings payable at beginning of year Less: Property and equipment and construction billings payable at end of year Cash paid Acquisitions of intangible assets Add: Payable at beginning of year Less: Payable at end of year Cash paid	For the year ended December 31,2018 18,262 $ 12,340 1,229) ( 29,373 $ For the year ended December 31,2018 4,398 $ 4,763 1,234) ( 7,927 $	For the year ended December 31,2017 97,615 $ 6,848 12,340) ( 92,123 $ For the year ended December 31,2017 48,637 $ 9,067 4,763) ( 52,941 $

(33) Changes in liabilities from financing activities

At January 1, 2018 Changes in cash flow from financing activities Impact of changes in foreign exchange rate Changes in other non-cash items At December 31, 2018	Short-term borrowings	Short-term notes and billspayable		Long-term borrowings	Guarantee deposits received	Total
	2,021,000 $ 261,000) ( - - 1,760,000 $	199,797 $ 201,244) ( - 1,447 - $		- $ 600,000 - - 600,000 $	23,923 $ 3,209) ( 244) ( - 20,470 $	2,244,720 $ 134,547 244) ( 1,447 2,380,470 $

7. RELATED PARTY TRANSACTIONS

(1) Names of related parties and relationship: None.

(2) Significant transactions and balances with related parties:

No significant related party transactions.

-147-

(3) Key management compensation

Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Share-based payments Total	For the year ended December 31,2018 32,351 $ 616 4,461 37,428 $	For the year ended December 31,2017
		24,649 $ 567 9,490
		34,706 $

8. PLEDGED ASSETS

The Group’s assets pledged as collateral are as follows:

Pledged asset	Book value	Book value
	December 31,2018 746,621 $ 770,551 1,517,172 $	December 31,2017
Land, buildings and structures Investment acquisition		- $ -
		- $

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED CONTRACT

COMMITMENTS

Contingencies

On December 22, 2015, the Company filed a civil complaint against HTC Corporation with the Taiwan Taipei District Court, alleging HTC Corporation’s default in relation to the agreed upon Manufacturing and Supply Agreement and claiming damage of USD 11,126 thousand against HTC Corporation. As of March 15, 2019, the case is still under trial.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT EVENT AFTER THE BALANCE SHEET DATE

None.

12. OTHERS

(1) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends, return capital or issue new shares to achieve the optimal capital structure.

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(2) Financial instruments

A. Financial instruments by category

Financial instruments by category
Financial assets Financial assets measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at cost Financial assets at amortised cost/ Loans and receivables Cash and cash equivalents Current financial assets at amortised cost Notes receivable Accounts receivable Other accounts receivable Guarantee deposit paid Financial liabilities Financial liabilities at amortised cost Short-term borrowings Short-term notes and bills payable Notes payable Accounts payable Other accounts payable Long-term borrowings (including current portion) Guarantee deposits received	December31,2018 23,683 $ 114,508 - 6,495,017 261,288 1,387,222 2,414,775 31,712 38,525 10,766,730 $ 1,760,000 $ - 1,049,446 1,878,509 415,658 600,000 20,470 5,724,083 $	December31,2017
		584,799 $ - 138,011 5,874,982 - 30,335 2,342,369 18,976 34,053
		9,023,525 $
		2,021,000 $ 199,797 30,335 2,097,254 420,452 - 23,923
		4,792,761 $

B. Financial risk management policies

(a) The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. To minimize any adverse effects on the financial performance of the Group, derivative financial instruments, such as foreign exchange forward contracts and foreign currency option contracts are used to hedge certain exchange rate risk, and interest rate swaps are used to fix variable future cash flows. Derivatives are used exclusively for hedging purposes and not as trading or speculative instruments.

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(b) Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas and matters, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
C. Significant financial risks and degrees of financial risks
(a) Market risk

Foreign exchange risk

i. The Group operates internationally and is exposed to exchange rate risk arising from the transactions of the Company and its subsidiaries used in various functional currency, primarily with respect to the USD and RMB. Exchange rate risk arises from future commercial transactions and recognized assets and liabilities.
ii. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. The companies are required to hedge their entire foreign exchange risk exposure with the Group treasury. Exchange rate risk is measured through a forecast of highly probable USD and RMB expenditures. Forward foreign exchange contracts are adopted to minimize the volatility of the exchange rate affecting cost of forecast inventory purchases.
iii. The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.

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iv. The information on assets and liabilities denominated in foreign currencies whose values would be materially affected by the exchange rate fluctuations is as follows:

December 31, 2018

							Sensitivity	Sensitivity	Analysis	Analysis	Analysis	Analysis
												Effect on
	Foreign Currency							Effect on				Other
	Amount		Exchange	Book Value		Extent of		Profit or			Comprehensive
	(In thousands)		Rate		(NTD)	Variation		(Loss)			Income(Loss)
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD	USD	62,373	30.715	$	1,915,787	1%		19,158 $			$	-
USD:RMB	USD	41,445	6.8632		1,272,983	1%		12,730				-
Non-monetary items
USD:NTD	USD	872	30.715	$	26,768	1%		$	-		$	268
Financial liabilities
Monetary items
USD:NTD	USD	61,532	30.715	$	1,889,955	1%	18,900) ($				$	-
USD:RMB	USD	32,014	6.8632		983,310	1%	9,833) (					-
			December31,2017
						SensitivityAnalysis
											Effect on
	Foreign	Currency					Effect on					Other
	Amount		Exchange	Book Value		Extent of	Profit or		Comprehensive
	(In thousands)		Rate	(NTD)		Variation		(Loss)		Income (Loss)
(Foreign currency:
functional currency)
Financial assets
Monetary items
USD:NTD	USD	82,628	29.760	2,459,009 $		1%	$	24,590		$		-
USD:RMB	USD	58,286	6.5342	1,734,591		1%		17,346				-
Financial liabilities
Monetary items
USD:NTD	USD	79,594	29.760	2,368,717 $		1%	($	23,687)		$		-
USD:RMB	USD	48,656	6.5342	1,448,003		1%	(	14,480)				-
v. Total exchange gain (loss), including realized and unrealized							arising from					significant
foreign exchange variation on the			monetary	items held		by the Group for the					years ended
December 31, 2018 and 2017 amounted to $9,606 and ($82,483), respectively.

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Price risk

The Group is exposed to price risk because of investments held by the Group. The Group sets limits to control the transaction volume and stop-loss amount to reduce its market risk.

Cash flow and fair value interest rate risk

Interest risk arises from the changes of market interest rate causing fluctuation in financial instruments’ fair value or cash received and paid in the future.

The Group raised short-term and long-term borrowings at fixed rates during the years ended December 31, 2018 and 2017, and thus had no significant cash flow interest rate risk.

(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. The main factor is that counterparties could not repay in full the accounts receivable based on the agreed terms.
ii. The Group manages their credit risk taking into consideration the entire group’s concern. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings. The utilisation of credit limits is regularly monitored.
iii. The Group adopts the assumptions under IFRS 9, the default occurs when the contract payments are past due over 90 days.
iv. The Group adopts following assumptions under IFRS 9 to assess whether there has been a significant increase in credit risk on that instrument since initial recognition: If the contract payments were past due over 30 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition.
v. The following indicators are used to determine whether the credit impairment of debt instruments has occurred:
(i) It becomes probable that the issuer will enter bankruptcy or other financial reorganization due to their financial difficulties;
(ii) The disappearance of an active market for that financial asset because of financial difficulties;
(iii) Default or delinquency in interest or principal repayments;
(iv) Adverse changes in national or regional economic conditions that are expected to cause a default.
vi. The Group classifies customers’ accounts receivable, contract assets and rents receivable in accordance with customer types. The Group applies the simplified approach using loss rate methodology to estimate expected credit loss under the provision matrix basis.

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vii. The Group used the forecastability to adjust historical and timely information to access the default possibility of accounts receivable, contract assets and lease payments receivable. On December 31, 2018, the loss rate methodology is as follows:

Up to 90 days past due At December 31,2018 Expected loss rate 0% Total book value 3,775,678 $ Loss allowance - $	Up to 90 days past due	91~180 days past due	181 to 360 days past due	Upto 361 days	Total
		20% 29,761 $ 4,375 $	50% 6,222 $ 5,289 $	100% 6,215 $ 6,215 $	3,817,876 $ 15,879 $

viii. Movements in relation to the group applying the simplified approach to provide loss allowance for accounts receivable, contract assets and notes receivable are as follows:

2018

At January 1_IAS 39 Adjustments under new standards At January 1_IFRS 9 Reversal of impairment loss Write-offs Effect of foreign exchange At December 31	Accounts receivable		Notes receivable
	8,747 $ - 8,747 7,262 33) ( 97) ( 15,879 $		- $ - - - - - - $

ix. Credit risk information of 2017 is provided in Note 12(4).

(c) Liquidity risk

i. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed borrowing facilities. Such forecasting takes into consideration the Group’s debt financing plans, and compliance with internal balance sheet ratio targets.
ii. Surplus cash held by the operating entities over and above the balance required for working capital management are transferred to the Group treasury. Group treasury invests surplus cash in interest bearing current accounts, time deposits and marketable securities, choosing instruments with appropriate maturities or sufficient liquidity to provide sufficient head-room as determined by the above-mentioned forecasts.

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iii. The Group has following undrawn borrowing facilities:

� Fixed rate: Expiring within one year Expiring beyond one year	December31,2018 3,425,060 $ 600,000 4,025,060 $	December31,2017
		1,114,700 $ -
		1,114,700 $

iv. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date for non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

Non-derivative financial liabilities: December 31, 2018 Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) Guarantee deposits received Non-derivative financial liabilities: December 31, 2017 Short-term borrowings Short-term notes and bills payable Notes payable Accounts payable Other payables Guarantee deposits received		Less than 1year		Over 1year

(3) Fair value estimation

A. The different levels that the inputs to valuation techniques are used to measure fair value of financial and non-financial instruments have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. A market is regarded as active where a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The fair value of the Group’s investment in listed beneficiary certificates, on-the-run derivative instruments with quoted market prices is included in Level 1.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

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Level 3: Unobservable inputs for the asset or liability. The fair value of the Group’s investment in equity investment without active market is included in Level 3.

B. Fair value information of investment property at cost is provided in Note 6(9).

C. The related information of	financial and non-financial instruments	financial and non-financial instruments	financial and non-financial instruments	financial and non-financial instruments	financial and non-financial instruments	measured at	fair value by level	fair value by level
on the basis of the nature,	characteristics and		risks of the assets and liabilities				are as follows:
December 31, 2018		Level 1		Level 2		Level 3		Total
Assets
Recurring fair value
measurements
Financial assets at fair
value through profit
or loss
Unlisted stocks	$	-	$	-	$	23,683	$	23,683
Financial assets at fair
value through other
comprehensive income
Unlisted stocks		-		60,515		53,993		114,508
	$	-	$	60,515	$	77,676	$	138,191
December 31, 2017		Level 1		Level 2		Level 3		Total
Assets
Recurring fair value
measurements
Financial assets at fair
value through profit
or loss
Beneficiary certificate	$	584,799	$	-	$	-	$	584,799

D. The methods and assumptions the Group used to measure fair value are as follows:
(a) The instruments the Group used market quoted prices as their fair values (that is, Level 1) are listed below by characteristics:

Open-end fund

Market quoted price

Net asset value

(b) The fair value of Level 2 financial instruments is measured by using valuation techniques or by reference to counterparty quotes. The fair value of financial instruments measured by using valuation techniques can be referred to current fair value of instruments with similar terms and characteristics in substance, discounted cash flow method or other valuation methods, including calculated by applying model using market information available at the consolidated balance sheet date.

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E. Accounting Department segment is in charge of valuation procedures for fair value measurements being categorised within Level 3, which is to verify independent fair value of financial instruments. Such assessment is to ensure the valuation results are reasonable by applying independent information to make results close to current market conditions, confirming the resource of information is independent, reliable and in line with other resources and represented as the exercisable price, and frequently calibrating valuation model, performing back-testing, updating inputs used to the valuation model and making any other necessary adjustments to the fair value. Investment property is valuated regularly by the Group’s Accounting Department segment based on the valuation methods and assumptions announced by the Financial Supervisory Commission, Securities and Futures Bureau or through outsourced appraisal performed by the external valuer.
F. The following is the qualitative information of significant unobservable inputs and sensitivity analysis of changes in significant unobservable inputs to valuation model used in Level 3 fair value measurement:

Financial assets at fair value through profit or loss Unlisted shares Financial assets at fair value through comprehensive income Unlisted shares	Fair value at December 31, 2018	Valuation technique	Significant unobservable input	Relationship of inputs to fair value
	23,683 $ 53,993	Net asset value Net asset value	Not applicable Not applicable	Not applicable Not applicable

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(4) Effects on initial application of IFRS 9 and information on application of IAS 39 in 2017

A. Summary of significant accounting policies adopted in 2017:
(a) Financial assets at fair value through profit or loss
- i. They are financial assets held for trading or financial assets designated as at fair value through profit or loss on initial recognition. Financial assets are classified in this category of held for trading if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as financial assets held for trading unless they are designated as hedges. Financial assets that meet one of the following criteria are designated as at fair value through profit or loss on initial recognition:
- (i) Hybrid contracts; or
- (ii) They eliminate or significantly reduce a measurement or recognition inconsistency; or
- (iii)They are managed and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.
- ii. On a regular way purchase or sale basis, financial assets at fair value through profit or loss are recognized and derecognized using settlement date accounting.
- iii. Financial liabilities at fair value through profit or loss are initially recognized at fair value. Related transaction costs are expensed in profit or loss. These financial liabilities are subsequently remeasured and stated at fair value, and any changes in the fair value of these financial liabilities are recognized in profit or loss. Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured or derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are presented in ‘financial assets measured at cost’.
(b) Loans and receivables

Accounts receivable are loans and receivables originated by the entity. They are created by the entity by selling goods or providing services to customers in the ordinary course of business. They are initially recognized at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. However, short-term accounts receivable without bearing interest are subsequently measured at initial invoice amount as the effect of discounting is immaterial.

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(c) Impairment of financial assets
i. The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
ii. The criteria that the Group uses to determine whether there is objective evidence of an impairment loss is as follows:
(i) Significant financial difficulty of the issuer or debtor;
(ii) A breach of contract, such as a default or delinquency in interest or principal payments;
(iii) The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granted the borrower a concession that a lender would not otherwise consider;
(iv) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
(v) The disappearance of an active market for that financial asset because of financial difficulties;
(vi) Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial asset in the group, including adverse changes in the payment status of borrowers in the group or national or local economic conditions that correlate with defaults on the assets in the group;
(vii) Information about significant changes with an adverse effect that have taken place in the technology, market, economic or legal environment in which the issuer operates, and indicates that the cost of the investment in the equity instrument may not be recovered;
(viii) A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost.
iii. When the Group assesses that there has been objective evidence of impairment and an impairment loss has occurred, accounting for impairment is made as follows according to the category of financial assets:

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(i) Financial assets at amortised cost
- The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost that would have been at the date of reversal had the impairment loss not been recognised previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the asset through the use of an impairment allowance account.
(ii)Financial assets at cost
- The amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at current market return rate of similar financial asset, and is recognised in profit or loss. Impairment loss recognised for this category shall not be reversed subsequently. Impairment loss is recognised by adjusting the carrying amount of the asset through the use of an impairment allowance account.
B. The reconciliations of carrying amount of financial assets transfered from December 31, 2017, IAS 39, to January 1, 2018, IFRS 9, were as follows:

IAS 39 Transferred into and measured at fair value through profit or loss Transferred into and measured at fair value through other comprehensive income-equity Impairment loss adjustment IFRS 9	Measured at fair value through profit or loss	Measured at fair value through profit or loss		Measured at fair value through other comprehensive income-equity	Measured at cost		Total		Effects	Effects	Effects
									Retained earnings		Other equity
		$ - 10,601 - - 10,601 $	(	$ - - 151,010 23,600) 127,410 $	$ 138,011 ( 10,601) ( 151,010) 23,600 - $		$ 138,011 - - - 138,011 $		$ - - - 23,600 23,600 $	$ - - - 23,600) ( 23,600) ($

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(a) Under IAS 39, because the equity instruments, which were classified as: financial assets at cost, amounting to $151,010, were not held for the purpose of trading, they were reclassified as "financial assets at fair value through other comprehensive income (equity instruments)", increased retained earnings and decreased other equity interest in the amount of $23,600 on initial application of IFRS 9.
(b) Under IAS 39, the equity instruments, which were classified as: financial assets at cost, amounting to $10,601, were reclassified as "financial assets at fair value through profit or loss (equity instruments)" under IFRS 9.
C. The financial assets at cost as of December 31, 2017 are as follows:

Items Non-current items: Unlisted stocks Accumulated impairment (	December31,2017 167,657 $ 29,646) 138,011 $

(a) Since to the Group’s investment stocks are not traded in active market, and have no sufficient industry information of companies similar to the investment stocks, the fair value of the investment stocks cannot be measured reliably. The Group classified those stocks as ‘financial assets measured at cost’.
(b) Due to the impairment of the financial assets at cost, the Group assessed the recoverable value of the financial assets at cost was lower than its carrying amount, and recognised impairment loss by $17,050 for the year ended December 31, 2017.
(c) As of December 31, 2017, no financial assets measured at cost held by the Group were pledged to others.
D. Credit risk information for 2017 are as follows:
(a) Credit risk refers to the risk of financial loss to the Group arising from default by the clients or counterparties of financial instruments on the contract obligations. According to the Group’s credit policy, each local entity in the Group is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables.

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(b) For the year ended December 31, 2017, no credit limits were exceeded during the reporting periods, and management does not expect any significant losses from non-performance by these counterparties.
(c) The credit quality of accounts receivable that were neither past due nor impaired was in the following categories based on the Group’s Credit Quality Control Policy:

Group 1 Group 2	December31,2017
	2,070,650 $ 264,105
	2,334,755 $

Note:

Group 1: Including domestic and foreign listed companies and their affiliated companies. Group 2: Others.
(d) The ageing analysis of accounts receivable that were past due but not impaired is as follows:

The ageing analysis of accounts receivable that were past due but not	impaired is as follow
Up to 30 days 31 to 90 days 91 to 180 days Over 181 days	December31,2017
	334 $ - 218 7,062
	7,614 $

The above ageing analysis was based on past due date.

(e) Movements in the provision for impairment of accounts receivable are as follows:

Individualprovision At January 1 9,477 $ Provision for impairment 672) ( Effects of foreign exchange 58) ( At December 31 8,747 $		2017

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(5) Effects of initial application of IFRS 15 and information on application of IAS 11 and IAS 18 in 2017

A. The significant accounting policies applied on revenue recognition for the year ended December 31, 2017 are set out below :
(a) Sales of goods

The Group manufactures and sells digital image technology application products. Revenue is measured at the fair value of the consideration received or receivable taking into account of value-added tax, returns, rebates and discounts for the sale of goods to external customers in the ordinary course of the Group’s activities. Revenue arising from the sales of goods should be recognised when the Group has delivered the goods to the customer, the amount of sales revenue can be measured reliably and it is probable that the future economic benefits associated with the transaction will flow to the entity. The delivery of goods is completed when the significant risks and rewards of ownership have been transferred to the customer, the Group retains either continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the customer has accepted the goods based on the sales contract or there is objective evidence showing that all acceptance provisions have been satisfied.

(b) Technical service revenue and royalty income

The Group provides and charges for technical service and royalty income. Revenue is recognised in accordance with the stage of completion of the transaction, and cost is recognised when incurred in the current period. The Group recognised losses immediately if any loss is expected to be incurred in the transaction. Revenue is recognised when the following conditions are met:

i. The amount of revenue can be measured reliably;
ii. It is probable that the economic benefits associated with the transaction will flow to the entity;
iii. The costs incurred or to be incurred in respect of the transaction can be measured reliably; and
iv. The stage of completion of the transaction at the end of the reporting period can be measured reliably.
B. The revenue recognised by using above accounting policies for the year ended December 31, 2017 are as follows:

2017 are as follows:
Sales revenue Service revenue Other	For the yearendedDecember31,2017
	10,167,892 $ 186,854 198,027
	10,552,773 $

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13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

A. Loans to others: None.
B. Provision of endorsements and guarantees to others: None.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures) : Please refer to table 1.
D. Acquisition or sale of the same security with the accumulated cost exceeding NT$300 million or 20% of the Company’s paid-in capital: None.
E. Acquisition of real estate reaching NT$300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching NT$300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 2.
H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 3.
I. Trading in derivative financial instruments undertaken during the reporting periods: None.
J. Significant inter-company transactions during the reporting periods: Please refer to table 4.
(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 5.

(3) Information on investments in Mainland China
A. The related information of investments in Mainland China: Please refer to table 6.
B. Significant transactions, either directly or indirectly through a third area, with investee companies in the Mainland Area:

For the significant purchases, sales, accounts payable and accounts receivable transactions between the Company and the investee companies in Mainland China through its subsidiaries, please refer to tables 2 and 4.

14. SEGMENT INFORMATION

(1) General information

The Group mainly operates in one segment. The Chief Operating Decision-Maker reviews the Group’s reporting to assess performance and allocate resources. The Group mainly has a single reportable segment.

(2) Measurement of segment information

The chief operating decision-maker assesses the segment performance through the consolidated financial statements which are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and the International Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and SIC Interpretations as endorsed by the FSC.

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(3) Information about segment profit or loss, assets and liabilities

The Group has a single reportable segment. The revenue from external customers, the related gain or loss, and the assets correspond with the consolidated revenue, consolidated operating income, and consolidated assets.

(4) Reconciliation for segment income (loss), assets and liabilities�None.

(5) Information on products and services

Revenues from external customers are derived from the sale of digital image technology application and related export and import trade.

(6) Geographical information

Geographical information for the years ended December 31, 2018 and 2017 is as follows:

Revenue Non-current assets 9,181,159 $ 2,068,891 $ 1,401,530 - 503,893 - 106,987 2,178,147 11,193,569 $ 4,247,038 $ For theyear ended December 31,2018	For theyear ended December 31,2017	For theyear ended December 31,2017
Revenue 9,181,159 $ 1,401,530 503,893 106,987 11,193,569 $	Revenue 9,332,973 $ 1,047,980 60,389 111,431 10,552,773 $	Non-current assets
		2,307,520 $ - - 2,240,174
		4,547,694 $

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2018 and 2017 is as follows:

Year ended December 31, 2018 Year ended December 31, 2017

	Year ended December 31,2018	Year ended December 31,2017
Client A Client B Client C Client D Client E Client F	Revenue 3,037,506 $ 2,298,888 1,182,959 1,206,049 939,417 451,848	Revenue
		184,784 $ 2,064,733 163 1,024,349 1,877,714 1,156,451

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Table 1
Number of shares
Book value
Ownership (%)
Fair value
Securities held by
Marketable securities
Relationship with the
securities issuer
General
ledger account
As of December 31, 2018
December 31, 2018
Expressed in thousands of NTD
(Except as otherwise indicated)

Altek Corporation
Gianta Co., Ltd. - Common stock
Director
Financial assets at fair value
through profit or loss
- non-current
762,876
23,683
$ 14.55%
23,683
$ "
Yung Li Investments Inc. - Common
stock
None
"
241,935
-
4.84%
-
"
Hua-chuang Automobile Information
Technical Center Co., Ltd. - Common
stock
None
Financial assets measured at
fair value through other
comprehensive income
- non-current
5,660,000
60,515
2.00%
60,515
Altek (Kunshan) Co., Ltd.
Guangdong Kingding Optical Technology
Co., Ltd.
None
"
1,200,000
6,668
6.45%
6,668
"
CPEC Huachuang Private Equity
(Kunshan) Enterprise (Limited
Partnership)
None
"
N/A
47,325
(Note)
47,325

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Table 2
Purchases
(sales)
Amount
Percentage of
total purchases
(sales)
Credit term
Unit price
Credit term
Balance
Percentage of
total notes/accounts
receivable (payable)
Purchaser/seller
Counterparty
Relationship with the
counterparty
Transaction
Differences in transaction terms
compared to third party
transactions
Notes/accounts
receivable (payable)
Expressed in thousands of NTD
(Except as otherwise indicated)
For the year ended December 31, 2018

Altek Corporation
Altek International
Investment Co., Ltd.
Parent and affiliated
company
Purchases
3,435,208
$ 99%
Net 120 days
Approximately
the same price
with third
parties
Note
1,380,217)
($ 98%
Altek International
Investment Co., Ltd.
Altek (Kunshan) Co., Ltd.
"
Purchases
4,956,557
100%
Net 75 days
"
"
913,212)
(
98%
Altek Semiconductor
Corporation
Altek International
Investment Co., Ltd.
"
Purchases
305,227
83%
"
"
"
143,962)
(
85%
Altek Biotechnology
Corporation
"
The same ultimate
parent company
Purchases
987,060
100%
"
"
"
331,436)
(
99%
Altek (Kunshan) Co., Ltd
"
Parent and affiliated
company
Purchases
104,490
1%
"
"
"
-
0%
Altek Trading (Shanghai)
Limited
Altek (Kunshan) Co., Ltd.
The same ultimate
parent company
Purchases
365,239
84%
"
"
"
39,424)
(
92%
Altek Semiconductor
(Shanghai) CO., Ltd.
"
"
Purchases
3,762,729
100%
"
"
"
2,318,888)
(
100%

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Table 3
Amount
Action taken
Amount collected
subsequent to the
balance sheet date
Allowance for
doubtful accounts
Creditor
Counterparty
Relationship
with the counterparty
Balance as at December 31, 2018
Turnover rate
Overdue receivables
December 31, 2018
Expressed in thousands of NTD
(Except as otherwise indicated)

Altek International
Investment Co., Ltd.
Altek Corporation
Parent and affiliated
company
1,380,217
$ 2.65
-
$ N/A
31,736
$ -
$ "
Altek Semiconductor
Corporation
Parent and affiliated
company
143,962
1.50
-
N/A
36,037
-
"
Altek Biotechnology
Corporation
The same ultimate
parent company
331,436
3.04
-
N/A
164,657
-
Altek (Kunshan) Co., Ltd.
Alteck International Investment
Co., Ltd.
Parent and affiliated
company
913,212
5.05
-
N/A
779,213
-
"
Altek Semiconductor
(Shanghai) Co., Ltd.
The same ultimate
parent company
2,138,888
1.99
-
N/A
1,252,074
-

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Table 4
General ledger account
Amount
Transaction terms
Percentage of consolidated total operating
revenues or total assets (Note 2)
Company name
Counterparty
Relationship
(Note 1)
Transaction
Expressed in thousands of NTD
(Except as otherwise indicated)

Altek Corporation
Altek International Investment Co., Ltd.
(1)
Purchases
3,435,208
$ Net 120 days
31%
"
"
(1)
Accounts payable
1,380,217
"
8%
Altek International Investment Co., Ltd.
Altek (Kunshan) Co., Ltd.
(3)
Purchases
4,956,557
Net 75 days
44%
"
"
(3)
Accounts payable
913,212
"
6%
Altek Semiconductor Corporation
Altek International Investment Co., Ltd.
(3)
Purchases
305,227
"
3%
"
"
(3)
Accounts payable
143,962
"
1%
"
"
(3)
Sales
65,871
"
1%
"
"
(3)
Accounts receivable
14,882
"
0%
"
Altek Semiconductor (Shanghai) Co., Ltd.
(3)
Royalty income
284,498
"
3%
"
"
(3)
Other receivables
41,745
"
0%
Altek Biotechnology Corporation
Altek International Investment Co., Ltd.
(3)
Purchases
987,060
"
9%
"
"
(3)
Accounts payable
331,436
"
2%
Altek (Kunshan) Co., Ltd.
"
(3)
Purchases
104,490
"
1%
Altek Trading (Shanghai) Limited
"
(3)
Purchases
67,961
"
1%
"
Altek (Kunshan) Co., Ltd.
(3)
Purchases
365,239
"
3%
"
"
(3)
Accounts payable
39,424
"
0%
Altek Semiconductor (Shanghai) Co., Ltd.
"
(3)
Purchases
3,762,729
"
34%
"
"
(3)
Notes/accounts payable
2,138,888
"
13%
Note 1: Relationship between transaction and counterparty is classified into the following categories:
(1) Parent company to subsidiary.
(2) Subsidiary to parent company.
(3) Subsidiary to subsidiary.
Note 2: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and
based on accumulated transaction amount for the period to consolidated total operating revenues for income statement accounts.
Note 3: The Company may decide to disclose or not to disclose transaction details in this table based on the Materiality Principle.

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Table 5
Balance
as at December 31,
2018
Balance
as at December 31,
2017
Number of shares
Ownership (%)
Book value
Initial investment amount
Shares held as at December 31, 2018
Net profit (loss) of
the investee for the year
ended December 31, 2018
Investment income(loss)
recognised by the Company
for the year ended
December 31, 2018
Altek Corporation and subsidiaries
Information on investees
For the year ended December 31, 2018
Expressed in thousands of NTD
(Except as otherwise indicated)
Investor
Investee
Location
Main business activities

Altek Corporation
Altek International
Investment Co., Ltd.
British Virgin
Islands
Investment and general business
operations
2,910,046
$ 2,910,046
$ 88,662,059
100%
8,953,335
$ 124,822
$ 124,822
$ "
Altek Japan Corporation
Japan
Sale of optical optical instruments
2,869
2,869
1,000
100%
11,501
1)
(
1)
(
"
Altek Investment Co.,
Ltd.
Republic of China Investment
50,000
50,000
5,000,000
100%
39,872
22)
(
22)
(
"
Altek International
Holding (BVI) Co, Ltd.
British Virgin
Islands
Investment and general business
operations
415,376
415,376
12,865,921
100%
588,544
90,814
90,814
Altek International
Investment Co., Ltd.
Altek Lab Inc.
U.S.A.
Design service
113,023
113,023
11,311,875
100%
62,093
1,576
1,545
"
JinJing Optical
Technology Co., ltd.
Samoa
Investment and general business
operations
107,503
107,503
3,500,000
23.33%
26,768
113,661
-
"
Altek Semiconductor
(Cayman) Co., Ltd.
Cayman Islands
Investment and general business
operations
188,812
188,812
20,000,000
50%
673,401
85,176
42,588
Altek Semiconductor
(Cayman) Co., Ltd.
Altek Semiconductor
Corporation
Republic of China Research design and sales of ASIC
200,000
200,000
20,000,000
100%
296,557
21,381)
(
10,691)
(
Altek Biotechnology
Holding (Cayman)
Co., Ltd.
Altek Biotechnology
Corporation
Republic of China Research and development,
manufacture and sales of
medical electronic equipments
415,376
415,376
40,100,000
100%
516,324
105,753
105,753
Noted: The dissolution and liquidation of Altek Investment Co., Ltd was resolved by the Board of Directors on December 17, 2018. Moreover, the competent authority approved its dissolution on December 24, 2018.

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Table 6 Remitted to Mainland China Remitted back to Taiwan Paid-in capital Investment method �Note 1� Accumulated amount of remittance from Taiwan to Mainland China as of January 1, 2018 Investee in Mainland China Main business activities Altek Corporation and subsidiaries Information on investments in Mainland China For the year ended December 31, 2018 Expressed in thousands of NTD (Except as otherwise indicated) Accumulated amount of investment income remitted back to Taiwan as of December 31, 2018 Amount remitted from Taiwan to Mainland China/Amount remitted back to Taiwan for the year ended December 31, 2018 Accumulated amount of remittance from Taiwan toMainland China as of December 31, 2018 Net profit (loss) of investee for the year ended December 31, 2018 Ownership held by the Company (direct or indirect) Investment income (loss) recognised by the Company the year ended December 31, 2018 Book value of investments in Mainland China as of December 31, 2018	Altek (Kunshan) Co., Ltd. (Note 2) Manufacture and sale of digital still cameras and its accessories 1,523,464 $ 2 1,382,175 $ - $ - $ 1,382,175 $ 135,319 $ 100% 135,319 $ 4,028,009 $ - $ Altek EMS (Kunshan) Co., Ltd. (Note 3) Manufacture and sale of related engineering services 153,575 2 278,984 - - 278,984 21,251 100% 21,251 769,376 - Altek Trading (Shanghai) Limited Wholesale, import and export of digital cameras, digital video cameras and their associated accessories 261,078 2 261,078 - - 261,078 2,149 100% 2,149 297,908 - Kinko Optical (Suzhou) Co., Ltd. (Note 4) Manufacture and sale of optical components 460,725 2 107,503 - - 107,503 - 23.33% - - - Altek Precision (Kunshan) Co., Ltd. Design, manufacture and sales of digital camera parts 423,867 2 423,867 - - 423,867 2,748 100% 2,748 150,256 - Altek Optical Technology (Kunshan) Co., Ltd. Manufacture and sales of digital camera and its accessories and optical components 344,008 2 344,008 - - 344,008 ( 4,493) 100% ( 4,493) 7,951 - Altek Semiconductor (Shanghai) Co., Ltd. Research design and sales of imaging technologies, electronic software and hardware 46,073 2 - - - - 86,483 50% 43,242 124,152 - Note 1: Investment methods are classified into the following three categories; fill in the number of category each case belongs to: (1)Directly invest in a company in Mainland China. (2)Through investing in an existing company in the third area,which then investeed in the investee in Mainland China. (3)Others. Note 2: Including retained earnings capitalized of US$4,600 (In thousand of US dollars). Note 3: On May 8, 2017, Phoenix Optical (Shanghai) Co., Ltd. has completed liquidation. Note 4: Jinjing Optical Technology. Co., Ltd. has sold its stake in Kinko Optical(Suzhou) Co., Ltd. Ceiling on investments in Mainland China imposed by the Investment Commission of MOEA Company name Accumulated amount of remittance from Taiwan to Mainland China as of December 31, 2018 Investment amount approved by the Investment Commission of the Ministry of Economic Affairs (MOEA)	Note:According to “REGULATIONS GOVERNING THE APPROVAL OF INVESTMENT OR TECHNICAL IN MAINLAND CHINA”on August 29, 2008, Altek Corporation obtained the approval from the Industrial Development Bureau of Ministry of Economics Affairs issued to Headquarters, so there is no need to compute the ceiling amount of the Company. Altek Corporation 2,797,615 $ 3,008,350 $ - $

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6.5 Separate Financial Statements for the Years Ended December 31, 2018 and 2017

Please refer to page 137~201 of the 2017 Chinese Annual Report.

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6.6 Difficulty in Financial Turnover of the Company and its Affiliated Companies: None

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VII. Review of Financial Conditions, Financial Performance, and Risk Management

7.1 Analysis of Financial Status

IFRS & Consolidated Base

Unit: NT$ thousand

Year Item	December 31, 2017	December 31, 2018	Difference	Difference
			Amount	%
Current Assets	10,213,502	11,685,441	1,471,939	14.41
Property, Plant and Equipment	4,426,156	4,146,896	(279,260)	(6.31)
Intangible Assets	121,538	100,142	(21,396)	(17.60)
Other Assets	287,775	337,991	50,216	17.45
Total Assets	15,048,971	16,270,470	1,221,499	8.12
Current Liabilities	5,042,892	5,420,670	377,778	7.49
Non-current Liabilities	520,854	1,188,219	667,365	128.13
Total Liabilities	5,563,746	6,608,889	1,045,143	18.78
Share Capital	2,738,188	2,740,113	1,925	0.07
Capital Reserve	2,256,692	2,262,397	5,705	0.25
Retained Earnings	4,259,236	4,278,647	19,411	0.46
Other Equity Interest	(302,339)	(294,938)	7,401	(2.45)
Treasury Stock	(96,138)	�	96,138	(100.00)
Non-controlling Interests	629,586	675,362	45,776	7.27
Total Shareholders’ Equity	9,485,225	9,661,581	176,356	1.86

7.1.1 Analysis of the percentage of change exceeding 20%

A. The increase in non-current liabilities was mainly due to long-term capital planning and increased long-term loans.
B. The decrease in treasury stocks was mainly due to the transfer of treasury shares to employees.
7.1.2 Effect of changes on the Company’s financial condition: No significant effect.
7.1.3 Future response actions: N/A.

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7.2 Analysis of Financial Performance IFRS & Consolidated Base

Unit: NT$ thousand

Year Item	2017	2018	Amount of Increase (Decrease)	Percentage of Change (%)
OperatingRevenue	10,552,773	11,193,569	640,796	6.07
Cost of Sales	9,117,731	9,875,021	757,290	8.31
Gross Profit from Operations	1,435,042	1,318,548	(116,494)	(8.12)
OperatingExpenses	1,275,596	1,227,291	(48,305)	(3.79)
Net OperatingIncome(Loss)	159,446	91,257	(68,189)	(42.77)
Non-operatingIncome and Expenses	(21,884)	209,763	231,647	(1,058.52)
Income before Tax	137,562	301,020	163,458	118.82
Income Tax Expense	87,975	127,870	39,895	45.35
Income after Tax	49,587	173,150	123,563	249.18

7.2.1 Analysis of the percentage of change exceeding 20%

A. The decrease in operating net profit was mainly due to the adjustment of the Group's product mix and the decrease in gross profit.
B. Non-operating income and expenses, net profit before tax and net profit after tax increased were mainly due to the inconsistent trends of large exchange rate fluctuations in 2017 and 2018 and the evaluation of financial assets in 2018.
7.2.2 Potential effects on the company’s future business finance brought about by expected sales volume and its reference and the countermeasures Altek cooperates with major domestic and foreign companies to provide edge vision AI solutions for various industries. This year, Altek is expected to launch commercial and home AI security control systems, Vision AI chips, 3D sensing solutions and other products. In the field of medical electronics, there are already products such as blood glucose meters, insulin injection systems and disposable endoscopes, which will grow steadily this year. In the future, Altek will constantly work on the field of smart imaging and enhance the value of our solutions by mastering core technologies and system integration capabilities to improve the company's technical energy and competitiveness.

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7.3Analysis of Cash Flow

7.3.1 Analysis of changes in cash flow in 2017

Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017	Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017	Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017	Analysis of Cash Flow 7.3.1 Analysis of changes in cash flow in 2017
				Unit: NT$thousand
Cash and Cash Equivalents, Beginning of Year (a)	Net Cash Flow from Operating Activities (b)	Cash Inflows (c)	Cash Surplus (Deficit) (a)+(b)+(c)	Leverage of Cash Deficit
				Investment Plan	Financing Plan
5,874,982	703,775	(83,740)	6,495,017	�	�

A. Operating activities: Net cash inflows from the business cycle.
B. Investment activities: Net cash outflow from time deposits of more than 3 months.
C. Financing activities: Net cash inflows from long-term bank borrowing.
7.3.2 The Improvement Program of Liquidity Insufficiency
Altek has no lack of liquidity. The financing activities will be organized based on the business needs.
7.3.3 Analysis of cash flow for the coming year:

According to the balance of cash and the cash flows from operating activities, Altek has conducted prudent assessments, plans and controls related operating and investment cash expenses. The mandate is that Altek presupposes maintaining stable cash liquidity.

7.4 Major Capital Expenditure Items and Impact on Finance and Business: None.
7.5 Investment Policy in the Last Year, Main Causes for Profits or Losses, Improvement Plans and Investment Plans for the Coming Year

Altek’s investments in joint ventures are mostly strategic. For some non-core investments or the transfer investments that have completed the phased tasks, Altek will gradually dispose of shares or withdraw from them. 7.6 Analysis of Risk Management

7.6.1 Effects of Changes in Interest Rates, Foreign Exchange Rates and Inflation on Corporate Finance, and Future Response Measures
A.the change of interest rate:

Altek’s financial status is good, and it has close relationship with the banks for a long time. We will be able to obtain better interest rate conditions to meet the needs of its operations, regularly assess the status of the cost of funding and pay attention to the trend of market interest rates, so it is estimated that the fluctuations of interest rate will have no major impact to us.

B. Change of Exchange rate:

Altek's purchases and sales of goods major quoted by the currency in US dollars, through the balance of assets and liabilities, will be able to significantly reduce exchange rate risk and achieve a neutral hedge effect.

According to the procedures for acquisition or disposal of derivatives stipulated in the Procedures for Acquisition or Disposal of Assets, Altek collects information on interest rates and foreign exchange rates on a daily basis and refers to the opinions of experts in foreign exchange to reduce the effect of changes in foreign exchange rates on profit.

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C. inflation effect:

Altek's quotations for customers and suppliers are adjusted by the market rates, and inflation has little effect for Altek. However, Altek will commit to the transformation of better production process and continue to save money to meet the uncertainty of inflation.

7.6.2 Policies, Main Causes of Gain or Loss and Future Response Measures with Respect to High-risk, High-leveraged Investments, Lending or Endorsement Guarantees, and Derivatives Transactions

Altek did not engage in any high-risk or high-leveraged investments or any lending or endorsement to others. Altek has established the Procedures for Lending Funds to Other Parties and Endorsement & Guarantee and the Procedures for Acquisition or Disposal of Assets (including regulations for derivative transactions).

7.6.3 Future Research & Development Projects and Corresponding Budget

Please refer to page 52 “Ongoing Research and Development Projects and Expenses”

7.6.4 Effects of and Response to Changes in Major Policies and Laws Relating to Corporate Finance and Sales

Altek consistently pays close attention to any changes in local and foreign policies and makes appropriate amendments to our systems when necessary. Changes in related laws have not had a significant impact on our operations.

7.6.5 Effects of and Response to Changes in Technology and the Industry Relating to Corporate Finance and Sales
The rapid development of science and technology and the application and service innovation have led to dramatic changes in consumer behavior and business models. Altek will pay close attention to market demand and trends, constantly invest in research and development resources, and improve organizational efficiency to enhance the company's competitiveness.
7.6.6 The Impact of Changes in Corporate Image on Corporate Risk Management, and the Company’s Response Measures

Altek adheres to the principle of integrity in running business, and no risky incidents that affect the corporate image have been reported in the most recent year and as of the printing date of the annual report.

7.6.7 Expected Benefits from, Risks Relating to and Response to Merger and Acquisition Plans

Altek has no plans for mergers and acquisitions in the near future.

7.6.8 Expected Benefits from, Risks Relating to and Response to Factory Expansion Plans

As of the date of this Annual Report, Altek has no ongoing factory expansion activities.

7.6.9 Risks Relating to and Response to Excessive Concentration of Purchasing Sources and Excessive Customer Concentration
A. Purchase

In addition to maintaining a good relationship with major suppliers, Altek has consistently worked to diversify its supplier base in order to reduce the concentration of purchase.

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B. Sales

Altek provides a wide variety of products, and our customers can be found in Europe, the United States, Japan, China and other areas, so there is no risk of sales oncentration. In addition to constantly strengthen the relationship with existing customers, Altek will strive to find more new customers in the future.
7.6.10 Effects of, Risks Relating to and Response to Large Share Transfers or Changes in Shareholdings by Directors, Supervisors, or Shareholders with Shareholdings of over 10%

As of the date of this Annual Report, there have been no major transfers of shares.

7.6.11 Effects of, Risks Relating to and Response to the Changes in Management Rights

There was no change in management rights.

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7.6.12 Litigation or Non-litigation Matters

Case	Fact in Dispute	Amount of Subject	Start of Litigation	Major Litigant	Current Progress
Civil complaint against HTC Corporation	HTC Corporation’s default in the agreed upon Manufacturing and Supply Agreement	US$11,126 thousand against HTC Corporation	2015.12.22	HTC Corporation	The case is still under trial at the Taiwan Taipei District Court.

7.6.13 Other Major Risks:

A complete network and computer system security protection mechanism has been installed in the company's information system to ensure the company's R&D, operations, manufacturing, and accounting will not be affected by the external environment factors, including:

A. Remote host backup and data backup: to ensure the information system functions normally and that data are well preserved and that the risk of system interruption caused by unpredicted natural disasters and human error can be reduced. Also, a drill is conducted annually to make sure that the system backup mechanism meets expectations.
B. Outbound and received email backup: The external email is perfectly archived for future access to reduce operational risks. There is also a complete security privilege control to ensure privacy and legality of data usage, as well as traceable access records.
C. Anti-virus and network security threat protection: The latest anti-virus software is regularly updated to the computer, and a network anti-intrusion mechanism is established to block network attacks to reduce operational risks.

Due to the ever-changing threats of cyber attacks, we still cannot rest assured that there will not be any third-party system-based cyber attacks and malicious hackers that attempt to implant computer viruses, destructive software or ransomware into the company's network system to extort or pry into confidential information. As of the printing date of the annual report, however, the Company has not identified any serious cyber attacks or incidents that cause or may cause a material adverse effect on the company's business and operations, nor has it been involved in any legal cases or regulatory investigations related to this.

7.7 Other Important Items: None.

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	100%	Altek Biotechnology Holding (Cayman) Co., Ltd.	100%	Altek Biotechnology Corporation

	Leading Tech Co., Ltd. Altek Lab Inc. Toptek Investment Cayman Co., Ltd. Altek Trading (Cayman) Co. Ltd. Altek Imaging Technology (Cayman) Co., Ltd. 100% 100% 100% 50% 100% 100% Altek Semiconductor (Cayman) Co., Ltd. Altek Optical Technology (Cayman) Co., Ltd. 100% Altek Optical (Cayman) Co., Ltd. 100%
		Altek Optical (Cayman) Co., Ltd.	100%	Altek Semiconductor (Shanghai) Co., Ltd.


		Altek Semiconductor (Cayman) Co., Ltd.		Altek Semiconductor Corp.
			100%

		Altek Optical Technology (Cayman) Co., Ltd.	100%	Altek Optical (Kunshan) Co., Ltd.


		Altek Trading (Cayman) Co. Ltd.	100%	Altek Trading (Shanghai) Co., Ltd
Altek Corp.

		Toptek Investment Cayman Co., Ltd.	100%	Altek EMS (Kunshan) Co., Ltd.


			Altek (Kunshan) Co., Ltd. 100%
		Altek Imaging Technology (Cayman) Co., Ltd.	100%	Altek Precision (Kunshan) Co., Ltd.


		Altek Lab Inc.

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Division of Work	Buying and selling of electronic components	Business operation and investment	Design Service	Holding company indirectly investing in mainland China	Component supplier	Holding company indirectly investing in mainland China	Manufacturing and sales of digital imaging production	Holding company indirectly investing in mainland China	Component supplier	Holding company indirectly investing in mainland China	Import/export of electronic products	Holding company indirectly investing in mainland China	Production/sales of electronic product components
Main Business or Production	Buying and selling of electronic components	Business operation and investment	Design Service	Business operation and investment	Production/sales of plastic and metal parts	Business operation and investment	Production services for digital imaging applications	Business operation and investment	Production/sales of electronic product components	Business operation and investment	Wholesale and import/export of electronic products and accessories and package products	Business operation and investment	Production/sales of electronic product components
Paid-in Capital	10,000	88,662	1,005	15,092	13,800	45,000	49,600	1,400	5,000	8,500	8,500	11,200	11,200
	JPY	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD
Address	Japan	British Virgin Islands	U.S.A.	Cayman Islands	Kunshan, China	Cayman Islands	Kunshan, China	Cayman Islands	Kunshan, China	Cayman Islands	Shanghai, China	Cayman Islands	Kunshan, China
Date of Establishment	July 5, 2005	February 2, 2000	July 15, 2000	April 19, 2005	October 27, 2010	May 15, 2002	July 23, 2001	March 3, 2004	March 3, 2004	June 7, 2005	December 7, 2005	November 21, 2011	November 21, 2011
Name of Company	Altek Japan Corporation	Altek International Investment Co., Ltd.	Altek Lab Inc.	Altek Imaging Technology (Cayman) Co., Ltd.	Altek Precision (Kunshan) Co., Ltd.	Leading Tech. Co., Ltd.	Altek (Kunshan) Co., Ltd.	Toptek Investment Cayman Co., Ltd.	Altek EMS (Kunshan) Co., Ltd.	Altek Trading (Cayman) Co., Ltd.	Altek Trading(Shanghai) Co., Ltd.	Altek Optical Technology (Cayman) Co., Ltd.	Altek Optical (Kunshan) Co., Ltd.

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Division of Work	Holding company indirectly investing in subsidiaries in Taiwan	Development and design of integrated circuits with special applications	Imaging technology and electronic hardware and software development and sales	Holding company indirectly investing in mainland China	Investment company	Holding company indirectly investing in subsidiaries in Taiwan	Holding company indirectly investing in subsidiaries in Taiwan	R&D of medical electronic equipment
Main Business or Production	Business operation and investment	R&D and sales of integrated circuits with special applications	Imaging technology and electronic hardware and software development and sales	Business operation and investment	General investment	Business operation and investment	Business operation and investment	R&D, manufacturing, and sales of medical electronic equipment
Paid-in Capital	100	200,000	1,500	4,800	50,000	12,866	12,866	401,000
	USD	NTD	USD	USD	NTD	USD	USD	NTD
Address	Cayman Islands	Hsinchu City, Taiwan	Shanghai, China	Cayman Islands	Taipei City, Taiwan	British Virgin Islands	Cayman Islands	Hsinchu City, Taiwan
Date of Establishment	November 26, 2009	November 26, 2009	November 21, 2016	May 19, 2006	July 20, 2004	May 17, 2016	May 23, 2016	December 11, 2014
Name of Company	Altek Semiconductor (Cayman) Co., Ltd.	Altek Semiconductor Corp.	Altek Semiconductor(Shanghai) Co., Ltd.	Altek Optical (Cayman) Co., Ltd.	Altek Investment Co., Ltd.	Altek International Holding (BVI) Co., Ltd.	Altek Biotechnology Holding (Cayman) Co., Ltd.	Altek Biotechnology Corp.

-181-


Shareholding	Shareholding Ratio	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%
	Number of Shares	1,000	88,662,059	11,311,875	15,092,410	N/A	45,000,000	N/A	1,400,000	N/A	8,500,000	N/A	11,200,000	N/A
Name or Representative	Corporate Representative	Alex Hsia David Lin Vincent Kao Sophia Chen	Alex Hsia	Alex Hsia	Alex Hsia	Alex Hsia Steven Su	Alex Hsia	Alex Hsia Steve Chou	Alex Hsia	Alex Hsia Belle Liang	Alex Hsia	Alex Hsia Steven Su	Alex Hsia	Alex Hsia Belle Liang
	Name	Altek Corporation	Altek Corporation	Altek International Investment Co., Ltd.	Altek International Investment Co., Ltd.	Altek Imaging Technology (Cayman) Co., Ltd.	Altek International Investment Co., Ltd.	Leading Tech. Co., Ltd.	Altek International Investment Co., Ltd.	Toptek Investment Cayman Co., Ltd.	Altek International Investment Co., Ltd.	Altek Trading (Cayman) Co., Ltd.	Altek International Investment Co., Ltd.	Altek Optical Technology (Cayman) Co., Ltd.
Title		Chairman Director Director Supervisor	Director	Director	Director	Executive Director Supervisor	Director	Executive Director Supervisor	Director	Executive Director Supervisor	Director	Executive Director Supervisor	Director	Executive Director Supervisor
Name of Company		Altek Japan Corporation	Altek International Investment Co., Ltd.	Altek Lab Inc.	Altek Imaging Technology (Cayman) Co., Ltd.	Altek Precision (Kunshan) Co., Ltd.	Leading Tech. Co., Ltd.	Altek (Kunshan) Co., Ltd.	Toptek Investment Cayman Co., Ltd.	Altek EMS (Kunshan) Co., Ltd.	Altek Trading (Cayman) Co., Ltd.	Altek Trading(Shanghai) Co., Ltd.	Altek Optical Technology (Cayman) Co., Ltd.	Altek Optical (Kunshan) Co., Ltd.

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									Altek Biotechnology Corp. Chairman Director Director Supervisor Altek Biotechnology (Cayman) Co., Ltd. Alex Hsia Jason Lin David Lin Sophia Chen 40,100,000 100.00% Note: The resolution of the board of directors of Altek Investment Co., Ltd. was dissolved and liquidated on December 17, 2018, and was approved by the competent authority on December 24, 2018.
Shareholding	Shareholding Ratio	50.00%	50.00%	50.00%	100.00%	100.00%	100.00%	100.00%	100.00%
	Number of Shares	20,000,000	10,000,000	N/A	4,800,241	5,000,000	12,865,921	12,865,921	40,100,000
Name or Representative	Corporate Representative	Alex Hsia Jye-Sheng Lin Tat On Lo	Alex Hsia Jason Lin Simon Law Belle Liang	Alex Hsia Jonathan Shaw	Alex Hsia	Sophia Chen	Alex Hsia	Alex Hsia	Alex Hsia Jason Lin David Lin Sophia Chen
	Name	Altek International Investment Co., Ltd.	Altek Semiconductor (Cayman) Co., Ltd.	Altek Semiconductor (Cayman) Co., Ltd.	Altek International Investment Co., Ltd.	Altek Corporation	Altek Corporation	Altek International Holding Co., Ltd.	Altek Biotechnology (Cayman) Co., Ltd.
Title		Chairman Director Director	Chairman Director Director Supervisor	Executive Director Supervisor	Director	Supervisor	Director	Director	Chairman Director Director Supervisor
Name of Company		Altek Semiconductor (Cayman) Co., Ltd.	Altek Semiconductor Corp.	Altek Semiconductor(Shanghai) Co., Ltd.	Altek Optical (Cayman) Co., Ltd.	Altek Investment Co., Ltd. (Note)	Altek International Holding BVI Co., Ltd.	Altek Biotechnology Holding(Cayman) Co., Ltd.	Altek Biotechnology Corp.

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Net Value	41,341	291,544	2,021	4,892	4,892	131,142	131,141	25,050	25,049	9,699	9,699	259	259	43,976	296,558	4,042	0	39,872	19,161	19,146	516,324
	JPY	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	NTD	USD	USD	NTD	USD	USD	NTD
Total Liabilities	87	31,543	41	0	0	0	98,784	0	2	0	1,407	0	24	0	260,451	72,204	0	0	0	0	651,015
	JPY	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	NTD	USD	USD	NTD	USD	USD	NTD
Total Assets	41,428	323,087	2,062	4,892	4,892	131,142	229,925	25,050	25,051	9,699	11,106	259	283	43,976	557,009	76,246	0	39,872	19,161	19,146	1,167,339
	JPY	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	NTD	USD	USD	NTD	USD	USD	NTD
Capital	10,000	88,662	1,005	15,092	13,800	45,000	49,600	1,400	5,000	8,500	8,500	11,200	11,200	100	200,000	1,500	4,800	50,000	12,866	12,866	401,000
	JPY	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	USD	NTD	USD	USD	NTD	USD	USD	NTD
Name of Company	Altek Japan Corporation	Altek International Investment Co., Ltd.	Altek Lab Inc.	Altek Imaging Technology (Cayman) Co., Ltd.	Altek Precision (Kunshan) Co., Ltd.	Leading Tech. Co., Ltd.	Altek (Kunshan) Co., Ltd.	Toptek Investment Cayman Co., Ltd.	Altek EMS (Kunshan) Co., Ltd.	Altek Trading (Cayman) Co., Ltd.	Altek Trading(Shanghai) Co., Ltd.	Altek Optical Technology (Cayman) Co., Ltd.	Altek Optical (Kunshan) Co., Ltd.	Altek Semiconductor (Cayman) Co., Ltd.	Altek Semiconductor Corp.	Altek Semiconductor(Shanghai) Co., Ltd.	Altek Optical (Cayman) Co., Ltd.	Altek Investment Co., Ltd.	Altek International Holding (BVI) Co., Ltd.	Altek Biotechnology Holding (Cayman) Co., Ltd.	Altek Biotechnology Corp.

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8.1.7 Declaration of Consolidated Financial Statements of Affiliated Companies

Altek Corporation

Declaration of Consolidated Financial Statements of Affiliated Companies

In 2018 (January 1, 2018 to December 31, 2018), companies that shall be included in the consolidated financial statements of affiliated companies in accordance with the Criteria Governing Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same companies that shall be included in the consolidated financial statements of the parent company and subsidiaries in accordance with IFRS 10. In addition, the related information that shall be disclosed in the consolidated financial statements of affiliated companies has been disclosed in the abovementioned consolidated financial statements of the parent company and subsidiaries. Accordingly, the consolidated financial statements of affiliated companies are not compiled separately. Sincerely,

Altek Corporation Chairman: Alex Hsia March 25, 2019

8.1.8 Affiliation Report

Altek is not the affiliated company of other companies as stipulated in “Chapter VI-I Affiliated Enterprises” of the Company Act, so no affiliation report is compiled.

8.1.9 Endorsement/Guarantee, Lending Funds to Others, and Derivatives Transactions of Affiliated Companies: None.

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8.2 Private Placement of Securities in the Most Recent Years

To invest the high-end technologies, enrich working capital, repay borrowings, reinforce financial structures, invite strategic investors and support the Company’s development funding needs, the 9[th] meeting of 8[th] Board of Directors approved raising funds through private placement within the limit of 60,000,000 common shares, and will proposed to the 2019 shareholders meeting.

8.3 Shares in the Company Held or Disposed of by Subsidiaries in the Most Recent Years: None
8.4 Other Mentionable Items: None
8.5 Any Event Having a Material Impact on Shareholders' Rights and Interests or Securities Prices stipulated in Subparagraph 2, Paragraph 3, Article 36 of the Securities and Exchange Act: None

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AI assistant

Altek — Annual Report 2018

52290_rns_2019-06-19_8d99e974-24e4-4b8a-b9ff-eed1e0d6457f.pdf

Contents

I. Letter to Shareholders

II. Company Profile

2.1 Date of Incorporation

2.2 Company History

III. Corporate Governance Report

3.1 Organization

3.1.1 Organizational Chart

3.1.2 Major Corporate Functions

3.4 Implementation of Corporate Governance

3.4.1 Board of Directors

Other mentionable items:

3.4.2 Audit Committee:

3.4.3 Corporate Governance Implementation Status and Deviations from “the Corporate Governance Best-Practice Principles for TWSE/TPEx Listed Companies”

3.4.5 Social Responsibility Implementation Status as Required by the Taiwan Financial

Supervisory Commission

3.4.6 Corporate Conduct and Ethics Implementation as Required by the Taiwan Financial Supervisory Commission

3.4.7 Corporate Governance Guidelines and Regulations

3.4.8 Other Important Information Regarding Corporate Governance

A. Employees’ rights and cares

B. Investor Service

C. Supplier relation

D. Communication channels for interested parties

3.4.9 Internal Control Systems

A. Internal Control Declaration

3.4.11 Major Resolutions of Shareholders’ Meeting and Board Meetings

B.Resolutions of 2018 board meeting:

3.5 Information of Audit Fee

3.5.1 Payment to the Audit:

3.5.2Non-audit fee paid to auditors, the audit firm and its affiliates accounted for more than one-fourth of total audit fee, should disclose the details:

3.5.4 Audit fee reduced more than 15% year over year: None.

3.8.1 Changes in shareholdings of directors, managers and major shareholders

3.8.2 Shares Trading with Related Parties: None.

3.8.3 Shares Pledge with Related Parties: None.

3.9 Relationship among the Top Ten Shareholders

3.10 Ownership of Shares in Affiliated Enterprises

IV. Capital Overview

4.1 Capital and Shares

4.1.1 Source of Capital

A. Issued Shares

B.Information for Shelf Registration: N/A.

4.1.2 Status of Shareholders

4.1.3 Shareholding Distribution Status

A. Common Shares

4.1.4 List of Major Shareholders

4.1.5 Market Price, Net Worth, Earnings, and Dividends per Share

4.1.6 Dividend Policy and Implementation Status

A. Dividend Policy

B. Proposed Distribution of Dividend

C. Major Change in the Dividend Policy: None.

4.5 Employee Stock Options

4.5.1 Issuance of Employee Stock Options

4.6 Restricted Employee Shares

4.6.1 Issuance of New Restricted Employee Shares

V. Operational Highlights

5.1 Business Activities

5.1.1 Business Scope

C. New Product Development

(2) Imaging chips

5.1.2 Industry Overview

B. Relevance of Upstream, Midstream, and Downstream

C. Product Development Trend

5.1.4 Long-term and Short-term Development

5.2 Market and Sales Overview

5.2.1 Market Analysis

C. Market Supply/Demand and Growth in the Future

D. Competitive Niche

(1) Advantages

Countermeasure:

b. Intense industrycompetition

Countermeasure:

5.2.2 Purpose and Production Process of Major Products

A. Digital Imaging Chip

(1) Major purpose

(2) Production process

a. Design procedure

b. Mask procedure

Altek Annual Report 2018