Altek — Audit Report / Information 2019

Nov 14, 2019

ALTEK CORPORATION AND

SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AND

REPORT OF INDEPENDENT ACCOUNTANTS

DECEMBER 31, 2019 AND 2018

(Stock Code : 3059)

~1~

REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE

PWCR 19000242 (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 SUBSIDIARIES (the “Group”) as at December 31, 2019 and 2018, 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, 2019 and 2018, 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.

~2~

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 Group 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.

~3~

• 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(30) 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, 2019 and 2018.

~4~

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 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, 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 judgment 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.

~5~

• 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.

~6~

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.

Li, Tien-Yi[Tsang, Kwok-Wah ] For and on behalf of PricewaterhouseCoopers, Taiwan March 20, 2020

------------------------------------------------------------------------------------------------------------------------------------------------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.

~7~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Assets	Notes 6(1) 6(4) 6(5) 6(5) 6(6) 6(2) 6(3) 6(4) 6(7) 6(8) 6(9) 6(10) 6(11) 6(28)	December31,2019 AMOUNT % $ 6,666,055 47 371,900 3 - - 918,019 7 42,095 - 5,481 - 1,038,629 8 194,345 1 5,869 - 9,242,393 66 40,156 - 50,644 - 365,285 3 - - 3,135,694 22 131,950 1 763,733 6 153,541 1 161,572 1 40,466 - 4,843,041 34 $ 14,085,434 100	December31,2018	December31,2018
		AMOUNT $ 6,666,055 371,900 - 918,019 42,095 5,481 1,038,629 194,345 5,869 9,242,393 40,156 50,644 365,285 - 3,135,694 131,950 763,733 153,541 161,572 40,466 4,843,041 $ 14,085,434	AMOUNT $ 6,495,017 261,228 1,387,222 2,414,775 31,712 683 999,212 89,451 6,141 11,685,441 23,683 114,508 - 26,768 3,376,345 - 770,551 100,142 102,696 70,336 4,585,029 $ 16,270,470	%
Current assets 1100 Cash and cash equivalents 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 1535 Non-current financial assets at amortised cost 1550 Investments accounted for using equity method 1600 Property, plant and equipment, net 1755 Right-of-use assets 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				40 2 8 15 - - 6 1 -
				72
				- 1 - - 21 - 4 1 1 -
				28
				100

(Continued)

~8~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

Liabilities and Equity

December31,2019 December31,2018 Notes AMOUNT % AMOUNT % 6(12) $ 2,200,000 16 $ 1,760,000 11 6(13) 229,962 2 - - 34,096 - - - 4,316 - 1,049,446 6 1,010,670 7 1,878,509 12 424,512 3 415,658 3 39,762 - 58,625 - 6(17) 5,823 - 35,378 - 7,274 - - - 200,878 2 223,054 1 4,157,293 30 5,420,670 33 6(14) - - 600,000 4 6(17) 136,568 1 113,115 1 6(28) 449,924 3 447,061 3 95,531 1 - - 29,392 - 28,043 - 711,415 5 1,188,219 8 4,868,708 35 6,608,889 41 6(18) 2,753,613 19 2,740,113 17 6(19) 2,280,487 16 2,262,397 14 6(20) 1,394,151 10 1,381,094 8 435,679 3 425,580 3 2,394,976 17 2,471,973 15 6(21) ( 615,359) ( 4) ( 294,938) ( 2 ) 8,643,547 61 8,986,219 55 573,179 4 675,362 4 9,216,726 65 9,661,581 59 11 $ 14,085,434 100 $ 16,270,470 100

Current liabilities 2100 Short-term borrowings 2110 Short-term notes and bills payable 2130 Current contract liabilities 2150 Notes payable 2170 Accounts payable 2200 Other payables 2230 Current income tax liabilities 2250 Provisions for liabilities - current 2280 Current lease liabilities 2300 Other current liabilities 21XX Current Liabilities Non-current liabilities 2540 Long-term borrowings 2550 Provisions for liabilities - noncurrent 2570 Deferred income tax liabilities 2580 Non-current lease 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 31XX Equity attributable to owners of the parent 36XX Non-controlling interest 3XXX Total equity Significant subsequent event 3X2X Total liabilities and equity

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

~9~

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items

Year ended December 31 2019 2018 Notes AMOUNT % AMOUNT % 6(22) $ 6,189,352 100 $ 11,193,569 100 6(6)(26)(27) ( 5,174,937 ) ( 84) ( 9,875,021) ( 88 ) 1,014,415 16 1,318,548 12 6(26)(27) ( 57,328 ) ( 1) ( 69,425) ( 1 ) ( 335,763 ) ( 5) ( 336,529) ( 3 ) ( 787,765 ) ( 13) ( 814,075) ( 7 ) 12(2) 9,771 - ( 7,262) - ( 1,171,085 ) ( 19) ( 1,227,291) ( 11 ) ( 156,670 ) ( 3) 91,257 1 6(23) 189,844 3 184,733 2 6(24) 23,951 - 50,527 - 6(25) ( 25,703 ) - ( 25,497) - 188,092 3 209,763 2 31,422 - 301,020 3 6(28) ( 35,275 ) - ( 127,870) ( 1 ) ( $ 3,853 ) - $ 173,150 2

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 gains (losses) 6000 Total operating expenses 6900 Operating (loss) 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 (Loss) profit for the year

(Continued)

~10~

ALTEK CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

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

Items	Year ended December 31 2019 2018 Notes AMOUNT % AMOUNT 6(15) ( $ 1,430 ) - $ 682 6(3) ( 61,872 ) ( 1) ( 12,016) 6(28) 558 - ( 1,029) ( 62,744 ) ( 1) ( 12,363) ( 310,899 ) ( 5) 33,267 6(28) 59,375 1 6,219 ( 251,524 ) ( 4) 39,486 ( $ 314,268 ) ( 5) $ 27,123 ( $ 318,121 ) ( 5) $ 200,273 $ 84,308 1 $ 130,562 ( 88,161 ) ( 1) 42,588 ( $ 3,853 ) - $ 173,150 ( $ 215,938 ) ( 3) $ 144,490 ( 102,183 ) ( 2) 55,783 ( $ 318,121 ) ( 5) $ 200,273 6(29) $ 0.31 $ 6(29) $ 0.31 $	Year ended December 31	Year ended December 31	% - - - - - - - - 2 2 - 2 1 1 2 0.48 0.48
		2019	2018
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 8399 Income tax relating to the components of other comprehensive income 8360 Components of other comprehensive (loss) income that will be reclassified to profit or loss 8300 Total other comprehensive (loss) income for the year 8500 Total comprehensive (loss) income for the year Profit (loss), attributable to: 8610 Owners of the parent 8620 Non-controlling interest Profit (loss) 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.

~11~

ALTEK CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

(Expressed in thousands of New Taiwan dollars)

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 2019 Balance at January 1, 2019 Profit (loss) for the year Other comprehensive income (loss) for the year Total comprehensive income (loss) Appropriation of 2018 earnings Legal reserve Special reserve Cash dividends Share-based payment transactions Restricted stock Retirement of employee restricted shares Balance at December 31, 2019	Notes								Equity attribu	ta	bleto owners of the	parent	parent					Non-controlling interest		Totalequity
			Commonstock		Additional paid-in capital				Retained earnings			Otherequityinterest		Treasury stocks		Total
							Legal reserve		Special reserve		Unappropriated retained earnings	Currency translation differences of foreignoperations	Others
	6(21) 6(21) 6(20) 6(16)(18)(19)(21) 6(16)(18)(19)(21) 6(21) 6(20) 6(16)(21) 6(16)(18)(19)(21) 6(16)(18)(19)(21)	$ 2,738,188 - 2,738,188 - - - - - - 3,200 ( 1,275 ) - - $ 2,740,113 $ 2,740,113 - - - - - - - 14,500 ( 1,000 ) $ 2,753,613		$ 2,256,692 - 2,256,692 - - - - - - 6,624 ( 2,165 ) 1,246 - $ 2,262,397 $ 2,262,397 - - - - - - - 19,430 ( 1,340 ) $ 2,280,487			$ 1,379,754 - 1,379,754 - - - 1,340 - - - - - - $ 1,381,094 $ 1,381,094 - - - 13,057 - - - - - $ 1,394,151		$ 142,456 - 142,456 - - - - 283,124 - - - - - $ 425,580 $ 425,580 - - - - 10,099 - - - - $ 435,679	$ 2,737,026 23,600 2,760,626 130,562 427 130,989 ( 1,340 ) ( 283,124 ) ( 135,178 ) - - - - $ 2,471,973 $ 2,471,973 84,308 ( 1,144 ) 83,164 ( 13,057 ) ( 10,099 ) ( 137,005 ) - - - $ 2,394,976		($ 283,124 ) - ( 283,124 ) - 26,291 26,291 - - - - - - - ($ 256,833 ) ($ 256,833 ) - ( 237,502 ) ( 237,502 ) - - - - - - ($ 494,335 )	($ 19,215 ) ( 23,600 ) ( 42,815 ) - ( 12,790 ) ( 12,790 ) - - - 14,060 3,440 - - ($ 38,105 ) ($ 38,105 ) - ( 61,600 ) ( 61,600 ) - - - 10,271 ( 33,930 ) 2,340 ($ 121,024 )	($ 96,138 ) - ( 96,138 ) - - - - - - - - 96,138 - $ - $ - - - - - - - - - - $ -	$ 8,855,639 - 8,855,639 130,562 13,928 144,490 - - ( 135,178 ) 23,884 - 97,384 - $ 8,986,219 $ 8,986,219 84,308 ( 300,246 ) ( 215,938 ) - - ( 137,005 ) 10,271 - - $ 8,643,547		$ 629,586 - 629,586 42,588 13,195 55,783 - - - - - - ( 10,007 ) $ 675,362 $ 675,362 ( 88,161 ) ( 14,022 ) ( 102,183 ) - - - - - - $ 573,179		$ 9,485,225 - 9,485,225 173,150 27,123 200,273 - - ( 135,178 ) 23,884 - 97,384 ( 10,007 ) $ 9,661,581 $ 9,661,581 ( 3,853 ) ( 314,268 ) ( 318,121 ) - - ( 137,005 ) 10,271 - - $ 9,216,726

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

~12~

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 Amortisation Expected credit (gains) losses Net gain on financial assets at fair value through profit or loss Interest expense Interest income Dividend income Share-based payment compensation cost Reversal of impairment loss on investments accounted for under the equity method (Gain) loss on disposal of property, plant and equipment Changes in operating assets and liabilities Changes in operating assets Financial assets at fair value through profit or loss Notes receivable Accounts receivable Other receivables Inventories Prepayments Other current assets Changes in operating liabilities Current contract 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 2019 2018 $ 31,422 $ 301,020 6(8)(9)(10)(26) 196,903 218,896 6(11)(26) 29,352 28,802 12(2) ( 9,771 ) 7,262 6(2)(24) ( 16,710 ) ( 13,944 ) 6(25) 25,703 25,497 6(23) ( 143,999 ) ( 123,745 ) 6(23) ( 763 ) ( 915 ) 6(16)(27) 10,271 16,841 6(24) ( 649 ) ( 26,272 ) 6(24) ( 1,922 ) 1,358 237 581,745 1,389,593 ( 1,383,249 ) 1,506,379 ( 101,648 ) 21,074 ( 12,602 ) ( 78,118 ) 150,526 ( 107,492 ) 86,624 91 9,853 34,228 - ( 1,046,737 ) 1,039,044 ( 829,267 ) ( 186,687 ) 15,079 9,556 ( 6,108 ) 24,908 ( 21,651 ) 41,550 64 81 997,209 694,501 111,086 123,176 763 915 ( 24,258 ) ( 23,434 ) ( 54,691 ) ( 91,383 ) 1,030,109 703,775

(Continued)

~13~

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 Proceeds from capital reduction of investments accounted for under the equity method Proceeds from capital reduction of financial assets at fair value through profit or loss Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in intangible assets Acquisition of investment property Increase in deposits received Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase (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 Repayment of long-term borrowings Increase (decrease) in deposits-in Repayment of lease liabilities principal Cash dividends for capital surplus Employee stock options exercised Treasury shares sold to employees Net cash flows (used in) 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 2019 2018 ($ 506,472 ) ($ 257,524 ) 27,529 - - 3,915 6(31) ( 17,948 ) ( 29,373 ) 4,076 41,831 6(31) ( 85,612 ) ( 7,927 ) - ( 8,000 ) ( 2,347 ) ( 4,656 ) ( 580,774 ) ( 261,734 ) 440,000 ( 261,000 ) 709,203 798,756 ( 480,000 ) ( 1,000,000 ) - 600,000 ( 600,000 ) - 424 ( 3,209 ) ( 7,966 ) - 6(20) ( 137,005 ) ( 135,178 ) - 9,824 - 94,603 ( 75,344 ) 103,796 ( 202,953 ) 74,198 171,038 620,035 6(1) 6,495,017 5,874,982 6(1) $ 6,666,055 $ 6,495,017

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

~14~

ALTEK CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2019 AND 2018

(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 20, 2020.

3. 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 2019 are as follows:

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

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. IFRS 16, ‘Leases’

• A. 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

~15~

those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided by lessors.

• B. The Group has elected to apply IFRS 16 by not restating the comparative information (referred herein as the ‘modified retrospective approach’) when applying “IFRSs” effective in 2019 as endorsed by the FSC. Accordingly, the Group increased ‘right-of-use asset’ and ‘lease liability’ by $107,196 on January 1, 2019.

• C. The Group has used the following practical expedients permitted by the standard at the date of initial application of IFRS 16:

• (a) Reassessment as to whether a contract is, or contains, a lease is not required, instead, the application of IFRS 16 depends on whether or not the contracts were previously identified as leases applying IAS 17 and IFRIC 4.

• (b)The accounting for operating leases whose period will end before December 31, 2019 are treated as short-term leases and accordingly, rent expense of $8,475 was recognised in 2019.

• (c) The exclusion of initial direct costs for the measurement of ‘right-of-use asset’.

• (d) The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

• D. The Group calculated the present value of lease liabilities by using the weighted average incremental borrowing interest rate range from 1.1% to 1.25%.

• E. The Group recognised lease liabilities which had previously been classified as ‘operating leases’ under the principles of IAS 17, ‘Leases’. The reconciliation between operating lease commitments under IAS 17 measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate and lease liabilities recognised as of January 1, 2019 is as follows:

==> picture [476 x 159] intentionally omitted <==

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

Operating lease commitments disclosed by applying IAS 17 as at
December 31, 2018 $ 44,230
Less: Short-term leases ( 425)
Add: Adjustments as a result of a different treatment of
83,294
extension and termination options
Total lease contracts amount recognised as lease liabilities by applying
IFRS 16 on January 1, 2019 127,099
Incremental borrowing interest rate at the date of
initial application 1.1%~1.25%
Lease liabilities recognised as at January 1, 2019 by applying IFRS 16 $ 107,196
----- End of picture text -----

(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 2020 are as follows:

~16~

New Standards,Interpretations and Amendments Amendment to IAS 1 and IAS 8, ‘Disclosure Initiative-Definition of Material’ Amendments to IFRS 3, ‘Definition of a business’ Amendments to IFRS 9, IAS 39 and IFRS7 ,‘Interest rate benchmark reform’	Effective date by International Accounting Standards Board
	January 1, 2020 January 1, 2020 January 1, 2020

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

(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:

Effective date by International Accounting New Standards, Interpretations and Amendments Standards Board Amendments to IFRS 10 and IAS 28, ‘Sale or contribution of assets To be determined by between an investor and its associate or joint venture’ International Accounting Standards Board IFRS 17, ‘Insurance contracts’ January 1, 2021 Amendments to IAS 1, ‘Classification of liabilities as current or January 1, 2022 non-current’

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

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the consolidated financial statements for the year ended December 31, 2019, except for the compliance statement, basis of preparations, basis of consolidation and additional policies as 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.

~17~

  - (b) Financial assets at fair value through other comprehensive income.

  - (c) Defined benefit liabilities recognised 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.

• (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 an 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.

  • (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.

~18~

B. Subsidiaries included in the consolidated financial statements:

Name of Investor	Name ofSubsidiaries	Main Business Activities	Ownership (%)	Ownership (%)	Note
			December31,2019	December31,2018
Altek Corporation " " " Altek International Investment Co., Ltd. " " " Note 1 Note 1 Note 1 Note 1 Note 2 Altek Semiconductor (Cayman) Co., Ltd. " Note 1	Altek International Investment Co., Ltd. Altek Japan Corporation Altek Investment Co., Ltd. Altek International Holding (BVI) Co.,Ltd. Altek Lab Inc. Altek Optical (Cayman) Co., Ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek International Trading Co.,Ltd Altek (Kunshan) Co., Ltd. Altek EMS (Kunshan) Co., Ltd. Altek Precision (Kunshan) Co., Ltd. Altek Trading (Shanghai) Limited Altek Biotechnology Corporation Altek Semiconductor Corporation Altek Semiconductor (Shanghai) Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd.	Investments Sales of optical instruments Investments Investments Design service Investments Investments Investments and general business operations Manufacture and sales of digital still camera and its accessories Manufacture and sales of related engineering services Manufacture and sales of digital camera parts Wholesale, import and export of related electronic and their associated accessories Research and development, manufacture and sales of medical electronic equipments Research design and sales of ASIC Research design and sales of imaging technologies, electronic software and hardware Manufacture and sales of related electronic services and its accessories and optical components	100 100 - 100 100 100 50 100 100 100 100 100 100 100 100 100	100 100 100 100 100 100 50 - 100 100 100 100 100 100 100 100	- - Note 3 - - - - Note 4 - - - - - - - -

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: The dissolution and liquidation of Altek Investment Co., Ltd. was resolved by the Board of Directors on December 17, 2018. Moreover, the liquidation was completed as approved by the court on April 25, 2019. Note 4: Invested by Altek International Investment Co., Ltd. and established on July, 2019.

~19~

• 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 Dollar, 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. 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, nonmonetary 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 foreign exchange gains and losses 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, associates and joint arrangements 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.

• (b) When the foreign operation partially disposed of or sold is an associate or joint arrangement, exchange differences that were recorded in other comprehensive income are proportionately

~20~

reclassified to profit or loss as part of the gain or loss on sale. In addition, even when the Group retains partial interest in the former foreign associate or joint arrangement after losing significant influence over the former foreign associate, or losing joint control of the former joint arrangement, such transactions should be accounted for as disposal of all interest in these foreign operations.

• (c) When the foreign operation partially disposed of or sold is a subsidiary, cumulative exchange differences that were recorded in other comprehensive income are proportionately transferred to the non-controlling interest in this foreign operation. In addition, even when the Group retains partial interest in the former foreign subsidiary after losing control of the former foreign subsidiary, such transactions should be accounted for as disposal of all interest in the foreign operation.

• (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 settle 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 settled within the normal operating cycle;

• (b) Liabilities arising mainly from trading activities;

• (c) Liabilities that are to be settled 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

~21~

operations are classified as cash equivalents.

(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 recognised and derecognised using settlement date accounting.

• C. At initial recognition, the Group measures the financial assets at fair value and recognises the transaction costs in profit or loss. The Group subsequently measures the financial assets at fair value, and recognises the gain or loss in profit or loss.

• D. The Group recognises 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 recognise changes in fair value in other comprehensive income.

• B. On a regular way purchase or sale basis, financial assets at fair value through other comprehensive income are recognised and derecognised 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 recognised 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 recognised 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

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 financial assets at amortised cost at each reporting date, the Group recognises the impairment provision for 12 months expected credit losses if there has not been a significant increase in credit risk since initial recognition or recognises the impairment provision for the lifetime expected credit losses (ECLs) if such credit risk has increased since initial recognition after taking into consideration

~22~

all reasonable and verifiable information that includes forecasts. On the other hand, for accounts receivable that does not contain a significant financing component, the Group recognises the impairment provision for lifetime ECLs.

(12) Derecognition of financial assets

• The Group derecognises a financial asset when the contractual rights to receive the cash flows from the financial asset expire.

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

• A. The contractual rights to receive the cash flows from the financial asset expire.

• B. The contractual rights to receive cash flows of the financial asset have been transferred and the Group has transferred substantially all risks and rewards of ownership of the financial asset.

• C. The contractual rights to receive cash flows of the financial asset have been transferred; however, the Group has not retained control of the financial asset.

－ (13) Leasing arrangements (lessor) operating leases

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 labour, other direct costs and related production overheads (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.

(15) Investments accounted for using 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.

• 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 legal or constructive obligations or made payments on behalf of the associate.

• C. When changes in an associate’s equity do not arise from profit or loss or other comprehensive income of the associate and such changes do not affect the Group’s ownership percentage of the associate, the Group recognizes the Group’s share of change in equity of the associate in ‘capital surplus’ in proportion to its ownership.

~23~

• 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 and 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 retains significant influence over this associate, 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.

• H. When the Group disposes its investment in an associate and 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 retains significant influence over this associate, 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.

~24~

Each part of an item of property, plant, and equipment with a cost that is significant in relation to the total cost of the item must be depreciated separately.

• D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end. 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 ~ 40 years Machinery and equipment 3 ~ 10 years Utility equipment 3 ~ 6 years Other equipment 2 ~ 11 years

(17) Leasing arrangements (lessee) － right-of-use assets/ lease liabilities

Effective 2019

• A. Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group. For short-term leases or leases of lowvalue assets, lease payments are recognised as an expense on a straight-line basis over the lease term.

• B. Lease liabilities include the net present value of the remaining lease payments at the commencement date, discounted using the incremental borrowing interest rate. The Group subsequently measures the lease liability at amortised cost using the interest method and recognises interest expense over the lease term. The lease liability is remeasured and the amount of remeasurement is recognised as an adjustment to the right-of-use asset when there are changes in the lease term or lease payments and such changes do not arise from contract modifications.

• C. At the commencement date, the right-of-use asset is stated at cost comprising the following: (a) The amount of the initial measurement of lease liability

• (b) Any initial direct costs incurred by the lessee

• The right-of-use asset is measured subsequently using the cost model and is depreciated from the commencement date to the earlier of the end of the asset’s useful life or the end of the lease term. When the lease liability is remeasured, the amount of remeasurement is recognised as an adjustment to the right-of-use asset.

~25~

(18) Operating leases (lessee)

Applicable in 2018

Payments made under an operating lease (net of any incentives received from the lessor) are recognised in profit or loss on a straight-line basis over the lease term.

(19) 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 ~ 35 years.

(20) Intangible assets

Computer software, reticle and patent right is stated at cost and amortised on a straight-line basis over its estimated useful life of 3 ~ 5 years.

(21) 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.

(22) Borrowings

Borrowings comprise long-term and short-term bank borrowings. Borrowings are recognised initially at fair value, net of transaction costs incurred.

(23) 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 Group initially measures notes and accounts payable at fair value and subsequently amortises the interest expense in profit or loss over the period of circulation using the effective interest method.

(24) Provisions

Provisions (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.

(25) Employee benefits

• A. Short-term employee benefits

Short-term employee benefits are measured at the undiscounted amount of the benefits expected

~26~

to be paid in respect of service rendered by employees in a period and should be recognised as expense in that period when the employees render service.

• B. Pensions

• (a) Defined contribution plans

For defined contribution plans, the contributions are recognised as pension expense 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 net defined benefit 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. Remeasurements 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 recognises 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.

• D. Employees’ compensation and directors’ remuneration

• Employees’ compensation and directors’ 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.

~27~

- (26) 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. 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 recognised 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 recognises 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 have to pay to acquire those stocks, if employees resign during the vesting period, they must return the stocks to the Group and the Group must refund their payments on the stocks, the Group recognises the payments from the employees who are expected to resign during the vesting period as liabilities at the grant date, and recognises the payments from the employees who are expected to be eventually vested with the stocks in ’capital surplus – others’.

(27) 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.

• B. The current income tax expense 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 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

~28~

consolidated balance sheet. However, the deferred 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 or loss. Deferred 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 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 tax asset is realised or the deferred tax liability is settled.

• D. Deferred 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 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 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 recognised 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.

(28) 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.

(29) 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~

(30) Revenue recognition

• A. Sales of goods

• (a) The Group manufactures and sells digital image technology application products. Sales are recognised when control of the products has transferred, being when the products are delivered to the buyer, the buyer has full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the wholesaler’s 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 wholesaler, and either the wholesaler has 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 recognised based on the price specified in the contract, net of the value-added tax, sales return, volume discounts, sales discounts and allowances.

• (c) The Group’s obligation to provide a repair for faulty products under the standard warranty terms is recognised as a provision.

• (d) A receivable is recognised 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.

• B. Technical service revenue

The Group provides technical support services. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised 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 based on the number of delivered report relative to the total number of committed report.

• 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 recognises the revenue from licencing when the licence transfer 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 patents 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 recognised 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 recognised when transferring the licence to a customer at a point in time.

~30~

• (b) Some contracts require a usage-based royalty in exchange for a licence of intellectual property. The Group recognises revenue when the performance obligation has been satisfied and the subsequent usage occurs. The customer pays at the time specified in the payment schedule. If the services rendered exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

• (31) Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Group’s chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments.

5. 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:

• (a) Critical judgements in applying the Group’s accounting policies

• None.

• (b) 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 normal inventory consumption, obsolete inventories or inventories without market selling value 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, 2019, the carrying amount of inventories was $1,038,629.

6. DETAILS OF SIGNIFICANT ACCOUNTS

(1) Cash and cash equivalents

TAILS OF SIGNIFICANT ACCOUNTS Cash and cash equivalents
0 Cash on hand revolving funds Checking accounts and demand deposits Time deposits Total	December 31,2019 901 $ 252,974 6,412,180 6,666,055 $	December 31, 2018
		1,070 $ 933,058 5,560,889
		6,495,017 $

• 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.

~31~

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

Items Non-current items: Financial assets mandatorily measured at fair value through profit or loss Unlisted stocks Valuation adjustment Total	December 31,2019 December 31,2018 10,312 $ 12,731 $ 29,844 10,952 40,156 $ 23,683 $

• 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	2019 2018 16,710 $ 16,998 $ - 3,020 16,710 $ 20,018 $

• B. The Group’s has no financial assets at fair value through profit or loss as at December 31, 2019 and 2018 pledged to others.

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

Items Non-current items: Equity instruments Unlisted stocks Valuation adjustment Total	December 31,2019	December 31,2018
	148,132 $ 97,488) ( 50,644 $	150,124 $ 35,616) ( 114,508 $

• A. The Group has elected to classify equity instruments that are considered to be strategic investments as financial assets at fair value through other comprehensive income. The fair value of such investments amounted to $50,644 and $ 114,508 as at December 31, 2019 and 2018, respectively.

• B. Amounts recognised in profit or loss and other comprehensive income in relation to the financial assets at fair value through other comprehensive income amounted to ($61,872) and ($12,016) as at December 31, 2019 and 2018, respectively.

• C. As at December 31, 2019 and 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 $50,644 and $114,508, respectively.

• D. The Group’s has no financial assets at fair value through profit or loss as at December 31, 2019 and 2018 pledged to others.

~32~

(4) Financial assets at amortised cost

==> picture [474 x 115] intentionally omitted <==

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

Items December 31, 2019 December 31, 2018
Current items:
Time deposit with maturity
from three months to one year $ 371,900 $ 261,228
Non-current items:
Time deposit with maturity
over one year $ 365,285 $ -
----- End of picture text -----

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

below:
		2019		2018
Interest income	$	17,989	$	1,242

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

• (5) Notes and accounts receivable

Notes and accounts receivable
	December	31, 2019	December 31,2018
Notes receivable	$	-	$	1,387,222
Accounts receivable		923,301		2,430,654
Less: Allowance for uncollectible accounts	(	5,282)	(	15,879)
	$	918,019	$	2,414,775

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

is as follows:
Not past due Up to 30 days 31 to 90 days 91 to 180 days 180 to 360 days over 361 days		December		Accounts receivable 31,2019		December		Accounts receivable 31,2018
		Notes receivable				Notes receivable
		- $ - - - - - - $		874,130 $ 38,011 2,798 3,568 337 4,457 923,301 $		1,387,222 $ - - - - - 1,387,222 $		2,146,832 $ 67,351 174,273 29,761 6,222 6,215 2,430,654 $

The above ageing analysis was based on past due date.

• B. As of December 31, 2019 and 2018, accounts receivable and notes receivable were all from contracts with customers.

• C. The Group has no notes and accounts receivable pledged to others.

• D. As at December 31, 2019 and 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 Group’s notes and accounts receivable was $0 and $1,387,222, $918,019 and $2,414,775, respectively.

~33~

• E. Information relating to credit risk of accounts receivable and notes receivable is provided in Note 12(2).

(6) Inventories

Raw materials Work in progress Finished goods Total Raw materials Work in progress Finished goods Total	Cost 627,464 $ 180,747 285,494 1,093,705 $ Cost 688,388 $ 95,968 268,788 1,053,144 $	Allowance for valuation loss Book value 34,134) ($ 593,330 $ 5,317) ( 175,430 15,625) ( 269,869 55,076) ($ 1,038,629 $ December 31, 2019 Allowance for valuation loss Book value 34,641) ($ 653,747 $ 7,558) ( 88,410 11,733) ( 257,055 53,932) ($ 999,212 $ December 31, 2018

The cost of inventories recognised as expense for the period:

Cost of goods sold Loss on decline(Gain on reversal of) in market value Total	For the year ended For the year ended December 31,2019 December 31,2018 5,173,793 $ 9,884,670 $ 1,144 9,649) ( 5,174,937 $ 9,875,021 $

For the year 2018, the Group reversed from a previous inventory write-down and accounted for as reduction of cost of goods sold because inventory that has been appropriated as loss on decline in market value was partially sold.

(7) Investments accounted for using equity method

market value was partially sold. Investments accounted for using equity method
JinJing Optical Technology Co., Ltd. Less: Accumulated impairment loss		December 31,2019	December 31,2018
		- $ - - $	44,524 $ 17,756) ( 26,768 $

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

As of December 31, 2019 and 2018, the carrying amount of the Group’s individually immaterial associates amounted to $0 and $26,768, respectively.

~34~

		For the year ended		For the year ended
		December 31,2019		December 31,2018
Profit for the period from	$	51	$	113,661
continuing operations
Other comprehensive income,
net of tax		-		-
Total comprehensive income	$	51	$	113,661

B. The dissolution and liquidation of JinJing Optical Technology Co., Ltd. was resolved by the Board of Directors on October 8, 2019. Moreover, the liquidation was completed on October 24, 2019.

（Blank below ）

~35~

(8) Property, plant and equipment

At January 1 Cost Accumulated depreciation Opening net book amount Additions Disposals Reclassifications Depreciation charge Net exchange differences Closing net book amount At December 31 Cost Accumulated depreciation					2019
		Construction in progress and Buildings and prepayment for Land structures Machinery Test equipment equipment Others Total 468,684 $ 3,316,999 $ 1,089,739 $ 157,605 $ 10,459 $ 461,630 $ 5,505,116 $ - 765,750) ( 768,358) ( 151,959) ( - 442,704) ( 2,128,771) ( 468,684 $ 2,551,249 $ 321,381 $ 5,646 $ 10,459 $ 18,926 $ 3,376,345 $ 468,684 $ 2,551,249 $ 321,381 $ 5,646 $ 10,459 $ 18,926 $ 3,376,345 $ - 2,535 6,958 2,630 4,055 1,439 17,617 - - 2,021) ( 53) ( - 80) ( 2,154) ( - 9,094 - 983 10,459) ( 382 - - 87,683) ( 80,811) ( 3,296) ( - 10,061) ( 181,851) ( - 64,203) ( 9,633) ( 60) ( 154) ( 213) ( 74,263) ( 468,684 $ 2,410,992 $ 235,874 $ 5,850 $ 3,901 $ 10,393 $ 3,135,694 $ 468,684 $ 3,243,125 $ 901,360 $ 153,649 $ 3,901 $ 406,631 $ 5,177,350 $ - 832,133) ( 665,486) ( 147,799) ( - 396,238) ( 2,041,656) ( 468,684 $ 2,410,992 $ 235,874 $ 5,850 $ 3,901 $ 10,393 $ 3,135,694 $

~36~

2018

At January 1 Cost Accumulated depreciation Opening net book amount Additions Disposals Reclassifications Depreciation charge Net exchange differences Closing net book amount At December 31 Cost Accumulated depreciation

Construction in progress and Buildings and prepayment for Land structures Machinery Test equipment equipment Others Total 468,684 $ 3,353,156 $ 1,366,032 $ 170,311 $ - $ 533,260 $ 5,891,443 $ - 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 $ 468,684 $ 2,667,512 $ 462,422 $ 11,567 $ - $ 38,603 $ 3,648,788 $ - 1,910 - 1,513 10,466 4,373 18,262 - - 41,997) ( 848) ( - 344) ( 43,189) ( - - - - - 278) ( 278) ( - 88,761) ( 93,536) ( 6,539) ( - 23,243) ( 212,079) ( - 29,412) ( 5,508) ( 47) ( 7) ( 185) ( 35,159) ( 468,684 $ 2,551,249 $ 321,381 $ 5,646 $ 10,459 $ 18,926 $ 3,376,345 $ 468,684 $ 3,316,999 $ 1,089,739 $ 157,605 $ 10,459 $ 461,630 $ 5,505,116 $ - 765,750) ( 768,358) ( 151,959) ( - 442,704) ( 2,128,771) ( 468,684 $ 2,551,249 $ 321,381 $ 5,646 $ 10,459 $ 18,926 $ 3,376,345 $

A. For the years ended December 31, 2019 and 2018, 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.

~37~

－ (9) Leasing arrangements lessee

Effective 2019

• A. The Group leases various assets including land, buildings, business vehicles. Rental contracts are typically made for periods of 1 to 49 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.

• B. Short-term leases with a lease term of 12 months or less comprise of leases for printers.

• C. The carrying amount of the depreciation charge are as follows:

Land Buildings Transportation equipment (Business vehicles)		December 31,2019 Carryingamount		For the year ended December 31, 2019
				Depreciation charge
		$ 123,882 3,264 4,804 131,950 $		$ 4,040 1,777 2,417 8,234 $

• D. For the year ended December 31, 2019, the additions to right-of-use assets were $2,191.

• E. The information on profit and loss accounts relating to lease contracts is as follows:

Items affecting profit or loss Interest expense on lease liabilities Expense on short-term lease contracts Expense on leases of low-value assets	For the year ended December 31,2019 $ 1,170 8,475 114 $ 9,759

• F. For the year ended December 31, 2019, the Group’s total cash outflow for leases were $16,555. G. Extension and termination options

In determining the lease term, the Group takes into consideration all facts and circumstances that create an economic incentive to exercise an extension option. The assessment of lease period is reviewed if a significant event occurs which affects the assessment.

~38~

(10) Investment property

At January 1 Cost Accumulated depreciation At January 1 Depreciation charge At December 31 At December 31 Cost Accumulated depreciation At January 1 Cost Accumulated depreciation At January 1 Depreciation charge At December 31 At December 31 Cost Accumulated depreciation

Land Buildings and structures Total 573,532 $ 245,710 $ 819,242 $ - 48,691) ( 48,691) ( 573,532 $ 197,019 $ 770,551 $ 573,532 $ 197,019 $ 770,551 $ - 6,818) ( 6,818) ( 573,532 $ 190,201 $ 763,733 $ 573,532 $ 245,710 $ 819,242 $ - 55,509) ( 55,509) ( 573,532 $ 190,201 $ 763,733 $ 2019 Land Buildings and structures Total 573,532 $ 245,710 $ 819,242 $ - 41,874) ( 41,874) ( 573,532 $ 203,836 $ 777,368 $ 573,532 $ 203,836 $ 777,368 $ - 6,817) ( 6,817) ( 573,532 $ 197,019 $ 770,551 $ 573,532 $ 245,710 $ 819,242 $ - 48,691) ( 48,691) ( 573,532 $ 197,019 $ 770,551 $ 2018

• 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		For the year ended December 31,2019		For the year ended December 31,2018
		26,127 $ 8,250 $		26,127 $ 8,220 $

~39~

• B. The fair value of the investment property held by the Group as at December 31, 2019 and 2018 all amounted to $870,022, which were valued by independent valuers. Valuations were made using the comparative method and income approach to perform evaluation capitalization.

• C. There was no capitalization 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.

(11) Intangible assets

		2019		2018
At January 1
Cost	$	168,707	$	165,921
Accumulated amortisation	(	68,565)	(	44,383)
	$	100,142	$	121,538
At January 1	$	100,142	$	121,538
Additions		84,378		4,398
Amortisation charge	(	29,352)	(	27,878)
Net exchange differences	(	1,627)		2,084
At December 31	$	153,541	$	100,142
At December 31
Cost	$	245,090	$	168,707
Accumulated amortisation	(	91,549)	(	68,565)
	$	153,541	$	100,142

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

Operating costs Operating expense	For the year ended December31,2019 170 $ 29,182 29,352 $	For the year ended December 31, 2018
		2,507 $ 25,371
		27,878 $

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

(12) Short-term borrowings

Short-term borrowings
Type of borrowings Bank borrowings Unsecured borrowings Type of borrowings Bank borrowings Unsecured borrowings	December 31,2019 2,200,000 $ December 31,2018 1,760,000 $	Interest rate range 0.9% ~1% Interest rate range 1% ~1.0758%	Collateral
			None Collateral
			None

~40~

(13) Short-term notes and bills payable

Short-term notes and bills payable
	December	31, 2019	December 31, 2018
Commercial paper payable	$	230,000	$	-
Less: Discount on short-term
notes and bills payable	(	38)		-
	$	229,962	$	-
Interest rate ranges		0.997%		-

- (14) Long term borrowings

As at December 31, 2019 : None.

Type of borrowings Secured borrowings Less: Current portion	Borrowing period and repayment term	Interest rate range Collateral 1.1%~1.25% Yes (Note)	December 31, 2018
	Borrowing period is from August 24, 2018 to May 8, 2021. Revolving credit facility.		600,000 $ -
			600,000 $

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 Group 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.

~41~

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

Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability	December 31,2019 December 31,2018 52,536) ($ 49,943) ($ 43,470 42,370 9,066) ($ 7,573) ($

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

Movements in net defined benefit liabilities are as follows:	es are as follows:	es are as follows:	es are as follows:
Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability At January 1 49,943) ($ 42,370 $ 7,573) ($ Interest (expense) income 499) ( 424 75) ( 50,442) ( 42,794 7,648) ( Remeasurements: Return on plan assets (excluding amounts included in interest income or expense) - 1,498 1,498 Change in financial assumptions 1,492) ( - 1,492) ( Experience adjustments 1,436) ( - 1,436) ( 2,928) ( 1,498 1,430) ( Pension fund contribution - 12 12 Paid pension 834 834) ( - At December 31 52,536) ($ 43,470 $ 9,066) ($ 2019 Present value of defined benefit obligations Fair value of plan assets Net defined benefit liability At January 1 48,728) ($ 40,554 $ 8,174) ($ 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 At December 31 49,943) ($ 42,370 $ 7,573) ($ 2018					2019			Net defined benefit liability 7,573) ($ 75) ( 7,648) ( 1,498 1,492) ( 1,436) ( 1,430) ( 12 - 9,066) ($
	Present value of defined benefit obligations				Fair value of plan assets
				$ ( $	$		42,370 424 42,794 1,498 - - 1,498 12 834) 43,470 2018
					$
			Present value of defined benefit obligations				Fair value of plan assets			Net defined benefit liability
			48,728) ($ 536) ( 49,264) ( - 500) ( 179) ( 679) ( - 49,943) ($				40,554 $ 446			8,174) ($ 90) ( 8,264) ( 1,361 500) ( 179) ( 682 9 7,573) ($
							41,000
							1,361 - -
							1,361
							9
							42,370 $

~42~

• (d) The Bank of Taiwan was commissioned to manage the Fund of the Group’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 and domestic subsidiaries have no right to participate in managing and operating that fund and hence the Company and domestic subsidiaries are unable to disclose the classification of plan assets fair value in accordance with IAS 19 paragraph 142. The composition of fair value of plan assets as of December 31, 2019 and 2018 is given in the Annual Labor Retirement Fund Utilisation Report announced by the government.

• (f) The principal actuarial assumptions used were as follows:

Discount rate Future salary increases	For the year ended December 31, 2019 0.70% 3.00%	For the year ended December 31, 2019
		1.00% 3.00%

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

December 31, 2019 Effect on present value of defined benefit obligations December 31, 2018 Effect on present value of defined benefit obligations	Discount rate	Discount rate	Discount rate	Future salaryincreases	Future salaryincreases	Future salaryincreases
	Increase 0.25%	Decrease 0.25%		Increase 0.25%		Decrease 0.25%
	1,248) ($ 1,235) ($		1,294 $ 1,282 $		1,150 $ 1,130 $	1,117) ($ 1,096) ($

~43~

The sensitivity analysis above is based on one assumption which changed while the other conditions remain unchanged. 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 methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

• (g) Expected contributions to the defined benefit pension plans of the Group for the year ending December 31, 2020 amount to $12.

• (h) As of December 31, 2019, the weighted average duration of the retirement plan is 10 years. The analysis of timing of the future pension payment was as follows:

Within 1 year	$	7,977
2-5 years		6,552
Over 5 years		14,377
	$	28,906

• 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. The pension costs under defined contribution pension plans of the Group for the years ended December 31, 2019 and 2018, were $28,907 and $28,919, respectively, under the above pension scheme.

• (b) The foreign 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 recognised pension costs of $19,597 and $26,227 for the years ended December 31, 2019 and 2018, respectively.

~44~

(16) Share-based payment

• A. For the years ended December 31, 2019 and 2018, the Group’s share-based payment arrangements were as follows:

==> picture [460 x 31] intentionally omitted <==

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

Quantity Contract Vesting
Type of arrangement Grant date granted period conditions
----- End of picture text -----

Type of arrangement	Grant date	granted	period	conditions
Employee stock options	October 28, 2011	3,000	9.2 years	Note 1
"	March 21, 2012	3,000	8.9 years	Note 1
First time issuance of restricted	November 13, 2015	2,440	3 years	Note 2, Note 3
shares to employees (2015-1)
"	March 18, 2016	1,190	3 years	Note 2, Note 3
"	May 5, 2016	370	3 years	Note 2, Note 3
First time issuance of restricted	August 12, 2019	630	3 years	Note 3, Note 4
shares to employees (2018-1)
First time issuance of restricted	August 12, 2019	820	3 years	Note 3, Note 4
shares to employees (2019-1)
Treasury stock transferred to	March 23,2018	3,433	-	Vested
employees				immediately

• 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 restricted shares were issued at no consideration to the Company’s existing employees whose service years have reached 1 year, 2 years and 3 years and who achieved the performance requirement. The vested ratio is 40%, 30% and 30%, 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 4: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, 2019 and 2018, the information on the share options and the weighted number of average exercise price of compensation plan employee stock options are as follows:

~45~

		For the	year ended	year ended		For the	year ended	year ended
		December 31,2019				December 31,2019
			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 period		1,941	$	30.61		2,453	$	30.62
Option expired	(	240)		-	(	192)		-
Options exercised		-		-	(	320)		30.70
Options outstanding at end
of the period		1,701		29.81		1,941		30.61
Options exercisable at end
of the period		1,701		29.81		1,941		30.61
Approved and not yet
issued options at the end
of the period		-				-

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

• (b) No stock options were exercised during the year ended December 31, 2019. The weightedaverage stock price of stock options at exercise dates for the year ended December 31, 2018 was $31.31.

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

follows:
Issue date approved Expiry date	December	Exercise price (in dollars) (Note) $ 29.90 $ 29.70 31,2019	December	31, 2018
	No. of shares (in thousands) 920 781		No. of shares (in thousands) 1,100 841	Exercise price (in dollars) (Note)
October 28, 2011 December 31, 2020 March 21, 2012 December 31, 2020				$ 30.70 $ 30.50

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

• (d) 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 "	October 28, 2011 March 21, 2012	$ 30.65 27.85	29.90 $ 29.70	30.27% 33.54%	5 years 4.9 years	1.4% 1.4%	1.18% 1.08%	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.

~46~

C. Restricted shares to employees:

• (a)The information on restricted shares to employees is as follows:

		For the year ended		For the year ended
		December 31, 2019		December 31, 2018
		(share in thousands)		(share in thousands)
Shares ungranted beginning balance		715		3,435
Given at period		1,450
Shares granted	(	715)	(	2,592)
Restricted shares forfeited - retired	(	100)	(	128)
Shares ungranted ending balance		1,350		715

• (b) As of December 31, 2019, the Company collected 100 thousand shares of restricted shares because certain employees did not meet the vesting condition, and the change of registration has been completed.

• D. The weighted average exercise price was 27.64 NT dollar of treasury stock transferred to employees for the year ended December 31, 2018.

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

(17)	Provisions Equity-settled At January 1, 2019 Additional provisions Reversed during the period Exchange differences At December 31, 2019 Current Non-current	For the year ended For the year ended December 31, 2019 December 31, 2018 10,271 $ 16,841 $ For the year ended December 31,2019 Warranty 148,493 $ 29,697 35,813) ( 14 142,391 $ December 31,2019 December 31,2018 5,823 $ 35,378 $ 136,568 $ 113,115 $	For the year ended For the year ended December 31, 2019 December 31, 2018 10,271 $ 16,841 $ For the year ended December 31,2019 Warranty 148,493 $ 29,697 35,813) ( 14 142,391 $ December 31,2019 December 31,2018 5,823 $ 35,378 $ 136,568 $ 113,115 $	For the year ended For the year ended December 31, 2019 December 31, 2018 10,271 $ 16,841 $ For the year ended December 31,2019 Warranty 148,493 $ 29,697 35,813) ( 14 142,391 $ December 31,2019 December 31,2018 5,823 $ 35,378 $ 136,568 $ 113,115 $
		$
				35,378 $
				113,115 $

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.

~47~

(18) Share capital

As of December 30, 2019, the Company’s authorized capital was $5,000,000, consisting of 500,000 thousand shares of ordinary stock, and the paid-in capital was $2,753,613 with a par value of $10

(in dollars) per share.

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

		(Expressed in thousands of shares)	(Expressed in thousands of shares)
		2019	2018
At January 1		274,011	270,386
Employee stock options exercised		-	320
Treasury stock sold to employees		-	3,433
Establish employee restricted shares		1,450	-
Retired restricted shares to employees that
did not meet the vesting conditions	(	100)	128) (
At December 31		275,361	274,011

(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.

2019

At January 1 Issuance of restricted shares to employees Employee restricted share granted Retirement of employee restricted shares At December 31	Share Employee stock premium options 1,802,659 $ 49,102 $ - - 11,873 - - - 1,814,532 $ 49,102 $	Difference between consideration and carrying amount of subsidiaries acquired or disposed 1,534 $ - - - 1,534 $	Changes in ownership interests in subsidiaries 395,774 $ - - - 395,774 $	Proceeds from sales of treasury Restricted shares to shares employees Total 1,455 $ 11,873 $ 2,262,397 $ - 19,430 19,430 $ - 11,873) ( - - 1,340) ( 1,340) ( 1,455 $ 18,090 $ 2,280,487 $

~48~

2018

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

(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.

~49~

• (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 2018 and 2017 earnings had been resolved at the stockholders’ meeting on June 13, 2019, and June 15, 2018, respectively. Details are summarized below:

Legal reserve Special reserve Cash dividends	Dividends per share Amount (in NT dollars) 13,057 $ 10,099 137,005 0.5 $ 160,161 $ 2018	Dividends per share Amount (in NT dollars) 1,340 $ 283,124 135,178 0.5 $ 419,642 $ 2017

The appropriation of 2018 and 2017 earnings were the same as that approved by the Board of Directors on March 15, 2019 and March 23, 2018, respectively.

• F. The appropriation of 2019 earnings had been resolved at the stockholders’ meeting on March 20, 2019. Details are summarized below:

2019. Details are summarized below:
Legal reserve Special reserve Cash dividends	2019
	Amount 8,316 $ 156,646 139,794 304,756 $	Dividends per share (in NT dollars)
		0.5 $

Above-mentioned appropriation of 2019 earnings is yet to be resolved by the shareholders.

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

~50~

(21) Other equity items

Other equity items
					2019
					Unrealized
		Foreign currency			losses on				Unearned
			translation		valuation			compensation			Total
At January 1	($		256,833)	($	36,390)		($		1,715)	($	294,938)
Valuation adjustment			-	(	61,600)				-	(		61,600)
Currency translation differences:
-Group	(		237,502)			-			-	(	237,502)
Issuance of restricted shares			-			-	(		33,930)	(		33,930)
to employees
Retirement of restricted shares			-			-			2,340			2,340
to employees
Share-based payment transactions			-			-			10,271			10,271
At December 31	($		494,335)	($	97,990)		($		23,034)	($	615,359)
					2018
					Unrealized
		Foreign currency			losses on				Unearned
			translation		valuation			compensation			Total
At January 1	($		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			-			-			3,440			3,440
to employees
Share-based payment transactions			-			-			14,060			14,060
At December 31	($		256,833)	($	36,390)		($		1,715)	($	294,938)
Operating revenue
			For	the year ended					For the year ended
			December 31,2019						December 31,		2018
Revenue from contracts with customers			$		6,189,352			$	11,193,569

(22) Operating revenue

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:

~51~

(23)	Other income For the year ended December 31,2019 Asia Europe America Taiwan Total Revenue from external customer contracts 3,508,238 $ 1,226,724 $ 1,407,566 $ 46,824 $ 6,189,352 $ Timing of revenue recognition At a point in time 3,415,594 $ 1,226,724 $ 1,407,566 $ 46,824 $ 6,096,708 $ Over time 92,644 - - - 92,644 Total 3,508,238 $ 1,226,724 $ 1,407,566 $ 46,824 $ 6,189,352 $ For the year ended December 31, 2018 Asia Europe America Taiwan Total Revenue from external customer contracts 9,181,159 $ 1,401,530 $ 503,893 $ 106,987 $ 11,193,569 $ Timing of revenue recognition At a point in time 9,173,464 $ 1,401,530 $ 503,893 $ 106,987 $ 11,185,874 $ Over time 7,695 - - - 7,695 Total 9,181,159 $ 1,401,530 $ 503,893 $ 106,987 $ 11,193,569 $ For the year ended For the year ended December 31,2019 December 31,2018 Interest income: Interest income from bank deposits 125,984 $ 122,476 $ Interest income from financial assets at amortised cost 17,989 1,242 Others 26 27 Interest income subtotal 143,999 123,745 Rental revenue 31,479 37,832 Dividend income 763 915 Other income - others 13,603 22,241 Total 189,844 $ 184,733 $	Total 6,189,352 $ 6,096,708 $ 92,644 6,189,352 $ Total
		11,193,569 $
		11,185,874 $ 7,695
		11,193,569 $

~52~

(24) Other gains and losses

Other gains and losses
			For the year ended			For the year ended
		December 31,2019			December 31,2018
Gains (losses) on disposal of property, plant and	$		1,922	($		1,358)
equipment
Net currency exchange gains			5,737			9,606
Net gains on financial assets at fair value
through profit			16,710			20,018
Reversal of impairment loss of investments
accounted for under equity method			649			26,272
Other expenses	(		1,067)	(		4,011)
Total	$		23,951	$		50,527
Finance costs
			For the year ended			For the year ended
		December 31,2019			December 31, 2018
Interest expense :
Bank loan	$		23,774	$		24,050
Lease liabilities			1,170			-
Other			759			1,447
	$		25,703	$		25,497
Expenses by nature
			For the year ended			For the year ended
		December 31, 2019			December 31,2018
Employee benefit expenses	$		1,102,313	$		1,290,984
Depreciation charges on property, plant and
equipment			181,851			212,079
Depreciation charges on investment property			8,234			-
Depreciation charges on right-of-use assets			6,818			6,817
Amortisation charges on intangible assets			29,352			27,878
Employee benefit expenses
			For the year ended			For the year ended
		December 31,2019			December 31,2018
Wages and salaries	$		969,326	$		1,139,385
Labour and health insurance fees			52,122			54,960
Pension costs			48,579			55,236
Other personnel expenses			32,286			41,403
Total	$		1,102,313	$		1,290,984

(25) Finance costs

(26) Expenses by nature

(27) Employee benefit expenses

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

~53~

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.

• B. For the years ended December 31, 2019 and 2018, employees’ compensation was accrued at $16,220 and $29,710, respectively; directors’ remuneration was accrued at $2,163 and $3,961, respectively. The aforementioned amounts were recognised in salary expenses. Employees’ compensation and directors’ remuneration for 2018 amounting to $29,710 and $3,961, respectively, as resolved at the meeting of Board of Directors were in agreement with those amounts recognised in the 2018 financial statements.

Information about employees’ compensation and directors’ 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:

e tax ome tax expense Components of income tax expense:
			For the year ended			For the year ended
		December 31,2019			December 31,2018
Current tax:
Current tax on profits for the period	$		47,675	$		71,130
Charge on unassigned retained earning			4,759			8,337
Tax paid outside of the territory of
the Republic of China			1,026			28,154
Adjustments in respect of prior years	(		22,105)	(		16,782)
Total current tax			31,355			90,839
Deferred tax:
Origination and reversal of
temporary differences			3,920	(		25,870)
Impact of change in tax rate			-			62,901
Total deferred tax			3,920			37,031
Income tax expense	$		35,275	$		127,870

~54~

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

		For the year ended		For the year ended
	December 31, 2019		December 31,2018
Changes in fair value of financial assets at
fair value through other comprehensive
income	($	272)	$	774
Translation differences of foreign operations	(	59,375)	(	6,219)
Benefit obligations revaluation	(	286)		136
Impact of change in tax rate		-		119
	($	59,933)	($	5,190)

B. Reconciliation between income tax expense and accounting profit

Tax calculated based on profit before tax and statutory tax rate Expenses disallowed by tax regulation Tax on undistributed earnings Change in assessment of realisation of deferred tax assets Effect from investment tax credits Loss deducted not recognised as deferred tax assets Prior year income tax overestimation Effect of different tax rates in countries in which the group operates Effect from changes in tax regulation Income tax expense

For the year ended December 31,2019 For the year ended December 31, 2018 33,409 $ 122,645 $ 7,538) ( 41,454) ( 4,759 8,337 4,683 40,981) ( 9,022) ( 12,403) ( 30,063 - 22,105) ( 16,782) ( 1,026 45,607 - 62,901 35,275 127,870

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

~55~

2019

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

~56~

• D. Details of the amount the Company is entitled as investment tax credit and unrecognised deferred tax assets are as follows:

==> picture [452 x 203] intentionally omitted <==

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

December 31, 2019
Unrecognised
Qualifying items Unused tax credits deferred tax assets Expiry year
Research and development $ 14,469 $ 6,418 2020
Research and development 2,840 - 2021
$ 17,309 $ 6,418
December 31, 2018
Unrecognised
Qualifying items Unused tax credits deferred tax assets Expiry year
Research and development $ 12,213 $ 4,281 2019
Research and development 14,348 - 2020
$ 26,561 $ 4,281
----- End of picture text -----

• E. Expiration dates of unused tax losses and amounts of unrecognised deferred tax assets are as follows:

follows:
		December 31, 2019
Year incurred 2018 2019	Amount filed/ assessed		Unused amount	Unrecognised deferred tax assets	Expiry year
	18,382 $ 187,895 206,277 $		14,173 $ 187,895 202,068 $	- $ 150,316 150,316 $	2028 2029

• F. The amounts of deductible temporary difference that are not recognised as deferred tax assets are as follows: None.

• G. The Company’s income tax returns through 2017 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.

~57~

(29) Earnings per share

==> picture [477 x 495] intentionally omitted <==

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

For the year ended December 31, 2019
Weighted average number of
ordinary shares outstanding Earnings per share
Amount after tax (share in thousands) (in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent $ 84,308 273,838 $ 0.31
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent $ 84,308
Assumed conversion of all dilutive
potential ordinary shares
Restricted shares to employees 170
Employees’ bonus 894
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares $ 84,308 274,902 $ 0.31
For the year ended December 31, 2018
Weighted average number of
ordinary shares outstanding Earnings per share
Amount after tax (share in thousands) (in dollars)
Basic earnings per share
Profit attributable to ordinary
shareholders of the parent $ 130,562 270,389 $ 0.48
Diluted earnings per share
Profit attributable to ordinary
shareholders of the parent $ 130,562
Assumed conversion of all dilutive
potential ordinary shares
Restricted shares to employees 1,660
Employees’ bonus 1,228
Profit attributable to ordinary
shareholders of the parent
plus assumed conversion of
all dilutive potential ordinary
shares $ 130,562 273,277 $ 0.48
----- End of picture text -----

(30) Operating leases

Prior to 2018

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

~58~

		December 31,2018
Not more than 1 year	$	28,921
More than 1 year but not more than 5 years		9,640
	$	38,561

• B. The Group leases land, office buildings and company cars for operational needs under noncancellable 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:

follows:
		December 31, 2018
Not more than 1 year	$	8,333
More than 1 year but not more than 5 years		20,810
Over 5 years		15,087
	$	44,230

(31) Supplemental cash flow information

• A. Investing activities with partial cash payments

		For the year ended		For the year ended
		December 31,2019		December 31,2018
Acquisitions of property, plant, and
equipment	$	17,617	$	18,262
Add: Property and equipment and
construction billings payable at
beginning of year		1,229		12,340
Less: Property and equipment and
construction billings payable at end
of year	(	898)	(	1,229)
Cash paid	$	17,948	$	29,373
		For the year ended		For the year ended
		December 31,2019		December 31,2018
Acquisitions of intangible assets	$	84,378	$	4,398
Add: Payable at beginning of year		1,234		4,763
Less: Payable at end of year		-	(	1,234)
Cash paid	$	85,612	$	7,927

~59~

(32) Changes in liabilities from financing activities

Short-term borrowings Short-term notes and bills payable Long-term borrowings Guarantee deposits received Lease liabilities Total At January 1, 2019 1,760,000 $ - $ 600,000 $ 20,470 $ 107,196 $ 2,487,666 $ Changes in cash flow from financing activities 440,000 229,203 600,000) ( 424 7,966) ( 61,661 Impact of changes in foreign exchange rate - - - 568) ( 132) ( 700) ( Changes in other non-cash items - 759 - - 3,707 4,466 At December 31, 2019 2,200,000 $ 229,962 $ - $ 20,326 $ 102,805 $ 2,553,093 $ Short-term borrowings Short-term notes and billspayable Long-term borrowings Guarantee deposits received Total At January 1, 2018 2,021,000 $ 199,797 $ - $ 23,923 $ 2,244,720 $ Changes in cash flow from financing activities 261,000) ( 201,244) ( 600,000 3,209) ( 134,547 Impact of changes in foreign exchange rate - - - 244) ( 244) ( Changes in other non-cash items - 1,447 - - 1,447 At December 31, 2018 1,760,000 $ - $ 600,000 $ 20,470 $ 2,380,470 $	Short-term borrowings Short-term notes and bills payable Long-term borrowings	Guarantee deposits received Lease liabilities Total

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.

(3) Key management compensation

No significant related party transactions. Key management compensation
Salaries and other short-term employee benefits Post-employment benefits Share-based payments Total	For the year ended December 31, 2019 37,151 $ 783 3,019 40,953 $	For the year ended December 31,2018
		32,351 $ 616 4,461
		37,428 $

8. PLEDGED ASSETS

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

Pledged asset	Purpose Long-term borrowings Long-term borrowings	Bookvalue	Bookvalue
		December 31, 2019 745,589 $ 763,733 1,509,322 $	December31,2018 746,621 $ 770,551 1,517,172 $
Land, buildings and structures Investment acquisition

~60~

9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT COMMITMENTS

None.

10. SIGNIFICANT DISASTER LOSS

None.

11. SIGNIFICANT SUBSEQUENT EVENT

• (1) 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. As of January 8, 2020, the case had reached a settlement and a payment of $88,000 (tax included) was received.

• (2) The purchase of treasury shares was approved by the Board of Directors’ resolution dated January 31, 2020 and March 20, 2020,each amounting to 8,000 thousand shares. The former had executed on March 19, 2020. All of the treasury shares will be reissued to employees.

12. OTHERS

(1) Capital 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.

(2) Financial instruments

A. Financial instruments by category

~61~

Financial assets Financial assets measured at fair value through profit or loss Financial assets at fair value through other comprehensive income Financial assets at amortised cost 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 Lease liabilities	December31,2019 40,156 $ 50,644 $ 6,666,055 $ 737,185 - 918,019 42,095 40,466 8,403,820 $ December31,2019 2,200,000 $ 229,962 4,316 1,010,670 424,512 - 20,326 3,889,786 $ 102,805 $	December31,2018
		23,683 $
		114,508 $
		6,495,017 $ 261,288 1,387,222 2,414,775 31,712 38,525
		10,628,539 $
		December 31, 2018
		1,760,000 $ - 1,049,446 1,878,509 415,658 600,000 20,470
		5,724,083 $
		- $

• 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.

• (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

~62~

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 recognised 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.

• 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:

(Foreign currency: functional currency) Financial assets Monetary items USD:NTD USD:RMB Financial liabilities Monetary items USD:NTD USD:RMB		December 31,2019	December 31,2019	December 31,2019	December 31,2019
	Foreign Currency Amount (In thousands) 56,893 USD 61,047 USD 53,500 USD 29,564 USD	Exchange Rate 29.980 6.9762 29.980 6.9762	Book Value (NTD) 1,705,652 $ 1,830,189 1,603,930 $ 886,329	SensitivityAnalysis
				Effect on Extent of Profit or Variation (Loss) 1% 17,057 $ 1% 18,302 1% 16,039) ($ 1% 8,863) (	Effect on Other Comprehensive Income(Loss)
					- $ - - $ -

~63~

December 31, 2018

==> picture [444 x 250] intentionally omitted <==

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

Sensitivity 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) -
----- End of picture text -----

• v. Total exchange gain, including realized and unrealized arising from significant foreign exchange variation on the monetary items held by the Group for the years ended December 31, 2019 and 2018 amounted to $5,737 and $9,606, respectively.

Price risk

• i. The Group’s equity securities, which are exposed to price risk, are the held financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Group.

• ii. The Group’s investments in equity securities comprise shares issued by the domestic companies.The prices of equity securities would change due to the change of the future value of investee companies. If the prices of these equity securities had increased/decreased by 10% with all other variables held constant, post-tax profit for the years ended December 31, 2019 and 2018 would have increased/decreased by $4,016 and $2,368, respectively, as a result of gains/losses on equity securities classified as at fair value through profit or loss. Other components of equity would have increased/decreased by $5,064 and $11,451, respectively, as a result of other comprehensive income classified as equity investment at fair value through other comprehensive income.

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.

~64~

The Group raised short-term and long-term borrowings at fixed rates during the years ended December 31, 2019 and 2018, 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 in accordance with limits set by the Board of Directors. The utilisation of credit limits is regularly monitored.

• iii. The Group measured internal operating procedures, past experience of trading customers, and actual transaction status. If the contract payments were past due over 90 days based on the terms, there has been a significant increase in credit risk on that instrument since initial recognition. If the contract payments were past due over 360 days based on the term, the default has occurred.

• iv. 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.

• v. The Group classifies customers’ accounts receivable and notes receivable in accordance with customer types. The Group applies the simplified approach using loss provision matrix to estimate expected credit loss under the provision matrix basis.

• vi. The Group used the forecastability to adjust historical and timely information to access the default possibility of accounts receivable and notes receivable. On December 31, 2019 and 2018, respectively, the provision matrix is as follows:

~65~

Up to 90 days past due At December 31, 2019 Expected loss rate 0.02%~0.03% Total book value 914,939 $ Loss allowance 189 $ Up to 90 days past due At December 31, 2018 Expected loss rate 0% Total book value 3,775,678 $ Loss allowance - $	91~180 days past due 15%~20% 3,568 $ 535 $ 91~180 days past due	181 to 360 days past due 30%~40% 337 $ 101 $ 181 to 360 days past due	Upto 361 days 100% 4,457 $ 4,457 $ Up to 361 days	Total 923,301 $ 5,282 $ Total 3,817,876 $ 15,879 $
	20% 29,761 $ 4,375 $	50% 6,222 $ 5,289 $	100% 6,215 $ 6,215 $

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

At January 1 Reversal of impairment loss Write-offs Effect of foreign exchange At December 31 At January 1 Adjustment for retrospective application of IFRS 9 Provision for impairment Write-offs Effect of foreign exchange At December 31	Accounts receivable Notes receivable 15,879 $ - $ 9,771) ( - 835) ( - 9 - 5,282 $ - $ 2019 Accounts receivable Notes receivable 8,747 $ - $ - - 7,262 - 33) ( - 97) ( - 15,879 $ - $ 2018	Accounts receivable Notes receivable 15,879 $ - $ 9,771) ( - 835) ( - 9 - 5,282 $ - $ 2019 Accounts receivable Notes receivable 8,747 $ - $ - - 7,262 - 33) ( - 97) ( - 15,879 $ - $ 2018	Accounts receivable Notes receivable 15,879 $ - $ 9,771) ( - 835) ( - 9 - 5,282 $ - $ 2019 Accounts receivable Notes receivable 8,747 $ - $ - - 7,262 - 33) ( - 97) ( - 15,879 $ - $ 2018	Accounts receivable Notes receivable 15,879 $ - $ 9,771) ( - 835) ( - 9 - 5,282 $ - $ 2019 Accounts receivable Notes receivable 8,747 $ - $ - - 7,262 - 33) ( - 97) ( - 15,879 $ - $ 2018
		Accounts receivable
	8,747 $ - 7,262 33) ( 97) ( 15,879 $			- $ - - - - - $

(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

~66~

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 headroom as determined by the above-mentioned forecasts.

iii.The Group has following undrawn borrowing facilities:

	0 December 31, 2019	0 December 31, 2019	December 31, 2018	December 31, 2018
Fixed rate:
Expiring within one year	$	2,814,000	$	3,425,060
Expiring beyond one year		1,200,000		600,000
	$	4,014,000	$	4,025,060

• 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.

December 31, 2019 Non-derivative financial liabilities: Short-term borrowings Short-term notes and bills payable Notes payable Accounts payable Other payables Lease liabilities Guarantee deposits received December 31, 2018 Non-derivative financial liabilities: Short-term borrowings Notes payable Accounts payable Other payables Long-term borrowings (including current portion) Guarantee deposits received	Less than 1year 2,200,000 $ 229,962 4,316 1,010,670 424,512 8,632 - Less than 1year 1,760,000 $ 1,049,446 1,878,509 415,658 - -	Over 1year
		- $ - - - - 112,904 20,326 Over 1year
		- $ - - - 600,000 20,470

(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:

~67~

• 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.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

• 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(10).

• C. The related information of financial and non-financial instruments measured at fair value by level on the basis of the nature, characteristics and risks of the assets and liabilities are as follows:

• (a) The related information of natures of the assets is as follows:

December 31, 2019 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Unlisted stocks Financial assets at fair value through other comprehensive income Unlisted stocks December 31, 2018 Assets Recurring fair value measurements Financial assets at fair value through profit or loss Unlisted stocks Financial assets at fair value through other comprehensive income Unlisted stocks	Level 1 - $ - - $ Level 1 - $ - - $	Level 2 - $ - - $ Level 2 - $ 60,515 60,515 $	Level 3 40,156 $ 50,644 90,800 $ Level 3 23,683 $ 53,993 77,676 $	Total
				40,156 $ 50,644
				90,800 $
				Total
				23,683 $ 114,508
				138,191 $

~68~

• (b) The methods and assumptions the Group used to measure fair value are as follows:

• i.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

  - ii.Except for financial instruments with active markets, the fair value of other financial instruments is measured by using valuation techniques. 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.

• iii.The output of valuation model is an estimated value and the valuation technique may not be able to capture all relevant factors of the Group’s financial and non-financial instruments. Therefore, the estimated value derived using valuation model is adjusted accordingly with additional inputs.

• D. For the years ended December 31, 2019 and 2018, there was no transfer between Level 1 and Level 2.

• E. The following chart is the movement of Level 3 for the years ended December 31, 2019 and 2018:

		Derivative	Derivative	equity
		2019		2018
At January 1	$	77,676	$	61,611
Gains recognised in profit or loss		16,710		16,998
Gains and losses recognised in other comprehensive income	(	1,357)		3,369
Disposals during the period	(	237)		-
Capital reduction in the period		-	(	3,915)
Effect of exchange rate changes	(	1,992)	(	887)
At December 31	$	90,800	$	77,176

• F. For the years ended December 31, 2019 and 2018, there was no transfer of Level 3.

• G. 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.

~69~

• H. 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:

value measurement:
Financial assets at fair value through profit or loss Unlisted shares Financial assets at fair value through comprehensive income Unlisted shares 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, 2019	Valuation technique	Significant unobservable input	Relationship of inputs to fair value
	40,156 $ 50,644 Fair value at December 31, 2018	Market comparable companies Net asset value Valuation technique	Price to earnings ratio multiple, price to book ratio multiple,discount for lack of marketability, control premium Not applicable Significant unobservable input	The higher the multiple and control premium, the higher the fair value Not applicable Relationship of inputs to fair value
	23,683 $ 53,993	Market comparable companies Net asset value	Price to earnings ratio multiple, price to book ratio multiple,discount for lack of marketability, control premium Not applicable	The higher the multiple and control premium, the higher the fair value Not applicable

~70~

13. SUPPLEMENTARY DISCLOSURES

(1) Significant transactions information

• A. Loans to others: Please refer to table 1.

• 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 2.

• 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 3.

• H. Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more: Please refer to table 4.

• 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 5.

(2) Information on investees

Names, locations and other information of investee companies (not including investees in Mainland China): Please refer to table 6.

(3) Information on investments in Mainland China

• A. The related information of investments in Mainland China: Please refer to table 5.

• 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 table 3 ~ table 5.

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 Group evaluates performance based on profit or loss by using sales revenue and operation profit measurements. The accounting policies of the Group's operating segments are the same as the significant accounting policies summarized in Note 4.

~71~

(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)

The amounts provided to the chief operating decision-maker with respect to department assets, liabilities and profit are measured in a manner consistent with that of the financial statements.

(5) Information on products and services

The revenue from external customers are mainly derived from the sales of digital related products and related export and import trade.

(6) Geographical information

Geographical information for the years ended December 31, 2019 and 2018 is as follows:

Asia Europe America Taiwan	Revenue Non-current assets 3,508,238 $ 1,898,765 $ 1,226,724 - 1,407,566 - 46,824 2,286,153 6,189,352 $ 4,184,918 $ Year ended December 31, 2019	Revenue Non-current assets 3,508,238 $ 1,898,765 $ 1,226,724 - 1,407,566 - 46,824 2,286,153 6,189,352 $ 4,184,918 $ Year ended December 31, 2019	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 $ Year ended December 31,2018	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 $ Year ended December 31,2018
	Revenue 3,508,238 $ 1,226,724 1,407,566 46,824 6,189,352 $		Revenue 9,181,159 $ 1,401,530 503,893 106,987 11,193,569 $
				2,068,891 $ - 2,178,147 4,247,038 $

Note: Financial instruments and deferred income tax assets are excluded from Non-current assets.

(7) Major customer information

Major customer information of the Group for the years ended December 31, 2019 and 2018 is as follows:

A

B C D E

Revenue	Revenue
Year ended December 31,2019 2,260,160 $ 1,456,770 824,539 105,865 44,461	Year ended December 31,2018
	2,298,888 $ 1,206,049 2,896 3,037,506 1,182,959

~72~

Altek Corporation and subsidiaries Loans to other Year ended December 31, 2019

Table 1

Expressed in thousands of NTD (Except as otherwise indicated)

NO	Creditor	Borrower	General ledger account	Is a related party	Maximum outstanding balance during the year December 31, 2019	Balance at December 31 Actual amount 2019 drawndown	Balance at December 31 Actual amount 2019 drawndown	Interest rate	Nature of loan	Amount of transactions with the borrower	Reason term financing	Allowance for doubtful accounts Item Value Collateral	Allowance for doubtful accounts Item Value Collateral	Allowance for doubtful accounts Item Value Collateral	Limit on loans granted to a single party （Note)	Ceiling on total loans granted (Note)
													Item	Value
1	Altek Semiconductor (Cayman) Co., Ltd.	Altek Semiconductor Corporation	Other receivables- related party	Yes	104,930 $	104,930 $	104,930 $	0%	Reason for short-term financing	- $	Operational need	- $	Cashier's check	104,930 $	1,146,358 $	1,146,358 $

Note 1: The ”Procrdure for Provision of Loans” policy for loans granted by Altek Semiconductor (Cayman) Co.,Ltd. is as follows: the ceiling on total loans is 100% of the net assets value of lender. For the short-term financing, the ceiling on loans is 40% of the net assets value of lender.

Note 2: If the amount of NTD in this Note relates to foreign currencies, it is converted to NTD at the exchange rate at the end of the financial reporting period.

Table 1

Altek Corporation and subsidiaries

Holding of marketable securities at the end of the period (not including subsidiaries, associates and joint ventures)

December 31, 2019

Table 2

Expressed in thousands of NTD (Except as otherwise indicated)

Securities held by	Marketable securities	Relationship with the securities issuer	General ledger account		As of December31,2019	As of December31,2019
				Number of shares	Bookvalue	Ownership (%)	Fairvalue
Altek Corporation " Altek (Kunshan) Co., Ltd. "	Gianta Co., Ltd. - Common stock Hua-chuang Automobile Information Technical Center Co., Ltd. - Common stock Guangdong Kingding Optical Technology Co., Ltd. CPEC Huachuang Private Equity (Kunshan) Enterprise (Limited Partnership)	Director None None None	Financial assets at fair value through profit or loss - non-current Financial assets measured at fair value through other comprehensive income - non-current " "	762,876 5,660,000 1,200,000 N/A	40,156 $ - 6,540 44,104	14.55% 1.72% 6.45% (Note)	40,156 $ - 6,540 44,104

Note : 1% of CPEC Huachuang Private Equity (Kunshan) Enterprise (Limited Partnership)’s capital contribution.

Table 2

Altek Corporation and subsidiaries

Purchases or sales of goods from or to related parties reaching NT$100 million or 20% of paid-in capital or more

For the year ended December 31, 2019

Table 3

Expressed in thousands of NTD (Except as otherwise indicated)

Purchaser/seller	Counterparty	Relationship with the counterparty		Transaction	Transaction		Differences in transaction terms compared to third party transactions	Differences in transaction terms compared to third party transactions	Notes/accounts receivable(payable)	Notes/accounts receivable(payable)
			Purchases (sales)	Amount	Percentage of total purchases (sales)	Credit term	Unitprice	Credit term	Balance	Percentage of total notes/accounts receivable(payable)
Altek Corporation " Altek International Investment Co., Ltd. Altek International Trading Co., Ltd. Altek Biotechnology Corporation " Altek (Kunshan) Co., Ltd. Altek Semiconductor (Shanghai) Co., Ltd.	Altek International Investment Co., Ltd. Altek International Trading Co., Ltd. Altek (Kunshan) Co., Ltd. " Altek International Investment Co., Ltd. Altek International Trading Co., Ltd. Altek International Trading Co., Ltd. Altek (Kunshan) Co., Ltd.	Parent and affiliated company " " The same ultimate parent company " " " "	Purchases Purchases Purchases Purchases Purchases Purchases Purchases Purchases	1,558,856 $ 1,820,440 2,277,151 2,511,439 683,038 553,885 134,634 133,496	43% 51% 100% 100% 55% 45% 3% 100%	Net 120 days " Net 75 days " " " " "	Approximately the same price with third parties " " " " " " "	Note " " " " " " "	617,867) ($ 610,159) ( 60,290) ( 922,788) ( 3,929) ( 246,582) ( - -	49% 48% 100% 100% 2% 98% 0% 0%

Note: The payment term with third parties was net 60~120 days.

Table 3

Altek Corporation and subsidiaries

Receivables from related parties reaching NT$100 million or 20% of paid-in capital or more

December 31, 2019

Table 4 Creditor	Counterparty	Relationship with the counterparty	Balance as at December31,2019	Turnover rate	Overdue receivables	Overdue receivables	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)	Amount collected subsequent to the balance sheet date Allowance for doubtful accounts Expressed in thousands of NTD (Except as otherwise indicated)
					Amount	Action taken
Altek International Investment Co., Ltd. Altek International Trading Co., Ltd. " Altek (Kunshan) Co., Ltd.	Altek Corporation " Altek Biotechnology Corporation Altek International Trading Co., Ltd.	Parent company " The same ultimate parent company "	617,867 $ 610,159 246,582 922,788	0.86 6.84 5.02 5.74	- $ - - -	N/A N/A N/A N/A	573,945 $ 485,116 224,296 886,209	- $ - - -

Table 4

Altek Corporation and subsidiaries

Significant inter-company transactions during the reporting periods

For the year ended December 31, 2019

Table 5

Expressed in thousands of NTD

(Except as otherwise indicated)

Transaction

					Transaction
Companyname	Counterparty	Relationship (Note 1)	General ledger account	Amount	Transaction terms	Percentage of consolidated total operating revenues or total assets(Note 2)
Altek Corporation " " " Altek International Investment Co., Ltd. " Altek International Trading Co., Ltd. " Altek Semiconductor Corporation " " " " Altek Biotechnology Corporation " " " Altek (Kunshan) Co., Ltd. " Altek Trading (Shanghai) Limited " Altek Semiconductor (Shanghai) Co., Ltd.	Altek International Investment Co., Ltd. " Altek International Trading Co., Ltd. " Altek (Kunshan) Co., Ltd. " " " Altek International Investment Co., Ltd. Altek International Trading Co., Ltd. " " Altek Semiconductor (Shanghai) Co., Ltd. Altek International Investment Co., Ltd. " Altek International Trading Co., Ltd. " Altek International Investment Co., Ltd. Altek International Trading Co., Ltd. Altek (Kunshan) Co., Ltd. " "	(1) (1) (1) (1) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3) (3)	Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Purchases Accounts payable Sales Sales Purchases Accounts receivable Royalty income Purchases Accounts receivable Purchases Accounts receivable Purchases Purchases Purchases Accounts receivable Purchases	1,558,856 $ 617,867 1,820,440 610,159 2,277,151 60,290 2,511,439 922,788 19,023 9,915 6,483 6,239 10,188 683,038 3,929 553,885 246,582 79,817 134,634 73,886 5,807 133,496	Net 120 days " " " Net 75 days " " " " " Net 120 days " Net 75 days " " " " " " " "	25% 4% 29% 4% 37% 0% 41% 7% 0% 0% 0% 0% 0% 11% 0% 9% 2% 1% 2% 1% 0% 2%

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.

Table 5

Altek Corporation and subsidiaries

Information on investees

For the year ended December 31, 2019

Table 6 Investor	Investee	Location	Main business activities	Initial invest	ment amount	Shares he	ld as at December31,2019	ld as at December31,2019	Net profit (loss) of the investee for the year ended December31,2019	Investment income(loss) recognised by the Company for the year ended December31,2019 Expressed in thous (Except as otherw	ands of NTD ise indicated) Footnote
				Balance as at December 31, 2019	Balance as at December 31, 2018	Number of shares	Ownership (%)	Bookvalue
Altek Corporation " " " Altek International Investment Co., Ltd. " " " Altek Semiconductor (Cayman) Co., Ltd. Altek Biotechnology Holding (Cayman) Co., Ltd.	Altek International Investment Co., Ltd. Altek Japan Corporation Altek Investment Co., Ltd. Altek International Holding (BVI) Co, Ltd. Altek Lab Inc. JinJing Optical Technology Co., ltd. Altek Semiconductor (Cayman) Co., Ltd. Altek International Trading Co,. Ltd Altek Semiconductor Corporation Altek Biotechnology Corporation	British Virgin Islands Japan Republic of China British Virgin Islands U.S.A. Samoa Cayman Islands Republic of Seychelles Republic of China Republic of China	Investment Sale of optical optical instruments Investment Investment Design service Investment Investment Investment and general business operations Research design and sales of ASIC Research and development, manufacture and sales of medical electronic equipments	2,882,512 $ 2,869 - 415,376 110,318 - 184,294 89,940 200,000 415,376	2,910,046 $ 2,869 50,000 415,376 110,318 104,930 184,294 - 200,000 415,376	87,769,559 1,000 - 12,865,921 11,311,875 - 20,000,000 3,000,000 20,000,000 40,100,000	100 100 - 100 100 - 50 100 100 100	8,473,120 $ 11,428 - 750,479 62,295 - 572,535 76,415 94,393 678,889	20,013) ($ 18 1) ( 162,061 1,740 51 176,323) ( 13,947) ( 202,165) ( 162,564	20,524) ($ 18 1) ( 162,061 1,740 - 86,852) ( 13,947) ( 101,083) ( 162,564	Note 1 Note 2 Note 4 Note 3

Note 1: The difference between the profit or loss of the investee for the current period and the investment profit or loss recognized in the current period is the unrealized profit and loss adjustments for countercurrent transactions between subsidiaries. Note 2: The dissolution and liquidation of Altek Investment Co., Ltd. was resolved by the Board of Directors on December 17, 2018. Moreover, the liquidation was completed as approved by the court on April 25, 2019. Note 3: Invest and held by Altek Investment International Co,.Ltd at July 2019. Note 4: The dissolution and liquidation of JinJing Optical Technology Co., Ltd. was resolved by the Board of Directors on October 8, 2019. Moreover, the liquidation was completed on October 24, 2019.

Table 6

Altek Corporation and subsidiaries

Information on investments in Mainland China

Table 7

For the year ended December 31, 2019

Expressed in thousands of NTD (Except as otherwise indicated)

Investee in Mainland China	Main business activities	Paid-in capital	Investment method （Note 1）	Accumulated amount of remittance from Taiwan to Mainland China as of January1,2019	Amount remitte Mainland C remitted back the ye Decembe	d from Taiwan to hina/Amount to Taiwan for ar ended r 31,2019	Accumulated amount of remittance from Taiwan toMainland China as of December 31,2019	Net profit (loss) of investee for the year ended December 31,2019	Ownership held by the Company (direct or indirect)	Investment income (loss) recognised by the Company for the year ended December 31,2019	Book value of investments in Mainland China as of December 31,2019	Accumulated amount of investment income remitted back to Taiwan as of December 31,2019
					Remitted to Mainland China	Remitted back to Taiwan
Altek (Kunshan) Co., Ltd. (Note 2) Altek EMS (Kunshan) Co., Ltd. (Note 3) Altek Trading (Shanghai) Limited Altek Precision (Kunshan) Co., Ltd. Altek Optical Technology (Kunshan) Co., Ltd. Altek Semiconductor (Shanghai) Co., Ltd. Note 1: Investment metho (1)Directly invest (2)Through invest (3)Others. Note 2: Including retaine Note 3: Including retaine	Manufacture and sale of digital still cameras and its accessories Manufacture and sale of related engineering services Wholesale, import and export of digital cameras, digital video cameras and their associated accessories Design, manufacture and sales of digital camera parts Manufacture and sales of digital camera and its accessories and optical components Research design and sales of imaging technologies, electronic software and hardware ds are classified into the following in a company in Mainland China. ing in an existing company in the t d earnings capitalized of US$4,600 d earnings capitalized of US$3,600 Companyname	1,487,008 $ 149,900 254,830 413,724 335,776 44,970 three categories; fil hird area,which then (In thousand of US (In thousand of US	2 2 2 2 2 2 l in the numbe investeed in t dollars). dollars).	1,349,100 $ 272,308 254,830 413,724 335,776 - r of category each case belongs to he investee in Mainland China. Accumulated amount of remittan Mainland China as of Dece	- $ - - - - - : ce from Taiwan to mber 31,2019	- $ - - - - - Invest Commissio	1,349,100 $ 272,308 254,830 413,724 335,776 - ment amount approved by the Inv n of the Ministryof Economic Af	58,162 $ 19,639 10,921 2,670 1,668) ( 6,507 estment fairs(MOEA)	100 100 100 100 100 50	58,162 $ 19,639 10,921 2,670 1,668) ( 3,254 Ceiling on investments in bythe Investment C	3,922,488 $ 757,627 296,538 146,845 6,036 125,456 Mainland China imposed ommission of MOEA	- $ - - - - -
Altek Corporation			$		2,625,738	$		2,898,916	$			-

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.

Table 7