ANDERSON — Audit Report / Information 2018

Nov 12, 2018

Anderson Industrial Corporation and Subsidiaries

Consolidated Financial Statements for the Years Ended December 31, 2018 and 2017 and Independent Auditors’ Report

DECLARATION OF CONSOLIDATION OF FINANCIAL STATEMENTS OF AFFILIATES

The entities that are required to be included in the consolidated financial statements of Anderson Industrial Corporation as of and for the year ended December 31, 2018, under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the International Financial Reporting Standards No. 10 “Consolidated Financial Statements”. In addition, the information required to be disclosed in the consolidated financial statements is included in the consolidated financial statements. Consequently, Anderson Industrial Corporation and subsidiaries do not prepare a separate set of consolidated financial statements.

Very truly yours,

ANDERSON INDUSTRIAL CORPORATION

By

WEN JIA LIAO Chairman March 11, 2019

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders Anderson Industrial Corporation

Opinion

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

In our opinion, based on our audits and the report of other auditors (refer to the Other Matter paragraph), the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

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

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 for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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Key audit matters for the Group’s consolidated financial statements for the year ended December 31, 2018 are stated as follows:

Inventory Provision

As of December 31, 2018, the balance of inventory held by the Group was $1,755,292 thousand, which was a significant amount and represented 30% of total assets. Because an assessment of the net realizable value of inventory involves the Group’s significant judgement based on IAS 2 “Inventory”, we believe that inventory provision is one of key audit matters. Refer to Notes 5 and 9 to the consolidated financial statements.

Our primary audit procedures in respect of this area included understanding the appropriateness of inventory provisioning policy, assessing the reasonableness of net realizable value by performing tests of samples of sales, reviewing and implementing year-end inventory count, assessing the condition of the inventory and recalculating the amount of inventory provision.

Estimated Impairment of Accounts Receivable

As of December 31, 2018, the balance of accounts receivable held by the Group was $1,217,149 thousand, which was a significant amount and represented 21% of total assets. The management applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected credit losses for all accounts receivables. The expected credit losses on accounts receivables are estimated by considering past default experience of the debtor, an analysis of the debtor’s current financial position and an assessment of both the current as well as the forecast direction of economic conditions at the reporting date. The evaluation of accounts receivable provision for loss, credit risk and appropriateness of provisioning policy involves significant judgment; therefore, we believe that the estimated impairment of accounts receivable is a key audit matter. Refer to Notes 5 and 8 to the consolidated financial statements.

Our primary audit procedures in respect of this area included assessing the appropriateness of accounts receivable provisioning policy, testing the validity of the aging reports, analyzing circumstances of accounts receivable movements and significant past due accounts receivable, assessing the reasonableness of individual accounts receivable impairment, confirming whether there is any sign of impairment or not at the end of the year. Recoverability was also tested by vouching cash receipts after the year end.

Other Matter

Among the subsidiaries included in the consolidated financial statements of the Group, the financial statements of Sogotec Enterprise Co., Ltd. (Sogotec) are audited by other independent auditors. Our opinion expressed in the opinion section of this report, insofar as it relates to the amounts recognized based on financial statements audited by other auditors, is based solely on the reports of other auditors. As of December 31, 2018, Sogotec’s total assets amounted to $1,323,494 thousand, constituting 23% of consolidated total assets of the Group, and the total operating revenue amounted to $1,104,986 thousand, representing 23% of the consolidated total comprehensive income of the Group.

We have also audited the parent company only financial statements of the Group as of and for the years ended December 31, 2018 and 2017 on which we have issued an unmodified opinion with another matter paragraph and an unmodified opinion, respectively.

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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 IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, 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, including the supervisors, are responsible for overseeing the Group’s financial reporting process.

Auditors’ 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 auditors’ 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 the auditing standards generally accepted in the Republic of China 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 the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

1. 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.

2. 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.

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

4. 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 auditors’ 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 auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

5. 4 -

6. 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.

7. Obtain sufficient and appropriate audit evidence regarding the financial information of 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.

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 for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ 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.

The engagement partners on the audit resulting in this independent auditors’ report are Wen Chin Lin and Li Wen Kuo.

Deloitte & Touche Taipei, Taiwan Republic of China March 11, 2019

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements shall prevail.

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ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

ASSETS CURRENT ASSETS Cash and cash equivalents (Notes 4 and 6) Financial assets at fair value through profit or loss - current (Notes 4 and 7) Available-for-sale financial assets - current (Note 4) Financial assets at amortized cost - current (Notes 4 and 26) Debt investments with no active market - current (Note 4) Notes receivable, net (Notes 4 and 8) Accounts receivable, net (Notes 4, 8 and 26) Other receivables (Notes 4 and 26) Current tax assets (Note 4) Inventories (Notes 4 and 9) Prepayments Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through other comprehensive income - non-current (Notes 4 and 26) Financial assets at amortized cost - non-current (Notes 4 and 26) Financial assets measured at cost - non-current (Note 4) Investments accounted for using the equity method Property, plant and equipment (Notes 4, 11 and 26) Intangible assets (Notes 4 and 12) Deferred tax assets (Notes 4 and 19) Other non-current assets (Note 26) Total non-current assets TOTAL LIABILITIES AND EQUITY CURRENT LIABILITIES Short-term borrowings (Notes 13 and 26) Contract liabilities - current (Notes 4 and 17) Notes payable Accounts payable (Note 25) Other payables (Note 14) Current tax liabilities (Note 4) Provisions - current (Note 4) Current portion of long-term borrowings (Notes 13 and 26) Other current liabilities (Note 14) Total current liabilities NON-CURRENT LIABILITIES Long-term borrowings (Notes 13 and 26) Deferred tax liabilities (Notes 4 and 19) Net defined benefit liabilities (Notes 4 and 15) Other non-current liabilities Total non-current liabilities Total liabilities EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY (Note 16) Share capital Common stock Capital surplus Retained earnings Legal reserve Special reserve Unappropriated earnings Total retained earnings Other equity Exchange differences on translating the financial statements of foreign operations Unrealized gain (loss) on financial assets at fair value through other comprehensive income Unrealized gain (loss) on available-for-sale financial assets Total other equity Treasury shares NON-CONTROLLING INTERESTS Total equity TOTAL		2018 Amount % $ 607,901 10 214,242 4 - - 60,696 1 - - 189,090 3 1,217,149 21 161,487 3 6,691 - 1,755,292 30 129,781 2 25,398 1 4,367,727 75 27,549 1 17,006 - - - 8,561 - 1,142,940 20 140,371 2 81,722 1 65,532 1 1,483,681 25 $ 5,851,408 100 $ 1,349,667 23 363,535 6 2,465 - 353,028 6 310,363 6 42,166 1 53,866 1 246,061 4 13,002 - 2,734,153 47 396,481 7 1,872 - 62,226 1 31,787 - 492,366 8 3,226,519 55 1,998,810 34 369,134 6 182,567 3 58,067 1 48,762 1 289,396 5 (75,980) (1) 802 - - - (75,178) (1) (4,914) - 47,641 1 2,624,889 45 $ 5,851,408 100		2017
				Amount % $ 706,962 12 187,165 3 32,370 1 - - 39,843 1 196,636 3 1,133,990 20 55,071 1 266 - 1,712,962 30 145,603 3 19,203 - 4,230,071 74 - - - - 26,747 1 - - 1,161,333 20 145,840 3 55,464 1 63,384 1 1,452,768 26 $ 5,682,839 100 $ 1,131,729 20 - - 2,455 - 580,300 10 323,870 6 23,392 - 42,372 1 391,476 7 394,768 7 2,890,362 51 373,943 7 6,352 - 71,349 1 19,304 - 470,948 8 3,361,310 59 1,800,000 32 266,674 5 172,915 3 50,624 1 103,198 2 326,737 6 (55,000) (1) - - (3,067) - (58,067) (1) (34,972) (1) 21,157 - 2,321,529 41 $ 5,682,839 100

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

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ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

OPERATING REVENUE (Notes 4, 17 and 30) OPERATING COSTS (Notes 9, 18 and 25) GROSS PROFIT OPERATING EXPENSES (Notes 4 and 18) Selling and marketing expenses General and administrative expenses Research and development expenses Expected credit loss Total operating expenses PROFIT FROM OPERATIONS NON-OPERATING INCOME AND EXPENSES (Notes 4 and 18) Other income Other gains and losses (Note 12) Finance costs Share of loss of associates accounted for using the equity method Total non-operating income and expenses PROFIT BEFORE INCOME TAX INCOME TAX EXPENSE (Notes 4 and 19) NET PROFIT FOR THE YEAR OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified subsequently to profit or loss: Remeasurement of defined benefit plans Unrealized gain on investments in equity instruments at fair value through other comprehensive income Income tax expense relating to items that will not be reclassified subsequently (Note 19)		2018 Amount % $ 4,905,234 100 3,612,668 74 1,292,566 26 587,080 12 530,545 11 81,786 1 7,527 - 1,206,938 24 85,628 2 42,110 1 (22,738) (1) (38,082) (1) (1,973) - (20,683) (1) 64,945 1 (24,757) - 40,188 1 6,290 - 1,229 - (1,284) -		2017
				Amount % $ 4,465,134 100 3,129,136 70 1,335,998 30 625,764 14 518,583 11 79,029 2 - - 1,223,376 27 112,622 3 60,689 1 (18,792) - (30,912) (1) - - 10,985 - 123,607 3 (28,672) (1) 94,935 2 1,948 - - - (329) - (Continued)

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ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Items that may be reclassified subsequently to profit or loss: Exchange differences on translating the financial statements of foreign operations Unrealized gain on available-for-sale financial assets Other comprehensive loss for the year, net of income tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR NET PROFIT (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the Company Non-controlling interests EARNINGS PER SHARE (Note 20) Basic Diluted		2018 Amount % $ (20,290) - - - (14,055) - $ 26,133 1 $ 40,977 1 (789) - $ 40,188 1 $ 26,247 1 (114) - $ 26,133 1 $ 0.22 $ 0.22		2017
				Amount % $ (11,677) - 3,984 - (6,074) - $ 88,861 2 $ 96,521 2 (1,586) - $ 94,935 2 $ 90,697 2 (1,836) - $ 88,861 2 $ 0.55 $ 0.55
		$		$
		$		$
		$		$
		$		$
		$		$

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

(Concluded)

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ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Except Per Share Amounts)

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Equity Attributable to Owners of the Company
Other Equity
Exchange Unrealized Gain
Differences on (Loss) on Financial
Translating the Assets at Fair
Financial Value Through Unrealized Gain
Retained Earnings Statements of Other (Loss) on
Unappropriated Foreign Comprehensive Available-for-sale Non-controlling
Common Stock Capital Surplus Legal Reserve Special Reserve Earnings Operations Income Financial Assets Treasury Shares Interests Total Equity
BALANCE AT JANUARY 1, 2017 $ 1,800,000 $ 319,573 $ 163,053 $ - $ 100,810 $ (43,573 ) $ - $ (7,051 ) $ (34,972 ) $ 22,993 $ 2,320,833
Appropriation of 2016 earnings
Legal reserve - - 9,862 - (9,862 ) - - - - - -
Special reserve - - - 50,624 (50,624 ) - - - - - -
Cash dividends distributed by the Company - NT$0.2 per share - - - - (35,266 ) - - - - - (35,266 )
Cash dividends distributed from capital surplus - (52,899 ) - - - - - - - - (52,899 )
Net profit for the year ended December 31, 2017 - - - - 96,521 - - - - (1,586 ) 94,935
Other comprehensive income (loss) for the year ended December 31, 2017 - - - - 1,619 (11,427 ) - 3,984 - (250 ) (6,074 )
Total comprehensive income (loss) for the year ended December 31, 2017 - - - - 98,140 (11,427 ) - 3,984 - (1,836 ) 88,861
BALANCE AT DECEMBER 31, 2017 1,800,000 266,674 172,915 50,624 103,198 (55,000 ) - (3,067 ) (34,972 ) 21,157 2,321,529
Effect of retrospective application and retrospective restatement - - - - (2,684 ) - (383 ) 3,067 - - -
ADJUSTED BALANCE, JANUARY 1, 2018 1,800,000 266,674 172,915 50,624 100,514 (55,000 ) (383 ) - (34,972 ) 21,157 2,321,529
Appropriation of 2017 earnings
Legal reserve - - 9,652 - (9,652 ) - - - - - -
Special reserve - - - 7,443 (7,443 ) - - - - - -
Cash dividends distributed by the Company - NT$0.45 per share - - - - (80,699 ) - - - - - (80,699 )
Cash dividends distributed from capital surplus - (8,967 ) - - - - - - - - (8,967 )
Net profit for the year ended December 31, 2018 - - - - 40,977 - - - - (789 ) 40,188
Other comprehensive income (loss) for the year ended December 31, 2018 - - - - 5,021 (20,980 ) 1,229 - - 675 (14,055 )
Total comprehensive income (loss) for the year ended December 31, 2018 - - - - 45,998 (20,980 ) 1,229 - - (114 ) 26,133
Issuance of ordinary shares for cash 200,000 60,000 - - - - - - - - 260,000
Disposals of treasury shares - - - - - - - - 28,950 - 28,950
Cancellation of treasury shares (1,190 ) 82 - - - - - - 1,108 - -
Actual disposals of interests in subsidiaries - 12,201 - - - - - - - 9,358 21,559
Changes in percentage of ownership interests in subsidiaries - 32,794 - - - - - - - 36,710 69,504
Share-based payment - 6,350 - - - - - - - - 6,350
Decreases in non-controlling interests - - - - - - - - - (15,942 ) (15,942 )
Cash dividends paid to non-controlling interests of subsidiaries - - - - - - - - - (3,528 ) (3,528 )
Disposals of investments in equity instruments designated as at fair value
through other comprehensive income - - - - 44 - (44 ) - - - -
BALANCE AT DECEMBER 31, 2018 $ 1,998,810 $ 369,134 $ 182,567 $ 58,067 $ 48,762 $ (75,980 ) $ 802 $ - $ (4,914 ) $ 47,641 $ 2,624,889
The accompanying notes are an integral part of the consolidated financial statements.
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ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for: Depreciation expenses Amortization expenses Expected credit loss recognized on accounts receivables Impairment loss recognized on accounts receivable Finance costs Interest income Compensation costs of employee share options Share of loss of investments accounted for using the equity method Loss (gain) on disposal of property, plant and equipment Loss on disposal of available-for-sale financial assets Impairment losses recognized on intangible assets (Reversal of write-downs) write-downs of inventories (Gain) loss on foreign currency exchange Gain on disposal of subsidiaries Changes in operating assets and liabilities Financial assets held for trading Financial assets mandatorily classified as at fair value through profit or loss Notes receivable Accounts receivable Other receivables Inventories Prepayments Other current assets Contract liabilities Notes payable Accounts payable Other payables Provisions Other liabilities Net defined benefit liabilities Cash used in operations Interest received Interest paid Income tax paid Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of financial assets at fair value through other comprehensive income Purchase of financial assets at amortized cost	2018 $ 64,945 97,430 15,027 7,527 - 38,082 (2,470) 6,350 1,973 1,452 - 10,000 (5,867) (3,800) (1,233) - (12,030) 7,546 (97,410) (106,430) (72,073) 244 (6,288) 9,243 10 (223,846) (12,256) 11,494 (23,802) (2,818) (299,000) 2,484 (38,216) (44,430) (379,162) 13,673 (37,859)	2017 $ 123,607 96,443 9,379 - 17,633 30,912 (6,931) - - (511) 984 - 38,243 10,904 - (122,527) - (14,564) (25,847) 17,917 (543,557) (68,716) (4,985) - (2,167) 191,433 79,383 1,536 (24,431) (872) (196,734) 6,937 (30,388) (24,399) (244,584) - - (Continued)

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ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars)

Purchase of available-for-sale financial assets Proceeds from sale of available-for-sale financial assets Purchase of debt investment with no active market Net cash outflow on disposal of subsidiaries Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment (Increase) decrease in refundable deposits Payments for intangible assets Proceeds from disposal of intangible assets Decrease (increase) in non-current assets Decrease (increase) in prepayments for equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Increase in short-term borrowings Proceeds from long-term borrowings Repayment of long-term borrowings Increase in guarantee deposits Increase in other non-current liabilities Cash dividends paid Proceeds from issuance of ordinary shares Proceeds from disposals of treasury shares Disposals of interests in subsidiaries Dividends paid to non-controlling interests Change in non-controlling interests Net cash generated from financing activities EFFECTS OF EXCHANGE RATE CHANGES ON THE BALANCE OF CASH HELD IN FOREIGN CURRENCIES NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR	2018 $ - - - (4,378) (88,446) 3,596 (4,721) (3,397) 80 4,469 8,355 (108,628) 217,938 304,960 (428,331) 11,221 1,262 (89,666) 260,000 28,950 21,559 (3,528) 64,559 388,924 (195) (99,061) 706,962 $ 607,901	2017 $ (59,772) 185,128 (13,875) - (200,769) 1,459 3,914 (16,196) - (1,669) (15,446) (117,226) 502,384 335,534 (226,414) 8,715 4,867 (88,165) - - - - - 536,921 (5,147) 169,964 536,998 $ 706,962

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

(Concluded)

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ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. GENERAL INFORMATION

Anderson Industrial Corporation (the “Company”) was incorporated in the Republic of China (ROC) in July 1972. The Company is mainly engaged in the design, manufacture, sale and import and export of computer numerical control (CNC) machinery, tooling, lumber, wood panels, and building materials.

Since October 11, 2000, the Company’s shares have been listed on the Taiwan Stock Exchange (TWSE).

The consolidated financial statements are presented in the Company’s functional currency, New Taiwan dollars.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the Company’s board of directors on March 11, 2019.

3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS, AMENDMENTS AND INTERPRETATIONS

• a. Application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC) and Interpretations of IAS (SIC) (collectively, the “IFRSs”) endorsed and issued into effect by the Financial Supervisory Commission (the “FSC”).

Except for the following, whenever applied, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC would not have any material impact on the Group’s accounting policies:

1) IFRS 9 “Financial Instruments” and related amendments

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets

On the basis of the facts and circumstances that existed as of January 1, 2018, the Group has performed an assessment of the classification of recognized financial assets and has elected not to restate prior reporting periods.

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The following table shows the original measurement categories and carrying amount under IAS 39 and the new measurement categories and carrying amount under IFRS 9 for each class of the Group’s financial assets as of January 1, 2018.

		Measurement Category	Measurement Category	Measurement Category	Measurement Category					Carrying Amount	Carrying Amount	Carrying Amount	Carrying Amount
Financial Assets		IAS 39			IFRS	9			IAS 39			IFRS 9			Remark
Cash and cash equivalents	Loans and receivables				Amortized cost			$		706,962 $			706,962		-
Equity securities	Available‑for‑sale				Fair value through other					13,246			13,246		a)
					comprehensive income
					(“FVTOCI”)	- equity
					instrument - current
	Financial assets measured				FVTOCI - equity					26,747			26,747		a)
		at cost - non-current			instruments - non-
					current
Beneficiary certificates	Available‑for‑sale				Mandatorily at fair value					19,124			19,124		b)
					through profit or loss
					(“FVTPL”)
Time deposits with original	Loans and receivables				Amortized cost					39,843			39,843		c)
maturities of more than 3
months
Notes receivable, accounts	Loans and receivables				Amortized cost				1,385,697				1,385,697		d)
receivable and other
receivables
		IAS 39					IFRS 9		Retained				Other
		Carrying				Carrying			Earnings				Equity
		Amount as of			Amount as of				Effect on			Effect on
		January 1,		Reclassifi-		January 1,			January		1,	January		1,
Financial Assets		2018			cations		2018			2018			2018		Remark
Financial assets at FVTPL		$ 187,165		$	-	$	187,165		$		-	$		-
Add: Reclassification from
available-for-sale (IAS 39)
Required reclassification			-		19,124		19,124			(2,684 )			2,684		b)
		187,165			19,124		206,289			(2,684)			2,684
Financial assets at FVTOCI
Equity instruments
Add: Reclassification from			-		13,246		13,246				-			-	a)
available-for-sale (IAS 39)
Financial assets at FVTOCI -
non-current
Equity instruments
Add: Reclassification from financial			-		26,747		26,747				-			-	a)
assets measured at cost -
non-current (IAS 39)
Financial assets at amortized cost
Add: Reclassification from loans		and	-		39,843		39,843				-			-	c)
receivables (IAS 39)
		$ 187,165		$	98,960	$	286,125		$	(2,684)		$	2,684

• a) The Group elected to designate all its investments in equity securities previously classified as available-for-sale under IAS 39 as at FVTOCI under IFRS 9, because these investments are not held for trading. As a result, the related other equity - unrealized loss on available-for-sale financial assets of $383 thousand was reclassified to other equity - unrealized loss on financial assets at FVTOCI.

Investments in unlisted shares previously measured at cost under IAS 39 have been designated as at FVTOCI under IFRS 9 and were remeasured at fair value.

• 13 -

• b) Beneficiary certificates previously classified as available-for-sale under IAS 39 were classified mandatorily as at FVTPL under IFRS 9, because the contractual cash flows are not solely payments of principal and interest on the principal outstanding and they are not equity instruments. The retrospective adjustment resulted in an increase of $2,684 thousand in other equity - unrealized gain on available-for-sale financial assets and a decrease of $2,684 thousand in retained earnings on January 1, 2018.

• c) Debt investments previously classified as debt investments with no active market and measured at amortized cost under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9, because on January 1, 2018, the contractual cash flows were solely payments of principal and interest on the principal outstanding and these investments were held within a business model whose objective is to collect contractual cash flows.

• d) Notes receivable, accounts receivable and other receivables that were previously classified as loans and receivables under IAS 39 were classified as at amortized cost with an assessment of expected credit losses under IFRS 9.

• 2) IFRS 15 “Revenue from Contracts with Customers” and related amendments

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers and supersedes IAS 18 “Revenue”, IAS 11 “Construction Contracts” and a number of revenue-related interpretations. Refer to Note 4 for related accounting policies.

Under IFRS 15, the net effect of revenue recognized and consideration received and receivable is recognized as a contract asset or a contract liability. Prior to the application of IFRS 15, receivables were recognized or deferred revenue was reduced when revenue was recognized for the relevant contract under IAS 18. Therefore, the other current liabilities of $354,292 thousand prior to restatement is reclassified as contract liabilities.

• b. Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed by the FSC for application starting from 2019

New, Amended or Revised Standards and Interpretations (the“New IFRSs”) Annual Improvements to IFRSs 2015-2017 Cycle Amendments to IFRS 9 “Prepayment Features with Negative Compensation” IFRS 16 “Leases” Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement” Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures” IFRIC 23 “Uncertainty over Income Tax Treatments”	Effective Date Announced by IASB (Note 1)
	January 1, 2019 January 1, 2019 (Note 2) January 1, 2019 January 1, 2019 (Note 3) January 1, 2019 January 1, 2019

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The FSC permits the election for early adoption of the amendments starting from 2018.

• Note 3: The Group shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

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IFRS 16 “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a Lease”, and a number of related interpretations.

Definition of a lease

Upon initial application of IFRS 16, the Group will elect to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 will not be reassessed and will be accounted for in accordance with the transitional provisions under IFRS 16.

The Group as lessee

Upon initial application of IFRS 16, the Group will recognize right-of-use assets, or investment properties if the right-of-use assets meet the definition of investment properties, and lease liabilities for all leases on the consolidated balance sheets except for those whose payments under low-value asset and short-term leases will be recognized as expenses on a straight-line basis. On the consolidated statements of comprehensive income, the Group will present the depreciation expense charged on right-of-use assets separately from the interest expense accrued on lease liabilities; interest is computed using the effective interest method. On the consolidated statements of cash flows, cash payments for the principal portion of lease liabilities will be classified within financing activities; cash payments for the interest portion will be classified within operating activities. Prior to the application of IFRS 16, payments under operating lease contracts are recognized as expenses on a straight-line basis. Prepaid lease payments for land use rights of land located in China are recognized as prepayments for leases. The difference between the actual payments and the expenses, as adjusted for lease incentives, is recognized as prepayments for leases. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

The Group anticipates applying IFRS 16 retrospectively with the cumulative effect of the initial application of this standard recognized on January 1, 2019. Comparative information will not be restated.

Lease liabilities will be recognized on January 1, 2019 for leases currently classified as operating leases with the application of IAS 17. Lease liabilities will be measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate on January 1, 2019. Right-of-use assets will be measured at the amount equal to the lease liabilities. The Group will apply IAS 36 to all right-of-use assets.

For leases currently classified as finance leases under IAS 17, the carrying amounts of right-of-use assets and lease liabilities on January 1, 2019 will be determined as at the carrying amounts of the respective leased assets and finance lease payables as of December 31, 2018.

The Group expects to apply a single discount rate to measure lease liabilities.

The Group as lessor

Except for sublease transactions, the Group will not make any adjustments for leases in which it is a lessor and will account for those leases with the application of IFRS 16 starting from January 1, 2019.

The Group subleased its leasehold to a third party. Such sublease is classified as an operating lease under IAS 17. The Group will assess the sublease classification on the basis of the remaining contractual terms and conditions of the head lease and sublease on January 1, 2019.

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The Group will evaluate the lease contracts belonging to lessees in accordance with IFRS 16, and will not restate prior year financial statements. As for January 1, 2019, the right-of-use assets and lease liabilities might increase by $52,844 thousand.

Except for the above impact, as of the date the consolidated financial statements were authorized for issue, the Group had assessed that the application of other standards and interpretations would not have significant impacts on the Group’s financial position and financial performance.

• c. New IFRSs in issue but not yet endorsed and issued into effect by the FSC

New IFRSs Amendments to IFRS 3 “Definition of a Business” Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor and Its Associate or Joint Venture” IFRS 17 “Insurance Contracts” Amendments to IAS 1 and IAS 8 “Definition of Material”	Effective Date Announced by IASB (Note 1)
	January 1, 2020 (Note 2) To be determined by IASB January 1, 2021 January 1, 2020 (Note 3)

• Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

• Note 2: The Group shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

• Note 3: The Group shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

As of the date the consolidated financial statements were authorized for issue, the Group is continuously assessing the possible impact that the application of other standards and interpretations will have on the Group’s financial position and financial performance and will disclose the relevant impact when the assessment is completed.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• a. Statement of compliance

The consolidated financial statements have been prepared in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IFRSs as endorsed and issued into effect by the FSC.

• b. Basis of preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments which are measured at fair value and net defined benefit liabilities which are measured at the present value of the defined benefit obligation less the fair value of plan assets.

The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as follows:

• 1) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

• 16 -

• 2) Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• 3) Level 3 inputs are unobservable inputs for the asset or liability.

• c. Classification of current and non-current assets and liabilities

Current assets include:

• 1) Assets held primarily for the purpose of trading;

• 2) Assets expected to be realized within twelve months after the reporting period; and

• 3) Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.

Current liabilities include:

• 1) Liabilities held primarily for the purpose of trading;

• 2) Liabilities due to be settled within twelve months after the reporting period, even if an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting period and before the consolidated financial statements are authorized for issue; and

• 3) Liabilities for which the Group does not have an unconditional right to defer settlement for at least twelve months after the reporting period. 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.

Assets and liabilities that are not classified as current are classified as non-current.

• d. Basis of consolidation

• Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (i.e. its subsidiaries).

Income and expenses of subsidiaries acquired or disposed of during the period are included in the consolidated statement of profit or loss and other comprehensive income from the effective dates of acquisitions up to the effective dates of disposals, as appropriate.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

• 17 -

The fair value of investment retained in a former subsidiary at the date when control is lost is regarded as the fair value of the cost on initial recognition of an investment in an associate.

See Note 10 and Tables 7 and 8 for the detailed information of subsidiaries (including the percentage of ownership and main business).

e. Foreign currencies

In preparing the financial statements of each individual Group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Exchange differences on monetary items arising from settlement or translation are recognized in profit or loss in the period.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising from the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purpose of presenting consolidated financial statements, the functional currencies of the Group entities (including subsidiaries in other countries that use currency different from the currency of the Company) are translated into the presentation currency - New Taiwan dollars as follows: Assets and liabilities are translated at the exchange rates prevailing at the end of the reporting period; income and expense items are translated at the average exchange rates for the period. The resulting currency translation differences are recognized in other comprehensive income (attributed to the owners of the Company and non-controlling interests as appropriate).

Goodwill and fair value adjustments on identifiable assets and liabilities acquired in the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in other comprehensive income.

f. Inventories

Inventories, which comprise finished goods, work-in-process, raw materials and merchandise, are stated at the lower of cost or net realizable value. Inventory write-downs are made by item, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale. Inventories are recorded at weighted-average cost.

g. Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment loss.

Freehold land is not depreciated.

• 18 -

Depreciation on property, plant and equipment is recognized using the straight-line method. Each significant part is depreciated separately. If the lease term is shorter than the useful lives, assets are depreciated over the lease term. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

On derecognition of an item of property, plant and equipment, the difference between the sales proceeds and the carrying amount of the asset is recognized in profit or loss.

• h. Goodwill

Goodwill arising from the acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment loss.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units or groups of cash-generating units (referred to as cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired, by comparing its carrying amount, including the attributed goodwill, with its recoverable amount. However, if the goodwill allocated to a cash-generating unit was acquired in a business combination during the current annual period, that unit shall be tested for impairment before the end of the current annual period. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognized directly in profit or loss. An impairment loss recognized on goodwill is not reversed in subsequent periods.

i. Intangible assets

1) Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis. The estimated useful lives, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are measured at cost less accumulated impairment loss.

• 2) Intangible assets acquired in a business combination

Intangible assets acquired in a business combination and recognized separately from goodwill are initially recognized at their fair value at the acquisition date (which is regarded as their cost). Subsequent to initial recognition, they are measured on the same basis as intangible assets that are acquired separately.

• 3) Derecognition of intangible assets

On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the asset is recognized in profit or loss.

• 19 -

• j. Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Corporate assets are allocated to the individual cash-generating units on a reasonable and consistent basis of allocation.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the assets may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.

When an impairment loss is subsequently reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized in profit or loss.

• k. Financial instruments

Financial assets and financial liabilities are recognized when a Group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at FVTPL are recognized immediately in profit or loss.

• 1) Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.

• a) Measurement categories

2018

Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized cost and investments in equity instruments at FVTOCI.

• i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when such a financial asset is mandatorily classified or designated as at FVTPL. Financial assets mandatorily classified as at FVTPL include investments in equity instruments which are not designated as at FVTOCI and debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria.

• 20 -

Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on such a financial asset. Fair value is determined in the manner described in Note 24.

• ii. Financial assets at amortized cost

Financial assets that meet the following conditions are subsequently measured at amortized cost:

• i) The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

• ii) The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Subsequent to initial recognition, financial assets at amortized cost, including cash and cash equivalents, financial assets at amortized cost, notes and accounts receivables (including long-term receivables) and other receivables, are measured at amortized cost, which equals the gross carrying amount determined using the effective interest method less any impairment loss. Exchange differences are recognized in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a financial asset.

Cash equivalents include time deposits with original maturities within 3 months from the date of acquisition, which are highly liquid, readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• iii. Investments in equity instruments at FVTOCI

On initial recognition, the Group may make an irrevocable election to designate investments in equity instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for trading or if it is contingent consideration recognized by an acquirer in a business combination.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments; instead, it will be transferred to retained earnings.

Dividends on these investments in equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the investment.

2017

Financial assets are classified into the following categories: Financial assets at FVTPL, available-for-sale financial assets and loans and receivables.

i. Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is held for trading or designated as at FVTPL.

• 21 -

Financial assets at FVTPL are stated at their fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividends or interest earned on financial assets.

ii. Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at FVTPL.

Available-for-sale financial assets are measured at fair value. Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and will be reclassified to profit or loss when the investment is disposed of or is determined to be impaired.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment loss at the end of each reporting period and are presented in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets. Any impairment losses are recognized in profit and loss.

iii. Loans and receivables

Loans and receivables (including cash and cash equivalent, debt investments with no active market, notes and accounts receivables (including long-term receivables) and other receivables) are measured at amortized cost using the effective interest method, less any impairment, except for short-term receivables when the effect of discounting is immaterial.

Cash equivalent includes time deposits with original maturities within three months from the date of acquisition, highly liquid, readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of meeting short-term cash commitments.

• b) Impairment of financial assets

2018

The Group recognizes a loss allowance for expected credit losses (“ECL”) on financial assets at amortized cost, including accounts receivables and other receivables.

The Group always recognizes lifetime ECLs for accounts receivables and other receivables. For all other financial instruments, the Group recognizes lifetime ECLs when there has been a significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECLs.

• 22 -

ECLs reflect the weighted average of credit losses with the respective risks of default occurring as the weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

The Group recognizes an impairment loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account.

2017

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets at amortized cost, such as notes and accounts receivable (including long-term receivables), are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience with non-collection of payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

For financial assets at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event that occurred after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For available-for-sale equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include significant financial difficulty of the issuer or counterparty, breach of contract, such as a default or delinquency in interest or principal payments, it is becoming probable that the borrower will enter bankruptcy or financial re-organization, or the disappearance of an active market for that financial asset because of financial difficulties.

When an available-for-sale financial asset is considered to be impaired, cumulative losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversible through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income. In respect of available-for-sale debt securities, the impairment loss is subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

• 23 -

For financial assets measured at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets with the exception of accounts receivable where the carrying amount is reduced through the use of an allowance account. When accounts receivable and other receivables are considered uncollectable, they are written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss except for uncollectible accounts receivable that are written off against the allowance account.

• c) Derecognition of financial assets

The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2) Financial liabilities

• a) Subsequent measurement

Financial liabilities are measured at amortized cost using the effective interest method.

• b) Derecognition of financial liabilities

The difference between the carrying amount of the financial liability derecognized and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

• l. Provisions

Provisions are measured at the best estimate of the discounted cash flows of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

Provisions for the expected cost of warranty obligations are recognized at the date of sale of the relevant products, at the best estimate of the expenditure required to settle the Group’s obligation by the management of the Group.

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m. Revenue recognition

2018

The Group identifies contracts with customers, allocates the transaction price to the performance obligations and recognizes revenue when performance obligations are satisfied.

• 1) Revenue from the sale of goods

Revenue from the sale of goods comes from sales of precision machineries and wood panels. Sales of precision machineries and wood panels are recognized as revenue when the goods are shipped or accepted, and accounts receivables are recognized concurrently.

The Group does not recognize revenue on materials delivered to subcontractors because this delivery does not involve a transfer of control.

• 2) Revenue from the rendering of services

Revenue from the rendering of services comes from the repair services and hardware installation services.

As the Group provides repair services and hardware installation services. Consequently, the related revenue is recognized when services are rendered.

2017

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Allowance for sales returns and liability for returns are recognized at the time of sale based on the seller’s reliable estimate of future returns and based on past experience and other relevant factors.

• 1) Sale of goods

Revenue from the sale of goods is recognized when all the following conditions are satisfied:

• a) The Group has transferred to the buyer the significant risks and rewards of ownership of the goods;

• b) The Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

• c) The amount of revenue can be measured reliably;

• d) It is probable that the economic benefits associated with the transaction will flow to the Group; and

• e) The costs incurred or to be incurred in respect of the transaction can be measured reliably.

The Group does not recognize sales revenue on materials delivered to subcontractors because this delivery does not involve a transfer of risks and rewards of materials ownership.

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• 2) Rendering of services

Service income is recognized when services are provided.

Revenue from a contract to provide services is recognized by reference to the stage of completion of the contract.

• 3) Dividend and interest income

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established provided that it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and applicable effective interest rate.

• n. Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

• 1) The Group as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

• 2) The Group as lessee

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

• o. Employee benefits

• 1) Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

• 2) Retirement benefits

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

Defined benefit costs (including service costs, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the projected unit credit method. Service costs (including current service costs) and net interest on a net defined benefit liability (asset) are recognized as employee benefits expenses in the period that they occur. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which it occurs. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

The net defined benefit liability (asset) represents the actual deficit (surplus) in the Group’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

• 26 -

3) Termination benefits

A liability for termination benefits is recognized at the earlier of when the Group can no longer withdraw the offer of the termination benefits and when the Group recognizes any related restructuring costs.

• p. Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

1) Current tax

An additional surtax on unappropriated earnings, computed according to the ROC Income Tax Act, is recognized in current taxes in the year of approval by a stockholders’ meeting resolution.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

• 2) Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for deductible temporary differences or unused loss carryforward to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and that they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which a liability is settled or an asset is realized, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

• 3) Current tax and deferred tax for the year

Current tax and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity; in which case, the current tax and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

• 27 -

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

a. Estimated impairment of financial assets - 2018

The provision for impairment of accounts receivable is based on assumptions about risk of default and expected loss rates. The Group uses judgment in making these assumptions and in selecting the inputs to the impairment calculation, based on the Group’s historical experience, existing market conditions as well as forward looking estimates as of the end of each reporting period. For details of the key assumptions and inputs used, see Note 8. Where the actual future cash inflows are less than expected, a material impairment loss may arise.

b. Estimated impairment of accounts receivable - 2017

When there is objective evidence of impairment loss of receivables, the Group takes into consideration the estimation of the future cash flows of such assets. The amount of the impairment loss is measured as the difference between an asset’s carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

c. Write-down of inventory

Net realizable value of inventory is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The estimation of net realizable value is based on current market conditions and the historical experience of selling products of a similar nature. Changes in market conditions may have a material impact on the estimation of net realizable value.

6. CASH AND CASH EQUIVALENTS

Cash on hand Checking accounts and demand deposits Cash equivalent Time deposits with original maturities less than three months Deposit in transit		December 31	December 31
		2018 $ 3,554 588,538 15,809 - $ 607,901	2017 $ 3,608 671,791 20,892 10,671 $ 706,962

• 28 -

The market rate intervals of cash in bank at the end of the reporting period were as follows:

Bank balance	December 31
	2018 2017 0%-0.55% 0%-0.98%

7. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at FVTPL-current Financial assets held for trading Non-derivative financial assets Beneficiary certificates Financial assets mandatorily classified as at FVTPL Non-derivative financial assets Beneficiary certificates NOTES AND ACCOUNTS RECEIVABLE Notes receivable Accounts receivable At amortized cost Gross carrying amount Less: Allowance for impairment loss			December 31	December 31
			2018 2017 $ - $ 187,165 214,242 - $ 214,242 $ 187,165 **December 31 **
		2018 $ 189,090 $ 1,295,288 (78,139) $ 1,217,149		2017 $ 196,636 $ 1,213,091 (79,101) $ 1,133,990

8. NOTES AND ACCOUNTS RECEIVABLE

Accounts Receivable

In 2018

The average credit period of sales of goods was 90-180 days.

The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all accounts receivables. The expected credit losses on accounts receivables are estimated by reference to past collecting and default experiences of the debtor, an increase in deferred or overdue payments over average credit term and an analysis of the debtors’ current financial position, adjusted for general economic conditions of the industries in which the debtors operate. As the Group’s historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished according to the Group’s different customer base.

• 29 -

The Group writes off an accounts receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery. For accounts receivables that have been written off, the Group continues to engage in enforcement activity to attempt to recover the receivables due. Where recoveries are made, these are recognized in profit or loss.

The following table details the loss allowance of accounts receivables.

December 31, 2018

Gross carrying amount Loss allowance (Lifetime ECL) Amortized cost	Under 180 Days $ 1,261,246 (7,348) $ 1,253,898	181 to 365 Days Over 365 Days $ 108,209 $ 114,923 (17,094) (53,697) $ 91,115 $ 61,226	Total $ 1,484,378 (78,139) $ 1,406,239

The ECL ratios of each of the Group’s accounts receivable aging are shown below, excluding individually assessed or abnormal transactions which their loss allowances have been recognized in their entirety. The ECL ratio for aging segment from the invoice date less than 180 days is less than 5%, while the ECL ratio for aging segment from the invoice date more than 181 days is between 20%-100%.

The movements of the loss allowance of accounts receivables were as follows:

Balance at January 1, 2018 per IAS 39 Adjustment on initial application of IFRS 9 Balance at January 1, 2018 per IFRS 9 Add: Provision Less: Write-off Effect of exchange rate changes Balance at December 31, 2018	2018 $ 79,101 - 79,101 7,527 (7,815) (674) $ 78,139

In 2017

The Group’s credit policy in 2017 was the same as the aforementioned credit policy in 2018. For some accounts receivables balances that were past due at the end of the reporting period, the Group did not recognize an allowance for impairment loss because there was no significant change in credit quality and the amounts were still considered recoverable. The Group did not hold any collateral or other credit enhancements for these balances.

The aging of receivables was as follows:

	December 31,	December 31,
		2017
Less than 180 days	$	845,985
181-365 days		122,793
More than 365 days		244,313
	$	1,213,091

• 30 -

The above aging schedule was based on the invoice date.

The aging of receivables that were past due but not impaired was as follows:

					December 31,	December 31,
						2017
Less than 180 days					$	86,663
181-365 days						15,043
More than 365 days						43,379
					$	145,085
The above aging schedule was based on the invoice date.
The movements of the allowance for doubtful accounts receivable were			as follows:
	Individually		Collectively
	Assessed for		Assessed for
	Impairment		Impairment			Total
Balance at January 1, 2017	$	56,785	$	6,404	$	63,189
Reclassification		(7,683)		7,683		-
Add: Impairment losses recognized on
receivables		11,205		6,428		17,633
Less: Amounts written off during the year as
uncollectable		(560)		-		(560)
Foreign exchange translation		(1,171)		10		(1,161)
Balance at December 31, 2017	$	58,576	$	20,525	$	79,101

Refer to Note 24 for details of the factoring agreements for accounts receivable.

Refer to Note 26 for details of collaterals that the Group held for these balances.

9. INVENTORIES

Work in progress Raw materials Merchandise Finished goods Inventory in transit		**December 31 **	**December 31 **
		2018 $ 534,370 427,165 406,517 237,696 149,544 $ 1,755,292	2017 $ 576,278 451,639 383,496 140,027 161,522 $ 1,712,962

The cost of goods sold for the years ended December 31, 2018 and 2017 included reversals of inventory write-downs of $5,867 thousand and inventory write-downs of $38,243 thousand, respectively. Previous write-downs were reversed as a result of increased selling prices in certain markets.

• 31 -

10. SUBSIDIARIES

a. Subsidiaries included in the consolidated financial statements:

Investor Investee Nature of Activities The Company Anderson Industrial (Hong Kong) Ltd. Importing, exporting and general investing activities Anderson Europe GmbH Manufacture and sale of machinery and service Anderson America Corporation (U.S.A.) (Anderson America) Sale of machinery and service CNT Industrial (Shanghai) Co., Ltd. (CNT) Manufacture and sale of woodworking machinery Anderson Logistics Corporation (Anderson Logistics) Importing and exporting Jentec Machinery (Shanghai) Co., Ltd. (Jentec) Manufacture and sale of machinery Anderson Merchandise Corporation (Anderson Merchandise) Sale of wood panels and service Giben Holdings Co., Ltd. (BVI) (Giben BVI) Investment Giben Holdings Co., Ltd. (SAMOA) (Giben SAMOA) Investment Sogotec Enterprise Co., Ltd. (Sogotec) Manufacture and sale of machinery Anderson Logistics Sogotec Manufacture and sale of machinery Verite Corporation (Verite) Importing and exporting Anderson Merchandise Sogotec Manufacture and sale of machinery Giben SOMOA Giben America, Inc. (Giben America) Sale of machinery and service Giben do Brasil Maquinas e Equipamentos Ltda (Giben Brasil) Manufacture and sale of machinery Giben BVI Giben Brasil Manufacture and sale of machinery CNT Chengdu ZhongDe Nc Machinery Co., Ltd (Chengdu ZhongDe) Manufacture of woodworking machinery Anderson Europe GmbH Monforts CNC Werkzeugmaschinentechnik GmbH (Monforts GmbH) Manufacture and sale of machinery MATEC GmbH (MATEC) Manufacture and sale of machinery Sogotec Sogotec Precision (Shanghai) Co., Ltd (Sogotec Shanghai) Sale of machinery and service MATEC MATEC Machinery Trading (Shanghai) Co., Ltd. (MATEC Shanghai) Sale of machinery and service

Proportion of Ownership December 31 2018 2017 Remark 100.00% 100.00% 1) 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 100.00% 100.00% - 65.53% 70.63% 2) 24.78% 28.62% 2) - 50.00% 3) 0.28% - 4) 100.00% 100.00% - 0.28% 0.28% - 99.72% 99.72% - - 66.67% 5) 100.00% 100.00% - 100.00% 100.00% 6) 100.00% 100.00% - 100.00% 100.00% 7)

Remarks:

• 1) The Group resolved to liquidate and dissolve the company. As of December 31, 2018, the process of liquidation is still ongoing.

• 2) Sogotec issued new shares for capital increase via cash in June and July 2018. The Company and Anderson Logistics did not purchase additional shares based on their percentages of ownership. Therefore, the Company’s percentage of ownership in Sogotec decreased to 65.53%. In addition, Anderson Logistics partially disposed of interests in Sogotec in October 2018, reducing its percentage of ownership in Sogotec to 24.78%.

• 3) Verite issued new shares for capital increase via cash in March 2018. As Anderson Logistics did not participate in the subscription based on the percentage of ownership, its percentage of ownership dropped to 33.33%. As a result, it ceased to have control over Verite. Therefore, it accounted Verite as investments accounted for using the equity method.

• 4) Sogotec issued new shares for capital increase via cash in July 2018, and Anderson Merchandise participated in the subscription. After the subscription, Anderson Merchandise’s percentage of ownership in Sogotec was 0.28%.

• 5) The Group resolved to liquidate and dissolve Chengdu ZhongDe in October 2017. The process of liquidation and dissolution has been completed in December 2018.

• 6) In February 2017, the Company invested $91,392 thousand and incorporated MATEC. The Company held 100% ownership in MATEC.

• 32 -

• 7) In September 2017, MATEC invested $4,630 thousand and incorporated MATEC Shanghai. MATEC held 100% ownership in MATEC Shanghai.

• b. Subsidiaries excluded from consolidated financial statements: None.

11. PROPERTY, PLANT AND EQUIPMENT

Cost Balance at January 1, 2017 Additions Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated depreciation and impairment Balance at January 1, 2017 Depreciation Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2018 Accumulated depreciation and impairment Balance at January 1, 2018 Depreciation Disposals Reclassification Effect of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Freehold Land $ 264,942 80,920 - 6,598 2,795 355,255 - - - - - - $ 355,255 $ 355,255 129 - - (940) 354,444 - - - - - - $ 354,444	Buildings $ 1,000,969 69,312 (28,827 ) 7,623 (1,705) 1,047,372 380,706 47,441 (28,775 ) (997 ) (2,508) 395,867 $ 651,505 $ 1,047,372 26,102 (4,125 ) - (6,074) 1,063,275 395,867 47,873 (4,076 ) - (3,873) 435,791 $ 627,484	Machinery $ 254,498 16,424 (21,015 ) 22,420 (2,456) 269,871 185,071 21,793 (20,723 ) (1,630 ) (2,477) 182,034 $ 87,837 $ 269,871 28,729 (77,231 ) (1,387 ) (3,955) 216,027 182,034 17,455 (74,170 ) (794 ) (2,891) 121,634 $ 94,393	Research and Development Equipment $ 64,955 1,001 (205 ) - (7 ) 65,744 32,392 13,160 (205 ) - - 45,347 $ 20,397 $ 65,744 2,287 (11,370 ) - (1) 56,660 45,347 12,710 (11,196 ) - - 46,861 $ 9,799	Other Equipment $ 164,812 31,239 (4,858 ) 1,099 (3,512) 188,780 134,357 14,049 (4,255 ) 997 (2,707) 142,441 $ 46,339 $ 188,780 31,199 (23,455 ) 471 (1,196) 195,799 142,441 19,392 (21,691 ) - (1,163) 138,979 $ 56,820	Total $ 1,750,176 198,896 (54,905 ) 37,740 (4,885) 1,927,022 732,526 96,443 (53,958 ) (1,630 ) (7,692) 765,689 $ 1,161,333 $ 1,927,022 88,446 (116,181 ) (916 ) (12,166) 1,886,205 765,689 97,430 (111,133 ) (794 ) (7,927) 743,265 $ 1,142,940

The above items of property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives as follows:

Building 3-55 years Machinery 1-30 years Research and development equipment 3-11 years Other equipment 1-33 years

In August 1996, the Company purchased land in Houlong Township of Miaoli county for $11,000 thousand. However, due to the statutory restrictions on the transfer of farmland, the title deed has not been legally transferred to the Company; therefore, the Company made a contract with the seller to prevent any future claims on the land by the seller, the seller’s heir at law, or any other third parties. In addition, if the land zoning is changed, the seller is obligated to transfer the title immediately. Accordingly, the farmland is recorded under other non-current assets. In March 2005, the Company applied to the Land Office for the modification of land usage and changed parts of the land’s zoning designation from farmland to construction use, which amounted to $4,518 thousand. Accordingly, the Company has been registered as the legal owner, and has reclassified such land to property, plant and equipment.

Property, plant and equipment pledged as collateral for bank borrowings were set out in Note 26.

• 33 -

12. INTANGIBLE ASSETS

Cost Balance at January 1, 2017 Additions Effect of foreign currency exchange differences Balance at December 31, 2017 Accumulated amortization and impairment Balance at January 1, 2017 Amortization expense Effect of foreign currency exchange differences Balance at December 31, 2017 Carrying amounts at December 31, 2017 Cost Balance at January 1, 2018 Additions Disposals Disposals of subsidiaries Reclassification Effect of foreign currency exchange differences Balance at December 31, 2018 Accumulated amortization and impairment Balance at January 1, 2018 Amortization expense Impairment loss Disposals Disposals of subsidiaries Effect of foreign currency exchange differences Balance at December 31, 2018 Carrying amounts at December 31, 2018	Goodwill $ 54,787 - (3,246) 51,541 - - - - $ 51,541 $ 51,541 - - - - 1,245 52,786 - - 10,000 - - - 10,000 $ 42,786	Customer Relation $ 18,705 - (1,443) 17,262 4,743 3,821 (451) 8,113 $ 9,149 $ 17,262 - - - - 554 17,816 8,113 7,572 - - - 403 16,088 $ 1,728	Patent $ 56,065 629 269 56,963 44,840 2,825 111 47,776 $ 9,187 $ 56,963 1,518 (104 ) - - (210) 58,167 47,776 2,996 - (24 ) - (63) 50,685 $ 7,482	Trademark $ 64,302 - (2,366) 61,936 - - - - $ 61,936 $ 61,936 - - - - 907 62,843 - - - - - - - $ 62,843	Software $ 865 1,146 43 2,054 133 424 12 569 $ 1,485 $ 2,054 551 - (598 ) 14,631 (160) 16,478 569 1,090 - - (306 ) (12) 1,341 $ 15,137	Technical Drawing $ - 14,421 512 14,933 - 2,309 82 2,391 $ 12,542 $ 14,933 1,328 - - - (170) 16,091 2,391 3,369 - - - (64) 5,696 $ 10,395	Total $ 194,724 16,196 (6,231) 204,689 49,716 9,379 (246) 58,849 $ 145,840 $ 204,689 3,397 (104 ) (598 ) 14,631 2,166 224,181 58,849 15,027 10,000 (24 ) (306 ) 264 83,810 $ 140,371

The above items of intangible asset are depreciated on a straight-line basis over the estimated useful lives as follows:

Customer relation 5 years Patents 5-20 years Software 1-10 years Technical drawing 5 years

The Group acquired 100% interests in Giben Brasil in September 2014. After the acquisition, the actual profitability of Giben Brasil has been lower than expectation. As result, impairment loss on goodwill of $10,000 thousand was recognized in other gains and losses for the year ended December 31, 2018.

Management believes the Group will renew the trademark continuously and has the ability to do so. Various studies including studies about product life cycle, market, competitive and environmental trends, and brand extension opportunities have been performed by management of the Group, which supported their opinion that there is no foreseeable limit to the period over which the trademarked products are expected to generate net cash flows. Therefore, the trademark is considered to have an indefinite useful life. The trademark will not be amortized until its useful life is determined to be finite. Instead it will be tested for impairment annually and whenever there is an indication that it may be impaired.

• 34 -

13. BORROWINGS

a. Short-term borrowings

Secured borrowings (Note 26) Bank loans Unsecured borrowings Bank loans		December 31	December 31
		2018 $ 383,710 965,957 $ 1,349,667	2017 $ 230,229 901,500 $ 1,131,729

The ranges of interest rates on bank loans were 0.85%-1.90% and 1.09%-1.90% per annum as of December 31, 2018 and 2017, respectively.

• b. Long-term borrowings

Secured borrowings (Note 26) Bank loans Unsecured borrowings Bank loans Less: Current portion Long-term borrowings		**December 31 **	**December 31 **
		2018 $ 578,265 64,277 642,542 (246,061) $ 396,481	2017 $ 480,975 284,444 765,419 (391,476) $ 373,943

As of December 31, 2018 and 2017, the interest rates of the bank borrowings secured by the Group’s financial assets at amortized cost, accounts receivable, other receivables, freehold land and buildings (see Note 26) were 1.70%-3.78% and 1.60%-2.76% per annum, respectively. The bank borrowings are due in May 2019 to April 2027.

14. OTHER LIABILITIES

Other payables Payables for commission Payables for salaries and bonuses Payables for business taxes Payable for employees’ compensation and remuneration of directors and supervisors Payables for interest Others		**December 31 **	**December 31 **
		2018 $ 60,038 133,632 25,273 8,328 1,490 81,602 $ 310,363	2017 $ 117,808 105,943 43,885 7,893 1,625 46,716 $ 323,870

(Continued)

• 35 -

Other liabilities Unearned receipts Temporary receipts Others		**December 31 **	**December 31 **
		2018 $ - 7,422 5,580 $ 13,002	2017 $ 354,292 24,543 15,933 $ 394,768 (Concluded)

15. RETIREMENT BENEFIT PLANS

a. Defined contribution plans

The Company, Sogotec and Anderson Merchandise adopted a pension plan under the Labor Pension Act (the “LPA”), which is a state-managed defined contribution plan. Under the LPA, an entity makes monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The employees of the Group’s subsidiaries in other countries are members of state-managed retirement benefit plans operated by the local government. The subsidiary is required to contribute amounts equal to a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit plan is to make the specified contributions.

b. Defined benefit plans

The defined benefit plans adopted by the Company and Sogotec in accordance with the Labor Standards Law are operated by the government. Pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Company and Sogotec contribute amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in the Bank of Taiwan in the committee’s name. Before the end of each year, the Group assesses the balance in the pension fund. If the amount of the balance in the pension fund is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Group is required to fund the difference in one appropriation that should be made before the end of March of the next year. The pension fund is managed by the Bureau of Labor Funds, Ministry of Labor (the “Bureau”); the Group has no right to influence the investment policy and strategy.

The amounts included in the consolidated balance sheets in respect of the Group’s defined benefit plans were as follows:

Present value of defined benefit obligation Fair value of plan asset Net defined benefit liability		**December 31 **	**December 31 **
		2018 $ 123,871 (61,645) $ 62,226	2017 $ 141,374 (70,025) $ 71,349

• 36 -

Movements in net defined benefit liability were as follows:

	Present Value
	of the Defined		Net Defined
	Benefit	Fair Value of		Benefit
	Obligation	the Plan Assets	Liability
Balance at January 1, 2017	$ 144,673	$ (70,833)	$	73,840
Service cost
Current service cost	1,490	-		1,490
Net interest expense (income)	1,833	(909)		924
Recognized in profit or loss	3,323	(909)		2,414
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	252		252
Actuarial loss - changes in demographic
assumptions	1,334	-		1,334
Actuarial gain - experience adjustments	(3,600)	-		(3,600)
Recognized in other comprehensive income	(2,266)	252		(2,014)
Contributions from the employer	-	(2,891)		(2,891)
Benefits paid from plan assets	(4,356)	4,356		-
	(4,356)	1,465		(2,891)
Balance at December 31, 2017	141,374	(70,025)		71,349
Service cost
Current service cost	1,110	-		1,110
Past service cost and gain on settlements	(1,585)	-		(1,585)
Net interest expense (income)	1,796	(904)		892
Recognized in profit or loss	1,321	(904)		417
Remeasurement
Return on plan assets (excluding amounts
included in net interest)	-	(1,969)		(1,969)
Actuarial loss - changes in demographic
assumptions	683	-		683
Actuarial loss - changes in financial
assumptions	1,808	-		1,808
Actuarial gain - experience adjustments	(6,761)	-		(6,761)
Recognized in other comprehensive income	(4,270)	(1,969)		(6,239)
Contributions from the employer	-	(3,301)		(3,301)
Benefits paid from plan assets	(14,554)	14,554		-
	(14,554)	11,253		(3,301)
Balance at December 31, 2018	$ 123,871	$ (61,645)	$	62,226

Through the defined benefit plans under the Labor Standards Law, the Group is exposed to the following risks:

• 1) Investment risk: The plan assets are invested in domestic and foreign equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the Bureau or under the mandated management. However, in accordance with relevant regulations, the return generated by plan assets should not be below the interest rate for a 2-year time deposit with local banks.

• 2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the plan’s debt investments.

• 37 -

• 3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The significant assumptions used for the purposes of the actuarial valuations were as follows:

Discount rates Expected rates of salary increase	**December 31 **
	2018 2017 1.125%-1.375% 1.250%-1.500% 3.000%-4.250% 3.000%-4.250%

If possible reasonable change in each of the significant actuarial assumptions will occur and all other assumptions will remain constant, the present value of the defined benefit obligation would increase (decrease) as follows:

Discount rate(s) 0.25% increase 0.25% decrease Expected rate(s) of salary increase 0.25% increase 0.25% decrease		**December **	**31 **
		2018 $ (3,551) $ 3,693 $ 3,557 $ (3,441)	2017 $ (4,128) $ 4,294 $ 4,144 $ (4,006)

The sensitivity analysis presented above may not be representative of the actual change in the present value of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

The expected contributions to the plan for the next year The average duration of the defined benefit obligation		**December **	**31 **
	2018 2017 $ 3,256 $ 3,547 11.40-14.80 years 11.58-15.02 years

16. EQUITY

a. Share capital

Common stocks

Number of shares authorized (in thousand) Shares authorized Number of shares issued and fully paid (in thousand) Shares issued		**December 31 **	**December 31 **
		2018 200,000 $ 2,000,000 199,881 $ 1,998,810	2017 200,000 $ 2,000,000 180,000 $ 1,800,000

• 38 -

A holder of issued common stock with par value of NT$10 per share is entitled to vote and to receive dividends.

On May 14, 2018, the Company’s board of directors resolved to issue 20,000 thousand ordinary shares, with a par value of NT$10, for a consideration of NT$13 per share, which increased the share capital issued and fully paid to $2,000,000 thousand. On July 6, 2018, the above transaction was approved by the FSC, and the subscription base date was determined as at August 5, 2018 by the board of directors.

On December 12, 2018, the Company’s board of directors resolved to cancel 119 thousand treasury shares, and the cancellation base date was determined as at December 7, 2018.

b. Capital surplus

May be used to offset a deficit, distributed as cash dividends, or transferred to share capital (1) Issuance of ordinary shares Conversion of bonds Treasury share transactions Difference between consideration and carrying amount arising from the disposal of subsidiaries’ stock May be used to offset a deficit only Changes in percentage of ownership interests in subsidiaries (2) May not be used for any purpose Employee share options		**December 31 **	**December 31 **
		2018 $ 165,391 99,979 58,585 12,201 32,794 184 $ 369,134	2017 $ 114,441 99,979 52,254 - - - $ 266,674

• 1) Such capital surplus may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or transferred to share capital (limited to a certain percentage of the Company’s capital surplus and to once a year).

• 2) Such capital surplus arises from the effect of changes in ownership interests in subsidiaries resulting from equity transactions other than actual disposals or acquisitions, or from changes in capital surplus of subsidiaries accounted for using the equity method.

• c. Retained earnings and dividend policy

Under the dividends policy as set forth in the amended Articles, where the Company made a profit in a fiscal year, the profit shall be first utilized for paying taxes, offsetting losses of previous years, setting aside as a legal reserve of 10% of the remaining profit, setting aside or reversing a special reserve in accordance with the laws and regulations, and then any remaining profit together with any undistributed retained earnings shall be used by the Company’s board of directors as the basis for proposing a distribution plan with a proportion of no less than 10%, which should be resolved in the shareholders’ meeting for the distribution of dividends and bonuses to shareholders. For the policies on the distribution of employees’ compensation and remuneration of directors and supervisors after the amendment, refer to employees’ compensation and remuneration of directors and supervisors in Note 18-f.

• 39 -

According to the Articles of Incorporation of the Company, 30%-100% of dividends are to be distributed as cash dividends and 0%-70% as stock dividends.

An appropriation of earnings to a legal reserve shall be made until the legal reserve equals the Company’s paid-in capital. The legal reserve may be used to offset deficits. If the Company has no deficit and the legal reserve has exceeded 25% of the Company’s paid-in capital, the excess may be transferred to capital or distributed in cash.

Items referred to under Rule No. 1010012865 issued by the FSC and in the directive titled “Questions and Answers for Special Reserves Appropriated Following Adoption of IFRSs” should be appropriated to or reversed from a special reserve by the Company.

The appropriations of earnings for 2017 and 2016 were approved in the shareholders’ meetings on May 29, 2018 and June 19, 2017, respectively, were as follows:

Legal reserve Special reserve Cash dividends	Appropriation of Earnings For the Year Ended December 31 2017 2016 $ 9,652 $ 9,862 7,443 50,624 80,699 35,266	Dividends Per Share (NT$)
		For the Year Ended December 31
		2017 2016 $ 0.45 $ 0.2

In the shareholders’ meeting on May 29, 2018 and June 19, 2017, the Company’s shareholders resolved to issue cash dividends from capital surplus of $8,967 thousand ($0.05 per share) and $52,899 thousand ($0.3 per share), respectively.

The appropriation of earnings for 2018 had been proposed by the Company’s board of directors on March 11, 2019. The appropriation and dividends per share were as follows:

	Appropriation	Appropriation	Dividends Per	Dividends Per
	of	Earnings	Share	(NT$)
Legal reserve	$	4,098
Special reserve		17,111
Cash dividends		19,933	$	0.1

The appropriations of earnings for 2018 are subject to the resolution of the shareholders’ meeting to be held on May 30, 2019.

d. Treasury shares

Purpose of Buy-back Number of Shares at January 1 Shares Transferred to Employees 2018 Shares transferred to employees (in thousands of shares) 3,669 (3,000) 2017 Shares transferred to employees (in thousands of shares) 3,669 -	Shares Cancelled Number of Shares at December 31 (119) 550 - 3,669

• 40 -

On January 12, 2018, the Company’s board of directors resolved to transfer 3,000 thousand treasury shares to employees at $9.65 per share with total value of $28,950 thousand. The base date for employee share option was determined at January 12, 2018. The Company had recognized $6,150 thousand of capital surplus - treasury share transaction on the date of transfer. Refer to Note 21 for relevant information.

Under the Securities and Exchange Act, the Company shall neither pledge treasury shares nor exercise shareholders’ rights on these shares, such as rights to dividends and to vote.

17. REVENUE

Revenue from the sale of goods Revenue from the rendering of services Others	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 4,784,590 118,631 2,013 $ 4,905,234	2017 $ 4,351,687 111,542 1,905 $ 4,465,134

• 1) Refer to Notes 4-m and 30 for information about contract information and disaggregation of revenue.

• 2) Contract balances: as of December 31, 2018, the balance for contract liabilities is $363,535 thousand, which is mainly constituted by unearned receipts.

• 3) Contract liabilities in the beginning of the year have been recognized as sales revenue during the year.

18. NET PROFIT AND OTHER COMPREHENSIVE INCOME (LOSS)

• a. Other income

Rental income Interest income Others	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 3,046 2,470 36,594 $ 42,110	2017 $ 2,620 6,931 51,138 $ 60,689

• b. Other gains and losses

Net foreign exchange losses Gain on disposal of subsidiaries Net gain on financial assets at FVTPL (Loss) gain on disposal of property, plant and equipment Loss on disposal of available-for-sale financial assets, net Impairment losses of goodwill Others	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ (4,219) 1,233 443 (1,452) - (10,000) (8,743) $ (22,738)	2017 $ (21,137) - - 511 (984) - 2,818 $ (18,792)

• 41 -

c. Finance costs

Interest on bank loans d. Depreciation and amortization Property, plant and equipment Intangible assets An analysis of depreciation by function Operating costs Operating expenses An analysis of amortization by function Operating expenses	For the Year Ended	For the Year Ended	December 31
	2018 $ 38,082 For the Year Ended		2017 $ 30,912 December 31
		2018 $ 97,430 15,027 $ 112,457 $ 31,748 65,682 $ 97,430 $ 15,027	2017 $ 96,443 9,379 $ 105,822 $ 35,258 61,185 $ 96,443 $ 9,379

e. Employee benefits expense

Short-term benefits Post-employment benefits Defined contribution plans Defined benefit plans (Note 15) Other employee benefits Total employee benefits expense An analysis of employee benefits expense by function Operating costs Operating expenses	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 982,953 20,373 417 20,790 21,583 $ 1,025,326 $ 194,233 831,093 $ 1,025,326	2017 $ 886,356 18,938 2,414 21,352 33,836 $ 941,544 $ 199,406 742,138 $ 941,544

• 42 -

• f. Employees’ compensation and remuneration of directors and supervisors

According to the Articles of Incorporation of the Company, the Company accrued employees’ compensation and remuneration of directors and supervisors at the rates between 1%-10% and no higher than 3%, respectively, of net profit before income tax, employees’ compensation, and remuneration of directors and supervisors. The employees’ compensation and remuneration of directors and supervisors for the years ended December 31, 2018 and 2017 which have been approved by the Company’s board of directors on March 11, 2019 and March 22, 2018, were as follows:

Accrual rate

Employees’ compensation Remuneration of directors and supervisors Amount Employees’ compensation Remuneration of directors and supervisors	**For the Year Ended **	**For the Year Ended **	**For the Year Ended **	**December 31 **
	2018 2% 2% For the Year Ended			2017 1% 1% December 31
		2018 Cash $ 569 $ 569		2017
				Cash $ 1,054 $ 1,054

If there is a change in the amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in the accounting estimate.

There is no difference between the actual amounts of employees’ compensation and remuneration of directors and supervisors paid and the amounts recognized in the consolidated financial statements for the years ended December 31, 2017 and 2016.

Information on the employees’ compensation and remuneration of directors and supervisors resolved by the Company’s board of directors in 2019 and 2018 is available at the Market Observation Post System website of the Taiwan Stock Exchange.

19. INCOME TAXES

a. Major components of tax expense recognized in profit or loss

Current tax In respect of the current year Income tax on unappropriated earnings Adjustments for prior years Deferred tax In respect of the current year Change in tax rates Income tax expense recognized in profit or loss	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 46,258 6,813 3,708 (23,185) (8,837) $ 24,757	2017 $ 34,844 1,663 6,191 (14,026) - $ 28,672

• 43 -

A reconciliation of accounting profit and income tax expense is as follows:

Profit before income tax Income tax expense calculated at the statutory rate Nondeductible expenses in determining taxable income Adjustment items in determining taxable profit Temporary differences Loss carryforwards Income tax on unappropriated earnings Effect of different tax rate of Group entities operating in other jurisdictions Adjustments for prior years’ tax Change in tax rates Income tax expense recognized in profit or loss	For the Year Ended	For the Year Ended	December 31
		2018 $ 64,945 $ 12,989 58 (16,180) 1,197 (1,835) 6,813 26,844 3,708 (8,837) $ 24,757	2017 $ 123,607 $ 21,013 394 (18,894) (4,430) (5,850) 1,663 28,585 6,191 - $ 28,672

In 2017, the applicable corporate income tax rate used by the group entities in the ROC is 17%. However, the Income Tax Act in the ROC was amended in 2018, and the corporate income tax rate was adjusted from 17% to 20%, effective in 2018. The effect of such tax rate change on deferred income tax was recognized in profit or loss this current year. In addition, the rate of the corporate surtax applicable to the 2018 unappropriated earnings will be reduced from 10% to 5%. The applicable tax rate used by subsidiaries in China is 25%. Tax rates used by other group entities operating in other jurisdictions are based on the tax laws in those jurisdictions.

As the status of the 2019 appropriation of earnings is uncertain, the potential income tax consequences of the 2018 unappropriated earnings are not reliably determinable.

b. Income tax recognized in other comprehensive income

Deferred tax Effect of change in tax rate In respect of the current period Remeasurement on defined benefit plan	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ 17 1,267 $ 1,284	2017 $ - 329 $ 329

• 44 -

c. Deferred tax assets and liabilities

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2018

							Recognized in	Recognized in	Recognized in
								Other
					Recognized in		Comprehensive
			Opening Balance		Profit or Loss		Income			Closing Balance
Deferred tax assets
Defined benefit obligation			$	12,500	$	1,528	$	(1,284 )		$	12,744
Inventory write-downs				16,849		3,499			-		20,348
Unrealized gain on transactions with associates				2,966		1,989			-		4,955
Share of loss of subsidiaries accounted for using the
equity method				3,453		9,550			-		13,003
Others				19,696		10,976			-		30,672
			$	55,464	$	27,542	$	(1,284)		$	81,722
Deferred tax liabilities
Share of income of subsidiaries accounted for using the
equity method			$	-	$	1,872	$		-	$	1,872
Unrealized foreign exchange gains				1,657		(1,657 )			-		-
Others				4,695		(4,695)			-		-
			$	6,352	$	(4,480)	$		-	$	1,872
For the year ended December 31, 2017
					Recognized in
						Other
			Recognized in		Comprehensive
	Opening Balance		Profit or Loss		Income		Reclassification			Closing Balance
Deferred tax assets
Defined benefit obligation	$ 12,916		$	(87 )	$	(329 )	$		-	$	12,500
Inventory write-downs	12,366			4,483		-			-		16,849
Unrealized gain on transactions with
associates		1,474		1,492		-			-		2,966
Share of loss of subsidiaries
accounted for using the equity
method		421		(260 )		-		3,292			3,453
Others	22,150			(2,454)		-			-		19,696
	$ 49,327		$	3,174	$	(329 )	$	3,292		$	55,464
Deferred tax liabilities
Share of income of subsidiaries
accounted for using the equity
method	$ 13,912		$	(17,204 )	$	-	$	3,292		$	-
Unrealized foreign exchange gains		-		1,657		-			-		1,657
Others		-		4,695		-			-		4,695
	$ 13,912		$	(10,852)	$	-	$	3,292		$	6,352

d. Unused loss carryforward as of December 31, 2017 comprised of:

Unused Amount

$ 49,919

Expiry Year 2026

• 45 -

• e. Income tax assessments

The latest annual income tax returns that have been assessed by the tax authorities were as follows:

Company The Company Anderson Merchandise Anderson Logistics Sogotec	**Year **
	2015 2016 2016 2016

20. EARNINGS PER SHARE

Unit: NT$ Per Share

Basic earnings per share Diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 0.22 $ 0.22	2017 $ 0.55 $ 0.55

The earnings and weighted average number of common stocks outstanding in the computation of earnings per share were as follows:

Net Profit for the Year

Earnings used in the computation of basic/diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 40,977	2017 $ 96,521

Weighted average number of ordinary shares outstanding (in thousand shares):

Weighted average number of ordinary shares in computation of basic earnings per share Effect of potentially dilutive ordinary shares: Employees’ compensation or bonuses issue to employees Weighted average number of ordinary shares used in the computation of diluted earnings per share	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 186,100 75 186,175	2017 176,331 100 176,431

If the Group offered to settle the compensation or bonuses paid to employees in cash or shares, the Group assumed that the entire amount of the compensation or bonuses will be settled in shares, and the resulting potential shares were included in the weighted average number of shares outstanding used in the computation of diluted earnings per share, as the effect is dilutive. Such dilutive effect of the potential shares is included in the computation of diluted earnings per share until the number of shares to be distributed to employees is resolved in the following year.

• 46 -

21. SHARE-BASED PAYMENT ARRANGEMENTS

On January 12, 2018, the Company’s board of directors resolved to transfer 3,000 thousand treasury shares to qualified employees of the Company and its subsidiaries.

In May 2018, the Company’s board of directors resolved to issue ordinary shares for capital increase via cash and reserved 10% of the new shares issued for employees subscription in accordance with the Company Act of the ROC.

Options were priced using the Black-Scholes pricing model, and the inputs to the model are as follows:

		January 12,
	July 23, 2018	2018
Grant-date share price (NT$)	$11.95	$11.67
Exercise price (NT$)	$13.00	$9.65
Expected volatility	32.93%	32.84%
Risk-free interest rate	0.4%	0.26%

Compensation costs recognized were $6,350 thousand for the years ended December 31, 2018.

22. OPERATING LEASE ARRANGEMENTS

The Group as Lessee

Operating leases relate to leases of office and plant with lease terms between 1 and 5 years.

The future minimum lease payments of non-cancellable operating lease commitments were as follows:

Not later than 1 year Later than 1 year and not later than 5 years Later than 5 years		December 31	December 31
		2018 $ 47,501 25,118 8,404 $ 81,023	2017 $ 45,893 65,121 12,006 $ 123,020

23. CAPITAL MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximizing the return to stakeholders through the optimization of the debt and equity balance.

The capital structure of the Group consists of net debt (borrowings offset by cash and cash equivalents) and equity of the Group (comprising issued capital, reserves, retained earnings, other equity and non-controlling interests).

Key management personnel of the Group review the capital structure on a quarterly basis. As part of this review, the key management personnel consider the cost of capital and the risks associated with each class of capital. Based on recommendations of the key management personnel, in order to balance the overall capital structure, the Group may adjust the amount of dividends paid to shareholders, the number of new shares issued or repurchased, and the amount of new debt issued or existing debt redeemed.

• 47 -

The Group is not subject to any externally imposed capital requirements.

24. FINANCIAL INSTRUMENTS

• a. Fair value of financial instruments that are not measured at fair value

The Group’s management considers the carrying amounts recognized in the consolidated financial statements for financial assets and financial liabilities not carried at fair value to approximate their fair values or their fair values cannot be reliably measured.

• b. Fair value of financial instruments that are measured at fair value on a recurring basis

• 1) Fair value hierarchy

December 31, 2018 Financial assets at FVTPL Beneficiary certificates Financial assets at FVTOCI- non-current Equity instruments Unlisted shares December 31, 2017 Financial assets at FVTPL Beneficiary certificates Available-for-sale financial assets Beneficiary certificates Securities listed in ROC Equity securities	Level 1 $ 214,242 $ - Level 1 $ 187,165 $ 19,124 13,246 $ 32,370	Level 2 $ - $ - Level 2 $ - $ - - $ -	Level 3 $ - $ 27,549 Level 3 $ - $ - - $ -	Total $ 214,242 $ 27,549 Total $ 187,165 $ 19,124 13,246 $ 32,370

There were no transfers between Levels 1 and 2 in the current and prior periods.

• 2) Reconciliation of Level 3 fair value measurements of financial instruments

For the year ended December 31, 2018

Financial Assets Balance at January 1, 2018 Recognized in other comprehensive income (included in unrealized gain on financial assets at FVTOCI) Balance at December 31, 2018	Financial Assets at FVTOCI
	Equity Instruments $ 26,747 802 $ 27,549

• 48 -

• 3) Valuation techniques and inputs applied for Level 3 fair value measurement

The fair values of unlisted equity securities - ROC were determined using the market approach. In this approach, the estimates or assumptions used to determine fair values are established by reference to relevant information of other listed companies or peers in similar nature of business.

• c. Categories of financial instruments

Financial assets Financial assets at FVTPL Mandatorily classified as at FVTPL Loans and receivables (1) Available-for-sale financial assets (2) Financial assets at amortized cost (3) Financial assets at FVTOCI Equity Instruments Financial liabilities Financial liabilities at amortized cost (4)	December 31
	2018 2017 $ 214,242 $ - - 2,132,502 - 59,117 2,253,329 - 27,549 - 2,658,065 2,803,773

• 1) The balances included loans and receivables measured at amortized cost, which comprise cash and cash equivalents, debt investments with no active market - current, notes receivable, accounts receivable and other receivables.

• 2) The balances included the carrying amount of available-for-sale financial assets and financial assets measured at cost.

• 3) The balances include financial assets at amortized cost, which comprise cash and cash equivalents, time deposits with original maturity of more than 3 months, notes receivable, accounts receivables and other receivables.

• 4) The balances included financial liabilities measured at amortized cost, which comprise short-term borrowings, notes payable, accounts payable, other payables and long-term borrowings.

• d. Financial risk management objectives and policies

The Group’s major financial instruments include equity and beneficiary certificates investments, accounts receivable, accounts payable and short-term and long-term borrowings. The Group’s corporate treasury function provides services to the business, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk.

• 49 -

1) Market risk

The Group’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a) below) and interest rates (see (b) below).

There had been no change to the Group’s exposure to market risks or the manner in which these risks were managed and measured.

a) Foreign currency risk

The Group had foreign currency sales and purchases, which were exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Group managed the risk by balancing positions of assets and liabilities denominated in foreign currencies.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities (including those eliminated on consolidation) and of the derivatives exposed to foreign currency risk at the end of the reporting period are set out in Note 28.

Sensitivity analysis

The Group was mainly exposed to the currency USD, currency RMB, and currency EUR.

The following table details the Group’s sensitivity to a 1% increase and decrease in New Taiwan dollars (the functional currency) against the relevant foreign currencies. The rate of 1% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis included only outstanding foreign currency denominated monetary items and adjusts their translation at the end of the reporting period for a 1% change in foreign currency rates. A positive number below indicates an increase in pre-tax profit and other equity assuming New Taiwan dollars strengthened by 1% against the relevant currency. For a 1% weakening of New Taiwan dollars against the relevant currency, there would be an equal and opposite impact on pre-tax profit and other equity and the balances below would be negative.

Profit or loss	Currency USD Impact For the Year Ended December 31 2018 2017 $ 6,510 $ 5,816	Currency RMB Impact For the Year Ended December 31 2018 2017 $ 7,766 $ 6,095	Currency EUR Impact
			For the Year Ended December 31
			2018 2017 $ 422 $ 1,273

b) Interest rate risk

The Group was exposed to interest rate risk because entities in the Group borrowed funds at both fixed and floating interest rates. The risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings.

• 50 -

The carrying amounts of the Group’s financial assets and financial liabilities with exposure to interest rates at the end of the reporting period were as follows:

Fair value interest rate risk Financial assets Financial liabilities Cash flow interest rate risk Financial assets Financial liabilities Sensitivity analysis	December 31
	2018 2017 $ 23,767 $ 43,078 415,597 131,446 563,810 689,496 1,576,612 1,765,702

The sensitivity analyses below were determined based on the Group’s exposure to interest rates for both derivatives and non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 10 basis points increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The sensitivity analyses were determined based on the Group’s exposure to interest rates at the end of the reporting period. A 10 basis points increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been 10 basis points higher/lower and all other variables were held constant, the Group’s pre-tax profit for the year ended December 31, 2018 and 2017 would decrease/increase by $1,013 thousand and $1,076 thousand, respectively, which was mainly attributable to the Group’s exposure to cash flow on its variable-rate bank borrowings.

c) Other price risk

The Group was exposed to equity price risk through its investments in equity securities and beneficiary certificates.

Sensitivity analysis

The sensitivity analysis below was determined based on the exposure to equity price risks at the end of the reporting period.

If equity prices had been 10% higher/lower, pre-tax profit for year ended December 31, 2018 would have increased/decreased by $2,142 thousand, as a result of the changes in fair value of financial assets at FVTPL, and the other comprehensive income for the year ended December 31, 2018 would increase/decrease by $21,424 thousand, as a result of the changes in fair value of financial assets at FVTOCI.

If equity prices had been 10% higher/lower, pre-tax profit for year ended December 31, 2017 would have increased/decreased by $18,717 thousand, as a result of the changes in fair value of held-for trading investments, and the other comprehensive income for the year ended December 31, 2017 would increase/decrease by $3,237 thousand, as a result of the changes in fair value of available-for-sale shares.

• 51 -

2) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. As at the end of the reporting period, the Group’s maximum exposure to credit risk which will cause a financial loss to the Group due to failure of counterparties to discharge an obligation and due to financial guarantees provided by the Group could arise from:

• a) The carrying amount of the respective recognized financial assets as stated in the balance sheets; and

• b) The amount of contingent liabilities in relation to financial guarantee issued by the Group.

The Group adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the equivalent of excellent grade. This information is supplied by a rating agency where available and, if not available, the Group uses other publicly available financial information to rate its major customers. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

The Group did transactions with a large number of unrelated customers and, thus, no concentration of credit risk was observed.

3) Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity risk management framework for the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, and continuously monitoring forecast and actual cash flows as well as matching the maturity profiles of financial assets and liabilities. As of December 31, 2018 and 2017, the Group had available unutilized bank loan facilities set out in (b) below.

• a) Liquidity and interest rate risk tables for non-derivative financial liabilities

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables had been drawn up based on the undiscounted cash flows of financial liabilities from the earliest date on which the Group can be required to pay. Specifically, bank loans with a repayment on demand clause were included in the earliest time band regardless of the probability of the banks choosing to exercise their rights. The maturity dates for other non-derivative financial liabilities were based on the agreed repayment dates.

December 31, 2018 Non-derivative financial liabilities Non-interest bearing Variable interest rate liabilities Fixed interest rate liabilities	On Demand or Less than 1 Month $ - 264,063 44,650 $ 308,713	1-3 Months $ 665,856 673,339 116,853 $ 1,456,048	3 Months to 1 Year $ - 343,270 169,137 $ 512,407	1-5 Years $ - 324,234 59,210 $ 383,444	5+ Years $ - - 46,285
					$ 46,285

• 52 -

December 31, 2017

Non-derivative financial liabilities Non-interest bearing Variable interest rate liabilities Fixed interest rate liabilities	On Demand or Less than 1 Month $ - 165,989 6,757 $ 172,746	1-3 Months $ 897,253 944,827 11,357 $ 1,853,437	3 Months to 1 Year $ - 390,146 28,337 $ 418,483	1-5 Years $ - 290,096 57,279 $ 347,375	5+ Years $ - - 61,493
					$ 61,493

The amount included above for variable interest rate instruments for both non-derivative financial assets and liabilities was subject to change if changes in variable interest rates differ from those estimates of interest rates determined at the end of the reporting period.

b) Financing facilities

Unsecured bank overdraft facility, reviewed annually and payable at call: Amount used Amount unused Secured bank overdraft facility: Amount used Amount unused		**December 31 **	**December 31 **
		2018 $ 1,030,234 1,291,096 $ 2,321,330 $ 961,975 513,547 $ 1,475,522	2017 $ 1,373,097 982,738 $ 2,355,835 $ 857,923 - $ 857,923

e. Transfers of financial assets

During 2018 and 2017, the Group discounted notes and accounts receivables with an aggregate carrying amount of $111,175 thousand and $111,079 thousand to a bank for cash proceeds of $84,617 thousand and $81,225 thousand, respectively. According to the contract, if the notes and accounts receivables are not paid at maturity, the bank has the right to request the Group to pay the unsettled balance. As the Group has not transferred the significant risks and rewards relating to these notes and accounts receivables, it continues to recognize the full carrying amount of the receivables and has recognized the cash received on the transfer as a secured borrowing (see Note 26).

As of December 31, 2018 and 2017, the carrying amount of the notes receivable (classified as other receivables) and accounts receivable that have been transferred but have not been derecognized amounted to $72,046 thousand and $27,011 thousand, respectively, and the carrying amount of the related liability was $69,212 thousand and $23,072 thousand, respectively.

• 53 -

25. TRANSACTIONS WITH RELATED PARTIES

The Company’s parent is Parpro Corporation, which held 20.02% of the ordinary shares of the Company as of December 31, 2018. Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. The price and the transaction terms with related parties were not significantly different from those with third parties. Details of transactions between the Group and other related parties are disclosed below:

• a. Related parties and their relationships with the Company:

Related Party Relationship with the Company Parpro Corporation (Parpro) Parent entity EFA Technologies Corporation (EFA) Fellow subsidiary Verite Associates

• b. Purchases of goods

Related Party Categories Parent entity Fellow subsidiary	**For the Year Ended December 31 **	**For the Year Ended December 31 **	**For the Year Ended December 31 **
		2018 $ - 10,994 $ 10,994	2017 $ 2,311 1,411 $ 3,722

• c. Payables to related parties

Line Item Related Party Category Accounts payable Fellow subsidiary Associates Compensation of key management personnel Short-term employee benefits Post-employment benefits		December	31
	2018 2017 $ 1,701 $ 1,481 28 - $ 1,729 $ 1,481 For the Year Ended December 31
		2018 $ 93,158 2,091 $ 95,249	2017 $ 90,306 1,352 $ 91,658

• d. Compensation of key management personnel

The remuneration of directors and key executives was determined by the remuneration committee having regard to the performance of individuals and market trends.

• 54 -

26. ASSETS PLEDGED AS COLLATERAL OR FOR SECURITY

The following assets at book value were provided as collateral for bank borrowings:

Bank deposits (classified as financial assets at amortized cost) Accounts receivable Note receivables (classified as other receivables) Building Freehold land Other non-current assets		**December 31 **	**December 31 **
		2018 $ 66,139 28,336 43,710 407,630 129,617 6,482 $ 681,914	2017 $ - 27,011 - 419,349 129,617 6,482 $ 582,459

27. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

In addition to those disclosed in other notes, significant commitments and contingencies of the Group were as follows:

As of December 31, 2018, unused letters of credit for purchases of raw materials amounted to $6,499 thousand.

28. SIGNIFICANT ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES

The Group entities’ significant financial assets and liabilities denominated in foreign currencies aggregated by the foreign currencies other than functional currencies and the related exchange rates between foreign currencies and respective functional currencies were as follows:

December 31, 2018
		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	24,720	30.715 (USD:NTD)	$ 759,275
RMB		173,654	4.472 (RMB:NTD)	776,581
EUR		1,198	35.200 (EUR:NTD)	42,170
Financial liabilities
Monetary items
USD		3,526	30.715 (USD:NTD)	108,301

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December 31, 2017

		Foreign		Carrying
	Currencies		Exchange Rate	Amount
Financial assets
Monetary items
USD	$	25,383	29.760 (USD:NTD)	$ 755,398
RMB		133,507	4.565 (RMB:NTD)	609,459
EUR		5,043	35.570 (EUR:NTD)	179,380
Financial liabilities
Monetary items
USD		5,841	29.760 (USD:NTD)	173,828
EUR		1,465	35.570 (EUR:NTD)	52,110

For the years ended December 31, 2018 and 2017, realized and unrealized net foreign exchange losses amounted to $4,219 thousand and $21,137 thousand, respectively. It is impractical to disclose net foreign exchange gain (loss) by each significant foreign currency due to the variety of the foreign currency transactions.

29. SEPARATELY DISCLOSED ITEMS

• a. Information about significant transactions and investees:

• 1) Financing provided to others. (Table 1)

• 2) Endorsements/guarantees provided. (Table 2)

• 3) Marketable securities held (excluding investment in subsidiaries, associates and joint ventures). (Table 3)

• 4) Marketable securities acquired and disposed at costs or prices at least NT$300 million or 20% of the paid-in capital. (None)

• 5) Acquisition of individual real estate at costs of at least NT$300 million or 20% of the paid-in capital. (None)

• 6) Disposal of individual real estate at prices of at least NT$300 million or 20% of the paid-in capital. (None)

• 7) Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 4)

• 8) Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital. (Table 5)

• 9) Trading in derivative instruments. (None)

• 10) Intercompany relationships and significant intercompany transactions formation on investees. (Table 6)

• 11) Information on investees. (Table 7)

• 56 -

• b. Information on investments in mainland China

• 1) Information on any investee company in mainland China, showing the name, principal business activities, paid-in capital, method of investment, inward and outward remittance of funds, ownership percentage, net income of investees, investment income or loss, carrying amount of the investment at the end of the period, repatriations of investment income, and limit on the amount of investment in the mainland China area. (Table 8)

• 2) Any of the following significant transactions with investee companies in mainland China, either directly or indirectly through a third party, and their prices, payment terms, and unrealized gains or losses. (Table 6)

30. SEGMENT INFORMATION

Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance focuses on the types of goods or services delivered or provided. The Group’s reportable segments were as follows:

• a. Segments revenues and results

The following was an analysis of the Group’s revenue and results from continuing operations by reportable segment.

Segment revenues Machinery segment Wood panels segment Eliminations Segment income Machinery segment Wood panels segment Non-operating income and expenses Profit before tax	For the Year Ended December 31	For the Year Ended December 31	For the Year Ended December 31
		2018 $ 5,429,951 707,109 (1,231,826) $ 4,905,234 $ 69,385 16,243 85,628 (20,683) $ 64,945	2017 $ 5,017,687 727,291 (1,279,844) $ 4,465,134 $ 63,263 49,359 112,622 10,985 $ 123,607

b. Segment total assets and liabilities

The Group’s segment total assets and liabilities and other segment information were not provided to the chief operating decision maker; therefore, disclosure was not necessary.

• 57 -

c. Geographic information

Taiwan China Germany USA Brazil Australia Thailand Others	Revenue from External Customers	Revenue from External Customers	Revenue from External Customers
	For the Year Ended December 31
		2018 $ 1,100,245 1,273,611 885,647 622,354 133,845 129,859 15,736 743,937 $ 4,905,234	2017 $ 1,100,695 1,110,494 610,111 681,922 64,265 211,676 149,262 536,709 $ 4,465,134

Taiwan China USA Germany Brazil		Non-current Assets	Non-current Assets
		December 31
		2018 $ 836,952 65,743 84,441 175,075 186,632 $ 1,348,843	2017 $ 797,903 74,883 89,514 196,818 211,439 $ 1,370,557

Non-current assets exclude financial instruments, investments accounted for using the equity method and deferred tax assets.

d. Revenue from major products and services

For the years ended December 31, 2018 and 2017, the Group does not have revenue from a single customer that exceeds 10% of the consolidated revenue.

• 58 -

TABLE 1

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

FINANCING PROVIDED TO OTHERS FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

No.	Lender	Borrower	Financial Statement Account	Related Parties	Highest Balance for the Period (Note 1)	Ending Balance (Note 1)	Actual Borrowing Amount	Interest Rate	Nature of Financing	Business Transaction Amounts	Reasons for Short-term Financing	Allowance for Impairment Loss	**Collateral **	**Collateral **	Financing Limit for Each Borrower (Notes 1and 3)	Aggregate Financing Limits (Notes 1 and 3)	Note
													Item	Value
0	The Company	Anderson Europe GmbH Giben America Monforts GmbH MATEC Sogotec	Accounts receivable - related parties Accounts receivable - related parties Accounts receivable - related parties Accounts receivable - related parties Accounts receivable - related parties	Yes Yes Yes Yes Yes	$ 152,208 30,830 54,360 126,840 100,000	$ - 30,715 35,200 - -	$ - 24,572 - - -	2.50% 2.50% 2.50% 2.50% 2.00%	Short-term financing Short-term financing Short-term financing Short-term financing Short-term financing	$ - - - - -	Operation requirements Operation requirements Operation requirements Operation requirements Operation requirements	$ - - - - -	- - - - -	$ - - - - -	$ 515,450 515,450 515,450 515,450 515,450	$ 1,030,899 1,030,899 1,030,899 1,030,899 1,030,899	2 2 2 2 2
1	CNT	The Company MATEC Shanghai	Accounts receivable - related parties Accounts receivable - related parties	Yes Yes	103,092 4,485	- 4,472	- 4,472	4.35% 5.00%	Short-term financing Short-term financing	- -	Operation requirements Operation requirements	- -	- -	- -	306,471 306,471	306,471 306,471	3 3
2	Anderson Europe GmbH	MATEC Monforts GmbH	Accounts receivable - related parties Accounts receivable - related parties	Yes Yes	35,200 35,200	35,200 35,200	- -	2.50% 2.50%	Short-term financing Short-term financing	- -	Operation requirements Operation requirements	- -	- -	- -	440,459 440,459	440,459 440,459	3 3

Note 1: The balance for the period and ending balance represent the amount approved by the board of directors.

Note 2: The loan limit should not exceed 40% of total equity of the Corporation. The loan limit to one party should not exceed 20% of the total equity or business transaction amount.

Note 3: The loan limit should not exceed 100% of total equity of the Corporation.

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TABLE 2

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

ENDORSEMENTS/GUARANTEES PROVIDED FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

No.	Endorser/Guarantor	Endorsee/Guarantee	Endorsee/Guarantee	Limits on Endorsement/ Guarantee Given on Behalf of Each Party (Note 1)	Maximum Amount Endorsed/ Guaranteed During the Period	Outstanding Endorsement/ Guarantee at the End of the Period	Actual Borrowing Amount	Amount Endorsed/ Guaranteed by Collaterals	Ratio of Accumulated Endorsement/ Guarantee to Net Equity in Latest Financial Statements (%)	Aggregate Endorsement/ Guarantee Limit (Note 2)	Endorsement/ Guarantee Given by Parent on Behalf of Subsidiaries	Endorsement/ Guarantee Given by Subsidiaries on Behalf of Parent	Endorsement/ Guarantee Given on Behalf of Companies in Mainland China	Note
		Name	Relationship (Note 3)
0	The Company	Anderson Europe GmbH MATEC Anderson Merchandise Sogotec	b b b b	$ 773,174 773,174 773,174 773,174	$ 43,994 181,200 425,000 350,000	$ 43,739 176,000 305,000 350,000	$ - 176,000 171,133 90,000	$ - - - -	2 7 12 14	$ 1,288,624 1,288,624 1,288,624 1,288,624	Yes Yes Yes Yes	- - - -	- - - -	- - - -

Note 1: The balance should not exceed 30% of total equity of the Company.

Note 2: The balance should not exceed 50% of total equity of the Company.

Note 3: The relationship is as follows:

• b. The Company controls over 50% of subsidiary’s ordinary shares directly.

• 60 -

TABLE 3

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

MARKETABLE SECURITIES HELD DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Holding Company Name	Type and Name of Marketable Securities (Note 1)	Relationship with the Holding Company	Financial Statement Account		December 31, 2018	December 31, 2018		Note
				Shares (In Thousands of Shares)	Carrying Amount	Percentage of Ownership	Fair Value
The Company CNT Anderson Logistics	Sinopac EMD & High Yield Bond Fund of Funds China Guangfa Bank “7 Day Notify Saving” Financial Product China Guangfa Bank “Xinjiaxin No. 16” Financial Product Bank of Communications “Yuntong Stable Wealth” 91 Day Financial Product Stock: Harbinger Technology Corporation	- - - - -	Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through profit or loss - current Financial assets at fair value through other comprehensive income - non-current	1,645 - - - 1,732	$ 17,474 13,416 76,024 107,328 27,549	- - - - 8.5	$ 17,474 13,416 76,024 107,328 27,549	2 2 2 2 -

Note 1: Marketable securities in the table refer to stock, bonds, beneficiary certificates and other related derivative securities within the scope of IFRS 9 “Financial Instruments”.

Note 2: Information on investments in subsidiaries and associates, see Table 7 and Table 8 for details.

Note 3: Fair value is measured based on the net asset value of the mutual funds on December 31, 2018.

• 61 -

TABLE 4

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST $100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Buyer	Related Party	Relationship		Transaction	Transaction	Details	Abnormal Transaction	Abnormal Transaction	Notes/Accounts Receivable (Payable)	Notes/Accounts Receivable (Payable)	Note
			Purchase/ Sale	Amount	% to Total	Payment Terms	Unit Price	Payment Terms	Ending Balance	% to Total
The Company Sogotec	Anderson America Sogotec Shanghai	Subsidiaries Subsidiaries	Sale Sale	$ (342,245) (622,082)	(31) (63)	The same as other customer The same as other customer	$ - -	Note Note	$ 285,080 641,191	37 84	- -

Note: Collection depends on capital status.

• 62 -

TABLE 5

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Company Name	Related Party	Relationship	Ending Balance	Turnover Rate		Overdue	Amounts Received in Subsequent Period	Allowance for Impairment Loss
					Amount	Actions Taken
The Company Sogotec	Anderson America Giben America Sogotec Sogotec Shanghai	Subsidiaries Subsidiaries Subsidiaries Subsidiaries	Accounts receivable $ 285,080 Accounts receivable 100,319 Accounts receivable 142,722 Accounts receivable 641,191	1.27 0.37 0.23 1.06	$ - - - -	- - - -	$ 168,154 - 4,085 33,942	$ - - - -

• 63 -

TABLE 6

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

BUSINESS RELATIONSHIP AND SIGNIFICANT INTERCOMPANY TRANSACTION FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Number	Company Name	Counterparty	Relationship (Note)		Transaction Details	Transaction Details
				Financial Account	Amount	Transaction Terms	% to Total Revenue or Assets
0	The Company	Anderson America CNT Giben America Sogotec Giben Brasil Anderson America CNT Giben America Giben Brasil Sogotec CNT Sogotec Giben America Monforts GmbH	1 1 1 1 1 1 1 1 1 1 1 1 1 1	Sales revenue Sales revenue Sales revenue Sales revenue Sales revenue Accounts receivable - related parties Accounts receivable - related parties Accounts receivable - related parties Accounts receivable - related parties Accounts receivable - related parties Other receivable - related parties Other receivable - related parties Other receivable - related parties Prepayments for equipments	$ 342,245 63,996 34,761 34,198 12,497 285,080 64,237 100,319 60,754 142,722 52,529 52,136 22,909 17,714	The same as common term of trade The prices are the Company’s cost plus 3% The same as common term of trade The same as common term of trade The same as common term of trade The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade	7 1 - - - 5 1 2 1 2 1 1 - -
1	Giben Brasil	Giben America Giben America	3 3	Accounts receivable - related parties Sales revenue	12,753 17,154	The same as common term of trade, and collection depends on capital status The same as common term of trade	- -
2	Sogotec	Sogotec Shanghai Sogotec Shanghai	1 1	Accounts receivable - related parties Sales revenue	641,191 622,082	The same as common term of trade, and collection depends on capital status The same as common term of trade	11 13
3	CNT	Sogotec Shanghai	3	Accounts receivable - related parties	19,906	The same as common term of trade, and collection depends on capital status	-
							(Continued)

• 64 -

Number	Company Name	Counterparty	Relationship (Note)		Transaction Details	Transaction Details
				Financial Account	Amount	Transaction Terms	% to Total Revenue or Assets
4	Giben SAMOA	Anderson America Giben Brasil Monforts GmbH Anderson America	3 3 3 3	Accounts receivable - related parties Accounts receivable - related parties Accounts receivable - related parties Sales revenue	$ 15,069 16,397 11,842 12,972	The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade, and collection depends on capital status The same as common term of trade	- - - -
5	Anderson Industrial	CNT	3	Other receivables - related parties	21,548	The same as common term of trade, and collection depends on capital status	-
6	Jentec	CNT	3	Sales revenue	28,119	The same as common term of trade	-
7	MATEC	The Company	2	Sales revenue	11,808	The same as common term of trade	-

• Note: 1. Parent to subsidiary.

• Subsidiary to parent.

• Between subsidiaries.

(Concluded)

• 65 -

TABLE 7

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTEES FOR THE YEAR ENDED DECEMBER 31, 2018 (In Thousands of New Taiwan Dollars)

Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount	Original Investment Amount	As of	December 31, 2018	December 31, 2018	Net Income (Loss) of the Investee	Share of Profits (Loss)	Note
				December 31, 2018	December 31, 2017	Shares (In Thousands of Shares)	%	Carrying Amount
The Company Anderson Merchandise Anderson Logistics Giben SAMOA Giben BVI Anderson Europe GmbH	Anderson Industrial Anderson Europe GmbH Anderson America Anderson Logistics Giben BVI Giben SAMOA Anderson Merchandise Sogotec Sogotec Sogotec Verite Giben America Giben Brasil Giben Brasil Monforts GmbH MATEC	Hong Kong Germany USA Taiwan British Virgin Islands Samoa Taiwan Taiwan Taiwan Taiwan Taiwan USA Brazil Brazil Germany Germany	Importing, exporting and general investing activities Manufacture and sale of machinery and service Sale of machinery and service Importing and Exporting Investment Investment Sale of wood panels and service Manufacture and sale of machinery Manufacture and sale of machinery Manufacture and sales of machinery Importing and Exporting Sale of machinery and service Manufacture and sale of machinery Manufacture and sale of machinery Manufacture and sale of machinery Manufacture and sale of machinery	$ 1,014 441,603 215,024 220,000 422,078 146,813 50,000 238,746 3,000 178,682 13,000 145,329 1,183 421,626 197,426 155,496	$ 1,014 314,868 165,197 220,000 407,501 146,772 50,000 190,709 - 171,961 10,000 145,329 1,142 407,049 125,006 101,181	300 - (Note) 1 22,000 10 10 5,000 11,796 50 4,461 1,300 - (Note) - (Note) - (Note) - (Note) - (Note)	100.00 100.00 100.00 100.00 100.00 100.00 100.00 65.53 0.28 24.78 33.33 100.00 0.28 99.72 100.00 100.00	$ 32,577 435,985 55,752 256,771 224,550 176,510 144,354 284,642 2,900 129,431 8,561 82,547 629 224,245 165,126 199,509	$ - 15,245 (2,086) 15,635 (53,807) (7,257) 11,151 71,216 71,216 71,216 (7,660) (35,513) (39,259) (39,259) (30,545) 27,630	$ - 10,876 (2,086) 15,635 (53,807) (7,257) 11,151 54,108 Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable	Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Associate Sub-subsidiary Sub-subsidiary Sub-subsidiary Sub-subsidiary Sub-subsidiary

Note: Limited company structure.

• 66 -

TABLE 8

ANDERSON INDUSTRIAL CORPORATION AND SUBSIDIARIES

INFORMATION ON INVESTMENTS IN MAINLAND CHINA FOR THE YEAR ENDED DECEMBER 31, 2018

(In Thousands of New Taiwan Dollars)

Investee Company	Main Businesses and Products	Main Businesses and Products	Paid-in Capital	Paid-in Capital	Method of Investment (Note 1)	Accumulated Outward Remittance for Investment from Taiwan as of January 1, 2018	Investment Flows	Investment Flows	Accumulated Outward Remittance for Investment from Taiwan as of December 31, 2018	Net Income (Loss) of the Investee	% Ownership of Direct or Indirect Investment	Investment Gain (Loss)	Carrying Amount as of December 31, 2018	Accumulated Repatriation of Investment Income as of December 31, 2018	Note
							Outflow	Inflow
CNT Jentec Chengdu ZhongDe Sogotec Shanghai MATEC Shanghai	Manufacture and sale of woodworking machinery Manufacture and sale of machinery Manufacture of woodworking machinery Sale of machinery and service Sale of machinery and service		$ 264,167 70,640 40,264 26,487 4,630		a a b c d	$ 264,167 70,640 - 26,487 -	$ - - - - -	$ - - - - -	$ 264,167 70,640 - 26,487 -	$ (3,772) 401 (2,183) 10,308 (4,117)	100 100 - 100 100	$ (3,772) 401 (1,463) 10,308 (4,117)	$ 303,481 60,242 - 27,493 (1,377)	$ 104,731 - - - -	2 and 4 2 2 and 5 2 2
Accumulated Outward Remittance for Investment in Mainland China as of December 31, 2018		Investment Amounts Authorized by Investment Commission, MOEA		Upper Limit on the Amount of Investment Stipulated by Investment Commission, MOEA
$ 361,294		$ 361,294		$ - (Note 3)

• Note 1: The methods of investment are as follows:

• a. Direct investment in mainland China.

• b. Indirect investment in mainland China through CNT. CNT has obtained 67% contribution for $26,977 thousand (RMB5,360 thousand). c. Sogotec has obtained 100% contribution for $26,487 thousand (US$800 thousand).

• d. MATEC has obtained 100% contribution for $4,630 thousand (EUR130 thousand).

Note 2: The amount was calculated using the equity method valuation and based on the audited financial statements.

Note 3: In accordance with “Examination Principles for Licensing Investment or Technical Cooperation in Mainland China” (revised by the MOEA on August 29, 2008), the Company has acquired certificate of operating scope, therefore the upper limit does not have to be calculated.

Note 4: As of December 31, 2018, CNT has remitted of investment income of RMB 23,109 thousand, equivalent to NT$104,731 thousand.

Note 5: Liquidation of Chengdu ZhongDe has been completed on December 13, 2018.

• 67 -