BRIGHT — Annual Report 2019

Jun 12, 2020

TSE ： 3031

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BRIGHT LED ELECTRONICS CORP.

Annual Report 2019

BRTLED annual report is available on: http : // mops.twse.com.tw https : // www.brtled.com

Notice to readers:

In case of any discrepancy between the English version and the Chinese version or any difference in the interpretation of the two versions, the Chinese version shall prevail.

BRTLED Spokesperson and Acting Spokesperson:

Spokesperson: Mei-Lien Lin Title: Director of Financial Management Office TEL ： (02)2959-1090

E-mail ： may.lin@brtled.com Acting Spokesperson: Hsin-Pei Liao Title: Manager of Operational Management Office TEL ： (02)2959-1090

Corporate Headquarter:

Address: 2, 3F, No. 19-25, Heping Rd., Banqiao Dist., New Taipei City, Taiwan, R.O.C. TEL ： (02)2959-1090

Common Share Transfer Agent and Registrar:

The Transfer Agency Department of Chinatrust Commercial Bank Address: 5F, 83, Sec. 1, Chung-Ching S. Rd., Taipei, Taiwan, R.O.C TEL ： (02)6636-5566 Website ： https://www.ctbcbank.com

Independent Auditors:

Certified public accountants: Ms. Hsin-I Kuo and Ms. Tzu-Hui Li

Accounting firm: KPMG Taiwan

Address: 68F, Taipei 101 Tower, No.7, Sec.5, Xinyi Road, Taipei, Taiwan R.O.C 11049 TEL ： (02)8101-6666

Website ： https://www.kpmg.com.tw

Name of any exchanges where BRTLED's securities are traded offshore and the method by which to access information on said offshore securities: N/A BRTLED official website: https://www.brtled.com

1. Letter to Shareholders----------------------------------------------------------------------------------------------

2. Company Profile----------------------------------------------------------------------------------------------------

3. Corporate Governance--------------------------------------------------------------------------------------------3.1 Organization structure

4. 3.2 Information regarding BRTLED’s Board of Directors, Supervisors, President, Vice president and Associate Vice President

5. 3.3 Status of corporate governance

6. 3.4 Information regarding BRTLED independent accountants

7. 3.5 Rotation of independent accountants

8. 3.6 Information regarding Chairman, President, CFO or Managers regarding Finance and Accounting, and independent auditors.

9. 3.7 Any transfer of equity interests and/or pledge of or change in equity interests by a director, supervisor, managerial officer, or shareholder with a stake of more than 10 percent during the most recent fiscal year or during the current fiscal year up to the date of publication of the annual report.

10. 3.8 Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another.

11. 3.9 The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers, and any companies controlled either directly or indirectly by the company

12. Capital and Shares-------------------------------------------------------------------------------------------------

13. 4.1 Capitalization

14. 4.2 Shareholders structure

15. 4.3 Distribution profile of share ownership

16. 4.4 List of major shareholders

17. 4.5 Stock price, net worth, surplus and dividend information for the past two years

18. 4.6 Dividend policy and implementation status

19. 4.7 The impact of the proposed bonus shares at the shareholders' meeting on the company's operating performance and earnings per share

20. 4.8 Compensation of employees, directors and supervisors

21. 4.9 Status of share buyback

22. 4.10 Issuance of corporate bonds

23. 4.11 Preferred shares

24. 4.12 Issuance of overseas depositary receipts

25. 4.13 Status of employee Stock Option Plan

26. 4.14 Status of employee restricted stock

27. 4.15 Status of M&A or transfer of new shares issued by other companies

28. 4.16 Financing plans and implementation

29. Operational Highlights--------------------------------------------------------------------------------------------

30. 5.1 Business activities

31. 5.2 Summaries of market, production and sales

32. 5.3 Overview of employees in the past two years

33. 5.4 Expenditures for environmental protection

34. 5.5 Labor relation

35. 5.6 Important contracts

36. Financial Highlights-----------------------------------------------------------------------------------------------75

37. 6.1 Condensed balance sheet and statement of comprehensive income for the most recent 5 financial year

38. 6.2 Financial analysis for the most recent 5 years

39. 6.3 Supervisors’ review report from the most recent financial report.

40. 6.4 The most recent consolidated financial statements including independent auditors’ report, a two-year comparative balance sheet and income statement, statement of changes in shareholders’ equity, cash flow statement, and any attached notes or appendices

41. 6.5 A consolidated financial statement for the parent company and its subsidiaries for the most recent fiscal year

42. 6.6 Any financial difficulties during the most recent fiscal year or the current fiscal year up to the date of printing of annual report

43. Financial Analysis and Risk Management -----------------------------------------------------------------

44. 7.1 Financial status

45. 7.2 Business performance

46. 7.3 Cash flows

47. 7.4 The effect of major capital expenditures during the most recent fiscal year on company’s finance and business operations

48. 7.5 The company’s reinvestment policy for the most recent fiscal year, the main reasons for the profits/losses generated thereby, the plan for improving re-investment profitability, and investment plans for the coming fiscal year

49. 7.6 Risk management and evaluation

50. 7.7 Other important matters

51. Subsidiaries Information and Other Special Notes --------------------------------------------------------8.1 Information related to the company’s affiliates

52. 8.2 Status of a private placement of securities during the most recent fiscal year or the current fiscal year up to the date of printing of annual report

53. 8.3 Holding or disposal of the company shares by the company’s subsidiaries during the most recent fiscal year or the current fiscal year up to the date of printing of annual report

54. 8.4 Other matters that require additional disclosure

55. 8.5 Any matter that set forth in Subparagraph 2, Paragraph 2, Article 36 of the Securities and Exchange Act, which might produce material impact on shareholders’ equity or the price of the company’s securities, has occurred during the most recent fiscal year or the current fiscal year up to the date of printing of annual report

1. Letter to Shareholders

Dear Shareholders

Compared with 2018, although the overall LED industry has slowly recovered under the continued influence of the U.S.-china trade war in 2019, the pressure of

price competition in LED industry still exists. In order to fight against such

unfavorable conditions under macroeconomics, Bright LED Electronics Corp. has actively adjusted the company's strategies over the years and operated with lean management. Fortunately, the company achieved favorable result this year due to costs reduction, resources optimization and increasing proportion of high value-added products. It is expected that the company could continue to make profits in this strange and changing situation in the future.

In 2019, the company's overall profitability was fair on the basis of steady gross margins. However, for the future, the company still needs to work hard to develop

diversified application products, to increase existing and future products’ added values, to cooperate in multiple industries for market expansion, and to provide customers with more one-stop services and customized products.

2019 Result

In 2019, our consolidated revenue totaled NT$1,763,659 thousand dollars, an increase of 6.84 per-cent over NT$1,650,740 thousand dollars in 2018. Consolidated net income totaled NT$233,879 thousand dollars, an increase of 169.10 percent over NT$86,910 thousand dollars in 2018. Net in-come attributed to the parent company

totaled NT$234,486 thousand dollars, an increase of 115.08 percent over NT$109,022 thousand dollars in 2018.

Financial Performance (based on consolidated Financial Statements)

		2019	2018
Financial structure	Debt ratio (%)	19.43	17.00
	Long term capital ratio (%)	416.70	446.93
Profitability	ROA (%)	6.91	2.57
	ROE (%)	8.31	3.08
	EBIT over paid-in capital (%)	13.90	5.96
	Profit margin (%)	13.26	5.26
	EPS (NT$ dollar)	1.28	0.58

Technological Developments

In 2019, for the product development of LED components, the ambient light sensors (ALS)’s project has been completed for now and been recognized by several customers. Its main advantage is to measure the amount of light around the environment, perceive the light intensity with the response characteristics of human eyes, and then automatically adjust brightness. The existing products of LED components such as photo coupler and IR LED, which used in security monitoring, medical, smart meter and other applications, have also been improved and developed and continually promoted. This year, their sales volumes could be expected to be relatively upward trended. Meanwhile, the development result of our new product, photo rely, in current phase of its development schedule achieved in good performance and it is expected to be completed on time under the planned development schedule. Compared to electromagnetic relay, photo relay has longer life time, lower current drive and faster response and so it’s one of the indispensable components in smart manufacturing industry. Finally, the development of UVC LED component products used in the field of environmental sterilization and health care has reached relatively significant results. Its product-related specifications and samples have been launched one after another and continue to be optimized for product quality and manufacturing process to meet customer needs for customization and differentiation. The miniaturization of UVC LED components brings many application advantages, which can be used in conjunction with many types of application products, such as surface sterilization: medical appliances, maternal and child products, smart toilets, refrigerators, tableware cabinets, fresh boxes, smart trash cans, thermos, escalator handrails and buttons on ticket vending machines; and still water sterilization: water tank, humidifier, ice machine; and flowing water sterilization: flowing water sterilization module, direct drinking water machine; and air sterilization: air purifier, air conditioning. Many of these applications are not able to conjunct with UVC using traditional mercury lamps. In addition, UVC LEDs have other advantages such as fast startup, more allowable switching times, and available battery power.

In view of the rampant COVID-19 virus that occurred at the beginning of 2020 and caused a severe impact on the world, the company expects to accelerate schedule of mass production for UVC LEDs this year and hopefully drive more incentives for more commodities to conjunct with UVC LEDs and its popularization in the future.

Summary, corporate development, and outlook affected by external competition,

regulatory environment and overall operation strategy

To outlook the company’s business plan for year 2020, other than continuously promoting and op-timizing the qualities and functions of the existing mass-produced LED products, which used in various application fields including consumer electronics, home appliances, security and safety controls, aviation and transportation electronics, computer-related applications,

sensing applica-tions, and lighting applications, the company also expects to provide new solutions to customers to meet their needs and so to achieve the company’s strategy of products’ customization and differentiation. For newly emerging LED technologies, especially UVC LED and photo relay, the company continues to accelerate their development schedules with expectation to expand 5G market, environmental sterilization market and health care and medical market. With the injection of new products, the company expects to obtain more new business opportunities and increase revenue and profits. From the beginning of 2020 to the present, the COVID-19 virus has caused severe impact on the world. It can be expected that the macroeconomics will decline rapidly in this year. Although the company's performance in early 2020 was unavoidably influenced by this world crisis, the company will continue to strengthen risk management, improve internal management and reinforce our adaptability to changes. In view of external factors, such as world environment and unpredictable risks of international policies, the company continues to adopt lean management, while at the same time promoting smart production and accelerating the improvement of our internal processes and operating model in order to diversify risks and reinforce adaptability to changes. Eventually, Bright LED Electronics Corp. will be able to sustainably operate and develop its business under such turbulent and uncertain era.

We sincerely thank you for your continued support towards BRTLED. We uphold our integrity to operate business and implement plans towards goals to live up to your expectations and supports. Finally, we wish you good health and great fortune in 2020.

Chairman: Tsung-Jen Liaw CEO: Tsung-Jen Liaw Accounting Manager: Mei-Lien Lin

2. Company Profile

2.1 Established date ： June 1, 1981

2.2 Milestone

• 1981 Establied with startup capital NT $1.13 million and produced light-emitting diode indicators

• 1984 Increased capital to NT $5.87 million and paid-in capital reached NT $7 million. Began production of light-emitting diode displays

• 1987 Capital increased by NT $13 million and paid-in capital amounted to NT $20 million. Implemented automated production equipments

• 1991 Capital increased by NT $40 million and paid-in capital reached NT $60 million. In April, production base moved to newly built factory located on Heping Road, Banqiao District, New Taipei City

• 1995 Capital increased by NT $40 million and paid-in capital amounted to NT $100 million to purchase equipments and expand production capacity. Started production of Axial LED and SMD LED and CHIP LAMPS

• 1997 Capital increased by NT $95 million and paid-in capital amounted to NT $195 million. Began production of plastic housing typed of SMD LEDs and stamping typed of Axial LEDs and obtained ISO 9002 quality certification

• 1998 In September, Securities and Futures Bureau approved public issue. Capital increased by NT $155 million and paid-in capital amounted to NT $350 million

• 1999 Obtained ISO 9001 quality certification in August. Capital increased by $77 million and paid-in capital amounted to NT $427 million

• 2000 Capital increased by NT $92.9 million and paid-in capital reached NT $519.9 million. Securities and Futures Bureau approved OTC

• 2001 Increased capital by NT $110 million and paid-in capital amounted to NT $630 million

• 2002 Securities and Futures Bureau approved the listing. Capital increased by NT $90 million in September and paid-in capital amounted to NT $720 million

• 2003 Increased capital by NT $100 million and paid-in capital amounted to NT $820 million

• 2004 Increased capital by NT $226 million and paid-in capital amounted to NT $1.06 billion

• 2005 Capital increased by NT $240 million and the paid-in capital amounted to NT $1.25 billion

• 2006 Capital increased by NT $200 million yuan and paid-in capital amounted to NT $1.45 billion

• 2007 Increased capital by NT $230 million yuan and paid-in capital amounted to NT $1.68 billion

• 2008 Capital increased by NT $154.4 million and paid-in capital amounted to NT $1.83 billion

• 2009 Increased capital by NT $112.4 million and paid-in capital amounted to NT $1.95 billion

• 2010 Capital increased by NT $19.9 million and paid-in capital amounted to NT $1.96 billion

• 2017 Capital reduced by NT $100 million by executing treasury stock repurchase and paid-in capital reduced to NT $1.86 billion

3. Corporate Governance

3.1 Organization Structure

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Shareholders’
Meeting
Supervisors
Board of
Directors Comp ensation
Committee
Internal
Audit
Chairman
CEO
Overseas Operation Finance Material R&D Lighting Sales &
Business Management Division Management Division Product Marketing
Division Division Division Sales Division
Division
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(1) Major Functions of Divisions

Divisions	Major Functions
Internal Audit	Inspection and review of BRTLED's internal control system, its adequacy in design and effectiveness in operation with independent risk assessment to ensure compliance with the company policies and procedures as well as with external regulations.
Overseas Business	Coordination and supervision of BRTLED’s overseas subsidiaries and factories’ operations.
Operation Management	1. Human resources management and organizational development, as well as proprietary information protection and security management. 2. Maintenance and development of the company’s business IT systems including infrastructure development, communication services and assurance of IT security and service quality plan.
Finance	1. Corporate finance and accounting. 2. Financial planning and long-term/ short-term investment evaluations. 3. Board affairs and stock affairs.
Material Management	1. Bargain and procurement of raw materials, materials and other assets and equipments. 2. Quality inspection and assurance. 3. Warehousing, import and export, and logistics support. Coordination of production and sales.
Research and Development	Advanced products development and specialty technology development and exploratory research, as well as design and testing and planning
Sales & Marketing Lighting Product Sales	1. Coordinate, supervise,and review sales plans and marketing plans. 2. Development of new customers and new markets. 3. Collection, aggregation and analysis of market information. 4. Improvement and suggestion of sales procedures and methods. 5. Sales development of various projects.

3.2 Information regarding BRTLED’s Board of Directors, Supervisors, President, Vice President and Associate Vice Presidents

3.2.1 Information regarding Board Members and Supervisors

As of 4/12/2019

															As of 4/12/2019	As of 4/12/2019	As of 4/12/2019
Title	Nationality or Place of Registration	Name	Gender	Date Elected	Term	Date First Elected	Shareholding When Elected		Current Shareholding		Spouse & Minor Shareholding		Shareholding by Nominee Arrangement		Directors Who are Spouses or within Second-degree Relative of Consanguinity to Each Other
							Shares	%	Shares	%	Shares	%	Shares	%	Title	Name	Relation
Chairman/ President (Note)	R.O.C	Tsung-Jen Liaw	M	2019.06.12	3yrs	1981.06.01	20,323,417	10.89%	20,938,417	11.22%	5,766,547	3.09%	0	-	Director Director	Shu-June Wang Hsin-Pei Liao	Spouse Daughter
Director	R.O.C	Shu-June Wang	F	2019.06.12	3yrs	2000.06.09	5,766,547	3.09%	5,766,547	3.09%	20,938,417	11.22%	0	-	Director Director	Tsung-Jen Liaw Hsin-Pei Liao	Spouse Daughter
Director	R.O.C	Chi-Chia Hsieh	M	2019.06.12	3yrs	2008.06.13	0	-	0	-	0	-	0	-	N/A	N/A	N/A
Director	R.O.C	Hsin-Pei Liao	F	2019.06.12	3yrs	2016.06.08	3,292,333	1.76%	3,292,333	1.76%	12,000	0.01%	0	-	Director Director	Tsung-Jen Liaw Shu-June Wang	Father Mother
Corporate Director	R.O.C	Wan-Hsu Investment Co.,Ltd	-	2019.06.12	3yrs	2000.06.09	25,880,397	13.86%	26,355,397	14.12%	-	-	-	-	-	-	-
	R.O.C	Representative- Po-Yuan Lin	M	2019.06.12		2018.07.31	2,291,596	1.23%	2,291,596	1.23%	-	-	-	-	Supervisor	Ju-Ching Liao	Mother
Independent Director	R.O.C	Ming-Chang Huang	M	2019.06.12	3yrs	2016.06.08	0	-	0	-	0	-	0	-	N/A	N/A	N/A
Independent Director	R.O.C	Chwen-Shell Ho	F	2019.06.12	3yrs	2016.06.08	0	-	0	-	0	-	0	-	N/A	N/A	N/A
Supervisor	R.O.C	Ju-Ching Liao	F	2019.06.12	3yrs	2000.06.09	2,240,541	1.20%	2,240,541	1.20%	1,690,929	0.91%	0	-	Director Director	Tsung-Jen Liaw Po-Yuan Lin	Second-degree Relative of ConsanguinitySon
Supervisor	R.O.C	Chin-Lung Huang	M	2019.06.12	3yrs	2004.05.31	0	-	0	-	0	-	0	-	N/A	N/A	N/A

Note: The current chairman and president of the company are the same person due to the dramatic changes in industry in recent years. In order to improve the efficiency of the implementation of operating policies, it is necessary to unify the authorities at present. The company is also actively seeking successor of the president and the appointment will be conducted at an appropriate time.

Title	Name	Education/ Experience	Current positions
Chairman/ President	Tsung-Jen Liaw	Bachelor Degree in Physics, Chung Yuan Christian University, Taiwan.	1. Chairman, Wan-Hsu Investment Co., Ltd 2. Chairman, Kobrite Corp. 3. Director, Yi-Run Investment Co., Ltd 4. Director, Powertip Technology Corp. 5. Chairman, Wan Hui company HK 6. Director, Powertip Image Corp. 7. Chairman, Bright Wonder(HK) 8. Director, WK Technology Fund IX Ltd. 9. Chairman, Bright Rise International Industrial Limited HK 10. Director, New Future Capital Ltd. 11. Director, AB Corp. 12. Director,Foxfortune TechnologyVentures Limited
Director	Shu-June Wang	Ching Kuo Institute of Management and Health, Taiwan.	1. Chairman, Yi-Run Investment Co., Ltd 2. Director, Wan-Hsu Investment Co., Ltd
Director	Chi-Chia Hsieh	Ph.D. in Electrical Engineering, University of Santa Clara, USA.	~~1. ~~Chairman, IQE Taiwan Corporation 2. Chairman, Microelectronics Technology Inc. 3. Director, Bright Crystal Company Limited 4. Director, The Taiwan Cement Corporation 5. Director, Kopin Corp. 6. Director, Sasson Capital 7. Director, Advanced Wireless Semiconductor Company 8. Independent Director, AcBel Polytech Inc. 9. Covener of Compensation Committee, AcBel Polytech Inc 10. Independent Director, Innolux 11. Covener of Audit Committee, Innolux 12. Covener of Compensiation Committee, Innolux 13. Chairman, Jupiter Network Corp. 14. Chairman,WelltopTechnologyCo.,Ltd
Director	Hsin-Pei Liao	Bachelor drgree in Finance, University of Alberta, Canada.	1. Director, Powertip Image Corp. 2. Director, PowertipTechnologyCorp.
Director	Representative of Wan-Hsu Investment Co., Ltd.﹕Po-Yuan Lin	Ph.D. in Materials Science and Engineering, Case Western Reserve University, USA.	N/A
Independent Director	Ming-Chang Huang	Ph.D. in Physics, Univeristy of Florida, USA.	Professor, Chung Yuan Christian University

Independent Director	Chwen-Shell Ho	Ph.D. in Physics, North Dakota State University, USA.	Professor, Chung Yuan Christian University
Supervisor	Ju-Ching Liao	National Hsinchu Senior High School, Taiwan	N/A
Supervisor	Chin-Lung Huang	Shih Hsin Senior High School, Taiwan.	CEO, Jin-Hui Management Consultant Corp.

3.2.1.1. Information of Corporate Shareholder

(a)Major Shareholders of BRTLED’s Corporate Shareholders

As of 5/6/2019

		As of 5/6/2019
Name of corporation	Major shareholders	%
Wan-Hsu Investment Co., Ltd	Tsung-Jen Liaw	35.00%
	Shu-June Wang	17.50%
	Ju-Ching Liao	18.50%
	Chung-Yao Lin	16.00%
	Ju-Hao Liao	8.00%
	Chung-Chun Lin	2.50%
	Jui-Lan Lin	2.50%

(b)Major Corporate Shareholders of BRTLED’s Corporate Shareholders

As of 5/6/2019

	As of 5/6/2019
Name of corporations	Major corporate shareholders
N/A	N/A

3.2.1.2. Eligibilities of Board Members and Supervisors

As of 5/6/2019

	Meet the Following Professional Qualification	Meet the Following Professional Qualification				Criteria (Note 1)	Criteria (Note 1)	Criteria (Note 1)	Criteria (Note 1)	Criteria (Note 1)	Criteria (Note 1)						Number of
	Requirements,																Other
	Together with at Least Five Years Work Experience																Taiwanese
	An Instructor or A Judge, Public	Have Work															Public
Criteria	Higher Position in Prosecutor,	Experience in the															Companies
	a Department of Attorney,	Area of															Concurrently
	Commerce, Law, Certified Public	Commerce,															Serving as an
	Finance, Accountant, or	Law, Finance, or															Independent
	Accounting, Other	Accounting, or															Director
	or Other Professional or	Otherwise
	Academic Technical	Necessary for the
	Department Specialists	Business of the
	Related to the Business Who Has Passed a National	Company	1	2	3	4	5	6	7	8		9		10	11	12
	Needs of the Examination
	Company and Been
Name	in a Public or Awarded a
	Private Certificate in a
	Junior College, Profession
	College or Necessary
	University for the Business
	of the
	Company
Tsung-Jen Liaw																	0
Shu-June Wang																	0
Chi-Chia Hsieh																	0
Representative of
Wan-Hsu Investment Co.,																	0
Ltd.: Po-Yuan Lin
Hsin-Pei Liao																	0
Ming-Chang Huang																	0
Chwen-Shell Ho																	0
Ju-ChingLiao																	0
Chin-LungHuang																	0
Note 1:	Directors, during the two years before being elected and during the term of office, meet
	any of the following situations, please tick the appropriate corresponding boxes:

1. Not an employee of the company or any of its affiliates;

2. Not a director or supervisor of the company or any of its affiliates. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary);

3. Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of 1% or more of the total number of issued shares of the company or ranks as one of its top ten shareholders;

4. Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the above persons in the preceding three subparagraphs;

5. Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds 5% or more of the total number of issued shares of the company or ranks as of its top five shareholders or has representative director(s) serving on the company’s board based on Article 27 of the Company Act;

6. Not a director, supervisor, or employee of a company of which the majority of board seats or voting shares is controlled by a company that also controls the same of the company. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary);

7. Not a director, supervisor, or employee of a company of which the chairman or president (or equivalent) themselves or their spouse also serve as the company’s chairman or president (or equivalent). (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary);

8. Not a director, supervisor, officer, or shareholder holding 5% or more of the shares of a specified company or institution that has a financial or business relationship with

the company (The same does not apply, however a company or instituite that holds above 20% but less than 50% of the company’s total issued shares and where such company or institute is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary);

1. Other than serving as a compensation committee member of the company, not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, and

the service provided is an “audit service” or a “non-audit service which total compensation within the recent two years exceeds NTD $500,000;

1. Not having a marital relationship, or a relative within the second degree of kinship to any other director of the company;

2. Not been a person of any conditions defined in Article 30 of the Company Law; and

3. Not a governmental, juridical person or its representative as defined in Article 27 of the Company Act.

3.2.2 Information regarding Management Team

													As of 5/6/2019	As of 5/6/2019	As of 5/6/2019
Title	Nationality	Name	Gender	On-board Date	Shareholding		Spouse & Minor		Shareholding by Nominee Arrangement		Education/ Experience	Current positions	Managers Who are Spouses or within Second-degree Relative of Consanguinity to Each Other
					Shares	%	Shares	%	Shares	%			Title	Name	Relation
President	R.O.C	Tsung-Jen Liaw	M	06/01/1981	20,938,417	11.22%	5,766,547	3.09%	0	-	Bachelor Degree in Physics, Chung Yuan Christian University, Taiwan.	1. Chairman, Wan-Hsu Investment Co., Ltd 2. Chairman, Kobrite Corp. 3. Director, Yi-Run Investment Co., Ltd 4. Director, Powertip Technology Corp. 5. Chairman, Wan Hui company HK 6. Director, Powertip Image Corp. 7. Chairman, Bright Wonder(HK) 8. Director, WK Technology Fund IX Ltd. 9. Chairman, Bright Rise International Industrial Limited HK 10. Director, New Future Capital Ltd. 11. Director, AB Corp. 12. Director, Foxfortune TechnologyVentures Limited	N/A	N/A	N/A
Vice President	R.O.C	Lin-Lin Chen	M	01/07/2014	10,531	0.01%	0	-	0	-	Bachelor Degree in Mechanical Engineering, Chinese Culture University, Taiwan.	N/A	N/A	N/A	N/A

Associate VP	R.O.C	Ming-Kuei Yu	M	04/11/2013	0	-	0	-	0	-	Master Degree in Graduate Institute of Automation and Control, National Taiwan University of Science and Technology, Taiwan.	N/A	N/A	N/A	N/A
Associate VP	R.O.C	Wei-Cheng Chen	M	10/01/2017	138,296	0.07%	0	-	0	-	Bachelor Degree in Accounting, Fu Jen Catholic University, Taiwan.	N/A	N/A	N/A	N/A
Associate VP	R.O.C	Hsiao-Yen Chang	M	10/01/2017	29,000	0.02%	0	-	0	-	Bachelor Degree in Electrical Engineering, Da-Yeh University,Taiwan.	N/A	N/A	N/A	N/A
Associate VP	R.O.C	Ying-Chen Hsiao	F	10/01/2017	191,930	0.10%	3,151	0.00%	0	-	Bachelor Degree in International Business, National Chengchi University,Taiwan.	N/A	N/A	N/A	N/A
Financial manager	R.O.C	Mei-Lien Lin	F	03/13/2015	0	-	0	-	0	-	Bachelor Degree in Accounting, Fu Jen Catholic University, Taiwan.	N/A	N/A	N/A	N/A

Note: The current chairman and president of the company are the same person due to the dramatic changes in industry in recent years. In order to improve the efficiency of the implementation of operating policies, it is necessary to unify the authorities at present. The company is also actively seeking successor of the president and the appointment will be conducted at an appropriate time.

• 3.2.3 Compensation Paid to Directors, Supervisors, President, and Vice President

• 3.2.3.1 Compensation Paid to Directors (including Independent Directors)

Unit: NT$ thousands

Title	Name	Director’s remuneration	Director’s remuneration	Director’s remuneration	Director’s remuneration	Director’s remuneration	Director’s remuneration	Director’s remuneration	Director’s remuneration	Total (A+B+C+D) as a % of yearly net income	Total (A+B+C+D) as a % of yearly net income	Directors who are also employees of BRTLED or of other consolidated entities	Directors who are also employees of BRTLED or of other consolidated entities	Directors who are also employees of BRTLED or of other consolidated entities	Directors who are also employees of BRTLED or of other consolidated entities	Directors who are also employees of BRTLED or of other consolidated entities	Directors who are also employees of BRTLED or of other consolidated entities	Directors who are also employees of BRTLED or of other consolidated entities	Directors who are also employees of BRTLED or of other consolidated entities	Total (A+B +C+D +E+F +G) as a % of yearly net incom e	Compension from Non-consolidate d affiliates	Compension from Non-consolidate d affiliates
		Base compen sation (A)		Severance pay and pension s (B)		Compensation to Directors (C)(Note)		Allowance s(D)				Base compensation, bonuses and allowances (E)		Severance pay and pensions (F)		Employee profit sharing bonuses (G) (Note)
		From BRTLE D	From all cons olidated entities	From BRT LED	From ~~a~~ll cons olidated entities	From BRTLED	From ~~a~~ll consoli dated entit ies	From BRT LED	From all cons olidated entities	From BRTLED	From ~~a~~ll conso lidated e ntities	From BRTLED	From all consolida ted entities	From BRTLED	From all consolidated entities	From BRTLED		From all consolidated entities		From BRTLED	From ~~a~~ll cons olidated entities
																Cash	Stock	Cash	Stock
Chairman	Tsung-Jen Liaw	60	60	0	0	1,243	1,243	0	0	0.56%	0.56%	4,847	4,847	0	0	5,856	0	5,856	0	5.12%	5.12%	N/A
Director	Shu-June Wang	60	60	0	0	622	622	0	0	0.29%	0.29%	480	480	0	0	0	0	0	0	0.50%	0.50%	N/A
Director	Chi-Chia Hsieh	60	60	0	0	622	622	0	0	0.29%	0.29%	0	0	0	0	0	0	0	0	0.29%	0.29%	N/A
Director	Hsin-Pei Liao	60	60	0	0	622	622	0	0	0.29%	0.29%	1,029	1,029	0	0	498	0	498	0	0.94%	0.94%	N/A
Director	Wan-Hsu Investment Co.,Ltd.	0	0	0	0	622	622	0	0	0.27%	0.27%	0	0	0	0	0	0	0	0	0.27%	0.27%	N/A
	Representa tive﹕ Po-Yuan Lin	60	60	0	0	0	0	0	0	0.03%	0.03%	1,264	1,264	0	0	230	0	230	0	0.66%	0.66%	N/A
Independent Director	Ming-Cha ng Huang	300	300	0	0	0	0	0	0	0.13%	0.13%	0	0	0	0	0	0	0	0	0.13%	0.13%	N/A
Independent Director	Chwen-Sh ell Ho	300	300	0	0	0	0	0	0	0.13%	0.13%	0	0	0	0	0	0	0	0	0.13%	0.13%	N/A
In addition to the disclosure above, the compensation received by the company directors for providing services to all companies noted in the financial report in the most recent year：0

In addition to the disclosure above, the compensation received by the company directors for providing services to all companies noted in the financial report in the most recent year ： 0 ~~Note~~ ： ~~The compensation distribution of employees and directors and supervisors in 2019 was NT $22,374,409 and NT $5,593,602, respectively.~~ Calculation of the amount to be issued this year is based on the ratio of the actual amount of allotment in the previous year.

3.2.3.2 Compensation Paid to Supervisors

Unit ︰ NT$ thousands

Title	Name	Supervisors’ remunerations	Supervisors’ remunerations	Supervisors’ remunerations	Supervisors’ remunerations	Supervisors’ remunerations	Supervisors’ remunerations	Total (A+B+C) as a % of yearly net income	Total (A+B+C) as a % of yearly net income	Compension from Non-consolidated affiliates
		Base compensation(A)		Severance pay and pensions (B) (Note)		Allowances (C)
		From BRTLED	From all consolidated entities	From BRTLED	From all consolidated entities	From BRTLED	From all consolidated entities	From BRTLED	From all consolidated entities
Supervisor	Ju-Ching Liao	60	60	622	622	0	0	0.29%	0.29%	N/A
Supervisor	Chin-Lung Huang	60	60	622	622	0	0	0.29%	0.29%	N/A
	Yi-Run Investment Co., Ltd.	0	0	622	622	0	0	0.27%	0.27%	N/A
Supervisor	Representative: Hung-Change Lin	60	60	0	0	0	0	0.03%	0.03%	N/A

Note ： The compensation of directors and supervisors in 2019 was NT $5,593,602. Calculation of the amount to be issued this year is based on the ratio of the actual amount of allotment in the previous year.

3.2.3.3 Compensation Paid to President and Vice President

														Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands	Unit: NT$ thousands
Title	Name	Base compensation (A)		Severance pay and pensions (B)		Bonuses and allowances (C)		Employees profit sharing bonus(D) (Note 1)				Total (A+B+C+D) as a % of yearly net income		Amount of employee stock option certificates obtained		Issuance of new restricted shares for subscription by employees		Compensi on from Non-cons olidated a ffiliates
		From BRTLED	From all consolida ted entities	From BRTLED	From ~~a~~ll consolida ted entities	From BRTLED	From all consolida ted entities	From BRTLED		From all consolidated enti ties		From BRTLED	From all consolida ted entities	From BRTLED t	From all consolida ed entities	From BRTLED	From all consoli dated entit ies
								Cash	Stock	Cash	Stock
President	Tsung-Jen Liaw	2,347	2,347	0	0	2,500	2,500	5,856	0	5,856	0	4.56%	4.56%	0	0	0	0	N/A
Vice President	Lin-Lin Chen	1,446	1,446	92	92	800	800	3,177	0	3,177	0	2.35%	2.35%	0	0	0	0	N/A

Note ： The compensation distribution for employees and directors and supervisors in 2019 was NT $ 22,374,409. Calculation of the amount to be issued this year is based on the ratio of the actual amount of allotment in the previous year.

3.2.3.4 Allocation of Employees Profit Sharing Bonus to Management team

Unit: NT$ thousands

==> picture [428 x 214] intentionally omitted <==

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

Amount of cash
Amount of Total as a % of yearly
Title Name dividends Total
stock net income
(Note)
dividends
President Tsung-Jen Liaw
Vice President Lin-Lin Chen
Associate VP Ming-Kuei Yu
Wei-Cheng
Associate VP
Chen
Management team Hsiao-Yen 0 12,382 12,382 5.28%
Associate VP
Chang
Ying-Chen
Associate VP
Hsiao
Mei-Lien
Financial
Manager Lin
----- End of picture text -----

• Note ： As of the date of publication of the annual report, the company's employee compensation to managers for 2019 has not yet been determined. It is planned to calculate the amount to be distributed based on the proportion of the actual amount allocated in the previous year.

• Compare and explain the analysis of the total remuneration paid to the company’s directors, supervisors, general managers and deputy general managers in recent two years to the net profit after tax of individual and consolidated financial statements. Also, explaining the policies, standards and combinations of remunerations related to portfolio, remuneration procedures, operating performance and relation to future risks.

  • (1) The percentage of the total remuneration paid to the company’s directors, supervisors, general managers and deputy general managers in recent two years over the net profit after tax of individual and consolidated financial statements: unit ： NT$ thousands

Items	2019			2018
	Total remuneration	Net profit after tax	%	Total remuneration	Net profit after tax	%
The company	26,392	234,486	11.26%	18,536	109,022	17.00%
The companies in consolidated statements	26,392	234,486	11.26%	18,536	109,022	17.00%

• (2) Each year, the cs paid to directors, supervisors, president and vice president are in accordance with the company's articles of association, the profitability of the year, and upon resolution of the board of directors.

• (3) The remunerations paid to directors and supervisors are processed under "Remuneration Payment Methods for Directors and Supervisors" approved by the Board of Directors and are reviewed by the Compensation Committee regularly before submitted to the Board of Directors for final approval. The remunerations includes periodic “transportation allowance” and “directors 'and supervisors' compensations” based on each year's profit situation and in proportion to directors and supervisors’ positions and participations in the company affairs. Independent directors do not participate in distribution of directors and supervisors ’compensation.

• (4) The total compensation paid to president and vice president is evaluated based on their job responsibility, contribution, company performance and projected future risks the company will face. The proposals of the total compensation are reviewed by the Compensation Committee regularly before submitted to the Board of Directors for final approval.

3.3 Status of Corporate Governance

3.3.1 Status of the Board of Directors

2019 Board of Directors’ meetings: 6. The directors’ attendance status is as follows:

	Name	Attendance in Person	By Proxy	Attendance Rate in Person (%) (Note)	Notes
Chairman	Tsung-Jen Liaw	6	0	100%
Director	Shu-June Wang	6	0	100%
Director	Chi-Chia Hsieh	4	2	67%
Director	Hsin-Pei Liao	6	0	100%
Director	Wan-Hsu Investment Co.,Ltd. Representative﹕ Po-Yuan Lin	6	0	100%
Independent director	Ming-Chang Huang	5	1	83%
Independent director	Chwen-Shell Ho	6	0	100%
Supervisor	Ju-Ching Liao	6	0	100%
Supervisor	Chin-Lung Huang	6	0	100%
Supervisor	Representative of Yi-Run Investment Co., Ltd.： Hung-Change Lin	5	0	83%	Resigned on 2020/3/20
Note：For those who have left their positions before the end of year, their actual attendance (%) is calculated based on the number of board meetings and their actual number of attendances during their tenure. Other matters： 1) If the operation of the board of directors is in any of the following situations, the date, period, content of the proposal, the opinions of all independent directors and the company's handling of the opinions of independent directors shall be stated: A. Securities and Exchange Act§14-3 resolutions: Meeting date Meeting period Content Opinions of all independent directors The company's handling of independent directors' opinions 2019/3/22 17thsession of 16th meeting Amendments to the Articles of Association Agreed Not applicable Amendments to the Regulations Governing the Acquisition and Disposal of Assets Agreed Not applicable

	Amendments to the Regulations
	Governing Loaning of Funds and Making of Agreed Not applicable
	Endorsements/Guarantees
	2020/3/20 18thseesion of fifth meeting Amendments to the Articles of Incorporation Agreed Not applicable
	B. In addition to the previous matters, other resolutions that have been opposed or reserved by
	independent directors with a record or written statement: No such situation
2) The implementation of directors ’avoidance of interested resolutions shall state the director’s
	name, the content of the resolutions, the reasons for avoidance of interests, and participation in
	voting: No such situation.
3) The board of directors’ self-assessment: the company passed the "The board of directors
	and Functional Committees’ Self or Peer Evaluation Method" on 2019/11/12 and began to
	implement it in 2020.
4) Objectives of strengthening the functions of the board of directors in the current year and most
	recent years (such as the establishment of an audit committee, improving information
	transparency, etc.) and evaluation of implementation: None

• 3.3.2 Status of Audit Committee or Supervisors

• a. Status of Audit committee: Not applicable at this moment

• b. Status of Supervisors: As shown in (1).

• c. Descriptions of the communications between the independent directors, the internal auditors, and the independent accountants:

• ． Communication guidelines between independent directors and internal auditors:

  • (a) The manager of internal auditors arranges meeting with independent directors at least once per quarter, communicates and replies to the independent directors, and reports to the independent directors with regard to internal auditing matters.

  • (b)The auditing report and follow-up report are delivered to each independent director for inspection via E-mail or in person before the end of the month following the completion of internal auditing matters.

  • (c) In the event of major unexpected incident, the manager of internal audit should reports immediately to the independent directors via phone or via other forms of communication.

• ． Communication guidelines between independent directors and independent accountants:

  • (a) Independent accountants should at least once per year communicate with independent directors regarding the company’s financial statements or impact of statute amendments.

  • (b) Meetings may be held at any time in case of major special conditions.

• d. Summary of past communications between independent directors and the manager of internal auditors:

Dates	Communication matters	Results	Results
		~~Suggestion~~ from independent directos	Actions taken after the communication
2019/5/10	Audit report for 2nd quarter of 2019	N/A	Continue to report

				to the Board of directors
	2019/8/9	Audit report for 3rdquarter of 2019	N/A	Continue to report to the Board of directors
	2019/11/12	Audit report for 4thquarter of 2019 Audit plan report for year 2020	N/A	Continue to report to the Board of directors
	2020/3/20	Annual audit plan actual implementation and tracking summary report for year 2019 Internal Control Self-assessment Report for year 2019 Audit report for 1st quarter of 2020	N/A	Continue to report to the Board of directors

• e. Summary of past communications between independent directors and the independent accountants:

Dates 2019/11/12	Communication matters	Results of execution
	Independent directors’ meeting with certified public accountants: Ms. Hsin-I Kuo and Ms. Tzu-Hui Li and Associate Chin-Mei Li from KPMG Taiwan. Topics including: 1. Reviewer ’s responsibility for reviewing mid-term financial reports 2. Scope of review 3. Finding of review 4. Key review matters 5. Independence 6. Updates on important accounting standards or relating explanatory letters, Securities and Exchange Act and Tax Act.	Independent directors had fully communicated with accountants regarding review of the first three quarters of 2019 financial report, recent important accounting principles and updates on government acts.

3.3.3 Status of Corporate Governance Operation and its Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
Does Company follow “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” to establish and disclose its corporate governance practices?		V	Although the Company has not yet set the code of corporate governance practice, it has been implemented in the rules and regulations and daily operations in accordance with the spirit and principles of corporate governance. The company had sets up a part-time corporate governance unit based on actual needs. Ms. Mei-Lien Lin, deputy director of the Financial Management Department and Ms. Hsin-Pei Liao, manager of the Operations Management Department, are both responsible for corporate governance related matters.	Same as explanation
Shareholding Structure & Shareholders’ Rights 1. Does Company have Internal Operation Procedures for handling shareholders’ suggestions, concerns, disputes and litigation matters. If yes, has these procedures been implemented accordingly? 2. Does Company possess a list of major shareholders and beneficial owners of these major shareholders? 3. Has the Company built and executed a risk management system and “firewall”	V V V		1. BRTLED has designated appropriate personnels, such as spokesperson, acting spokesperson, and the legal Department…etc to handle shareholder suggestions, concerns, disputes or litigation matters. 2. BRTLED has designated appropriate personnels to track the shareholdings of directors, officers, and top ten shareholders through the common share transfer agent. 3. BRTLED has set up internal rules in the Company’s Internal Control System and Affiliated Corporations	No major differences No major differences No major differences

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
between the Company and its affiliates? 4. Has the Company established internal rules prohibiting insider trading on undisclosed information?	ˇ V		Management. 4. BRTLED has established its “Insider Trading policy” that applies to all employees, officers and members of the Board of Directors of the Company and to any other person having a duty of trust or confidence, with respect to transactions in the Company’s securities. This policy, which is available on the company’s official website. prohibits any insider trading and the Company regularly provides internal training on this issue.	No major differences
Composition and Responsibilities of the Board of Directors 1. Has the Company established a diversification policy for the composition of its Board of Directors and has it been implemented accordingly? 2. Other than the Compensation Committee and the Audit Committee which are	V	ˇ V	1. The company's "Rules for Directors and Supervisors Election" stipulates that the members of the board of directors should have the knowledge, skills and literacy necessary to perform their duties, and be elected according to their specifications. Diversification Policy for the composition of the Board of directors and implementation: 2. The company established a compensation committee through the resolution from the board of	No major differences

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
required by law, does the Company plan to set up other Board committees? 3. Has the Company set performance assessment rules and methods for the board of directors and does it perform this evaluation every year? 4. Does the company regularly evaluate the independence of the CPA?	V	V	directors’meeing on December 22, 2011. In addition to the above committee, the company currently has no other functional committees. 3. The company has formulated the board of directors’ performance assessment rules and methods, which was approved by the board of directors on 2019/11/12, and started to implement in 2020. 4. The company regularly conducts the evaluation report of the independence of CPA accountants based on the following evaluation items each year and asks accountants to issue an independence statement. (1) The accountant has no direct or significant indirect financial interest relationship with the company. (2) The accountant has no financing or guarantee with the company or the company's directors. (3) The accountant has no close business relationship and potential employment relationship with the company. (4) Accountants and members of their audit team have not held positions as directors or managers of the company or had significant influence on audit work in past two years. (5) Accountants did not provide non-audit services that may directly affect the auditing. (6)Accountants do not intervene in stocks or other	Same as explanation Same as explanation No major differences

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
			securities issued by the company. (7) The accountant did not act as a defender of the company or coordinate conflicts with other third parties on behalf of the company. (8) The accountant has no kinship relationship with the company's directors, managers or personnel who have a significant influence on the audit case. On 2020/3/20, the board of directors of the company passed the independent assessment of 2020 CPA accountants.
Does the TWSE/TPEx listed company have a dedicated unit/staff member in charge of the Company' corporate governance affairs (including but not limited to providing information required for director/supervisor's operations, convening board/shareholder meetings in compliance with the law, apply for/change company registry, and producing meeting minutes of board/shareholder meetings)?	V		Our manager from financial division and manager from operational management division are concurrently in charge of the company’s corporate governance affairs.	No major differences
Does the Company establish communication channels and dedicate section for stakeholder on its website to respond to important issues of corporate social responsibility concerns?	V		The Company has set “Stakeholder Zone” and have the contact information for stakeholders to on its website to respond to major concerns regarding coporate social responsibilities from stakeholders.	No major differences

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
Has the company appointed a professional stock affairs agency for shareholders affairs?	V		The Company authorized “The Transfer Agency Department of Chinatrust Commercial Bank” as stock service agency to handle shareholder transactions.	No major differences
Disclosure of information 1. Does the Company set up website to disclose financial operations and corporate governance information? 2. Has the Company adopted other measures (such as English website, a designated person responsible for the collection and disclosure of information, implementation of the spokesman system, the legal entities announcements uploaded to website, etc.) to disclose information? 3. Does the company announce and declare the annual financial report within two months after the end of the fiscal year, and announce and declare the first, second, and third quarter financial reports and the monthly operating situation early within the prescribed time limit?	ˇ ˇ		1. The Company has placed financial and corporate governance information on its website. www.brtled.com 2. The Company has an English website and a Spokesperson and deputy spokesperson to disclose relevant information. 3. The company announced and declared its annual financial report within three months after the end of the fiscal year. The company also announced and declared the first, second, and third quarter financial reports and monthly operating results within the prescribed time limit.	No major differences No major differences No major differences
Does the Company have other important information for better understandingthe	ˇ		1. Interests and rights of employees: The Company has always treated employees ingood faith to	None

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
Company’s corporate governance system (including but not limited to interests and rights of employees, care for employees, relation with investors, relation with suppliers, relation with interested parties, continuing education of directors and supervisors, execution of risk management policies and risk measuring standards, execution of customer policies, liability insurance for the Company’s directors and supervisors)?			ensure their legal interests and rights in accordance with the Labor Standards Act. 2. Care for employees: by adopting a welfare system and good education and training, a relationship of mutual trust has been established with employees. Such as: employee benefits and community cultural and recreational activities and entertainment, health clinic grants and medical advice, the Company also provides staff quarters, rented accommodations for staff, accommodation care, parking lots, etc. 3. Relations with banks, customers, suppliers and other interested parties: the company has provided fluent communication channels to protect both parties’ legal rights and interests. 4. Execution of customer policies: stable and good relations with customers are maintained with the view of creating profits. 5. Execution of the company’s articles of association, internal auditing system to regurlay or irregularly evaluate risk management policy and risk measuring standards. 。 6. Continuing education of directors and supervisors:all directors and supervisors are required to take 6 hours of training. New

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
			appointed directors and supervisors are required to take 12 hours of training.
Please specify the measures adopted by the Company to improve the items listed in the corporate governance review result from Taiwan Stock Exchange's Corporate Governance Center and the improvement plans for items yet to be improved. 1. Protection of shareholders' rights and equality to shareholders: 2.2- Important updates posted on Public Information Observatory in Chinese and Engalish simultaneously. 2.9- The English version of the notice for shareholderins meeting 2019 was uploaded 30 days before the 2019 shareholders' meeting. 2.15- The English version of the proceedings and supplementary materials of the meeting will be uploaded 21 days before the 2019 shareholders’ meeting. 2. Implementation of Corporate social responsibility 3.1 Established "Integrity Code of Practice and Operational Procedures and Conduct Guidelines" 3.2 Stakeholder engagement zone on the company’s website discloses stakeholders’ identities, related issues and communication channels

3.3.4 Composition, Duties and Operation of the Compensation Committee:

a. Members of the Compensation Committee

Title	Criteria Name	Meet the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Meet the Following Professional Qualification Requirements, Together with at Least Five Years Work Experience	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Criteria for independence (Note 1)	Number of other Taiwanese public companies concurrently serving as an Independent Director	Notes
		An instructor or higher position in a Department of Commerce, Law, Finance, Accounting, or other academic department related to the business needs of the Company in a public or private junior college, college or university	A Judge, Public Prosecutor, Attorney, Certified Public Accountant, or Other Professional or Technical Specialists who has passed a national examination and been awarded a certificate in a profession necessary for the business of the Company	Have work experience in the area of Commerce, Law, Finance, or Accounting, or otherwise necessary for the business of the Company	1	2	3	4	5	6	7	8	9	10
Independent Director	Ming-Chang Huang	V			V	V	V	V	V	V	V	V	V	V	0
Independent Director	Chwen-Shell Ho	V			V	V	V	V	V	V	V	V	V	V	0
Other	Chin-Hui Lin		V	V	V	V	V	V	V	V	V	V	V	V	0

• Note 1 ： Directors, during the two years before being elected and during the term of office, meet any of the following situations, please tick the appropriate corresponding boxes:

• Not an employee of the company or any of its affiliates.

• Not a director or supervisor of the company or any of its affiliates. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.)

• Not a natural-person shareholder who holds shares, together with those held by the person’s spouse, minor children, or held by the person under others’ names, in an aggregate amount of one percent or more of the total number of issued shares of the company or ranks as one of its top ten shareholders.

• Not a spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the officer in the preceding 1 subparagraph, or of any of the above persons in the preceding subparagraphs 2 and 3.

• Not a director, supervisor, or employee of a corporate/institutional shareholder that directly holds five percent or more of the total number of issued shares of the company or ranks as of its top five shareholders or appointed as a representative in accordance with the Company Act Article 27, Item 1 or Item 2. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.)

8.

9.

• Not a director, supervisor, or employee of a company of which the majority of board seats or voting shares is controlled by a company that also controls the same of the company. (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.)

• Not a director, supervisor, or employee of a company of which the chairman or CEO (or equivalent) themselves or their spouse also serve as the company’s chairman or CEO (or equivalent). (The same does not apply, however, in cases where the person is an independent director of the company, its parent company, or any subsidiary, as appointed in accordance with the laws of Taiwan or with the laws of the country of the parent company or subsidiary.)

• Not a director, supervisor, officer, or shareholder holding five percent or more of the shares of a specified company or institution that has a financial or business relationship with the company. (However, if such specific company or institution holds more than 20% but less than 50% of the total issued shares of the company and its independent director who concurrently serves the company, the company’s parent company, subsidiary or subsidiary of the same parent company in accordance with this law or local national laws is not limited to this.)

• Other than serving as a compensation committee member of the company, not a professional individual who, or an owner, partner, director, supervisor, or officer of a sole proprietorship, partnership, company, or institution that, provides commercial, legal, financial, accounting services or consultation to the company or to any affiliate of the company, or a spouse thereof, and the service provided is an “audit service” or a “non-audit service which total compensation within the recent two years exceeds NTD500,000.

• Not been a person of any conditions defined in Article 30 of the Company Act.

b. Duties:

As professionals, the committee should evaluate the salary and remuneration policies and systems of the company's directors, supervisors and managers, and make recommendations to the board of directors for their decision-making reference. However, the proposal of the supervisor's salary and remuneration shall be submitted to the board of directors for discussion. The supervisor's salary and remuneration shall be prescribed by the company's articles of association or approved by the shareholders' meeting to authorize the board to deal with:

• (1) Regularly review the regulations and propose amendments.

• (2) Set and regularly review the company's directors, supervisors and managers' performance goals and policies, systems, standards and structure of salary and remuneration.

• (3) Regularly evaluate the salaries of directors, supervisors and managers of the company.

• Implementation status of the compensation committee

(1) The company's compensation committee consists three members and the term (the third term) is from June 12, 2019 to June 11, 2022.

• (2) 2019 Meeting status:

Title	Name	Attendance in person (Ｂ)	By proxy	Attendance rate(%) (Ｂ/Ａ)(Note)	Notes
Convenor	Ming-Chang Huang	2	0	100%
Member	Chwen-Shell Ho	2	0	100%
Member	Chin-Hui Lin	2	0	100%
Other matters for declaration： 1. If the board of directors does not adopt or amend the recommendations from the compensation committee, the date, the period, the content of the motion, the resolution of the board of directors’ meeting, and the company's feedback to the opinions from the compensation committee shall be stated: No such situation. 2. During resolutions of the Compensation Committee meetings, if any members of the compensation committee have objections or reservations and have a record or written statement, the date, the period, the motion content, the opinions of all members and feedbacks to members ’opinions shall be stated: No such situation.

3.3.5 Corporate Social Responsibility Performance:

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
Implement Corporate Governance 1. Does the company conduct risk assessments on environmental, social and corporate governance issues related to the company's operations in accordance with the principle of materiality, and formulate relevant risk management policies or strategies? (Note 3) 2. Does the company set up a full-time (part-time) unit that promotes corporate social responsibility and is authorized by the board of directors to deal with it at senior management level and report the situation to the board of directors? 3. Does the company set a reasonable compensation policy, combine employee performance evaluation system with corporate social responsibility policy, and establish a clear and effective reward and punishment system?	ˇ ˇ ˇ	ˇ	1. The company is co-ordinated by the operation management division to manage the company ’s management of environmental protection, corporate social responsibility, integrity management, risk management and other corporate governance issues related to the company ’s operations. Each divison evaluates the relevant business risks according to their functions. The risk control mechanism is regularly audited and revised at any time. 2. The operational management division is responsible for executing corporate social responsibility. 3. The company has set up the compensation committee to assist in reviewing relevant salary policies and to combine it with employee reward and punishment system and employee assessment system. In addition, the company's articles of incorporation clearly stipulate that the pre-tax benefits for the current year after deducting the distribution of employees' compensation and the	Same as explanation No major differences No major differences

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
			benefits before the compensation of directors and supervisors are retained to cover the accumulated losses, the remaining balance will be allocated at least 8% for employee compensation.
Environment for sustainable development 1. Does the Company endeavor to utilize all resources more efficiently and uses renewable materials which have a low impact on the environment? 2. Does the Company establish proper environment management systems based on its industrial features? 3. Does the Company monitor the impact of climate change on its operations, and establish company strategies to save energy and reduce the emission of carbon and greenhouse gas?	ˇ ˇ ˇ		1. The company aims to integrate commodities in the global environment through energy-saving and water-saving measures, and consider the product life cycle together with green environmental protection. 2. The company received the ISO 14001 environmental management system certification in 2004, and the products passed the ROHS environmental standards for toxic substances in 2005. 3. Fully adopt high efficient LED outdoor and indoor energy-saving lighting systems. Only when temperature reaches above 28 degrees,the company turns on the air-conditioning to reduce carbon. The company also stops air-conditioning for one hour during the lunch break and implement the energy saving and carbon reduction policies.	No major differences No major differences No major differences
Protect social public interests 1. Does the Companyestablishproper management	ˇ		1. The companyhas the "human rights

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
methods and procedures in accordance with the relevant regulations and the international conventions on human rights? 2. Has the Company set up an employee complaint mechanism and proceed with care? 3. Does the Company provide a safe and healthy working environment for its employees and organize training on safety and health on a regular basis? 4. Does the Company establish regular communication mechanisms for employees, and inform employees of the operation changes that mayhave significant	ˇ ˇ ˇ ˇ ˇ ˇ ˇ ˇ		policy" and abides labor laws and regulations to protects the rights and interests of employees, to create legal employment, to avoid sexual harassment and discrimination, and to formulate fair performance evaluation system. 2. The company is responsible for handling related matters, and has a fair trade dedicated mailbox fairtrade@brtled.com. It has a dedicated mobile phone number to provide an employee complaint channel, and a dedicated person handles the complaint properly. 3. The company provides a working environment that meets regulations (with access control and fire escape equipment) and cooperates with professional institutions to organize employee health inspections and safety and health education and training. The 2019 implementation situation is as follows: (1) Fire drills are held in June to strengthen employees' fire fighting concepts and emergency escape response capabilities. (2) Hold a health check in December to understand the health of employees. (3) No occupational disasters occurred in year 2019. 4. The company provides a variety of communication channels, through internal bulletin boards,e-mail or educational	No major differences No major differences No major differences

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
impact on employees in reasonable way? 5. Has the Company established an effective competency development career training program for employees? 6. Has the Company set up consumer protection policies and reporting procedures regarding R&D, procurement, production, operation and service processes? 7. Is the company in compliance with relevant laws and regulations as well as international standards when it comes to marketing and labeling of products and services? 8. Does the Company assess the past records of supplier’s in terms of its impact on the environment or society before the signing the contract. 9. Does the Company, in its contract with its major suppliers, include clause such as that the Company may terminate the contract any time when the supplier is found violate its social respoinsibilities,			announcements, etc., to immediately convey important company information to employees, and through two-way communication with employees through department meetings and business meetings. 5. The company has a complete education and training course every year according to the work needs of employees, which combines training and performance management systems to help employees develop their talents and potentials。 6. At present, the consumer (customer) rights and interests policy is formulated, there is a complete customer complaint system specification and a complaint channel has been established for R&D procurement, production, operations and service processes. 7. The company provides a complete product after-sales customer service system and pass relevant international safety standards and international environmental protection standards. 8. The company must pass the supplier evaluation process before and after the supplier, and record whether the supplier has a record of affecting the environment and society in the past. 9. The company must pass the supplier evaluation process before and after the supplier, and record whether the supplier has a record of affectingthe environment and societyin thepast.	No major differences No major differences No major differences No major differences No major differences

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
and when such violation has significant impact on the environment and society.			The company formulates the "Integrity and Integrity Transaction Commitment Letter" to request the supplier to sign back. If the employee or family members request any tangible or intangible benefits, the company will immediately notify the company to permanently stop cooperation. The company and its employees violate the regulations and mayviolate relevant criminal laws.
Enhanced information disclosure 1. Does the Company disclose relevant critical and reliable information on corporate social responsibilities on its website and MOPS?	ˇ		The company provides relevant information through the website, and has a dedicated person responsible for data maintenance and update.	No major differences
5. If the Company makes its own corporate social responsibilities principles according to the Rules of Corporate Social Responsibility Best Practice Principles for TWSE/GTSM-Listed Companies, please state the differences: No difference.
6. Other important information that helps understand the operation situation in terms of the corporate social responsibities: The company's concept of social responsibility is the product LED produced, with the goal of integrating products with the global environment, and considering the product life cycle together with green environmental protection. When engaging in various activities, all employees should reduce the load on the environment as much as possible, abide by the relevant national regulations, comply with the operating procedures, and strive to prevent pollution. Continuous improvement of environmental management System, make full use of the maximum resources, and pursue excellent environmental performance, with the goal of achieving ISO 14000, all products meet the environmental standards of toxic substances. The practical method is as follows： 1. R&D for new products is oriented towards an all-round green management model of environment, resources and products. 2. Fully adopt high-efficiency LED outdoor and indoor energy-saving lighting systems from daily life. 3. Fully communicate and coordinate with employees to strive for the whole company to recognize the concept of environmental protection and establish the concept ofgreen isquality.

Assessment items	Implementation status	Implementation status	Implementation status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
4. In daily life, the company finds ways to minimize the use of substances that may cause environmental damage. 5. The company abides by labor laws and regulations, protects the rights and interests of employees, legally hires, is free from sexual harassment and discrimination, and has a fair performance evaluation system 6. The daily implementations: when the temperature reaches 28 degrees, the air-conditioning turned on, the air-conditioning stopped for one hour during lunch break, and implement energy-saving and carbon-reduction policies. 7. The company carries out routine physical health checks every year, so that employees can grasp their own health status. 8. Reduce unnecessary travel, set up video equipment in each plant to promote energy saving and carbon reduction for employees. 9. Implement protection of employees' work rights, promote high-quality employee welfare system and implement education and training. 10. All products have obtained relevant testing and certifications: ．The street lamp series passed the third-party testing and energy-saving certification of TAF laboratory ．The LED light tubes passed the certification of BSMI standard by the Bureau of Standards and Inspection of the Ministry of Economic Affairs ．Quality system: ISO9001 / ISO14001 / IATF16949 ．The spotlights, tunnel lights and landscape lights series passed the third-party testing and energy-saving certification of TAF laboratory ．Downlights passed the third-party testing and certification of TAF laboratory ．OA lamps passed the third-party testing and certification of TAF laboratory ．LED light bulbs passed CE certification, neptune planetary LED bulbs passed BSMI ．Photo Coupler safetycertification: CQC China/ CSA Canada/ UL United States/ VDE Germany
8. A clear statement shall be made if the corporate social responsibilities report of the Company passed the inspection of relevant certification agencies: The Company hasn’t prepared its annual report on corporate social responsibilities yet.

3.3.6 Status of Implementation of Ethical management:

Assessment items	Implementation Status	Implementation Status	Implementation Status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
Adopt ethical management policy and scheme 1. Does the Company clarify the ethical management policy in its regulations and external documents and the commitment of board of directors and managers to active implementation? 2. Does the Company work out scheme, operation procedures and guidelines of conducts for employee education and training to prevent dishonest behaviors? 3. Does the Company adopt preventive measures to bad faith companies with higher risks of its business activities described in article 7 item 2 of the “Integrity Operation Practice Principles for TWSE/GTSM-Listed Companies”?	ˇ ˇ ˇ		1. The company has established the " Procedures for Ethical Management and Guidelines for Conduct" and " Codes of Ethical Conduct for Directors and Managers", and signed " "Ethical management and trade" with suppliers and distributors to implement the ethical management policy. 2. The company's "Procedures for Ethical Management and Guidelines for Conduct" has procedures for preventing dishonesty, reporting system, reward and punishment, appeal system and disciplinary action. Through internal bulletin boards, emails and department meetings, employees communicate the importance of integrity. The specification is disclosed in the corporate governance section of the company ’s website for reference。 3. The Company's "Procedures for Ethical Management and Guidelines for Conduct" sets out business activities with high risk of dishonesty behavior and related preventive measures within the business scope, which includes the seventh article of the "Listed OTC Company Integrity Management Code" Two acts of each paragraph. In addition, the employees of the companymust sign an "employment	No major difference No major difference No major difference

Assessment items	Implementation Status	Implementation Status	Implementation Status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
			agreement" with a promise of integrity, and require dealers and suppliers to sign an "integrity and integrity transaction commitment" to strengthen compliance with integrity.
Implementing Ethical management 1. Does the Company assess the integrity record of its business partners and set faithful conduct policies in the terms and conditions of its contracts? 2. Has the Company set up exclusively (or concurrently) dedicated units to be in charge of corporate ethical management which report to and are supervised by the Board of Directors? 3. Does the Company work out policies to prevent conflicts of interest and provide proper statement channels?	ˇ ˇ ˇ ˇ ˇ		1. The Company's "Ethical management and trade" sets out the terms of integrity and integrity transaction, which clearly requires dealers and suppliers to make commitments on honesty and integrity and integrity transactions. Each year, the business and procurement unit evaluates the transactions in the past year and re-signs the commitment to "Ethical management and trade". 2. The company's operation department is a part-time unit, responsible for promoting the operation of the company's integrity management, and reporting the actual operation to the management meeting, and reporting to the board of directors at least once a year. 3. The company's "Procedures for Ethical Management and Guidelines for Conduct" specifies that when the personnel who execute the company's business find that they have conflicts with themselves or the legal person they represent, they should report the relevant matters to the direct supervisor and the company's special responsibility. Units	No major difference Same as explanation No major difference

Assessment items	Implementation Status	Implementation Status	Implementation Status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
4. Has the Company established an effective accounting system, internal control system and audit by internal auditors or CPAs to put ethical management into practice? 5. Does the Company organize internal or external trainings in an ethical management of business regularly?			and direct supervisors should provide appropriate guidance. 3. The company's "Procedures for Ethical Management and Guidelines for Conduct" specifies that when the personnel who execute the company's business find that they have conflicts with themselves or the legal person they represent, they should report the relevant matters to the direct supervisor and the company's special responsibility. Units and di he company has established an accounting system, internal control system and related management methods, and internal auditors regularly check the compliance of various systems.rect supervisors should provide appropriate guidance. 4. The company has established an accounting system, internal control system and related management methods, and internal auditors regularly check the compliance of various systems. 5. In addition to the promotion of integrity behavior of new employees, the company's directors, supervisors, financial accounting, auditors and senior managers must participate in internal and external education and training every year. In 2019, relevant personnel participated in courses includingregulations revision,director supervision	No major difference No major difference No major difference

Assessment items	Implementation Status	Implementation Status	Implementation Status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
			and management practice, internal control fraud inspection, insider trading, professional ethics, and economic crime legal responsibility. A total of 14 participants participated in 141 hours of related education and training. The Operations Management Department also regularly conducts online courses on "Ethical Management Education Training and Case Sharing", which requires all employees to participate. As of 2020/3/12, a total of 54 people completed 5 hours of online courses. In addition, the "Procedures for Ethical Management and Guidelines for Conduct" are disclosed in the corporate governance section of the company's website for internal and external personnel to refer to.
Report System operating status 1. Has the company set specific report and reward system to facilitate the report cannel and assign appropriate specialist accepting to spot the reported object? 2. Has the company set the standard operating procedures and related nondisclosure mechanisms to investigate reported matters?	ˇ ˇ ˇ		1. The company's "Procedures for Ethical Management and Guidelines for Conduct" has a reporting and reward system, and the responsible unit handles related matters. There is a fair trade dedicated mail box fairtrade@brtled.com and a dedicated mobile phone number Charge. 2. The company's "Procedures for Ethical Management and Guidelines for Conduct" are clearly stipulated that after receiving the report, the responsible unit will be responsible for identifying the relevant facts, if necessary,bythe compliance of the regulations or other	No major difference No major difference

Assessment items	Implementation Status	Implementation Status	Implementation Status	Differences from the Law “Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies” and Reasons:
	Y	N	Explanation
3. Has the Company set measures to protect whistleblowers do not suffer for which he or she reported?			relevant departments to provide assistance, and for the identity of the informant And the content of the report shall be kept confidential. 3. The company keeps the identity of the informant and the content of the report confidential, and promises to protect the informant from improper handling of the report.	No major difference
Enhance information disclosure 1. Does the company disclose the information of implementation and results of ethical management on its website and the MOPS?	ˇ		1. The company disclosed the contents of the "Procedures for Ethical Management and Guidelines for Conducts" in the Corporate Governance section and public information observatories on the company's website. The relevant implementation of the promotion is also explained in the company's annual report disclosed on the above website.	No major difference
If the company develops its own integrity operation rules according to the Integrity Operation Best Practice Principles for TWSE/GTSM-Listed Companies, please state the differences: No difference.
Other important information for better understanding of the integrity operation (such as review and revision of the regulations on ethical management): The company signed "Commitments of Honesty and Cleanliness Transaction" with suppliers and distributors to jointly combat illegal acts of commercial bribery and uphold honesty and integrity and clean transactions.The company has established the "Procedures for Ethical Management and Guidelines for Conducts" to comply with relevant regulations and relevant laws and regulations on business conduct. The Companyhas a system for avoidingdirectors ’interests in the “Rules and Procedures of Board of Director Meetings”.

3.3.7. Other Company-established corporate governance rules and regulations:

Please refer to the Company’s website for the company’s Corporate Governance Principles.

3.3.8. Other Important Corporate Governance Information:

1. The company has established internal major information processing procedures and procedures for managing prevention of insider trading. All relevant departments handling potential major information and disclosure should comply with the relevant procedures and laws.

2. Employees of the company must abide by laws and internal regulations to avoid dishonesty.

3. The employees related to financial information transparency have obtained the relevant certificates designated by the competent authority ：

Certificates	Internal Auditors
Certified Internal Auditor CIA	2
Certification in Control Self-Assessment CCSA	2

4. 2019 Directors’ training:

Title	Name	Organizer	Course	Hours
Chairman	Tsung-Jen Liaw	~~Taiwan Corporate Governance~~ Association	~~Development Trends and Norms of Money Laundering~~ and Capital Terrorism Prevention	3
		~~Taiwan Corporate Governance~~ Association	~~Industry 4.0 and how companies lead innovation~~ transformation	3
Director	Shu-June Wang	~~Taiwan Corporate Governance~~ Association	~~Development Trends and Norms of Money Laundering~~ and Capital Terrorism Prevention	3
		~~Taiwan Corporate Governance~~ Association	~~Industry 4.0 and how companies lead innovation~~ transformation	3
Director	Chi-Chia Hsieh	Corporate Operation Association	~~Disclosure of major company information and case analysis~~ of directors' responsibilities	3
		Corporate Operation Association	~~Board of Directors' compliance with laws and regulations, legal~~ responsibilities and case studies of directors and supervisors	3
Director	Po-Yuan Lin	~~Taiwan Corporate Governance~~ Association	~~Development Trends and Norms of Money Laundering~~ and Capital Terrorism Prevention	3
		~~Taiwan Corporate Governance~~ Association	~~Industry 4.0 and how companies lead innovation~~ transformation	3
Director	Hsin-Pei Liao	~~Taiwan Corporate Governance~~ Association	~~Development Trends and Norms of Money Laundering~~ and Capital Terrorism Prevention	3
		~~Taiwan Corporate Governance~~ Association	~~Industry 4.0 and how companies lead innovation~~ transformation	3
Independent Director	Ming-Chang Huang	~~Taiwan Corporate Governance~~ Association	~~Development Trends and Norms of Money Laundering~~ and Capital Terrorism Prevention	3
		~~Taiwan Stock Exchange Corporation~~	~~Briefing of how to effectively exert directors' functions~~	~~3~~
Independent Director	Chwen-Shell Ho	~~Taiwan Corporate Governance~~ Association	~~Development Trends and Norms of Money Laundering~~ and Capital Terrorism Prevention	3
		~~Taiwan Corporate Governance~~ Association	~~Industry 4.0 and how companies lead innovation~~ transformation	3

3.3.9. Status of Implementation of Internal Control System:

1. Statement of Internal Control

Bright Led Electronics Corp. Statement of Internal Control

March 20, 2020

About the company's internal control system for 2020, based on the results of self-assessment, would like to declare the following:

1. The company is aware that it is the board of directors and managers’ responsibilities to establish, implement and maintain the internal control system. The company has already established such system with the purpose of providing reasonable assurances for the achievement of objectives such as the effectiveness and efficiency of operations (including profitability, performance, and asset security, etc.), reliability, timeliness, transparency of reporting, and compliance with relevant standards and relevant laws and regulations.

2. The internal control system has its inherent limitations. No matter how perfect the design is, an effective internal control system can only provide reasonable assurance for the achievement of the above three objectives; and, due to changes in the environment and circumstances, the effectiveness of the internal control system may vary. However, the company's internal control system has a self-monitoring mechanism. Once the deficiency is identified, the company will take corrective action.

3. The company determines whether the design and implementation of the internal control system is effective based on the judgment items on the effectiveness of the internal control system specified in the "Regulations Governing Establishment of Internal Control Systems by Public Companies" (hereinafter referred to as “the regulation"). The internal control system judgment items described in the "the regulation" are, according to the process of management control, composed by five elements: 1. control environment, 2. Risk assessment, 3. control operations, 4. information and communication, and 5. Supervision operations. Each element contains several items. For the aforementioned items, please refer to the "the regulation".

4. The company has adopted the above internal control system to judge the project and evaluate the effectiveness of the design and implementation of the internal control system.

5. Based on the evaluation results of the preceding paragraph, the company believes that the company's internal control system by December 31, 2019 (including supervision and management of subsidiaries), including understanding the effectiveness of operations and the degree to which efficiency goals are achieved, reports are reliable, timely, transparent and design and implementation of the internal control system are in compliance with relevant regulations and laws and regulations, are effective and can reasonably ensure the achievements of above goals.

6. This statement will become the main content of the company's annual report and be published in public. If the contents disclosed above are false or concealed, the legal responsibilities set by Article 20, Article 32, Article 171 and Article 174 of the Securities Exchange Law will be involved.

7. This statement was approved by the board of directors of the company on March 20, 2019. Of 7 directors present, no objections take place, all directors agreed with the contents of this statement, and hereby declare.

Bright LED Electronics Corp.

• Chairman: Tsung-Jen Liaw

President: Tsung-Jen Liaw

1. The person who entrusts the accountant to review the internal control system on an ad hoc basis should disclose the accountant ’s review report: No such situation.

2. 3.3.10. In recent years and as of the date of publication of the annual report, the company and its internal personnel were punished according to law or the company ’s internal personnel were punished by violating the internal control system or major deficiencies and improvements occur: no such situation

3. 3.3.11. In recent years and as of the date of publication of the annual report, important resolutions from the annual shareholders' meeting and the board of directors’ meetings:

4. Content of resolution and implementation from the Annual Shareholders’ meeting:

Date of 2019 Annual Shareholders’ meeting: June 12, 2019

Date of 2019 Annual Shareholders’ meeting:	June 12,2019
Important Resolution Matters	Implementation
(1) 2018 Financial statements approved	-
(2) 2018 Earnings distribution Cash dividend: NT $0.52/per share.	Distribution date: July 15, 2019 Date of Payment: August 07, 2019
(3) Amendment of Article of Incorporation	Continuously abide by
(4) Amendment of Procedures for Acquisition or Disposal of Assets	Continuously abide by
(5) Amendment of Procedures for Governing Loaning of Funds and Making of Endorsements/Guarantees	Continuously abide by
(6) Election of directors and supervisors	Announced the elected list of directors and supervisors

2. Important resolutions from board of directors’ meetings:

Date		Important resolution matters
2019/3/22 17th session of 16th meeting		1. 2018 Business reports and financial statements approved 2. 2018 Employees and directors/supervisors compensation distribution approved 3. 2018 profit distribution approved 4. 2019 budget statement approved 5. Amendment of Article of Incorporation approved 6. Amendment of Procedures for Acquisition or Disposal of Assets approved 7. Amendment of Procedures for Governing Loaning of Funds and Making of Endorsements/Guarantees approved 8. Directors/ Supervisors election approved 9. Candidate list of directors, independent directors and supervisors approved 10. Matters of convening 2019 Annual Shareholders’ meeting approved Opinions from Independent directors: N/A Implementation: Announcement and implementation have been made in accordance with the contents of various resolutions, and 2019 Annual Shareholders' General Meetinghas been completed.

2019/5/10 17th session of 17th meeting		1. Review of the financial statements for the first quarter of 2019 approved 2. Loans to the subsidiary Kobrite Taiwan Corporation from the company approved Opinions from Independent directors: N/A Implementation: Announcement and implementation have been made in accordance with the contents of various resolutions
2019/6/12 18th session of 1th meeting		1. Chairman election 2. Dissolution and liquidation of the subsidiary Dongguan Bright Rise Electronic Co. Ltd. Opinions from Independent directors: N/A Implementation: Announcement and implementation have been made in accordance with the contents of various resolutions
2019/6/21 18th session of 2th meeting		1. Settlement of case dividend distribution date and date of payment 2. Appointment of members of 4th compensation committee 3. Amendment of Rules and Procedures of Board of Director Meetings Opinions from Independent directors: N/A Implementation: Distribution date: July 15, 2019 Date ofpayment: August,07,2019
2019/8/9 18th session of 3th meeting		1. Review of the financial statements for the second quarter of 2019 approved 2. Implementation of the company’s treasury stock approved Opinions from Independent directors: N/A Implementation: Announcement and implementation have been made in accordance with the contents of various resolutions
2019/11/12 18th session of 4th meeting		1. 2019 3rdquarter financial statements review approved 2. 2020 Auditing plan review approved 3. Self-Evaluation or Peer Evaluation of the Board of Directors approved 4. 2018 Board of directors, supervisors, managers and employees’ compensation distribution review approved Opinions from Independent directors: N/A Implementation: Announcement and implementation have been made in accordance with the contents of various resolutions

1. New loan of funds to Kobrite Taiwan Corporation approved

2. 2019 Board of directors, supervisors, managers and employees’ compensation distribution approved

3. 2019 business reports and finance statements approved

4. 2019 profit distribution approved

5. 2019 distribution of shareholders’cash dividends approved

6. 2020/3/20 6. 2020 budget statements approved

7. 18th session 7. Amendment of Articles of incorporation approved of 5th 8. By selection of one seat of supervisors approved

8. meeting 9. Candidate list of supervisor approved

9. Matters of convening 2020 Annual Shareholders’ meeting approved

10. Implementation of treasury stocks approved Opinions from Independent directors: N/A

Implementation: Announcement and implementation have been made in accordance with the contents of various resolutions

• 3.3.12. In recent years and as of the date of publication of the annual report, any of directors or supervisors held objections with records or statements during the board of directors’ meetings and such contents: No such situation

• 3.3.13. In recent years and as of the date of publication of the annual report, summary of the resignation and dismissal of the company's chairman, CEO, accounting manager, finance manager, internal audit manager and research and development manager: No such situation

3.4 Information of Audit fees

3.4.1. Disclosure of individual amounts of CPA audit fees

				Unit: NT $thousands	Unit: NT $thousands
Accounting firm	Name of CPA	Audit fee	Non-Audit Fee		Audit period
			Pricing report	Other
KPMG	Hsin-I Kuo Tzu-Hui Li	3,860	-	-	2019/1/1~12/31
KPMG	Wei-Tun Yeh	-	280	-	2019/1/1~12/31

• 3.4.2. If the non-audit fees paid to CPA, the accounting firms where CPA belongs, and its affiliated enterprises, are more than a quarter of the audit public fees, the amount of audit and non-audit public fees and non-audit services shall be disclosed: No such situation

• 3.4.3. If the audit fee has decreased by more than 15% compared with the previous year, the amount, proportion and reason for the reduction of audit fee shall be disclosed: No such situation.

3.5 Information on Change of CPA

3.5.1 About the previous CPA:

bout theprevious CPA:
Replacement date	March 22, 2019
Reason and explanation	Internal personnel relocation made by the accounting firm
Explain that the client or accountant terminated or did not accept the appointment	Party Situation			CPA	Client
	Voluntarytermination			-	-
	No longer accept (continue)appointment			-	-
Opinions and reasons for the issuance of verification reports other than unqualified opinions within the latest two years	N/A
Any disagreement with the issuer	Y		Accounting principals orpractices
			Disclosure of financial reports
			Scope or stepof auditing
			Others
	N	V
	Explanation
Other disclosed matters	N/A

3.5.2 About the successor of CPA

bout the successor of CPA
Accountingfirm	KPMG
Name of CPA	Hsin-I Kuo,Tzu-Hui Li
Appointed date	March 22,2019
Consultation matters and results on the accounting treatment methods or accounting principles of specific transactions and possible issuance of financial reports before appointment	N/A
Successor of CPA’s written opinions on accounting matters that are different from theprevious CPAs’	N/A

3.5.3. Reply from the previous CPA: Not applicable

3.6 The company's chairman, president, finance or accounting managers who has worked in an accounting firm or its affiliated company within last year should disclose name, title and the period of working in the office of the visa

accountant or its affiliated company: No such situation

• 3.7 In recent years and as of the date of publication of the annual report, directors, supervisors, managers and shareholders whose shareholding ratio exceeds 10% share transfer and share pledge changes:

3.7.1. Changes in the equity of directors, supervisors, managers and major shareholders

Unit: thousand shares

Title	Name	2019	2019	Till April 12, 2020	Till April 12, 2020
		Increase (decrease) in the number of shares held	Increase (decrease) in the number of pledged shares	Increase (decrease) in the number of shares held	Increase (decrease) in the number of pledged shares
Chairman/President/ 10% or above shareholders	Tsung-Jen Liaw	615	0	0	0
Director	Shu-June Wang	0	0	0	0
Director/10% or above shareholders	Wan-Hsu Investment Co., Ltd Representative- Po-Yuan Lin	636	0	0	0
Director	Chi-Chia Hsieh	0	0	0	0
Director	Hsin-Pei Liao	0	0	0	0
Independent director	Ming-ChangHuang	0	0	0	0
Independent director	Chwen-Shell Ho	0	0	0	0
Supervisor	Ju-ChingLiao	0	0	0	0
Supervisor	Chin-Lung Huang	0	0	0	0
10% or above shareholders	Yi-Run Investment Co., Ltd.	1,040	0	33	0
Vice president	Lin-Lin Chen	(20)	0	10	0
Associate VP	Ming-Kuei Yu	0	0	0	0
Associate VP	Wei-ChengChen	0	0	0	0
Associate VP	Hsiao-Yen Chang	0	0	0	0
Associate VP	Ying-Chen Hsiao	0	0	0	0
Finance manager	Mei-Lien Lin	0	0	0	0

3.7.2. Stock transfer information

Directors, supervisors, managers and shareholders whose shareholding ratio exceeds 10% of the shareholder's equity transfer or equity pledged equity transfer are relatives: No such situation.

3.8 Relationship information, if among the company's 10 largest shareholders any one is a related party or a relative within the second degree of kinship of another.

April 12, 2020

Name	Me	Me	Spouse and minor children	Spouse and minor children	Hold in the name of others	Hold in the name of others	The top ten shareholders if inter-related to a party or a spouse, or kinship within second degree, etc.	The top ten shareholders if inter-related to a party or a spouse, or kinship within second degree, etc.	Note
	Shares	Shareholding ratio	Shares	%	Shares	%	Name	Relationship
Yi-Run Investment Co., Ltd.	30,963,212	16.59%	-	-	0	-	Shu-June Wang Tsung-Jen Liaw	Representative Director
Wan-Hsu Investment Co., Ltd	26,355,397	14.12%	-	-	0	-	Tsung-Jen Liaw Shu-June Wang	Representative Director
Tsung-Jen Liaw	20,938,417	11.22%	5,766,547	3.09%	0	-	Wan-Hsu Investment Co., Ltd Yi-Run Investment Co., Ltd. Shu-June Wang Hsin-Pei Liao Ju-Ching Liao	Representative Director Spouse Daughter Kinship within second degree
Shu-June Wang	5,766,547	3.09%	20,938,417	11.22 %	0	-	Yi-Run Investment Co., Ltd. Wan-Hsu Investment Co., Ltd Tsung-Jen Liaw Hsin-Pei Liao	Representative Director Spouse Daughter
Hsin-Pei Liao	3,292,333	1.76%	0	-	0	-	Tsung-Jen Liaw Shu-June Wang	Father Mother
Po-Yuan Lin	2,291,596	1.23%	0	-	0	-	Ju-Ching Liao Chung-Yao Lin	Mother Father
Ju-Ching Liao	2,240,541	1.20%	1,690,929	0.91%	0	-	Tsung-Jen Liaw Chung-Yao Lin Po-Yuan Lin	Kinship within second degree Spouse Son
Chung-Yao Lin	1,690,929	0.91%	2,240,541	1.20%	0	-	Ju-Ching Liao Po-Yuan Lin	Spouse Son
Ju-Hao Liao	1,341,188	0.72%	-	-	0	-	Tsung-Jen Liaw Ju-Ching Liao	Kinship within second degree Kinship within second degree
Yu-Chen Lin	875,675	0.47%	-	-	0	-	-	-

3.9 The total number of shares and total equity stake held in any single enterprise by the company, its directors and supervisors, managers,

and any companies controlled either directly or indirectly by the company

Comprehensive shareholding ratio

Unit: thousand shares; %

			Unit:	Unit:	thousand shares; %	thousand shares; %
Reinvestment (Note)	Investment by the company		Directors, supervisors, managers and investments that directly or indirectly control businesses		Comprehensive investment
	Shares	%	Shares	%	Shares	%
Wanhui Enterprise Co., Ltd. KoBrite Corp. Lisheng International Industrial Co., Ltd. American Bright Wanxu Enterprise Co., Ltd. Powertip Image Corp.	11,460 8,783,54 5 35,740 150,588 3 5,820	99.65% 92.64% 59.57% 45.63% 23.03% 19.04%	40 - 17,177 - 3 218	0.35% - 31.96% - 25.00% 0.71%	11,500 8,783,545 44,700 150,588 7 6,013	100.00 % 92.64% 91.53% 45.63% 48.03% 19.75%

Note ： The company's long-term investment uses the equity method

4. Capital and Shares

4.1 Capitalization Capital formation history:

	Y/M	Issued Price	Approved share capital	Approved share capital	Approved share capital	Paid-in capital	Paid-in capital	Paid-in capital	Note	Note	Note	Note	Note	Note
			Shares (thousand)		Amount (NT $thousand)	Shares (thousand)		Amount (NT $thousand)	Source of equity		Those who use property other than cash to offset the share capital		Others
	1981/06 1984/10 1987/04 1991/08 1995/08 1997/08 1998/12 1999/09 2000/09 2001/09 2002/09 2003/08 2004/08 2005/08 2006/08 2007/08 2007/09 2008/08 2009/09 2010/09 2017/05 2018/07	1,000 1,000 1,000 10 10 10 20 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10	1.13 7 20 6,000 10,000 19,500 75,000 75,000 75,000 100,000 100,000 122,000 122,000 174,000 174,000 174,000 200,000 250,000 250,000 250,000 250,000 350,000		1,130 7,000 20,000 60,000 100,000 195,000 750,000 750,000 750,000 1,000,000 1,000,000 1,220,000 1,220,000 1,740,000 1,740,000 1,740,000 2,000,000 2,500,000 2,500,000 2,500,000 2,500,000 3,500,000	1.13 7 20 6,000 10,000 19,500 35,000 42,700 51,990 63,000 72,000 82,000 104,600 125,000 145,000 157,000 168,000 183,440 194,682 196,674 186,674 186,674		1.13 7,000 20,000 60,000 100,000 195,000 350,000 427,000 519,900 630,000 720,000 820,000 1,046,000 1,250,000 1,450,000 1,570,000 1,680,000 1,834,400 1,946,824 1,966,742 1,866,742 1,866,742	Cash issuance of stock Cash issuance of stock Cash issuance of stock Cash issuance of stock Cash issuance of stock Cash issuance of stock Cash issuance.turnover. employee bonus Turnover.employee bonus Surplus.employee bonus Turnover. transfer. employee bonus Turnover.employee bonus Surplus.employee bonus Turnover.transfer. employee bonus Turnover.employee bonus Turnover.employee bonus Turnover.employee bonus Cash issuance Turnover.employee bonus. Surplus.transfer. employee bonus Turnover.employee bonus Capital reduction by treasury stock -		N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A		－ － － － － － － (88) Taiwan Finance Cert.(1) No.70838 (89) Taiwan Finance Cert.(1) No.71432 (90) Taiwan Finance Cert.(1) No.146154 Taiwan Finance Cert.(1) No. 0910148771 Taiwan Finance Cert.(1) No. 0920129544 SFB Cert.(1)No. 0930129606 FSC Cert. (1)No. 0940129144 FSC Cert. (1)No. 0950130503 FSC Cert. (1)No. 0960031969 FSC Cert. (1)No. 0960031777 FSC Cert. (1)No. 0970032588 FSC Cert. (release)No. 0980036139 FSC Cert. (release)No. 0990033948 FSC Cert. (rules)No. 1060007749 -
				Approved share capital Note Outstanding shares Treasury stock Unissued shares Total 175,521,224 11,153,000 163,325,776 350,000,000 Listed company stock
	Types of shares			Approved share capital										Note
				Outstanding shares			Treasury stock			Unissued shares		Total
Registered common stock				175,521,224			11,153,000			163,325,776		350,000,000		Listed company stock

4.2 Shareholders structure

4.2 Shareholders structure	4.2 Shareholders structure	4.2 Shareholders structure
			April 12,2020
Structure Quantity	Govt	Financial inst.	Other corporates	Foreign inst./ Foreigner	Person	Treasury stock	Total
Number	0	1	21	61	15,197	1	15,281
Number of shares held	0	11,562	57,757,584	4,985,117	112,766,961	11,153,000	186,674,224
Shareholding ratio	-	0.01%	30.94%	2.67%	60.41%	5.97%	100.00%

4.3 Distribution profile of share ownership

April 12, 2020

Shareholding grading	Number of shareholders	Number of shares held	Shareholding ratio
1-999	4,218	691,910	0.37%
1,000-5,000	8,205	17,521,818	9.39%
5,001-10,000	1,464	11,455,248	6.14%
10,001-15,000	473	5,846,140	3.13%
15,001-20,000	304	5,658,828	3.03%
20,001-30,000	227	5,681,972	3.04%
30,001-40,000	105	3,737,775	2.00%
40,001-50,000	80	3,737,233	2.00%
50,001-100,000	115	8,051,060	4.31%
100,001-200,000	51	7,459,309	4.00%
200,001-400,000	21	5,562,754	2.98%
400,001-600,000	4	2,021,576	1.08%
600,001-800,000	2	1,510,766	0.81%
800,001-1,000,000	2	1,704,675	0.91%
1,000,001 shares above	10	106,033,160	56.81%
Total	15,281	186,674,224	100.00%

4.4 List of major shareholders

ist of major shareholders
Name Shares	Number of shares held	Shareholding ratio
Yi-Run Investment Co., Ltd.	30,963,212	16.59%
Wan-Hsu Investment Co., Ltd	26,355,397	14.12%
Tsung-Jen Liaw	20,938,417	11.22%
Shu-June Wang	5,766,547	3.09%
Hsin-Pei Liao	3,292,333	1.76%

Po-Yuan Lin	2,291,596	1.23%
Ju-Ching Liao	2,240,541	1.20%
Chung-Yao Lin	1,690,929	0.91%
Ju-Hao Liao	1,341,188	0.72%
Yu-Chen Lin	875,675	0.47%

4.5 Stock price, net worth, surplus and dividend information for the past two years

Items	Year	Year	2018	2019	As of the current year May6,2020
Stock price/ share	Highest		19.45	17.55	16.95
	Lowest		8.60	9.96	9.18
	Average		14.17	13.14	14.01
Net worth/ share	Before distribution		14.27	14.87	－
	After distribution		13.75	Note 1	－
EPS	Weighted average number of shares		186,674,224	183,747,000	176,636,000
	Surplusper share		0.58	1.28	0.02
Dividend/ share	Cash dividend		0.52	0.80	－
	Stock granted	－	－	－	－
		－	－	－	－
	Accumulated unpaid dividend		－	－	－
ROI analysis	P/E (%)		24.43	10.27	－
	PBR (%)		27.25	16.43	－
	Dividend yield		3.67%	6.09%	－

Note 1 ： The current year's surplus distribution has not been completed

Note 2 ： P/E (%) ＝ Average closing price per share of the year/ earnings per share Note 3 ： PBR (%) ＝ Average closing price per share of the year/ cash dividend per share Note 4 ： Dividend yield ＝ Cash dividend per share/ average closing price per share of the year

4.6 Dividend policy and implementation status

4.6.1. The company’s dividend policy:

Before dividend distribution, the company shall first complete the taxation, then make up for the accumulated losses from the past years. According to regulations, the company shall also set aside proportion of earnings as legal reserves and special reserves for each fiscal year. In addition to the undistributed surplus of the previous year, after considering the funds required for operations, at least 50% of the shareholders ’dividends shall be allocated, and the proportion of cash dividends shall not be less than 10%.

4.6.2. Implementation status:

On March 20, 2020, the board of directors approved 2019 surplus distribution. The company's distributable surplus at the end of 2019 was NT$ 230,459,805. The company planned to distribute cash dividends of NT$ 0.80 per share based on the number of outstanding shares, so the total cash dividends will be NT$ 141,339,379, which accounting for about 61.33% of the distributable surplus. The plan will be able to be executed after approval from the shareholders' general meeting.

• 4.7 The impact of the proposed bonus shares at the shareholders' meeting on the company's operating performance and earnings per share: No proposal for allotment of bonus shares at 2019 shareholders’ meeting.

4.8 Compensation of employees, directors and supervisors

• 4.8.1. The percentage or scope of compensation of employees, directors and supervisors as stated in the Articles of incorporation:

  • According to the Article 20 section 1 from the company’s Articles of incorporation, the company shall allocate the income before tax to retain the accumulated loss from the past years before distribution of employees',

  • directors' and supervisors' compensations. If there is a remaining, it should be allocated to employees’ compensation not less than 8% and the directors and supervisors’ compensations not more than 2%. The resolutions for distribution ratio of employees’, directors’ and supervisors’ compensation distribution ratio and such compensations are based on stock or cash shall be approved by the board of directors with more than two-thirds of directors attending and half seats of the attended directors agree to during the board of directors’ meeting. Such resolution shall also be reported at the annual shareholders’ meeting. Employee compensation whether distributed as stock or cash shall include employees from subsidiaries that meet certain conditions.

• 4.8.2. The basis for estimating the amount of employees’, directors’

  • and supervisors’ compensations at the current period, the basis for calculating the number of shares for employees’ compensation by stock distribution and the accounting treatment when the actual distribution amount is different from the estimated amount:

• (1) The basis for estimating the amount of employees’, directors’ and supervisors’ compensations at the current period: According to the company’s Articles of incorporation, the company will allocate 8% of the income before tax that is distributable to employees’ compensation in cash and 2% of the income before tax that is distributable to directors and supervisors’ compensations in cash

• (2) The basis for calculating the number of shares for employees’ compensation by stock distribution: If the employees’ compensation is distributed by stocks from the resolution of the board of directors, the calculation of the number of issued shares is based on the closing price of the day before the board of directors decides to issue new shares and considers the effect of ex-rights and ex-dividends. The company's employee compensation for 2019 has not been resolved to be distributed by stocks.

• (3) The accounting treatment when the actual distribution amount is different from the estimated amount: After the annual consolidated financial statements are still subject to change, resulting in a difference between the actual distribution amount and the

estimated amount, it is treated as a change in accounting estimates and adjusted for accounting in next fiscal year.

• 4.8.3. Compensation distribution resolved by the board of directors: The company decides to distribute the employees and directors

and supervisors compensations for 2019 which resovled by the board of directors on March 20, 2020. The income before tax before the distribution for 2019 is NT$ 279,680,111. No accumulated loss needs to be retained, so will allocate 8% of income before tax in cash as employees’ compensation, which is NT$ 22,374,409. The company will also allocate 2% of income before tax in cash as directors’ and supervisors’ compensation which is NT$ 5,593,602. The above distribution complies with the company's Articles of incorporation.

4.8.4. Actual distribution of employees and directors and supervisors’ compensation from the

previous year:

The company allotted the 2018 surplus to employees, directors and supervisors with amounts of NT$ 11,691,488 and NT$ 2,922,872 respectively. The distribution was completed and there is no difference between the actual and the resolution approved by the board of directors.

4.9 Status of share buyback:

4.9.1. The repurchase of the company's shares in the last three years (completed):

		May06,2020
	First	Second
Purpose of share repurchase	Maintain the company credit and shareholders' rights	Transfer to employees
Type of share repurchase	Common	Common
Quantityof share repurchase	10,000,000 shares	10,000,000 shares
Reservation of repurchase period	2016/11/11~2017/1/10	2019/8/12~2019/10/11
Price range of repurchase	NT$9~NT$15	NT$10.5~ NT$17.5
Actual quantity of share repurchase	10,000,000 shares	10,000,000 shares
Actual repurchase period	2016/11/15~2017/1/10	2019/8/13~2019/10/9
Total amount of actual repurchase	NT$117,437,515	NT$149,507,225
Average price of actual repurchase	NT$11.74	NT$14.95
Cancellation of shares	10,000,000 shares	0
Accumulated shares of the company	0 share	10,000,000 shares
Accumulated shares held by the company accounted for the total number of issued shares	-	5.36%

4.9.2. The repurchase of the company's shares (in progress):

May 06, 2020 Third Purpose of share repurchase Maintain the company credit and shareholders' rights Type of share repurchase Common Maximum amount on shares repurchased NT$ 625,097,233 Reservation of repurchase period 2020/3/23~2020/5/22 Planned quantity of share repurchase 5,000,000 shares Price range of repurchase NT$ 7.5~NT$ 20.45 Actual type and quantity of share repurchase Common stock 3,498,000 shares Amount of actual repurchase NT $48,522,315 The ratio of actual repurchased shares over planned quantity of share repurchase (%) 70%	May 06, 2020 Third Purpose of share repurchase Maintain the company credit and shareholders' rights Type of share repurchase Common Maximum amount on shares repurchased NT$ 625,097,233 Reservation of repurchase period 2020/3/23~2020/5/22 Planned quantity of share repurchase 5,000,000 shares Price range of repurchase NT$ 7.5~NT$ 20.45 Actual type and quantity of share repurchase Common stock 3,498,000 shares Amount of actual repurchase NT $48,522,315 The ratio of actual repurchased shares over planned quantity of share repurchase (%) 70%
	Third
Purpose of share repurchase	Maintain the company credit and shareholders' rights
Type of share repurchase	Common
Maximum amount on shares repurchased	NT$ 625,097,233
Reservation of repurchase period	2020/3/23~2020/5/22
Planned quantity of share repurchase	5,000,000 shares
Price range of repurchase	NT$ 7.5~NT$ 20.45
Actual type and quantity of share repurchase	Common stock 3,498,000 shares
Amount of actual repurchase	NT $48,522,315
The ratio of actual repurchased shares over planned quantity of share repurchase (%)	70%

• 4.10 Issuance of corporate bonds: No outstanding corporate bonds nor corporate bonds under processing.

• 4.11 Preferred shares: No such situation.

• 4.12 Issuance of overseas depositary receipts: No such situation.

• 4.13 Status of employee Stock Option Plan: No outstanding employee stock options.

• 4.14 Status of employee restricted stock: No such situation.

• 4.15 Status of M&A or transfer of new shares issued by other companies: No such

situation.

• 4.16 Financing plans and implementation: No such situation.

5. Operational highlights

5.1 Business Activities

• 5.1.1 Scope of business

• (1) The company’s main business:

The company and its subsidiaries focus on producing photoelectric components. The main products include light-emitting diodes (LED), display modules, infrared component modules, surface mounted device (SMD) type of light-emitting diodes and light-emitting diode’s related application modules It is widely used in consumer electronics industry, lighting market, automotive market and other fields.

• (2) Proportion of sales revenue:

Proportion of sales revenue:
Products	%
Visible LED	33 %
Invisible LED	49 %
Engineering project	14 %
Others	4 %

• (3) The company’s current products:

• The company's main products are light-emitting diode components and its related applications, which are divided into visible light and invisible

• Visible: Lamp, Display, SMD, PLCC, LED Light bar assembly, outdoor/indoor LED luminaries.

Invisible: Infrared, Motor assembly, Sensor assembly.

• (4) Products under development:

The company's product development focuses on smart home application, security and safety control, aviation and transportation electronics, gaming application, and various lighting products according to the recent emerging technologies development and market needs. The company also focuses on development of multi-functional and high-efficiency light sources, automotive LEDs, ambient light sensor (ALS) and UVC LED application technologies

5.1.2 LED industry overview

• (1)Status and development of the industry:

Light emitting diode (LED) has the inherent advantages of small size, multi-color, good visibility, capability for mass production, etc. It is easy to make multiple light-emitting elements, and this light-emitting diode element has no filament and low power consumption With rapid response and long lifespan, it can be widely used in consumer electronics devices, information industry, communications, automobiles, traffic signs, industrial instruments, and outdoor/indoor display and other fields.

The LED industry is inseparable from the development of technology. The innovation of technology products also synchronously drives the research and development of LED application. In addition to the development of consumer electronics, household products, screen displays and remote applications, LED’s characteristics are also widely used with regard to security and safety control,

42

testing, medical and aesthetic products, with the development of related product industries, LED application technology has also been continuously improved.

• (2) LED industry chain:

The LED industry is mainly formed by vertical mode, which can be divided into upstream for wafers, die, midstream for LED packaging and downstream for LED application products, and LED application is the part among others that has high added value in the entire industry chain.

==> picture [468 x 99] intentionally omitted <==

• (3) Product development trends and competition:

• a.Advanced technology developed for current LED application product

End products such as home appliances and customer electronics products, has intellectual upgrading which increased the demand for infrared LEDs (IR LEDs) and SMD LEDs with various sensors and other components for packaging. It has also driven the improvement of related processes and machinery and equipment to greatly improve the yield. The photo coupler, applied on security, monitoring, medical, smart meters, etc areas, have been greatly improved on product manufacturing process and related packaging and testing technology. The related IC, sensors and other assembly and testing technology have also been greatly improved.

• b. LED Automotive market continues to grow

Automotive LED lighting, was introduced as a high-end model, now has gradually replaced traditional automotive lighting. According to LEDinside reports, as LED prices drop and its functionalities increase, the output value and penetration of automotive LED lighting continue to grow. In 2018, the annual output value of automotive LEDs increased by 15%. Among them, the demand for headlights and automotive panels has risen rapidly. However, due to higher requirements for LED manufacturers to be in the automotive pre-installation market and more and more auto manufacturers want to integrate the sensing element with headlights, the current automotive pre-installation market is still dominated by Osram, Nichia, Lumileds…etc. The remaining LED manufacturers mainly get into automotive’s aftermarket and refit market, or get into applications with relatively low thresholds applications such as interior lights and tail lights…etc.

c. UV-C LED market demand increases significantly in the future

UV-C LED applications include three major growth derivatives: still water sterilization, surface sterilization and flowing water sterilization. Still water sterilization and surface sterilization applications (such as air purification, home appliances, etc.) have low time requirements, but because these applications are consumer home appliances, the requirements for product cost performance are quite high, resulting in short-term UV-C LED can not be widely popularized. As

43

for the sterilization application of flowing water, rapid sterilization is required, and the power requirement of the product is high. Therefore, the UV-C LED power specification must be higher than 40-50mW. LEDinside believes that the biggest challenge for UV-C LEDs at this stage is that the technology and efficiency need to be improved, but such technical obstacles will have the opportunity to gradually overcome in the future. Since the end of 2019, the spread of pneumonia virus around the world has caused close attention and demands in public health and related areas. In particular, the

added sterilization function of various products can increase the added value of their products, so UV-C LED is an indispensable key. Its future demand is expected to increase significantly.

5.1.3 Recent technology and research and development

• [(1) R&D expenses invested in the most recent year and up to the date of publication ] of the annual report:

Unit: NT $thousand

Year	R&D expenses
2019	14,122
1stquarter of 2020	2,567

(2) Successfully developed technology or product:

• The company has been developing LED light sources and commercial lighting products over the years, including the use of its own patented technology and special manufacturing processes. Now has successfully developed a new generation of sapphire 360-degree full-period LED light sources (Filasun & Filament and other products), with a 360-degree lighting angle. The new generation of products with a coloring index above 90 and a luminous efficiency of 180lm / W not only responds to energy saving and environmental protection, but also has the advantage of an environmental light source that can completely replace the Uz bulb, giving people a new visual experience. The development of a new generation of Filasun sapphire headlights, currently used as in the car brake lights, warning lighting products, has also improved. The product has quick response, luminous efficiency to add the value of practicality to the product. The application of special light sources and the development of niche products are also quite fruitful. In addition, there are related achievements in the development of LED component products in recent years. Especially in the development of related Ambient Light Sensor products, photo coupler products, IR LED products and UV-C LED products.

a. Indoor lighting product

10W Neptune Planetary Bulb has obtained domestic CNS, BSMI

and energy-saving related certificates and won the 2015 Golden Dot Design Award. The 3W sapphire full-circular candle light and night light, 10W light engine bulb, 25W high-efficiency sapphire bulb and 10W amber bulb have all obtained domestic BSMI certificates. Lighting applications are superior to other commodity standards in the industry.

b. Outdoor lighting product

The company developed the full range of moduled street lights series and obtaied the certification of the street light energy-saving label in 2015 as the first company in Taiwan. In 2017, a series of new generation of street lights

44

and related landscape lights, flood lights, tunnel lights and other products with high-efficiency 120lm / W have been developed. The specifications meet the road lighting requirements and complied with National Standards of the Republic of China (CNS). The price is competitive. The series can provide safe lighting environment. The light source adopts its own patented technology

and produced by special manufacturing process. Moreover, it passed the difficult LM80 test to increase lifespan and usability. For getting domestic or foreign public construction projects, the products are relatively superior than others. In 2018, product improvement for the series of street lamps and related landscape lamps, floodlights, tunnel lamps and other products carried out to increase the luminous efficiency more than 140lm / W.

c. Special light source application

In addition to the traditional white lighting, a special wavelength of LED suitable for plant growth has also been developed and has been actually adopted by farms and plant factories. The medical IR infinite multi-level conversion grid light is suitable for hospitals and other medical places. 2 ft and 4 ft T8 tube products, ambient lighting for medical use and low voltage high efficiency lighting for vehicles also obtained related National Standards of the Republic of China (CNS) certificates.

d. Products for niche markets

The company’s infrared and motor module products had been developed in cooperation with customers and successfully applied to smart robots and smart sweeper products. Facing the upcoming era of "Industry 4.0!" Smart manufacturing, the pace of development of photo relays (Photo Relay) is also actively keeping up. Compared with mechanical relays, photo relays have continuous overlap, low current drive and fast response. One of the indispensable components of intelligent production machinery.

e. Sterilization applications

Recently, the UV-C LED products that the company has been focusing on development have had preliminary results and the related projects are currently entering into sample stage. The products will be tested in conjunction with related industries to confirm their effectiveness. Therefore, in the future, our UV-C LED series will officially be the main focus for mass production and promotion.

(3) Future R&D plans:

For application development of LED components, the development schedule of photo relays is actively carried out. Compared with mechanical relays, photo relays have a longer service life, low current drive and fast response, which is indispensable in smart production machinery. Insulated gate bipolar transistor (IGBT) is a power semiconductor element (transistor field). The main application is semiconductor switch. It adopts a composite structure. In addition to being a bipolar element using two carriers of electrons and holes, it is also a transistor with low saturation voltage (equivalent to low on-resistance of power MOSFET) and faster switching characteristics. IGBT module products are mainly used in transportation (aerospace and railway), defense military industry, industrial energy, electric vehicles, and smart grid industries. The prospects of IGBT application development shall be optimistic. For health care applications, with the rise of UVC LEDs, a new chapter has been opened. The functions of UVC LEDs for air and water monitoring

45

and disinfection and sterilization are highly valued. In the pursuit of quality of life and environmental protection, the company actively continues to develop UVC LED related products. Improving the product’s yield rate and testing will increase the added value for customers in the relevant application industries in the future.

  - (4) Expected R&D expenditure in the coming year: The company's R&D expenditures accounted for about 1% of revenue in the past two years. The company has not expanded the development of emerging products yet. It is expected that the R&D expenditures in 2020 will increase to approximately 2% of revenue.

• 5.1.4 Long-term and short-term business development plans

• Short-term plan: For the existing application products used in including smart home appliances, security and safety control, aviation and transportation electronics, gaming applications, and various lighting fields, the company continues to improve the qualities and functions of these products and achieve customization and differentiation to fulfill customers’ demands of adding more values on their final products. For emerging technological products using new application technologies, the company will accelerate the R&D development in order to grasp new market opportunities and increase revenues and profits.

• Long term plan: The company's development strategy is to constantly seek differentiated markets, avoid price competition in the expansion of production capacity, and cross-border cooperation to enhance the added value of its own or the other party's existing or future products.

5.2 Summaries of market, production and sales

• 5.2.1 Market analysis

• (1) The sales area and market share of the company's products

	Unit: NT $thousand	Unit: NT $thousand
Year Area	2019
	Sales revenues	Ratio (%)
China	865,716	49%
Taiwan	414,837	24%
United States	209,877	12%
Korea	179,539	10%
Others	93,690	5%
Total	1,763,659	100%

• (2) Applications of main products

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Products	Main applications
Visible LED	Computer and computing peripherals, communications, electrical appliances, firefighting, medical and aesthetic equipment, lighting, automotive electronics and display,…etc.
Invisible LED	Industrial automatic control, home appliances, motor products, security, remote control for home appliances,…etc.

(3) Applications of main products

As environmental awareness continues to rise, low-energy light source products continue to be developed and widely used in various household appliances, consumer electronics, medical and aesthetic medical, and automotive electronics. The future market demand for LED components will show a steady growth trend. However, due to the vicious price competition from manufacturers in China, the market demand has grown but the profits have shrunk.

• (4) Competitiveness

  • a. Wide range of product applications

  • The LED components are indispensable parts in electronic commodities. Electrical appliances used in daily life are mostly related to them. They are irreplaceable products. Customers are widely from consumer electronics, computers and peripheral equipment, telecommunications , Fire protection, security, automotive electronics and other related industries, the market demand is still showing a growth trend.

  • b. Sophisticated production technology

  • The company has been established for more than 30 years and has sophisticated and excellent production technology. The company is one of the excellent manufacturers of LED component manufacturing industry and obtained ISO14000 and ISO / TS16949 quality certifications. Under highly automated production, product quality is well recognized by customers.

  • c. Integration of upstream and downstream and stable supply of raw materials The company has divisions from LED upstream wafers, LED brackets to LED packaging for various manufacturing stages to ensure sufficient raw material supplies and stable quality.

  • (5) Advantages and disadvantages of development prospects and countermeasures

• a. Favorable factors

• Market demand continues to grow: Due to the global energy exhaustion crisis, environmental awareness is on the rise. The LED components are low-energy consumption products that can be widely used in consumer electronics, computers and peripheral equipments, telecommunications, medical, fire protection, security, automotive electronics and other related industries in order to produce indispensable parts for related products. The market demand continues to be optimistic.

• Excellent technology and integration of upstream, midstream and downstream: After decades of development of LED industry in Taiwan, the integration of upstream, midstream and downstream technologies has been stable and mature. Its excellent production technology and product quality have always been highly competitive internationally, and our company is also one of the

47

strong cornerstones of the domestic LED industry. With sophisticated production technology, the company also strengthens the competitiveness in the industry through integration of upstream, middle and downstream, so that the company can develop continuously.

• b. Unfavorable factors and countermeasures

• Vicious competition from manufacturers in China: The vigorous development of LED industry in recent years has driven more manufacturers to enter the industry and Chinese manufacturers have engaged in vicious competitions under government policy subsidies. A large number of

• low-priced and inferior products have caused an imbalance in market supply and demand.

• Countermeasure: To avoid falling into vicious competition, the company focuses on manufacturing differentiated and high-quality products by improving product quality, and constantly develops new product applications in order to expand markets.

• The production environment continues to deteriorate: The advantages that brought by the original internationalized tasks divide model have shrunk because of the rising labor consciousness and protectionism from various countries. The cost of production bases is increasing day by day, and the high capitalization investment makes it difficult to transfer production bases. The company has set up a production plant in Mainland China. In recent years, it has faced a continuous increase in labor costs, rising prices, cancellation of preferential taxes, and the protection policies of the local government, which has deteriorated the operating environment.

Countermeasure: The company actively increases the proportion of production automation and process improvement to reduce production costs and improves the competitiveness of products. At the same time, it adopts lean management and strictly reduces unnecessary unprofitable activities.

5.2.2 Production process of main products

(1) Lamp (2) Display (3) Chip Led

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Die bonding
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Die
Die
Arraying Die bonding
elastic cover
Die bonding
Ag-epoxy
Sealing
Ag-epoxy
Vaccum Wire bonding
Wire bonding mixing
Molding
PCB
Long bake
Short bake
Washing
Long bake
Drying
Testing Cutting
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Stripping

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Binning
Second front
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Packing
Testing
Warehousing
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Warehousing
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Testing
Binning
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Warehousing
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(4) Infrared emitting modules (5) Infrared receiving modules

Die Die bond Ag-epoxy Wire bonding Dispensing Molding Long bake First front cut Tinning Back cut Power transmit testing Packing Warehousing

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Die
Die bond
Ag-epoxy
Wire bonding
Dispensing
Molding
Long bake
First front cut
Tinning
Back cut
Photocurrent
testing
Packing
Warehousing
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• 5.2.3 Main raw material supply status

• The main products of the company are LED components. The main raw materials are wafers, brackets and printed circuit boards (PCB). Due to the integration of upstream and downstream work within the group, the main raw materials can be supplied by external manufacturers, and also be supplied by KoBrite, Lisheng Electronics and the reinvestment company Yirun Electronics and other suppliers who have stable supply sources.

• 5.2.4 The name of the manufacturer (customer) and its import (sales) volume, proportion and reasons for the increase and decrease in the volume of the import (sales) volume that accounted for more than 10% of the import (sales) volume in one of the most recent two years

• (1) Manufacturers that accounted for more than 10% of total purchases in any of the most recent two years

	2018	2018			2019	2019			1stquarter in 2020	1stquarter in 2020
Name	Amount	% of net purchases throughout theyear	Relationship	Name	Amount	% of net purchases throughout theyear	Relationship	Name	Amount	% of net purchases throughout theyear	Relationship
OptoTech Corporation	76,291	12%	N/A	OptoTech Corporation	78,907	14%	N/A	OptoTech Corporation	11,386	12%	N/A
Others	559,129	88%	-	Others	484,528	86%	-	Others	81,676	88%	-
Net purchases	635,420	100%		Net purchases	563,435	100%		Net purchases	93,062	100%

OptoTech Corporation is one of the company's wafer suppliers. The company has comprehensively considered the quality, price and delivery situation of the raw material in procurement system. In order to avoid excessive concentration, it maintains good relations with multiple suppliers.

• (2) Customers who accounted for more than 10% of total sales in any of the most recent two years

	2018	2018				2019			1stquarter in 2020	1stquarter in 2020	1stquarter in 2020
Name	Amount	% of net sales throughout theyear	Relationship	Name	Amount	% of net sales throughout theyear	Relationship	Name	Amount	% of net sales throughout theyear	Relationship
AB	174,443	11%	Affiliated	AB	168,828	10%	Affiliated	AB	28,023	11%	Affiliated
Others	1,476,297	89%	-	Others	1,594,831	90%	-	Others	238,588	89%	-
Net sales	1,650,740	100.0%		Net sales	1,763,659	100%		Net sales	266,611	100%

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5.2.5 Production and sales value table of the last two years

• (1) Production value of major products in the last two years

Unit: Kpcs∕NT $thousand

				Unit: Kpcs∕NT$thousand	Unit: Kpcs∕NT$thousand	Unit: Kpcs∕NT$thousand
Production Year Value Majorproducts	2018			2019
	Production capacity	Yield	Output value	Production capacity	Yield	Output value
Visible LED products	1,500,000	1,259,093	667,891	1,500,000	1,254,811	585,737
Invisible LED products	1,000,000	861,449	885,638	1,000,000	553,455	883,532
Total	2,500,000	2,120,542	1,553,529	2,500,000	1,808,266	1,469,269

The above capacity and output are calculated based on the number of wafers

(2) Sales volumes for the last two years

Unit: Kpcs ∕ NT $thousand

					Unit: Kpcs∕NT $thousand	Unit: Kpcs∕NT $thousand	Unit: Kpcs∕NT $thousand	Unit: Kpcs∕NT $thousand
Sales year Value Major products (or departments)	2018				2019
	Domestic sales		Overseas sales		Domestic sales		Overseas sales
	Quantity	Value	Quantity	Value	Quantity	Value	Quantity	Value
Visible LED products	158,449	179,179	1,100,644	488,712	135,219	144,981	1,119,592	440,756
Invisible LED products	25,159	24,189	836,290	861,449	18,162	17,856	535,293	865,676
Construction projects	-	47,977		0		248,294		0
Others	-	4,978		84,256		3,706		42,390
Total	183,608	256,323	1,936,934	1,394,417	153,381	414,837	1,656,438	1,348,822

The above quantity is the sales quantity.

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5.3 Overview of employees in the past two years

	Year	2018	2019	2020/5/6
Number of employees	Director employees	0	0	0
	Indirector employees	81	78	80
	Total	81	78	80
	Average age	41	46	45
Average years of service		10	13	13
Education distribution ratio	PhD	5	5	5
	Master degree	10	9	9
	Bachelor degree	54	51	53
	High school	9	10	10
	Below	3	3	3

Note: The above information is from Bright LED Electronics Corporation including directors who are not employees.

5.4 Expenditures for environmental protection

• 5.4.1 The company aims to produce products that are integrated into the global environment, and implements an important mission for environmental protection. The company is mainly engaged in the packaging business of light-emitting devices and sensing devices. The Group's environmental management philosophy is that there is no environmental pollution in the production process, and it complies with the local government's environmental protection policies

• 5.4.2 Regarding investment in major equipments for the prevention and control of environmental pollution, usages and potential benefits: Not applicable.

• 5.4.3 In the past three years, the company was in the course of improving environmental pollution. If there are incidents of pollution disputes, it shall indicate its handling: N/A.

• 5.4.4 In the past three years, the total amount of damages (including compensation) suffered by the company due to pollution of the environment, its future countermeasures (including improvement measures) and possible expenditures: N/A

• 5.4.5 The impact of the current pollution situation and its improvement on the company's earnings, competitive position and capital expenditures and any expected major environmental capital expenditures in the next three years: N/A

• 5.4.6 In response to the impact of RoHS on the company's financial and business situation: all of the company's products have complied with RoHS regulations, so there is no impact on business and financial aspects.

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5.5 Labor relation

5.5.1 Employee welfare measures:

The company was established in 1981. In order to ensure that employees work with peace of mind and have no worries about life, they have formulated work rules for employees in accordance with the labor-based laws, and established a Labor Retirement Reserve Supervision Committee, which is responsible for the supervision and use of retirement reserves. An employee welfare committee is set up to coordinate the planning of employee benefits and the management of the income and expenditure of benefits throughout the year.

1. All employees of the company enjoy labor insurance and national health insurance according to law.

2. All employees of the company enjoy special leave according to law.

3. The overtime pay of employees of the company is paid according to law.

4. The employees of the company all enjoy the rights to buy the company stocks.

5. The company's employees can enjoy some course subsidies and scholarships for courses related to work.

6. 2019 Employee trainings:

Categories	Number of courses	Total visits	Total hours
Professional	7	8	74
General	1	1	6
Management skills	2	2	12
New employee orientation	9	9	18
Total	19	20	110

1. The employees of the company are given leave in accordance with the provisions of the Labour Fundamental Law during the wedding and funeral, and enjoy the subsidy of welfare.

2. The employees of the company can receive gift (coupon) during the three major festivals every year; In addition to the rights, senior personnel may receive souvenirs.

3. The company's employees can receive the birthday gift (coupon).

4. The employees of the company have the right to participate in domestic and foreign tourism organized by the employee welfare committee.

5. The employees of the company have the right to participate in the company’s arrangement for employee health checks.

5.5.2 Retirement system and implementation:

The company has labor retirement regulations and in accordance with (76) New Taipei City No. 41057, set up a labor retirement fund supervision committee, which is responsible for the custody and use of retirement funds. In addition, the company allocates a certain percentage of the retirement reserve according to the salary of the employee every month, and stores it in the special account of the "Brigh LED Electronics Co., Ltd. Labor Retirement Reserve Supervision Committee" in the Bank of Taiwan. As of March 31, 2018, the amount of the retirement reserve fund, provided by the Company, in the Bank of Taiwan was NT $15,032,000. Since July 1, 2005, in conjunction with the implementation of the Labor Pension Regulations (hereinafter referred to as the "new system"), existing employees who originally applicable to old regulation, if they choose

53

to apply the new system, or new employees who join after the new system adopted determine their years of service by the definite appropriation system. The pension payment is paid by the company at a monthly rate of 2% of the monthly salary, which is stored in the individual account of the labor pension.

5.5.3 Labor management situation:

• The company has always upheld the spirit of independent management. Each department or each member has effective communication channels and spaces to understand each other, and to discuss with each other through business meetings to effectively communicate, so the labor-management relationship is extremely harmonious.

• 5.5.4 In the most recent year and up to the date of publication of the annual report, losses suffered due to labor disputes: N/A

• 5.5.5 Any disputes or need for coordination between labor and management: N/A.

5.5.6 Human Right Policy declaration:

Bright LED Electronics Corp. Human Rights Policy

1. General purpose

This is a human rights protection policy stated by the company to support and follow the spirit of human rights conventions from international organizations such as the United Nations Universal Declaration of Human Rights, the Global Covenant, and the United Nations Guiding Principles on Business and Human Rights in order to provide such comfortable working environment with secured human rights.

2. Scope of application

All relevant companies affiliated to the company are informed in accordance with this policy statement.

3. Declaration

We abide by relevant international human rights conventions and comply with the spirit of localization, provide equal employment conditions for local labor and employ diversity.

1. We care employee health and safety-physical examination, workplace safety.

2. No Child labor

3. Prohibition of any form of forced labor

4. No unfair treatment given due to discriminations based on race, gender, religion, age, political preferences…etc.

5. No extension of working hours in violation of the law.

6. We provide impartial opportunity of promotion and compensation increase.

7. Smooth communication among employees

8. We value right of privacy- legal us of personal data collection

9. We respect employees’ freedom of association and assembly and protection of right to organize.

10. This policy statement had been submitted to the general manager for approval. Same shall apply to amendments and abolitions.

5.6 Important contracts: N/A

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6. Financial highlights

6.1 Condensed balance sheet and consolidated income statement information for the last five years

6.1.1 Condensed balance sheet

Consolidated Balance Sheet-International Financial Reporting Standards

			Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Year Items		2015	2016	2017	2018	2019	March 31, 2020 (Reviewed)
Current assets		2,224,215	2,276,306	2,107,446	2,027,895	2,018,295	1,929,940
Property, plant and equipment		981,283	820,884	718,481	634,949	557,937	528,261
Intangible assets		-	-	-	-	-	-
Other assets		566,581	639,710	686,342	691,402	957,355	786,780
Total assets		3,772,079	3,739,900	3,512,269	3,354,246	3,533,587	3,244,981
Current liabilities	Before allocation	738,780	713,414	569,460	516,441	556,064	472,076
	After allocation	752,547	862,753	728,133	675,114	Note 1	Note 1
Noncurrent liabilities		147,651	107,832	80,077	53,650	130,511	47,187
Total liabilities	Before allocation	886,431	821,246	649,537	570,091	686,575	519,263
	After allocation	900,198	970,585	808,210	728,764	Note 1	Note 1
Equity attributable to owners of parent company		2,649,062	2,719,409	2,719,236	2,664,610	2,731,434	2,613,581
Share capital		1,966,742	1,966,742	1,866,742	1,866,742	1,866,742	1,866,742
Capital reserve		459,915	458,973	441,559	441,608	441,683	441,683
Retained e arning	Before allocation	269,315	431,797	490,517	440,642	573,929	578,101
	After allocation	255,548	282,458	331,844	281,969	註1	註1
Other equity		(46,910)	(48,407)	(79,582)	(84,382)	(1,413)	(113,298)
Treasurystock		-	(89,696)	-	-	(149,507)	(159,647)
Noncontrollingequity		236,586	199,245	143,496	119,545	115,578	112,137
Total equity	Before allocation	2,885,648	2,918,654	2,862,732	2,784,155	2,847,012	2,725,718
	After allocation	2,871,881	2,769,315	2,704,059	2,625,482	Note 1	Note 1

Note 1: 2019 earnings distribution has not been resolved by the shareholders' meeting.

180

Individual Balance Sheet-International Financial Reporting Standards

			Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Year Items		2015	2016	2017	2018	2019	March 31, 2020 (Reviewed)
Current assets		999,098	1,057,846	1,153,108	1,113,113	1,132,096	Note 2
Property, plant and equipment		55,857	55,853	54,132	52,343	50,917
Intangible assets		-	-	-	-	-
Other assets		2,893,952	2,923,177	3,079,843	3,101,878	3,101,878
Total assets		3,948,907	4,036,876	4,287,083	4,267,334	4,523,682
Current liabilities	Before allocation	1,197,200	1,244,061	1,500,504	1,556,365	1,733,790
	After allocation	1,210,967	1,393,400	1,659,177	1,715,038	Note 1
Noncurrent liabilities		102,645	73,406	67,343	46,359	38,458
Total liabilities	Before allocation	1,299,845	1,317,467	1,567,847	1,602,724	1,792,248
	After allocation	1,313,612	1,466,806	1,726,520	1,761,397	Note 1
Share capital		1,966,742	1,966,742	1,866,742	1,866,742	1,866,742
Capital reserve		459,915	458,973	441,559	441,608	441,683
Retained earning	Before allocation	269,315	431,797	490,517	440,642	573,929
	After allocation	255,548	282,458	331,844	281,969	Note 1
Other equity		(46,910)	(48,407)	(79,582)	(84,382)	(1,413)
Treasury stock		-	(89,696)	-	-	(149,507)
Total equity	Before allocation	2,649,062	2,719,409	2,719,236	2,664,610	2731,434
	After allocation	2,635,295	2,570,070	2,560,563	2,505,937	Note 1

Note 1: 2019 earnings distribution has not been resolved by the shareholders' meeting. Note 2: There is no individual financial statements reviewed by CPA in 1[st] quarter of 2020 yet.

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6.1.2 Condensed Income Statements

Consolidated Income Statement-International Financial Reporting Standards

Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand	Unit: NT$thousand
Year Items	2015	2016	2017	2018	2019	March 31, 2020 (Reviewed)
Operating income	2,048,934	2,168,224	1,972,727	1,650,740	1,763,659	266,611
Operating Margin	256,855	422,460	470,029	347,114	424,542	53,363
Operating (loss) profit	(108,977)	89,483	125,093	24,271	139,731	(7,266)
Non-operating income and expenses	62,190	101,607	77,931	86,990	119,816	13,123
Income before tax	(46,787)	191,090	203,024	111,261	259,547	5,857
Business unit net profit for the period	(72,121)	152,628	184,551	86,910	233,879	3,119
Loss of closed business	-	-	-	-	-	-
Net profit (loss) for the period	(72,121)	152,628	184,551	86,910	233,879	3,119
Other comprehensive income in the current period (Income after tax)	15,926	(16,421)	(33,970)	(6,863)	82,182	(114,273)
Total consolidated profit and loss for theperiod	(56,195)	136,207	150,581	80,047	316,061	(111,154)
Net profit attributable to owner of parent company	(14,379)	176,586	209,660	109,022	234,486	4,226
Net profit attributable to noncontrolling equity	(57,742)	(23,958)	(25,109)	(22,112)	(607)	(1,107)
Total comprehensive profit and loss belongs to the owner of the parent company	6,043	174,969	177,838	103,998	318,874	(107,713)
Total consolidated profit and loss attributable to non-controllingequity	(62,238)	(38,762)	(27,257)	(23,951)	(2,813)	(3,441)
EPS (NT $)	(0.07)	0.90	1.12	0.58	1.28	0.02

Note: 2015-2019 reviewed and certified by CPA.

182

Individual Income Statement-International Financial Reporting Standards

		Unit: NT$thousand 2016 2017 2018 2019 March 31, 2020 (Reviewed) 1,571,654 1,446,760 1,183,219 1,126,907 Note 2 338,885 202,686 177,949 148,597 203,145 68,864 67,224 31,597 7,605 153,027 64,305 220,115 210,750 221,891 131,529 251,712 176,586 209,660 109,022 234,486 (1,617) (31,822) (5,024) (84,388) 174,969 177,838 103,998 318,874 0.90 1.12 0.58 1.28	Unit: NT$thousand 2016 2017 2018 2019 March 31, 2020 (Reviewed) 1,571,654 1,446,760 1,183,219 1,126,907 Note 2 338,885 202,686 177,949 148,597 203,145 68,864 67,224 31,597 7,605 153,027 64,305 220,115 210,750 221,891 131,529 251,712 176,586 209,660 109,022 234,486 (1,617) (31,822) (5,024) (84,388) 174,969 177,838 103,998 318,874 0.90 1.12 0.58 1.28	Unit: NT$thousand 2016 2017 2018 2019 March 31, 2020 (Reviewed) 1,571,654 1,446,760 1,183,219 1,126,907 Note 2 338,885 202,686 177,949 148,597 203,145 68,864 67,224 31,597 7,605 153,027 64,305 220,115 210,750 221,891 131,529 251,712 176,586 209,660 109,022 234,486 (1,617) (31,822) (5,024) (84,388) 174,969 177,838 103,998 318,874 0.90 1.12 0.58 1.28	Unit: NT$thousand 2016 2017 2018 2019 March 31, 2020 (Reviewed) 1,571,654 1,446,760 1,183,219 1,126,907 Note 2 338,885 202,686 177,949 148,597 203,145 68,864 67,224 31,597 7,605 153,027 64,305 220,115 210,750 221,891 131,529 251,712 176,586 209,660 109,022 234,486 (1,617) (31,822) (5,024) (84,388) 174,969 177,838 103,998 318,874 0.90 1.12 0.58 1.28	Unit: NT$thousand 2016 2017 2018 2019 March 31, 2020 (Reviewed) 1,571,654 1,446,760 1,183,219 1,126,907 Note 2 338,885 202,686 177,949 148,597 203,145 68,864 67,224 31,597 7,605 153,027 64,305 220,115 210,750 221,891 131,529 251,712 176,586 209,660 109,022 234,486 (1,617) (31,822) (5,024) (84,388) 174,969 177,838 103,998 318,874 0.90 1.12 0.58 1.28
Year Items	2015	2016	2017	2018	2019	March 31, 2020 (Reviewed)
Operating income	1,280,199	1,571,654	1,446,760	1,183,219	1,126,907	Note 2
Operating Margin	183,239	338,885	202,686	177,949	148,597
Operating (loss) profit	62,505	203,145	68,864	67,224	31,597
Non-operating income and expenses	(57,381)	7,605	153,027	64,305	220,115
Income before tax	5,124	210,750	221,891	131,529	251,712
Net profit (loss) for the period	(14,379)	176,586	209,660	109,022	234,486
Other comprehensive income in the current period (Income after tax)	20,422	(1,617)	(31,822)	(5,024)	(84,388)
Total consolidated pro fit and loss for the period	6,043	174,969	177,838	103,998	318,874
EPS (NT $)	(0.07)	0.90	1.12	0.58	1.28

Note 1: 2015-2019 reviewed and certified by CPA. Note 2: There was no individual financial statements reviewed by CPA in 1[st] quarter of 2020 yet.

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6.1.3 Names and audit opinions of CPAs in the last five years

Year	Accounting firms	CPAs	Opinions
2015	KPMG	Hui-Chih Kou Hsin-Yi Kuo	Unqualified opinion
2016	KPMG	Hui-Chih Kou Hsin-Yi Kuo	Unqualified opinion
2017	KPMG	Hui-Chih Kou Hsin-Yi Kuo	Unqualified opinion
2018	KPMG	Hui-Chih Kou Hsin-Yi Kuo	Unqualified opinion
2019	KPMG	Hsin-Yi Kuo Tzu-Hui Li	Unqualified opinion

184

6.2 Financial analysis for the most recent 5 years

6.2.1 Consolidated Financial Analysis-International Financial Reporting Standards

Year Analyzed items	Year Analyzed items	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	As of March 31, 2020 (Note 2)
		2015	2016	2017	2018	2019
Financial structure (%)	Debt-to-asset ratio	23.50	21.96	18.49	17.00	19.43	16.00
	Long-term funds as a percentage of Property, plant and equipment	309.12	368.69	409.59	446.93	416.70	453.70
Liquidity (%)	Current ratio	301.07	319.07	370.08	392.67	362.96	408.82
	Quick ratio	255.87	268.00	294.68	325.45	306.15	341.57
	Interest coverage multiples	(14.97)	61.19	74.85	65.24	51.96	7.36
Operating performance	Receivable turnover ratio (times)	2.47	3.12	3.36	3.10	3.69	2.55
	Average cach collection days	147.77	116.99	108.63	117.74	98.92	143.14
	Inventory turnover (times)	6.29	5.59	4.64	4.67	5.91	3.89
	Average inventory turnover days	58.02	65.29	78.66	78.15	61.75	93.83
	Payable turnover ratio (times)	4.39	4.63	4.40	4.70	4.90	3.40
	PPE turnover ratio (times)	1.94	2.41	2.56	2.44	2.61	1.61
	Total assets turnover (times)	0.54	0.58	0.54	0.48	0.51	0.31
Profitability	Return on assets(%)	(1.82)	4.13	5.15	2.57	6.91	0.11
	Return on shareholders' equity(%)	(2.44)	5.26	6.38	3.08	8.31	0.11
	Ratio of net profit before tax to paid-in capital(%)	(2.38)	9.72	10.88	5.96	74.85	(0.39)
	Net profit rate(%)	(3.52)	7.04	9.36	5.26	13.90	0.31
	EPS (NT $)- after retrospective adjustment	(0.07)	0.90	1.12	0.58	13.26	1.17
Cash flow	Cash flow ratio(%)	38.80	24.99	16.29	57.82	1.28	0.02
	Net Cash Flow Allowance Ratio(%)	Note 3	Note 3	105.50	117.36	48.80	36.88
	Cash reinvestment ratio(%)	3.11	2.78	(0.96)	2.42	153.00	185.93
Leverage	Operating leverage	(0.94)	2.62	1.94	4.97	3.10	3.17
	Financial leverage	0.97	1.04	1.02	1.08	0.19	(2.67)
Reasons for changes in various financial ratios in last two years (increased or decreased changes of more than 20%): 1. Decrease in interest coverage multiples: Due to the adoption of IFRS16 for the recognition of lease liabilities in the current period, resulting in an increase in related interest expenses. 2. Increase in inventory turnover and decrease in average inventory turnover days: Strengthen inventory and production management to improve inventory liquidity. 3. Increased profitability: For 2019, due to the increase in the proportion of high value-added products and the decrease in fixed costs and expenditures. Revenue, gross profit, operating profit, pre-tax net profit and current net profit all increased by more than 20% compared with the same period last year. 4. Cash flow ratio decrease: Due to the increase in profits in recent years relative to the increase in the amount of dividends paid, the cash flow allowance ratio has declined. It is still fair. Also the proportion of cash reinvestment in thisperiod has increased.

1. Increased profitability: For 2019, due to the increase in the proportion of high value-added products and the decrease in fixed costs and expenditures. Revenue, gross profit, operating profit, pre-tax net profit and current net profit all increased by more than 20% compared with the same period last year. 4. Cash flow ratio decrease: Due to the increase in profits in recent years relative to the increase in the amount of dividends paid, the cash flow allowance ratio has declined. It is still fair. Also the proportion of cash reinvestment in this period has increased. Note 1: Reviewed and certified by CPA Note 2: Reviewed and certified by CPA Note 3: The financial statements using IFRS are less than 5 years.

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6.2.2 Individual Financial Analysis-International Financial Reporting Standards

Year Analyzed items (Note 4)	Year Analyzed items (Note 4)	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	Financial analysis in latest five years (Note 1)	As of March 31, 2020
		2015	2016	2017	2018	2019
Financial structure (%)	Debt-to-asset ratio	32.92	32.64	36.57	37.56	39.62	Note 2
	Long-term funds as a percentage of property, plant and equipment	4,926.34	5,000.30	5,147.75	5,179.24	5,440.01
Liquidity (%)	Current ratio	83.45	85.03	76.85	71.52	64.55
	Quick ratio	82.12	83.06	75.53	70.47	63.77
	Interest coverage multiples	9.90	214.96	313.08	277.32	675.83
Operating performance	Receivable turnover ratio (times)	1.72	2.68	2.46	2.43	3.17
	Average days for cash collection	212.21	136.26	148.37	150.21	115.14
	Inventory turnover ratio(times)	9.83	87.58	84.66	66.71	5.28
	Average days for sale of goods	0.87	1.07	0.96	0.69	69.00
	Payable turnover ratio (times)	37.15	4.17	4.31	5.47	0.61
	PPE turnover ratio (times)	22.79	28.14	26.31	22.23	21.83
	Total assets turnover (times)	0.31	0.39	0.35	0.28	0.26
Profitability	Return on assets(%)	(0.34)	4.44	5.05	2.56	5.34
	Return on shareholders' equity(%)	(0.53)	6.58	7.71	4.05	8.69
	Ratio of net profit before tax to paid-in capital(%)	0.26	10.72	11.89	7.05	13.48
	Net profit rate(%)	(1.12)	11.24	14.49	9.21	20.81
	EPS (NT $)- after retrospective adjustment	(0.07)	0.90	1.12	0.58	1.28
Cash flow	Cash flow ratio(%)	24.70	20.32	17.70	10.91	17.31
	Net Cash Flow Allowance Ratio(%)	Note 3	Note 3	568.45	445.48	272.26
	Cash reinvestment ratio(%)	11.72	10.10	4.98	0.51	9.60
Leverage	Operating leverage	1.05	1.02	1.03	1.04	1.14
	Financial leverage	1.01	1.00	1.01	1.01	1.01
Reasons for changes in various financial ratios in last two years (increased or decreased changes of more than 20%): 1. current and quick ratios decrease: Due to the increase in accounts payable to related parties. 2. Increase in interest coverage multiples: Due to the increase in net profit before tax in the current period compared to the previous period. 3. Increase in receivables turnover rate and decrease in average cash collection days: Due to enhanced collection of accounts. 4. Increased profitability: For 2019, due to the increase in the proportion of high value-added products and the decrease in fixed costs and expenditures. Revenue, gross profit, operating profit, pre-tax net profit and current net profit all increased by more than 20% compared with the same period last year. 5. Decrease in cash flow ratio: Due to the increase in profits in recent years relative to the increase in the amount of dividends paid, the cash flow allowable ratio has decreased. It is still acceptable. The cash reinvestment ratio has also increased in thisperiod.

Note 1: Reviewed and certified by CPA. Note 2: Individual financial statements have not been prepared. Note 3: The financial statements using IFRS are less than 5 years. Note 4: The calculation formula for financial analysis is as follows:

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1. Financial structure

2. (1) Debt-to-asset ratio ＝ Total liabilities ／ Total assets

3. (2) Long-term funds as a percentage of property, plant and equipment ＝（ Total equity ＋ noncurrent liabilities ） ／ Net value of property, plant and equipment

4. Liquidity

5. (1) Current ratio ＝ Current assets ／ Current liabilities

6. (2) Quick ratio ＝（ Current assets － Inventories － Prepaid expenses ）／ Current liabilities

7. (3) Interest coverage multiples ＝ Net income before income tax and interest expenses ／ Current interest expense

8. Operating performance

9. (1) Receivables (including account receivables and notes receivable from operation) turnover ratio ＝ Net sales revenue / Balance of average receivables (including accounts receivable and notes receivable from operation) in each period

10. (2) Average days for cach collection ＝ 365 ／ Receivable turnover ratio

11. ＝ 。

12. (3) Inventory turnover ratio Cost of goods sold ／ Average inventory

13. (4) Payable (including account payables and notes payable from operation)turnover ratio ＝ Cost of goods sold ／ Balance of average payables (including account payables and notes payable from operation) in each period

14. (5) Average days for sale of goods ＝ 365 ／ Inventory turnover ratio

15. (6) PPE turnover ratio ＝ Net sales revenue ／ Average net value of property, plant and equipment

16. (7) Total assets turnover ratio ＝ Net sales revenue ／ Average total assets

17. Profitability

18. (1) Return on assets ＝〔 Profit/loss after tax ＋ Interest expenses× （１－ tax rate ）〕／ Average total assets

19. (2) Return on shareholders' equity ＝ Profit/loss after tax ／ Average total equity

20. (3) Net profit rate ＝ Profit/loss after tax ／ Net sales revenue

21. (4) EPS ＝（ Profit/loss attributable to owners of parent company-preferred stock dividends ）／ Weighted average number of issued shares (Note 5)

22. Cash flow

23. (1) Cash flow ratio ＝ Net cash flow from operating activities ／ Current liabilities

24. ＝

25. (2) Net Cash Flow Allowance Ratio Net cash flow from operating activities in latest five years ／ (Capital expenditures ＋ Increase in inventory ＋ Cash dividends) in latest five years

26. ＝ －

27. (3) Cash reinvestment ratio (Net cash flow from operating activities Cash dividends) ／ (Gross value of property, plant and equipment ＋ long term investment ＋ other noncurrent assets ＋ Working capital)

28. Leverage

29. ＝

30. (1) Operating leverage (Net operating income-variable operating costs and expenses) ／ Operating margin (Note 7)

31. ＝ －

32. (2) Financial leverage Operating margin ／ (Operating margin Interest expenses)

33. Note 5: The above formula for calculating the EPS shall pay special attention to the following when measuring:

34. a. Shall based on the weighted average number of common stocks rather than the number of issued shares at the end of the year

35. b. Anyone who has a capital increase or treasury stock shall consider the period of circulation and calculate the weighted average number of shares

36. c. Anyone who capitalizing retained earning or capitalizing capital reserves, when calculating the EPS for past years and half a year, shall adjust retrospectively according to the capital increase ratio and there is no need to consider the issue period of the capital increase.

37. d. If the preferred stocks are non-convertible accumulated preferred stocks, the current year ’s dividends (whether or not distributed) shall be deducted from the net profit after tax or increase the net loss after tax. If the preferred stocks are of non-cumulative nature, in case of net profit after tax occurs, the dividend of preferred stocks shall be deducted from the net profit after tax; if it is a loss, no adjustment is necessary.

38. Note 6: When analyzing cash flow, shall pay special attention to the following matters:

39. a. Net cash flow from operating activities refers to the net cash inflow from operating activities in the cash flow statement.

40. b. Capital expenditure refers to the annual cash outflow of capital investment.

41. c. The increase in inventory is counted only when the ending balance is greater than the beginning balance. If inventory decreases at the end of the year, it is calculated as zero.

42. d. Cash dividends include common stock’s and preferred stock’s.

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• e. Gross value of property, plant and equipment refers to the total amount of property, plant and equipment before deduction of accumulated depreciation.

• Note 7: The issuer shall divide the various operating costs and operating expenses into fixed and variable. If it involves estimation or subjective judgment, the issuer shall pay attention to its rationality and maintain consistency.

• Note 8: If the company's stock has no face value or face value is not NT $10 per share, the calculation of the ratio of the paid-up capital will base on the equity ratio attributable to the parent company.

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6.3 Supervisors’ review report from the most recent financial report.

Supervisors’Review Report

The Board of Directors has prepared the Company's 2018 Business Report, Financial Statements, and proposal for allocation of earnings.The independent auditors, Mr.Hui-Chih Kou and Ms. Hsin-I Kuo from the accounting firm of KPMG was retained to audit Bright LED’s Financial Statements and has issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, and earnings allocation proposal have been reviewed and determined to be correct and accurate by the Supervisors of Bright LED Electronics Corp. According to relevant requirements of the Securities and Exchange Act and the Company Law, we hereby submit this report.

Bright LED Electronics Corp.

Supervisors: Ju-Ching Liao

Chin-Lung Huang

Yi-Run Investment Co., Ltd. Representative- Hung-Chang Lin

March 22, 2019

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• 6.4 The most recent consolidated financial statements including independent auditors’ report, a two-year comparative balance sheet and income statement, statement of changes in shareholders’ equity, cash flow statement, and any attached notes or appendices

Representation Letter

The entities that are required to be included in the combined financial statements of Bright LED Electronics Corp. as of and for the year ended December 31, 2019 (from January 1, 2019 to December 31, 2019), 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 Standard 10, “Consolidated Financial Statements.”, which is recognized by Financial Supervisory Commission. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Bright LED Electronics Corp. and Subsidiaries do not prepare a separate set of combined financial statements.

Yours Sincerely,

Bright LED Electronics Corp.

by

Tsung-Jen Liaw

Chairman

March 20, 2020

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INDEPENDENT AUDITORS’ REPORT

(Consolidated Financial Statements)

The Board of Directors and Shareholders

Bright LED Electronics Corp.

Opinion

We have audited the accompanying consolidated financial statements of Bright LED Electronics Corp and subsidiaries. (the “Company”), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, 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, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 Company 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, 2019. 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.

Key audit matters for the Company’s consolidated financial statements for the year ended December 31, 2019 are stated as follows:

Inventory valuation

For details of accounting policies, accounting estimations and assumptions,

and related disclosures of inventory valuation, please refer to Notes 4 (8), 5 (2) and 6 (5) of the Company’s consolidated financial statements.

The description of key audit matter:

The Company’s amount of inventories is shown as the lower of cost and net realizable value. Because

determining the slow moving inventory loss involves subjective judgment on individual assessment of

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each category of inventory and its idle days, inventory valuation is one of the key audit matters that we conducted.

Corresponding audit procedure included the following:

1. Obtained year-end inventory falling price losses and inventory aging report

2. Compared the difference between the actual selling prices and its book values

3. Evaluated managers’ judgment on allowance percentage of inventory aging report whether is reasonable or not, which included the following procedures as well:

4. Executed audit sampling procedure

5. Tested the accuracy of the inventory aging report

6. Compared the difference between last year’s allowance and actual write-off

7. Evaluated the appropriateness of the policy of allowance to reduce inventory and loss from idle inventories.

Revenue Recognition

For details of accounting policies and related disclosures of revenue recognition, please refer to Notes 4 (13) and 6 (20) of the Company’s consolidated financial statements.

The description of key audit matter:

The sources of the major operating revenue of the Company are research and development, productions, and sales of light-emitting diodes indicators and display…etc and contracts of LED display, LED lighting and related operating applications/systems’ constructions. Where the Company’s revenues generated from is the concerned factor for this report users or recipients. Furthermore, IFRS 15 was first adopted by the republic of China in 2018; hence, revenue recognition is considered as one of the key audit matters.

Corresponding audit procedure included the following:

1. Evaluated appropriateness of accounting policies according to the understanding of the Company’s operation and the characteristics of the industry both acquired by the new IFRS.

2. Tested the design of internal control system and effectiveness of execution.

3. Analyzed and evaluated if there is any major irregularity by inspecting revenues generated from main customers and new customers.

4. Evaluated accuracy during the period of revenue recognition by inspecting new major contract added in this period and testing sales samples in accordance with its contract terms during a period of time, which is before and after the year end.

Account Receivables Valuation

For details of accounting policies of account receivables valuation, please refer to Notes 4 (7) financial instruments of the Company’s consolidated financial statements; for details of accounting estimates and accounting assumption of uncertainty of account receivables valuation, please refer to Notes 5 (1) of the Company’s consolidated financial statements; for details of explanation on account receivables valuation, please refer to 6 (4) of the Company’s consolidated financial statements.

The description of key audit matter:

Account receivables of Bright LED Electronics Corp. are distributed among customers. The

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account receivables valuation allowance is calculated according to the expected percentage of credit losses which takes each time interval of overdues of account receivables and adjustments on prospective factors into consideration when estimating expected credit losses of account receivables. The management will, according to the report date, re-update new expected losses within each time interval of overdues and perform individual assessments on major overdues and payment disputes; hence, it involves subjective judgment from the managers and it is considered as one of the key audit matters.

Corresponding audit procedure included the following:

1. Evaluated reasonableness of the percentage of expected credit losses

2. Determined whether there is a major irregularity by comparing the turnover rate and turnover days of accounts receivables with the company’s credit policy and other related information.

3. Obtained the aging schedule.

4. Verified total amount from the aging schedule with general ledger

5. Confirmed integrity and accuracy of the aging schedule.

Other Matter

We have also audited the parent company only financial statements of Bright LED Electronics Corp. as of and for the years ended December 31, 2019 and 2018 on which we have issued an unmodified opinion.

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 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 Company’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 Company 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 Company’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,

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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.

1. 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 Company’s internal control.

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

3. 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 Company’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

4. the consolidated financial statements; if such disclosures are inadequate, we are responsible 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 Company to cease to continue as a going concern.

5. 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.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company 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, 2019 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 Ms. Hsin-I Kuo and Ms. Tzu-Hui Li.

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KPMG TAIWAN Republic of China

March 20, 2020

Notice to Readers

The accompanying financial statements are intended only to present the 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 financial statements are those generally applied in the Republic of China.

For the convenience of readers, the independent auditors’ report and the accompanying 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 independent auditors’ report and financial statements shall prevail.

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Bright LED Electronics Corp. and Subsidiaries Notes from consolidated financial statements

Year 2018 and 2019

(Unless otherwise specified, all amounts are in units of NT $thousand)

1. Company history

Bright LED Electronics Corp. (hereinafter referred to as the "Company") was established in June 1981. The company and its subsidiaries (hereinafter also referred to as "consolidated company") are principally engaged in the manufacturing and sales of light-emitting diode, indicator lights, displays and other extended products and undertaking engineering projects that provide indicator lights, displays and related supporting engineering projects.

2. The date and procedure for the approval of the financial statements

This consolidated financial statement was approved by the board of directors on March 20, 2020.

3. Application of newly issued and revised standards and explanations

• (1) Impact of the newly issued and revised standards and interpretations approved by the Financial Supervisory Commission:

• Since 2019, the consolidated company has fully adopted the International Financial statementing Standards approved by the Financial Supervisory Commission (hereinafter referred to as FSC) and effective in the Republic of China in 2019 to prepare consolidated financial statements. The relevant standards and explanations for new releases, amendments and amendments are listed below:

Newly issued and revised standards and explanations International Financial statementing Standards (IFRS) 16 “Lease” Explanation of IFRS 23 “Uncertainty in income tax treatment” Amendment to IFRS 9 “Early repayment feature with negative compensation” Amendment to International Accounting Standards Board (IASB) 19 “Plan to amend, reduce or pay off” Amendment to International Accounting Standards Board (IASB) 28 “Long-term interests in affiliated companies and joint ventures” IFRS from year 2015~2017’s annual improvement

Effective date issued by the International Accounting Standards Board

Jan 01, 2019 Jan 01, 2019 Jan 01, 2019 Jan 01, 2019 Jan 01, 2019 Jan 01, 2019

Except for the following items, the application of the newly recognized international financial statementing standards will not cause significant changes to the consolidated financial statement. The nature and impact of those who caused major changes are described below:

1. International Financial statementing Standards (IFRS) 16 “Lease”

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IFRS 16 "Leases" (hereinafter referred to as IFRS 16) replaces the current IAS 17 "Leases" (hereinafter referred to as IFRS 17), International Financial statementing Interpretation No. 4 "Determining whether an arrangement includes leases" (hereinafter referred to as IFRS Interpretation No. 4), Interpretation Announcement No. 15 "Operating Leases: Incentives" and Interpretation Announcement No. 27 "Evaluating the Lease The substance of the transaction in legal form ".

The consolidated company adopts the modified retrospective method to transition to IFRS 16, and adjusts the cumulative impact number applied for the first time to the retained earnings on January 1, 2019. The nature and impact of the related accounting policy changes are described as follows:

(1) Definition of Lease

The consolidated company had previously judged whether an agreement was or included a lease on the start date of the contract based on the International Financial statement Interpretation No. 4. After changing the accounting policy, the definition of lease from IFRS 16 is used to assess whether the contract is or contains a lease refer to Note 4 (11) of the accounting policy. When transitioning to IFRS 16,

the consolidated company chose to use an expedient approach to exempt the assessment of whether the transaction before the initial application date was a lease, that is, directly apply a contract previously identified as a lease to IFRS 16 Regulations. Contracts that have previously been identified in accordance with IAS 17 and IFRS 4 as non-lease will no longer be re-evaluated as leases. Therefore, the definition of lease under IFRS 16 only applies to contracts signed or changed on and after the initial application date.

(2) Lessee

The transaction of the consolidated company as a lessee was previously evaluated based on whether the lease contract has transferred almost all the risks and rewards of the ownership of the underlying asset. Under IFRS 16, the right-of-use assets and lease liabilities are recognized on the balance sheet for lease contracts.

• Contracts previously classified as operating leases under IASB 17

During the transition period, the lease liability is measured by the present value of the remaining lease payments, and is discounted using the incremental borrowing rate of the consolidated company on the initial applicable date. Right-of-use assets are measured in the following ways:

The carrying amount of the right-of-use asset is as if IFRS 16 has been applied since the start date, but it is discounted using the lessee ’s incremental borrowing rate on the date of the initial application. In addition, the consolidated company adopted the following expedient approach to transition to IFRS 16:

(a) Use a single discount rate for lease portfolios with similar characteristics.

(b) According to the evaluation results of relevant loss-making contracts in

accordance with International Accounting Standards No. 37 "Liability Reserves, Contingent Liabilities and Contingent Assets" immediately before the date of initial application, as an alternative method for impairment assessment of right-of-use assets.

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• (c) For leases whose lease period ends within 12 months after the initial application date, exemption is applied and the right-of-use assets and lease liabilities are not recognized.

• (d) The original direct costs are not included in the measurement of right-of-use assets on the date of initial application.

• (e) When the lease contract includes the option to extend or terminate the lease, the hindsight is adopted when determining the lease period

• (3) Lessor

• Except for subletting, the consolidated company is not required to make any adjustments to its transaction as a lessor when transitioning to IFRS16 and it applies IFRS 16 to process its lease from the date of initial application transaction.

• (4) Influences on financial statements

• When transitioning to IFRS16, the consolidated company recognized the right-of-use assets and lease liabilities at the initial application date to increase to NT $149,054 thousand and NT $103,346 thousand respectively. Other non-current assets decreased by NT $52,239 thousand. The difference recognized in retained earnings and non-controlling interests. Lease liabilities are discounted at the incremental borrowing rate of the consolidated company's initial applicable date, and the weighted average of the interest rates used is 1.62%.

• The amount of operating lease commitments disclosed in the year prior to the initial application date and the amount of the lease liability recognized on the initial application date are adjusted as follows:

2018/12/31 Operating lease commitments amount disclosed Amount discounted on 2019/1/1 incremental borrowing rate Amount of lease liability recognized on 2019/1/1	2019/1/1 $ 116,274 103,346 $ 103,346

• (2) The impact of not adopting the International Financial statementing Standards recognized by Financial Supervisory Commission

• According to the order of the Financial Supervisory Commission No. 1080323028 of the 29th of July, 2019, the listed companies should publicly adopt the international financial system approved by the Financial Supervisory Commission and effective in 2020 reporting guidelines. The relevant standards and explanations for new releases and amendments are listed below:

Newly release／revised standards and explanation Amendments to IFRS 3 "Definition of Business Amendments to IFRS 9, International Accounting Standards Board 39 and IFRS 7 "Interest Rate Index Reform" Amendments to IASB 1 and IASB 8 "Major Definitions"	Effective date issued by the Council
	2020/1/1 2020/1/1 2020/1/1

The consolidated company assesses the application of the above-recognized international financial statementing standards and will not cause significant changes to

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the consolidated financial statements.

• (3) Newly published and revised standards and explanations that have not yet been approved by the Financial Supervisory Commission

The following table summarizes the standards and explanations that have been published and revised by the International Accounting Standards Board (hereinafter referred to as IASB), but have not yet been approved by the Financial Supervisory Commission:

Newly published／revsied standards and explanation Amendments to IFRS 10 and IASB 28 "Sale or investment of assets between investors and their affiliates or joint ventures IFRS 17 "Insurance Contracts" Amendments to IASB1 "Classify liabilities as current or non-current"	Effective date issued by the Council
	To be resolved by the Council 2021/1/1 2022/1/1

The consolidated company is continuously evaluating the impact of the above standards and explanations on the consolidated company's financial statements and operating results. The relevant impact will be disclosed when the evaluation is completed.

• (4) Summary of major accounting policies

The major accounting policies adopted in this consolidated financial statements are summarized and explained below. The following accounting policies have been consistently applied to all presentation periods in this consolidated financial statement.

• a. Compliance declaration:

This consolidated financial statement is in accordance with “Regulations Governing the

Preparation of Financial statements by Securities Issuers” (hereinafter referred to as the

"preparation standards") and the International Financial statementing Standards, International Accounting Standards board, interpretation and interpretation announcements (hereinafter referred to as the Approved International Financial statementing Standards by Financial Supervisory Commisson").

b. Preparation basis:

1. Measurement basis

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

• (1) Measure financial assets at fair value through profit or loss measured at fair value;

• (2) Measure financial assets at fair value through other comprehensive profit or loss based on fair value;

• (3) Netly determined welfare liabilities (or assets) measured based on the fair value of

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retirement fund assets minus the present value of the determined welfare obligations.

1. Functional currency and expressed currency

Each entity of the consolidated company uses the currency of the main economic

environment in which each operation is located as its functional currency.

This consolidated financial statement is expressed in the company's functional currency which is the New Taiwan Dollar. All financial information expressed in NTD is in units of NTD $ thousands.

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3. Consolidation basis

1. Principles for preparing consolidated financial statements

The main body of the preparation of the consolidated financial statement includes the company and the entities (ie subsidiaries) controlled by the company. From the date when the subsidiary obtains control, it begins to include its financial statement in the consolidated financial statement until the date when it loses control. The profit or loss attributable to the subsidiary's non-controlling equity should be attributable to the non-controlling equity, even if the non-controlling equity becomes a loss balance. The transactions, balances and any unrealized income and expenses between the consolidated companies have been eliminated when preparing the consolidated financial statements. Changes in the ownership rights and interests of subsidiaries of the consolidated company without loss of control shall be treated as equity transactions with the owners. The difference between the adjustment amount of the non-controlling equity and the fair value of the consideration paid or received is directly recognized in the equity and attributed to the owner of the company.

2. Subsidiaries included in consolidated financial statement

Investment company name Subsidiaries’ company name Nature of businesses	% of equity held
	2019/12/31 2018/12/31
The company Wanhui Enterprise Co., Ltd. (HK) Investment holding and trading and selling of LED components, displays and electronic parts 100% 100% The company Bright Wonder Electronics Corp. (Bright Wonder (Mauritius)) Investment holding - 100% The company KoBrite Corp. (KoBrite) Investment holding 93% 93% The company Lisheng International Industrial Co., Ltd. (Lisheng International) Investment holding 60% 60% Bright Wonder (Mauritius) (Note 1) Bright Wonder Electronics LTD. (HK) (Bright Wonder (H.K.)) Investment holding - 56% Wanhui Enterprise Co., Ltd. (HK) DongGuan Bright LED Electronics Manufacturing and assembling LED components and extended products 100% 100% KoBrite KoBrite DongGuan corporation (DongGuan) producing and processing LED die 100% 100% KoBrite KoBrite Taiwan corporation producing 100% 100%

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	(Taiwan)	and processing LED die
KoBrite	Bright Crystel Company	Investment holding	80%	80%
	Limited (HK)
HK Bright	HeNan Bright Crystal Company	Production and sales of	100%	100%
Crystal	(HeNan Bright Crystal)	high-quality
		artificial crystals
		and finished LED
		lighting and import
		and export business
Lisheng	DongGuan Bright Rise Circuit	PCB electroplating	-	100%
International	Board Corp.
	(DongGuan Bright Rise)(Note 2)
Lisheng	DongGuan Bright Rise Electronic	PCB processing	100%	-
International	Co. Ltd.
	(DongGuan Bright Rise
	Electronics)(Note 3)

• Note 1: The Company’s board of directors resolved on May 10, 2019 that both the sub-company Bright Wonder Electronics Corp. and its reinvestment company Bright Wonder Electronics LTD. (HK) have no operational purpose anymore, so liquidation and cancellation processes have completed on November 3, 2019.

• Note 2: The Company board of directors revsolved on June 12, 2019 to dispose sub-company Dongguan Lisheng Circuit Board Co., Ltd. The transaction was completed at 4[th] quarter of 2019.

• Note 3: The Company board of directors revsolved on June 12, 2019 to establish a subsidiary Dongguan Lisheng Electronic Technology Co., Ltd.

3. Subsidiaries not included in the consolidated financial statement: N/A

4. Foreign currency

1. Foreign currency transaction

Foreign currency transactions are converted into functional currencies at the exchange rate on the transaction date. At the end of each subsequent reporting period (hereinafter referred to as the reporting day), foreign currency monetary items are converted into functional currencies at the exchange rate on that day. Foreign currency non-monetary items measured at fair value are converted to functional currency at the exchange rate on the day when the fair value is measured, and foreign currency non-monetary items measured at historical cost are converted at the exchange rate on the transaction date. Unless the currency foreign exchange differences arising from the conversion of equity instruments measured at fair value through other comprehensive profit or loss are recognized as other comprehensive profit or loss, the rest are recognized as profit or

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loss.

1. Foreign operating agencies

2. Assets and liabilities of foreign operating agencies, including goodwill and fair value adjustments at the time of acquisition, are converted to functional currencies at the exchange rate on the reporting date; except for highly inflationary economies, revenue and expense items are based on the current period The average exchange rate is converted into a functional currency, and the resulting exchange differences are recognized as other comprehensive income.

When a foreign operating agency is punished for loss of control, joint control or significant influence, the cumulative exchange difference related to the foreign operating agency is fully reclassified as profit or loss. When a part of the punishment includes a subsidiary of a foreign operating agency, the relevant accumulated exchange difference is re-attributed to non-controlling interests in proportion. When part of the punishment includes investments in affiliated enterprises or joint ventures of foreign operating agencies, the relevant accumulated exchange differences are reclassified to profit or loss in proportion.

For foreign currency receivables or payables of foreign operating agencies, if there is no liquidation plan and it is impossible to pay off in the foreseeable future, the foreign currency exchange gains and losses generated will be regarded as a net investment Part of it is recognized as other comprehensive income.

1. Classification criteria for distinguishing between current and non-current assets and Liabilities

Assets that meet one of the following conditions are classified as current assets, and all other assets that are not current assets are classified as non-current assets:

1. Expect to realize the asset in its normal business cycle, or intend to sell or consume it;

2. The asset is held mainly for trading purposes;

3. The asset is expected to be realized within twelve months after the reporting period;or

4. The asset is cash or cash equivalents, unless the asset is exchanged or used to pay off liabilities for other restrictions at least twelve months after the reporting period.

Liabilities that meet one of the following conditions are classified as current liabilities, and all other liabilities that are not current liabilities are classified as non-current liabilities:

1. The debt is expected to be settled in the normal business cycle;

2. The liability is held mainly for transaction purposes;

3. It is expected that the liability will be settled within twelve months after the reporting period; or

4. Liabilities that do not have the right to unconditionally postpone the settlement period to at least twelve months after the reporting period. The terms of the liability may be based on the choice of the counterparty to issue equity instruments and lead to its liquidation, which does not affect its classification.

5. Cash and cash equivalent

6. Cash includes cash in stock and demand deposits. Equivalent cash refers to short-term highly liquid investments that can be converted into fixed cash at any time and have little risk of change in value. Term deposits that meet the foregoing definition and are held for short-term cash commitments rather than investment or other purposes are listed in cash equivalents.

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1. Financial instruments

2. Financial assets

Financial assets at initial recognition are classified as: financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive profit or loss, and financial assets measured at fair value through profit or loss. The consolidated company only reclassifies all affected financial assets from the first day of the next reporting period when it changes the business model for managing financial assets.

• (1) Financial assets measured at amortized cost

  • When financial assets meet the following conditions at the same time and are not designated to be measured at fair value through profit or loss, they are measured at amortized cost:

• ‧ The financial asset is held under a business model whose purpose is to collect contractual cash flows.

• ‧ The contractual terms of the financial asset generate cash flow on a specific date, which is solely interest on the payment of principal and the amount of outstanding principal.

These assets are subsequently accumulatively amortized by the original recognized amount plus or minus the effective interest method, and any amortized cost of any allowance loss is adjusted to measure the subsequent acquisition. Interest income, foreign currency exchange gains and losses and impairment losses are recognized in profit or loss.

• (2) Financial assets measured at fair value through other comprehensive income When the debt instrument investment also meets the following conditions and is not designated to be measured at fair value through profit or loss, it is measured at fair value through other comprehensive income:

• ‧ The financial asset is held under the business model with the purpose of collecting contractual cash flow and selling.

• ‧ The contractual terms of the financial asset generate cash flow on a specific date, which is solely interest on the payment of principal and the amount of outstanding principal.

During initial recognition, the consolidated company may make an irrevocable choice to report subsequent fair value changes in equity instrument investments not held for trading in other comprehensive income. The aforementioned selections are made on a tool-by-item basis.

Equity instrument investors are subsequently measured at fair value. Dividend income (unless it clearly represents the recovery of part of the investment cost) is recognized in profit or loss. The remaining net benefits or losses are recognized as other comprehensive gains and losses and are not reclassified to profit or loss. Dividend income from equity investments is recognized on the date the consolidated company has the right to receive dividends (usually the ex-dividend date).

• (3) Financial assets measured at fair value through profit or loss Financial assets that are not measured at amortized cost or measured at fair value through other comprehensive profit or loss are measured at fair value through profit or loss including derivative financial assets. At the time of initial recognition, the consolidated company may irrevocably designate the financial asset that meets

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the conditions measured by amortized cost or fair value through other comprehensive profit or loss as the fair value through profit or loss in order to eliminate or significantly reduce the accounting ratio financial assets measured by value. These assets are subsequently measured at fair value, and their net benefits or losses (including any dividends and interest income) are recognized as profit or loss.

• (4) Impairment of financial assets

The consolidated company targets financial assets measured at amortized cost (including cash and cash equivalents, financial assets measured at amortized cost, bills and accounts receivable, other receivables, deposits and other financial Assets, etc.), through other comprehensive profit and loss, the debt instrument investment and the expected credit loss of the contract asset are recognized as the allowance loss. The following financial assets are measured based on the amount of 12-month expected credit losses, and the rest are measured based on the amount of expected credit losses during the lifetime:

• ‧ Determine that the debt securities have low credit risk on the reporting date; and

• ‧ The credit risk of other debt securities and bank deposits (that is, the risk of default in the expected duration of financial instruments) has not increased significantly since the original recognition.

Allowance losses for accounts receivable and contract assets are measured by the amount of expected credit losses over the lifetime.

In determining whether the credit risk has increased significantly since the original recognition, the consolidated company considered reasonable and corroborable information (which can be obtained without excessive cost or investment), including qualitative and quantitative information, and based on the consolidated company ’s historical experience, Analysis of credit evaluation and forward-looking information. If the contractual payment is overdue, the consolidated company assumes that the credit risk of the financial asset has increased significantly.

If the borrower is unlikely to perform its credit obligations and pay the full amount to the consolidated company, the consolidated company is deemed to have defaulted on the financial asset.

The expected credit loss during the lifetime refers to the expected credit loss arising from all possible defaults during the expected lifetime of the financial instrument. The twelve-month expected credit loss refers to the expected credit loss arising from the possible default of financial instruments within twelve months after the reporting date (or a shorter period if the expected duration of the financial instrument is shorter than twelve months).

The longest period for measuring expected credit losses is the longest contract period in which the consolidated company is exposed to credit risk.

The expected credit loss is a probability-weighted estimate of the credit loss of the financial instrument over the expected lifetime. Credit loss is measured by the present value of all short cash receipts, that is, the difference between the cash flow that the consolidated company can receive under the contract and the cash flow expected by the consolidated company. Expected credit losses are discounted at the effective interest rate of the financial asset.

On each reporting day, the consolidated company assesses whether there is

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any credit impairment on the financial assets measured at amortized cost and the fair value of the debt securities measured through other comprehensive income. When one or more events that have an adverse effect on the estimated future cash flow of a financial asset have occurred, the financial asset has been credit-impaired. Evidence of credit impairment of financial assets includes observable data on the following:

• ‧ Significant financial difficulties of the borrower or issuer;

• ‧ Breach of contract, such as delay or overdue;

‧ For economic or contractual reasons related to the borrower's financial difficulties, the consolidated company gave the borrower a concession that would not otherwise be considered;

• ‧ The borrower is likely to claim bankruptcy or other financial reorganization; or

• ‧ The financial asset's active market disappeared due to financial difficulties.

The allowance for financial assets measured at amortized cost is deducted from the asset’s carrying amount. The fair value of the debt instrument investment measured through fair value through other comprehensive income is to adjust the profit and loss and recognize it in other comprehensive income (without reducing the asset's carrying amount).

When the consolidated company cannot reasonably anticipate the recovery of the whole or part of the financial assets, it directly reduces the total carrying amount of its financial assets. For company accounts, the combined company analyzes the timing and amount of the write-off individually on the basis of whether it is reasonably expected to be recovered. The consolidated company expects that the amount written off will not materially reverse. However, financial assets that have been written off can still be enforced to comply with the consolidated company's procedures for recovering overdue amounts.

• (5) Exclusion of financial assets

The consolidated company terminates the contractual rights only from the cash flow of the asset, or has transferred the financial asset and almost all the risks and rewards of ownership of the asset have been transferred to another enterprise, or has almost neither transferred nor retained ownership. When all risks and rewards do not retain the control of the financial assets, the financial assets are excluded.

If the consolidated company signs a transaction to transfer financial assets, if it retains all or almost all the risks and rewards of ownership of the transferred assets, it will continue to be recognized on the balance sheet.

1. Financial liabilities and equity instruments

2. (1) Classification of liabilities or equity

The debt and equity instruments issued by the consolidated company are classified as financial liabilities or equity based on the substance of the contractual agreement and the definition of financial liabilities and equity instruments.

(2) Equity transactions

Equity instrument refers to any contract that recognizes the remaining equity of the consolidated company after the assets are deducted from all its liabilities. The equity instruments issued by the consolidated company are recognized at the

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amount obtained after deducting the direct issuance cost.

• (3) Treasury stocks

When repurchasing the equity instruments recognized by the company, the consideration paid (including directly attributable costs) is recognized as a decrease in equity. The repurchased shares are classified as treasury stocks. Subsequent sales or reissue of treasury stocks, the amount received is recognized as an increase in equity, and the remaining or loss generated by the exchange is recognized as a capital reserve or retained surplus (if the capital reserve is insufficient to offset).

• (4) Financial liabilities

Financial liabilities are classified as amortized costs or measured at fair value through profit or loss. Financial liabilities are classified as measured at fair value through profit or loss if they are held for trading, derivatives, or designated at initial recognition. Financial liabilities measured at fair value through profit or loss are measured at fair value, and related net benefits and losses, including any interest expense, are recognized in profit or loss.

The subsequent effective interest method for other financial liabilities is measured by amortized cost. Interest expenses and exchange gains and losses are recognized in profit or loss. Any profit or loss at the time of delisting is also recognized in profit or loss.

• (5) Exclusion of financial liabilities

The consolidated company excludes financial liabilities when the contractual obligations have been fulfilled, cancelled or expired. When the financial liability clause is modified and the cash flow of the revised liability is significantly different, the original financial liability is excluded and the new financial liability is recognized at fair value based on the revised terms.

When a financial liability is excluded, the difference between its carrying amount and the total consideration paid or payable (including any transferred non-cash assets or liabilities assumed) is recognized as profit or loss.

• (6) Mutual offset of financial assets and liabilities

Financial assets and financial liabilities are only offset when the consolidated company currently has the legally enforceable right to offset and intend to deliver or simultaneously realise the assets and settle the liabilities on the net, and express them in the net balance sheet.

1. Inventory

Inventories are measured by the lower of cost and net realizable value. The cost includes the acquisition, production or processing costs and other costs incurred in bringing it to the available location and condition, and is calculated using the weighted average method. The cost of finished goods and work-in-process inventories includes manufacturing expenses that are apportioned to normal production capacity at an appropriate rate.

Net realizable value refers to the balance of the estimated selling price under normal operations minus the estimated cost required to complete the completion and the estimated cost required to complete the sale.

9. Investment-related enterprises

Affiliated companies are those companies that have significant influence over their

1

financial and operating policies but are not controlled or jointly controlled. The consolidated company shall adopt the equity method to deal with the equity of the related companies. Under the equity method, the original acquisition is recognized based on cost, and the investment cost includes the cost of the transaction. The carrying amount of an investment-related enterprise includes the goodwill identified at the time of the original investment, less any accumulated impairment losses.

The consolidated financial statement includes from the date of significant influence to the date of loss of significant influence. After adjustments to the consistency of

the consolidated company's accounting policies, the consolidated company recognizes the profit and loss of the investment-related enterprise and other amount of comprehensive profit and loss. When the related company's equity changes in non-profit and loss and other comprehensive profit and loss do not affect the shareholding ratio of the consolidated company, the consolidated company will be recognized as a capital reserve according to the shareholding ratio.

The unrealized benefits and losses arising from the exchange between the consolidated company and the affiliated company shall be recognized in the enterprise's financial statements only within the scope of the non-related investor's interest in the affiliated enterprise.

When the consolidated company should recognise the proportion of the

affiliated company’s loss equal to or exceeds its equity in the affiliated company, it will stop recognizing its loss, but only when statutory obligations, deductions or payments have been made on behalf of the invested company within the scope, recognize additional losses and related liabilities.

1. Property, plant and equipment

2. Recognition and measurement

Property, plant and equipment items are measured by cost

(including capitalized borrowing costs) less accumulated depreciation and any accumulated impairment.

When the major components of property, plant and equipment have different durability, they are treated as separate items (main components) of property, plant and equipment. The property, plant and equipment disposition benefit or loss is recognized in profit or loss.

1. Follow-up costs

Subsequent expenditures are only capitalized when their future economic benefits are likely to flow into the consolidated company.

1. Amortization

Depreciation is calculated based on the cost of assets minus the residual value, and the

straight-line method is recognized in profit or loss within the estimated useful life of each component.

The land is not subject to depreciation.

The estimated service life of the current period and the comparative period is as follows:

(1) Housing and construction: 2 ~ 55 years

• (2) Machine equipment: 2 ~ 8 years

• (3) Others: Except that lease improvements are listed according to the lease term, the rest are 2 to 8 years.

The consolidated company reviews the depreciation method, durability, and residual value on each reporting day, and makes appropriate adjustments as necessary.

1. Lease Lease (applicable from January 1, 2019)

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1. Lease judgment

The consolidated company evaluates whether the contract is a lease or contains a lease on the contract establishment date. If the contract transfers control over the use of the

identified asset for a period of time in exchange for consideration, the contract is a lease or contains a lease. In order to evaluate whether the contract is a lease, the consolidated company evaluates the following items:

• (1) The contract involves the use of an identified asset. The identified asset is specified in the contract or implied by the time when it is available for use. Its entity can distinguish or represent substantially all of its production capacity. If the supplier has substantive rights to replace the asset, the asset is not an identified asset; and

• (2) The customer has the right to obtain almost all economic benefits from the use of the identified assets throughout the period of use; and

• (3) The client obtains the right to lead the use of identified assets when one of the following conditions is met:

• ‧ The customer has the right to lead the use and purpose of the identified assets throughout the use period; or

• ‧ The relevant decisions about the use method and purpose of the asset are determined in advance, and:

  • The customer has the right to operate the asset during the entire use period, and the supplier does not have the right to change the operation instructions; or

  • The way the customer designs the asset has pre-determined the way and purpose of use for the entire period of use.

2. Lessee

The consolidated company recognizes the right-of-use asset and lease liability on the lease start date. The right-of-use asset is originally measured at cost, which includes the original measured amount of the lease liability, adjusts any lease payments paid on or before the lease start date, and adds the original direct cost incurred and the estimated cost of dismantling, removing the underlying asset and restoring its location or underlying asset, and deducting any leasing incentives received.

The right-of-use asset is subsequently depreciated on a straight-line basis between the start of the lease and the end of the end-of-life of the right-of-use asset or the end of the lease period. In addition, the consolidated company periodically assesses whether the right-of-use asset is impaired and processes any impairment loss that has occurred, and cooperates to adjust the right-of-use asset when the lease liability is remeasured.

Lease liabilities are originally measured by the present value of the lease payments that have not been paid on the lease start date. If the implied interest rate of the lease is easy to determine, the discount rate is that rate. If it is not easy to determine, the incremental borrowing rate of the consolidated company is used. Generally speaking,

the consolidated company uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of lease liabilities include:

• (1) Fixed benefits, including substantial fixed benefits;

• (2) The lease payment depends on the change of an index or fee rate, the original measurement is based on the index or rate of the lease start date;

• (3) The guaranteed amount of residual value expected to be paid; and

• (4) When reasonably determined that the purchase option or lease termination option will be exercised, the exercise price or the penalty payable.

• The lease liability is subsequently accrued by the effective interest method, and its amount is measured when the following occurs:

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• (1) Changes in the index or rate used to determine lease payments result in changes in the future lease payments;

• (2) The guaranteed amount of residual value expected to be paid has changed;

• (3) The evaluation of the underlying asset purchase option has changed;

• (4) The estimate of whether to exercise the extension or termination option has changed, and the assessment of the lease period has been changed;

• (5) Modification of lease subject, scope or other terms.

• When the lease liability is remeasured due to changes in the aforementioned index or rate used to determine lease payments, changes in the residual value guarantee amount, and changes in the evaluation of purchase, extension or termination options, the book value of the right-of-use asset should be adjusted accordingly, and When the carrying amount of the right-of-use asset is reduced to zero, the remaining remeasured amount is recognized in profit or loss.

For lease modifications that reduce the scope of the lease, the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease, and the difference between the lease and the remeasured amount of the lease liability is recognized in profit or loss.

The consolidated company expresses the right-of-use assets and lease liabilities that do not meet the definition of investment real estate as separate line items in the balance sheet.

1. Lessor

The transaction of the consolidated company as the lessor is to classify the lease contract according to whether it transfers almost all the risks and rewards attached to the ownership of the underlying asset on the date of the lease establishment. If it is classified as a financial lease, otherwise it is classified as an operating lease. At the time of evaluation, the consolidated company considers whether it covers the relevant specific indicators such as whether it covers the main part of the economic life of the underlying asset during the lease period.

If the agreement includes lease and non-lease components, the consolidated company uses IFRS 15 to distribute the consideration in the contract.

Lease (applicable before January 1, 2019)

1. Lessor

Lease income from operating leases is recognized as income on a straight-line basis over the lease period. The original direct costs arising from negotiating and arranging operating leases are added to the carrying amount of the leased assets and are recognized as expenses on a straight-line basis during the lease period. The total incentives provided to the lessee to achieve the lease arrangement are recognized as a reduction in rental income using the straight-line method during the lease period.

1. Lessee

Other leases are operating leases, and these lease assets are not recognized in the consolidated company's balance sheet.

Rental payments for operating leases (excluding insurance and maintenance service costs) are recognized as expenses on a straight-line basis during the lease period.

1. Impairment of non-financial assets

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The consolidated company assesses on each reporting day whether there is any indication that the carrying amount of non-financial assets (other than inventory, contract assets, deferred income tax assets) may be impaired. .

For the purpose of impairment testing, a group of assets whose cash inflows are largely independent of the cash inflows of other individual assets or asset groups is used as the smallest identifiable asset group.

The recoverable amount is the higher of the fair value of individual assets or cash-generating units minus the cost of sales and its use value. When assessing value in use, the

estimated future cash flow is converted to the present value at a pre-tax discount rate, which should reflect the current market assessment of the time value of money and the specific risks of the asset or cash-generating unit. If the recoverable amount of an individual asset or cash-generating unit is lower than the carrying amount, an impairment loss is recognized. Impairment losses are recognized immediately in the current profit and loss.

13. Revenue recognition

1. Revenue from customer contracts

Revenue is measured by the consideration expected to be obtained for the transfer of goods or services. The consolidated company recognizes revenue when the control of goods or services is transferred to the customer and the performance obligations are met. The consolidated company is explained as follows according to the main income items: (1) Selling goods

The consolidated company recognizes revenue when the control of the product is transferred. The transfer of control of the product means that the product has been delivered to the customer, the customer can fully determine the sales channel and price of the product, and there is no unfulfilled obligation that will affect the customer's acceptance of the product. Delivery occurs when the product is shipped to a specific location, its obsolescence and risk of loss have been transferred to the customer, and the customer has accepted the product in accordance with the sales contract, the acceptance terms have lapsed, or

• the consolidated company has objective evidence that all acceptance conditions have been met.

The average credit period for the combined company’s sales is 90 days, which is consistent with the industry’s practice, so it does not include financing elements. The consolidated company recognizes the accounts receivable when delivering the goods, because the consolidated company has the right to receive the consideration unconditionally at that time.

• (2) Engineering contract

The consolidated company is engaged in the contracting business of public works. Since the assets are controlled by customers at the time of construction, the revenue is gradually recognized over time based on the proportion of the engineering costs incurred so far to the estimated total contract costs. The contract includes fixed and variable consideration. The customer pays a fixed amount according to the agreed time. Some changes in the consideration are estimated using the accumulated experience in the past as the expected value; other changes in the consideration are estimated based on the most likely amount. Considering that the construction progress of public works is influenced by factors that are not under the control of the consolidated company, the rewards for early completion are usually limited. The consolidated company only recognizes revenue within the scope of the cumulative income height that is unlikely to undergo a major turnaround. If the amount of the recognized income has not been requested, it is recognized as

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a contract asset. When there is an unconditional right to the consideration, the contract asset is transferred to the accounts receivable.

If it is not possible to reasonably measure the degree of completion of the performance obligations of the engineering contract, contract revenue is recognized only within the range of expected recoverable costs.

When the consolidated company anticipates that the inevitable cost of fulfilling the obligations of an engineering contract exceeds the expected economic benefits from the contract, the liability provision for the lossy contract is recognized. If the situation changes, the estimates of income, cost, and degree of completion will be revised, and during the period when the management is informed of the change in the situation, the resulting changes will be reflected in profit or loss. The consolidated company provides standard warranty for public works that conforms to the agreed specifications and has recognized warranty liability provisions for this obligation.

• (3) Financial components

The consolidated company expects that the time between the transfer of all customer contracts for goods or services to the customer and the time for the customer to pay for the goods or services will not exceed one year. Therefore, the consolidated company does not adjust the monetary time value of the transaction price.

1. Cost of customer contract

2. The incremental cost of obtaining a contract

   • If the consolidated company expects to recover the incremental cost of obtaining a customer contract, the cost is recognized as an asset. The incremental cost of obtaining a contract is the cost incurred in obtaining a customer contract and not incurred if the contract is not obtained. The cost of obtaining a contract that will occur regardless of whether the contract is obtained is recognized as an expense when incurred, unless such cost is clearly chargeable to the customer regardless of whether the contract has been obtained.

The consolidated company adopts the standard practical expedient method. If the incremental cost of obtaining a contract is recognized as an asset and the amortization period of the asset is within one year, it is recognized as an expense when the incremental cost occurs.

1. The cost of fulfilling the contract

2. If the costs incurred in fulfilling the customer's contract are not within the scope of other standards (International Accounting Standard No. 2 "Inventory", International Accounting Standard No. 16 "Real Estate, Plant and Equipment" or International Accounting Standard No. 38 "Intangible Assets" "), The consolidated company will only begin when these costs are directly related to the contract or clearly identifiable expected contract, will generate or strengthen resources that will be used to meet (or continue to meet) performance obligations in the future, and are expected to be recovered. Such costs are recognized as assets.

General and administrative costs, wasted raw materials used to fulfill the contract but are not reflected in the contract price, labor or other resource costs, costs related to fulfilled (or partially fulfilled) performance obligations, and inability to distinguish between unsatisfied and unsatisfied performance. Costs related to obligations or fulfilled (or partially fulfilled) performance obligations are recognized as expenses when incurred.

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1. Employee benefits

2. Determine the withdrawal plan

The obligation to determine the pension plan is recognized as an expense during the service period of the employee.

1. Determine the welfare plan

The consolidated company's net obligation to determine the benefit plan is calculated for each benefit plan based on the present value of the employee's future benefits earned during the current or previous period of service, and the fair value of any plan assets is deducted.

The determination of welfare obligations is carried out annually by a qualified actuary based on the expected unit welfare method. When the calculation result may be beneficial to the consolidated company, the recognized asset is limited to the present value of any economic benefits that may be obtained in the form of refunding the withdrawal from the plan or reducing the future withdrawal from the plan. When calculating the present value of economic benefits, any minimum funding requirements are considered.

The re-measured amount of net-determined welfare liabilities, including actuarial gains and losses, planned asset compensation (excluding interest), and any changes in the asset ceiling effect (excluding interest) are immediately recognized in other comprehensive profit and loss and accumulated in retained earnings . The consolidated company determines the net interest expense (income) of the net determined benefit liability (asset), using the net determined benefit liability (asset) and discount rate determined at the beginning of the annual reporting period. The net interest expense and other expenses that determine the benefit plan are recognized in profit or loss.

When the plan is revised or reduced, the number of changes in welfare related to previous service costs or reduced benefits or losses is immediately recognized as profit or loss. When liquidation occurs, the consolidated company recognizes and determines the liquidation profit and loss of the welfare plan.

1. Short-term employee benefits

Short-term employee benefit obligations are recognized as expenses when services are provided. If the consolidated company has current statutory or presumptive payment obligations due to employees providing services in the past, and the obligation can be reliably estimated, the amount is recognized as a liability.

1. Share-based payment transaction

Equity delivered with share-based payment agreement to give the fair value of the date, recognizing expenses and increasing relative equity during the period when employees reach unconditional remuneration. The recognized fee is adjusted according to the amount of rewards expected to meet the service conditions and the non-market price vesting conditions; the final recognized amount is based on the amount of rewards that meet the service conditions and non-market price vesting conditions on the vesting date. The non-estimated conditions for the share-based payment rewards have been reflected in the measurement of the share-based payment and the fair value of the day, and there is no need to verify the difference between the expected and actual results. The fair value of the share delivery value-added rights payable to employees in cash is the period during which employees reach unconditional remuneration, recognize

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expenses and increase relative liabilities. The liability is remeasured according to the fair value of the share appreciation rights on each reporting day and closing date, and any changes is recognized as profit or loss.

1. Income tax

Income tax includes current and deferred income tax. Except for those related to business combinations, items recognized directly in equity or other comprehensive profit or loss, current income tax and deferred income tax should be recognized in profit or loss. Current income tax includes the estimated income tax payable or tax receivable payable based on the taxable income (loss) of the current year, and any adjustments to income tax payable or tax receivable receivable in the previous year. The amount is based on the statutory tax rate on the reporting date or the tax rate of substantive legislation to measure the best estimate of the amount expected to be paid or received.

Deferred income tax measures and recognizes the temporary difference between the carrying amount of assets and liabilities for financial statementing purposes and their tax base. Temporary differences arising from the following circumstances are not recognized as deferred income tax:

1. Assets or liabilities originally recognized in a transaction that is not a business combination, and does not affect accounting profits and taxable income (loss) at the time of the transaction;

2. Due to temporary differences arising from investment in subsidiaries, affiliated companies and joint venture interests, the consolidated company can control the timing of the temporary difference reversal and is likely to not revert in the foreseeable future.

Deferred income tax is measured at the tax rate at which the temporary difference is expected to reverse, and is based on the legal tax rate or substantive legislative tax rate at the reporting date.

The consolidated company will only offset the deferred income tax assets and deferred income tax liabilities when it meets the following conditions at the same time:

1. Have statutory enforcement power to offset current income tax assets and current income tax liabilities; and

2. Deferred income tax assets and deferred income tax liabilities are related to one of the following taxpayers subject to income tax levied by the same tax authority; (1) The same taxpayer; or

3. (2) Different taxpayers, but each entity intends to pay off the current income tax liabilities and assets on a net basis for each future period in which significant amounts of deferred income tax assets are expected to be recovered and deferred income tax liabilities are expected to be settled, or at the same time Assets and liquidation of liabilities.

For the unused taxable losses and unused income tax credits at the later stage of transfer and deduction, the temporary difference can be recognized as deferred income tax assets in the range where there is a possibility that future taxable income will be available. It will be reassessed on each reporting day to reduce the relevant income tax benefits to the extent that it is not likely to be realized; or to revert the amount that has been reduced to the extent that it is likely to have sufficient taxable income.

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18. Earnings per share

The consolidated company lists the basic and diluted earnings per share attributable to the holders of the company's common equity. The basic earnings per share of

the consolidated company is calculated by dividing the profit and loss attributable to the holders of the common stock equity of the company by the current weighted average number of common shares outstanding. Diluted earnings per share is calculated by adjusting the impact of all potential diluted common shares by dividing the profit and loss attributable to the common equity holders of the company and the weighted average number of common shares outstanding. The potential dilutive common stock of the merged company includes the employee's stock options and estimated employee compensation.

19. Department Information

The operating department is an integral part of the consolidated company and is engaged in business activities that may earn income and incur expenses (including income and expenses related to transactions between other components in

the consolidated company). The operating results of all operating departments are regularly reviewed by the chief operating decision maker of the conslidated company to make decisions on the allocation of resources to that department and evaluate its performance. Each operating department has separate financial information.

5. Major sources of uncertainty in significant accounting judgments, estimates and assumptions

When the management team prepares this consolidated financial statement in accordance with the International Financial statementing Standards recognized by the Financial Supervisory Commission, it must make judgments, estimates and assumptions that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates.

Management team continues to review estimates and basic assumptions, and changes in accounting estimates are recognized during the period of change and future periods affected.

The accounting policy involves significant judgments and has no significant impact on the amount recognized in this consolidated financial statement.

Among uncertainties in assumptions and estimates, the existence of significant risks that will not cause major adjustments for the following year will be as follows:

• (1) Allowance loss for accounts receivable

The allowance loss for the accounts receivable of the consolidated company is estimated based on the assumption of default risk and expected loss rate. The company considers historical experience, current market conditions and forward-looking estimates on each reporting day to determine the assumptions and input values that must be used when calculating impairments. Please refer to Note 6 (4) for detailed explanations of relevant assumptions and input values.

• (2) Evaluation of inventory

Since inventory must be measured at the lower of cost and net realizable value, the consolidated company assesses the amount of inventory due to normal wear and tear, obsolescence or no market sales value on the reporting date, and writes down the cost of inventory to net realizable value. This inventory evaluation is mainly based on the product demand in a specific period in the future as the basis for estimation, so it may cause significant changes due to

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rapid industrial changes. Please refer to Note 6 (5) for details of inventory evaluation and estimation.

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6.4 The most recent financial statements for the parent company only

INDEPENDENT AUDITORS’ REPORT

(Parent Company Only Financial Statements)

The Board of Directors and Shareholders

Bright LED Electronics Corp.

Opinion

We have audited the accompanying parent company only financial statements of Bright LED Electronics Corp. (the “Company”), which comprise the parent company only balance sheets as of December 31, 2019 and 2018, and the parent company only statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the parent company only financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying parent company only financial statements present fairly, in all material respects, the parent company only financial position of the Company as of December 31, 2019 and 2018, and its parent company only financial performance and its parent company only cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers.

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 parent company only Financial Statements section of our report. We are independent of the Company 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 parent company only financial statements for the year ended December 31, 2019. These matters were addressed in the context of our audit of the parent company only financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters for the Company’s parent company only financial statements for the year ended December 31, 2019 are stated as follows:

Inventory valuation

For details of accounting policies, accounting estimates and assumptions, and related disclosures of inventory valuation, please refer to Notes 4 (7), 5 (2) and 6 (5) of the Company’s parent company only financial statements.

The description of key audit matter:

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The Company’s amount of inventories is shown as the lower of cost and net realizable value. Because determining the slow moving inventory loss involves subjective judgment on individual assessment of each category of inventory and its idle days, inventory valuation is one of the key audit matters that we conducted.

Corresponding audit procedure included the following:

Obtained year-end inventory falling price losses and inventory aging report Compared the difference between the actual selling prices and its book values Evaluated managers’ judgment on allowance percentage of inventory aging report whether is reasonable or not, which included the following procedures as well: Executed audit sampling procedure Tested the accuracy of the inventory aging report Compared the difference between last year’s allowance and actual write-off Evaluated the appropriateness of the policy of allowance to reduce inventory and loss from idle inventories.

Revenue Recognition

For details of accounting policies and related disclosures of revenue recognition, please refer to Notes 4 (13) and 6 (17) of the Company’s parent company only financial statements.

The description of key audit matter:

The sources of the major operating revenue of the Company are research and development, productions, and sales of light-emitting diodes indicators and display…etc and contracts of LED display, LED lighting and related operating applications/systems’ constructions. Where the Company’s revenues generated from is the concerned factor for this report users or recipients. Furthermore, IFRS 15 was first adopted by the republic of China in 2018; hence, revenue recognition is considered as one of the key audit matters.

Corresponding audit procedure included the following:

1. Evaluated appropriateness of accounting policies according to the understanding of the Company’s operation and the characteristics of the industry both acquired by the new IFRS.

2. Tested the design of internal control system and effectiveness of execution.

3. Analyzed and evaluated if there is any major irregularity by inspecting revenues generated from main customers and new customers.

4. Evaluated accuracy during the period of revenue recognition by inspecting new major contract added in this period and testing sales samples in accordance with its contract terms during a period of time, which is before and after the year end.

Account Receivables Valuation

For details of accounting policies of account receivables valuation, please refer to Notes 4 (6) financial instruments of the Company’s parent company only financial statements; for details of accounting estimates and accounting assumption of uncertainty of account receivables valuation, please refer to Notes 5 (1) of the Company’s parent company only financial statements; for details of explanation on account receivables valuation, please refer to 6 (4) of the Company’s parent company only financial

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statements.

The description of key audit matter:

Account receivables of Bright LED Electronics Corp. are distributed among customers. The account receivables valuation allowance is calculated according to the expected percentage of credit losses which takes each time interval of overdues of account receivables and adjustments on prospective factors into consideration when estimating expected credit losses of account receivables. The management will, according to the report date, re-update new expected losses within each time interval of overdues and perform individual assessments on major overdues and payment disputes; hence, it involves subjective judgment from the managers and it is considered as one of the key audit matters.

Corresponding audit procedure included the following:

1. Evaluated reasonableness of the percentage of expected credit losses

2. Determined whether there is a major irregularity by comparing the turnover rate and turnover days of accounts receivables with the company’s credit policy and other related information.

3. Obtained the aging schedule.

4. Verified total amount from the aging schedule with general ledger

5. Confirmed integrity and accuracy of the aging schedule

Responsibilities of Management and Those Charged with Governance for the Parent Company Only Financial Statements

Management is responsible for the preparation and fair presentation of the parent company only financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the 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 parent company only financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the parent company only financial statements, management is responsible for assessing the Company’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 Company 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 Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Parent Company Only Financial Statements

Our objectives are to obtain reasonable assurance about whether the parent company only 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 parent company only 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:

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1. Identify and assess the risks of material misstatement of the parent company only 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 Company’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 Company’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 parent company only financial statements; if such disclosures are inadequate, we are responsible 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 Company to cease to continue as a going concern.

5. Evaluate the overall presentation, structure and content of the parent company only financial statements, including the disclosures, and whether the parent company only financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the parent company only 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 parent company only financial statements for the year ended December 31, 2019 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 Ms. Hsin-I Kuo

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and Ms. Tzu-Hui Li.

KPMG TAIWAN Republic of China March 20, 2020

N otice to Readers

The accompanying financial statements are intended only to present the 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 financial statements are those generally applied in the Republic of China. For the convenience of readers, the independent auditors’ report and the accompanying 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 independent auditors’ report and financial statements shall prevail.

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Bright LED Electronics Corp. and Subsidiaries Notes from Parent company only financial statements Year 2018 and 2019

(Unless otherwise specified, all amounts are in units of NT $thousand)

1. Company history

Bright LED Electronics Corp. (hereinafter referred to as the "Company") was established in June 1981. The company and its subsidiaries (hereinafter also referred to as "parent company") are principally engaged in the manufacturing and sales of light-emitting diode, indicator lights, displays and other extended products and undertaking engineering projects that provide indicator lights, displays and related supporting engineering projects.

2. The date and procedure for the approval of the financial statements

This parent financial statement was approved by the board of directors on March 20, 2020.

3. Application of newly issued and revised standards and explanations

• (1) Impact of the newly issued and revised standards and interpretations approved by the Financial Supervisory Commission:

• Since 2019, the parent company has fully adopted the International Financial statementing Standards approved by the Financial Supervisory Commission (hereinafter referred to as FSC) and effective in the Republic of China in 2019 to prepare parent financial statements. The relevant standards and explanations for new releases, amendments and amendments are listed below:

Newly issued and revised standards and explanations International Financial statementing Standards (IFRS) 16 “Lease” Explanation of IFRS 23 “Uncertainty in income tax treatment” Amendment to IFRS 9 “Early repayment feature with negative compensation” Amendment to International Accounting Standards Board (IASB) 19 “Plan to amend, reduce or pay off” Amendment to International Accounting Standards Board (IASB) 28 “Long-term interests in affiliated companies and joint ventures” IFRS from year 2015~2017’s annual improvement

Effective date issued by the International Accounting Standards Board

Jan 01, 2019 Jan 01, 2019 Jan 01, 2019 Jan 01, 2019 Jan 01, 2019 Jan 01, 2019

Except for the following items, the application of the newly recognized international financial statementing standards will not cause significant changes to the parent financial statement. The nature and impact of those who caused major changes are described below:

1. International Financial statementing Standards (IFRS) 16 “Lease” IFRS 16 "Leases" (hereinafter referred to as IFRS 16) replaces the current IAS 17 "Leases" (hereinafter referred to as IFRS 17), International Financial statementing

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Interpretation No. 4 "Determining whether an arrangement includes leases" (hereinafter referred to as IFRS Interpretation No. 4), Interpretation Announcement No. 15 "Operating Leases: Incentives" and Interpretation Announcement No. 27 "Evaluating the Lease The substance of the transaction in legal form ".

The parent company adopts the modified retrospective method to transition to IFRS 16, and adjusts the cumulative impact number applied for the first time to the retained earnings on January 1, 2019. The nature and impact of the related accounting policy changes are described as follows:

(1) Definition of Lease

The parent company had previously judged whether an agreement was or included a lease on the start date of the contract based on the International Financial statement Interpretation No. 4. After changing the accounting policy, the definition of lease from IFRS 16 is used to assess whether the contract is or contains a lease refer to Note 4 (11) of the accounting policy. When transitioning to IFRS 16, the parent company chose to use an expedient approach to exempt the assessment of whether the transaction before the initial application date was a lease, that is, directly apply a contract previously identified as a lease to IFRS 16 Regulations. Contracts that have previously been identified in accordance with IAS 17 and IFRS 4 as non-lease will no longer be re-evaluated as leases. Therefore, the definition of lease under IFRS 16 only applies to contracts signed or changed on and after the initial application date.

(2) Lessee

The transaction of the parent company as a lessee was previously evaluated based on whether the lease contract has transferred almost all the risks and rewards of the ownership of the underlying asset. Under IFRS 16, the right-of-use assets and lease liabilities are recognized on the balance sheet for lease contracts.

• Contracts previously classified as operating leases under IASB 17

During the transition period, the lease liability is measured by the present value of the remaining lease payments, and is discounted using the incremental borrowing rate of the parent company on the initial applicable date. Right-of-use assets are measured in the following ways:

The carrying amount of the right-of-use asset is as if IFRS 16 has been applied since the start date, but it is discounted using the lessee ’s incremental borrowing rate on the date of the initial application. In addition, the parent company adopted the following expedient approach to transition to IFRS 16:

• (a) Use a single discount rate for lease portfolios with similar characteristics.

• (b) According to the evaluation results of relevant loss-making contracts in accordance with International Accounting Standards No. 37 "Liability Reserves, Contingent Liabilities and Contingent Assets" immediately before the date of initial application, as an alternative method for impairment assessment of right-of-use assets.

• (c) For leases whose lease period ends within 12 months after the initial application date, exemption is applied and the right-of-use assets and lease liabilities are not recognized.

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• (d) The original direct costs are not included in the measurement of right-of-use assets on the date of initial application.

• (e) When the lease contract includes the option to extend or terminate the lease, the hindsight is adopted when determining the lease period

• (3) Lessor

• Except for subletting, the parent company is not required to make any adjustments to its transaction as a lessor when transitioning to IFRS16 and it applies IFRS 16 to process its lease from the date of initial application transaction.

• (4) Influences on financial statements

• When transitioning to IFRS16, the parent company recognized the right-of-use assets and lease liabilities at the initial application date to increase to NT $149,054 thousand and NT $103,346 thousand respectively. Other non-current assets decreased by NT $52,239 thousand. The difference recognized in retained earnings and non-controlling interests. Lease liabilities are discounted at the incremental borrowing rate of the parent company's initial applicable date, and the weighted average of the interest rates used is 1.62%.

• The amount of operating lease commitments disclosed in the year prior to the initial application date and the amount of the lease liability recognized on the initial application date are adjusted as follows:

2018/12/31 Operating lease commitments amount disclosed Amount discounted on 2019/1/1 incremental borrowing rate Amount of lease liability recognized on 2019/1/1	2019/1/1 $ 116,274 103,346 $ 103,346

• (2) The impact of not adopting the International Financial statementing Standards recognized by Financial Supervisory Commission

• According to the order of the Financial Supervisory Commission No. 1080323028 of the 29th of July, 2019, the listed companies should publicly adopt the international financial system approved by the Financial Supervisory Commission and effective in 2020 reporting guidelines. The relevant standards and explanations for new releases and amendments are listed below:

Newly release／revised standards and explanation Amendments to IFRS 3 "Definition of Business Amendments to IFRS 9, International Accounting Standards Board 39 and IFRS 7 "Interest Rate Index Reform" Amendments to IASB 1 and IASB 8 "Major Definitions"	Effective date issued by the Council
	2020/1/1 2020/1/1 2020/1/1

The parent company assesses the application of the above-recognized international financial statementing standards and will not cause significant changes to the parent financial statements.

• (3) Newly published and revised standards and explanations that have not yet been approved by the Financial Supervisory Commission

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The following table summarizes the standards and explanations that have been published and revised by the International Accounting Standards Board (hereinafter referred to as IASB), but have not yet been approved by the Financial Supervisory Commission:

Newly published／revsied standards and explanation Amendments to IFRS 10 and IASB 28 "Sale or investment of assets between investors and their affiliates or joint ventures IFRS 17 "Insurance Contracts" Amendments to IASB1 "Classify liabilities as current or non-current"	Effective date issued by the Council
	To be resolved by the Council 2021/1/1 2022/1/1

The parent company is continuously evaluating the impact of the above standards and explanations on the parent company's financial statements and operating results. The relevant impact will be disclosed when the evaluation is completed.

• (4) Summary of major accounting policies

The major accounting policies adopted in this parent financial statements are summarized and explained below. The following accounting policies have been consistently applied to all presentation periods in this parent financial statement.

• a. Compliance declaration:

This parent financial statement is in accordance with “Regulations Governing the Preparation

of Financial statements by Securities Issuers” (hereinafter referred to as the "preparation

standards") and the International Financial statementing Standards, International Accounting

Standards board, interpretation and interpretation announcements (hereinafter referred to as the

Approved International Financial statementing Standards by Financial Supervisory Commisson").

• b. Preparation basis:

• Measurement basis

Except for the following important items in the balance sheet, this parent financial statement is prepared on the basis of historical cost:

• (1) Measure financial assets at fair value through profit or loss measured at fair value;

• (2) Measure financial assets at fair value through other comprehensive profit or loss based on fair value;

• (3) Netly determined welfare liabilities (or assets) measured based on the fair value of retirement fund assets minus the present value of the determined welfare obligations.

• Functional currency and expressed currency

Each entity of the parent company uses the currency of the main economic environment in which each operation is located as its functional currency. This parent financial statement is

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expressed in the company's functional currency which is the New Taiwan Dollar. All financial information expressed in NTD is in units of NTD $ thousands.

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4. Foreign currency

1. Foreign currency transaction

Foreign currency transactions are converted into functional currencies at the exchange rate on the transaction date. At the end of each subsequent reporting period (hereinafter referred to as the reporting day), foreign currency monetary items are converted into functional currencies at the exchange rate on that day. Foreign currency non-monetary items measured at fair value are converted to functional currency at the exchange rate on the day when the fair value is measured, and foreign currency non-monetary items measured at historical cost are converted at the exchange rate on the transaction date. Unless the currency foreign exchange differences arising from the conversion of equity instruments measured at fair value through other comprehensive profit or loss are recognized as other comprehensive profit or loss, the rest are recognized as profit or loss.

1. Foreign operating agencies

2. Assets and liabilities of foreign operating agencies, including goodwill and fair value adjustments at the time of acquisition, are converted to functional currencies at the exchange rate on the reporting date; except for highly inflationary economies, revenue and expense items are based on the current period The average exchange rate is converted into a functional currency, and the resulting exchange differences are recognized as other comprehensive income.

When a foreign operating agency is punished for loss of control, joint control or significant influence, the cumulative exchange difference related to the foreign operating agency is fully reclassified as profit or loss. When a part of the punishment includes a subsidiary of a foreign operating agency, the relevant accumulated exchange difference is re-attributed to non-controlling interests in proportion. When part of the punishment includes investments in affiliated enterprises or joint ventures of foreign operating agencies, the relevant accumulated exchange differences are reclassified to profit or loss in proportion.

For foreign currency receivables or payables of foreign operating agencies, if there is no liquidation plan and it is impossible to pay off in the foreseeable future, the foreign currency exchange gains and losses generated will be regarded as a net investment Part of it is recognized as other comprehensive income.

1. Classification criteria for distinguishing between current and non-current assets and Liabilities

Assets that meet one of the following conditions are classified as current assets, and all other assets that are not current assets are classified as non-current assets:

1. Expect to realize the asset in its normal business cycle, or intend to sell or consume it;

2. The asset is held mainly for trading purposes;

3. The asset is expected to be realized within twelve months after the reporting period;or

4. The asset is cash or cash equivalents, unless the asset is exchanged or used to pay off liabilities for other restrictions at least twelve months after the reporting period.

Liabilities that meet one of the following conditions are classified as current liabilities, and all other liabilities that are not current liabilities are classified as non-current liabilities:

1. The debt is expected to be settled in the normal business cycle;

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  2. The liability is held mainly for transaction purposes;

  3. It is expected that the liability will be settled within twelve months after the reporting period; or

  4. Liabilities that do not have the right to unconditionally postpone the settlement period to at least twelve months after the reporting period. The terms of the liability may be based on the choice of the counterparty to issue equity instruments and lead to its liquidation, which does not affect its classification.

1. Cash and cash equivalent

   • Cash includes cash in stock and demand deposits. Equivalent cash refers to short-term highly liquid investments that can be converted into fixed cash at any time and have little risk of change in value. Term deposits that meet the foregoing definition and are held for short-term cash commitments rather than investment or other purposes are listed in cash equivalents.

2. Financial instruments

   1. Financial assets

Financial assets at initial recognition are classified as: financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive profit or loss, and financial assets measured at fair value through profit or loss. The parent company only reclassifies all affected financial assets from the first day of the next reporting period when it changes the business model for managing financial assets.

• (1) Financial assets measured at amortized cost

  • When financial assets meet the following conditions at the same time and are not designated to be measured at fair value through profit or loss, they are measured at amortized cost:

• ‧ The financial asset is held under a business model whose purpose is to collect contractual cash flows.

• ‧ The contractual terms of the financial asset generate cash flow on a specific date, which is solely interest on the payment of principal and the amount of outstanding principal.

These assets are subsequently accumulatively amortized by the original recognized amount plus or minus the effective interest method, and any amortized cost of any allowance loss is adjusted to measure the subsequent acquisition. Interest income, foreign currency exchange gains and losses and impairment losses are recognized in profit or loss.

(2) Financial assets measured at fair value through other comprehensive income When the debt instrument investment also meets the following conditions and is not designated to be measured at fair value through profit or loss, it is measured at fair value through other comprehensive income:

• ‧ The financial asset is held under the business model with the purpose of collecting contractual cash flow and selling.

• ‧ The contractual terms of the financial asset generate cash flow on a specific date, which is solely interest on the payment of principal and the amount of outstanding principal.

During initial recognition, the parent company may make an irrevocable choice to report subsequent fair value changes in equity instrument investments not held for trading in other comprehensive income. The aforementioned selections are made on a

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tool-by-item basis.

Equity instrument investors are subsequently measured at fair value. Dividend income (unless it clearly represents the recovery of part of the investment cost) is recognized in profit or loss. The remaining net benefits or losses are recognized as other comprehensive gains and losses and are not reclassified to profit or loss. Dividend income from equity investments is recognized on the date the parent company has the right to receive dividends (usually the ex-dividend date).

• (3) Financial assets measured at fair value through profit or loss Financial assets that are not measured at amortized cost or measured at fair value through other comprehensive profit or loss are measured at fair value through profit or loss including derivative financial assets. At the time of initial recognition, the parent company may irrevocably designate the financial asset that meets the conditions measured by amortized cost or fair value through other comprehensive profit or loss as the fair value through profit or loss in order to eliminate or significantly reduce the accounting ratio financial assets measured by value. These assets are subsequently measured at fair value, and their net benefits or losses (including any dividends and interest income) are recognized as profit or loss.

• (4) Impairment of financial assets

The parent company targets financial assets measured at amortized cost (including cash and cash equivalents, financial assets measured at amortized cost, bills and accounts receivable, other receivables, deposits and other financial Assets, etc.), through other comprehensive profit and loss, the debt instrument investment and the expected credit loss of the contract asset are recognized as the allowance loss. The following financial assets are measured based on the amount of 12-month expected credit losses, and the rest are measured based on the amount of expected credit losses during the lifetime:

• ‧ Determine that the debt securities have low credit risk on the reporting date; and

• ‧ The credit risk of other debt securities and bank deposits (that is, the risk of default in the expected duration of financial instruments) has not increased significantly since the original recognition.

Allowance losses for accounts receivable and contract assets are measured by the amount of expected credit losses over the lifetime.

In determining whether the credit risk has increased significantly since the original recognition, the parent company considered reasonable and corroborable information (which can be obtained without excessive cost or investment), including qualitative and quantitative information, and based on the parent company ’s historical experience, Analysis of credit evaluation and forward-looking information. If the contractual payment is overdue, the parent company assumes that the credit risk of the financial asset has increased significantly.

If the borrower is unlikely to perform its credit obligations and pay the full amount to the parent company, the parent company is deemed to have defaulted on the financial asset.

The expected credit loss during the lifetime refers to the expected credit loss arising from all possible defaults during the expected lifetime of the financial instrument. The twelve-month expected credit loss refers to the expected credit loss arising from the possible default of financial instruments within twelve months after the reporting date (or a shorter period if the expected duration of the financial

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instrument is shorter than twelve months).

The longest period for measuring expected credit losses is the longest contract period in which the parent company is exposed to credit risk.

The expected credit loss is a probability-weighted estimate of the credit loss of the financial instrument over the expected lifetime. Credit loss is measured by the present value of all short cash receipts, that is, the difference between the cash flow that the parent company can receive under the contract and the cash flow expected by the parent company. Expected credit losses are discounted at the effective interest rate of the financial asset.

On each reporting day, the parent company assesses whether there is any credit impairment on the financial assets measured at amortized cost and the fair value of the debt securities measured through other comprehensive income. When one or more events that have an adverse effect on the estimated future cash flow of a financial asset have occurred, the financial asset has been credit-impaired. Evidence of credit impairment of financial assets includes observable data on the following:

• ‧ Significant financial difficulties of the borrower or issuer;

• ‧ Breach of contract, such as delay or overdue;

‧ For economic or contractual reasons related to the borrower's financial difficulties, the parent company gave the borrower a concession that would not otherwise be considered;

• ‧ The borrower is likely to claim bankruptcy or other financial reorganization; or

• ‧ The financial asset's active market disappeared due to financial difficulties.

• The allowance for financial assets measured at amortized cost is deducted from the

asset’s carrying amount. The fair value of the debt instrument investment measured through fair value through other comprehensive income is to adjust the profit and loss and recognize it in other comprehensive income (without reducing the asset's carrying amount).

When the parent company cannot reasonably anticipate the recovery of the whole or part of the financial assets, it directly reduces the total carrying amount of its financial assets. For company accounts, the combined company analyzes the timing and amount of the write-off individually on the basis of whether it is reasonably expected to be recovered. The parent company expects that the amount written off will not materially reverse. However, financial assets that have been written off can still be enforced to comply with the parent company's procedures for recovering overdue amounts.

• (5) Exclusion of financial assets

The parent company terminates the contractual rights only from the cash flow of the asset, or has transferred the financial asset and almost all the risks and rewards of ownership of the asset have been transferred to another enterprise, or has almost neither transferred nor retained ownership. When all risks and rewards do not retain the control of the financial assets, the financial assets are excluded.

If the parent company signs a transaction to transfer financial assets, if it retains all or almost all the risks and rewards of ownership of the transferred assets, it will continue to be recognized on the balance sheet.

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2. Financial liabilities and equity instruments

• (1) Classification of liabilities or equity

The debt and equity instruments issued by the parent company are classified as financial liabilities or equity based on the substance of the contractual agreement and the definition of financial liabilities and equity instruments.

• (2) Equity transactions

Equity instrument refers to any contract that recognizes the remaining equity of the parent company after the assets are deducted from all its liabilities. The equity instruments issued by the parent company are recognized at the amount obtained after deducting the direct issuance cost.

• (3) Treasury stocks

When repurchasing the equity instruments recognized by the company, the consideration paid (including directly attributable costs) is recognized as a decrease in equity. The repurchased shares are classified as treasury stocks. Subsequent sales or reissue of treasury stocks, the amount received is recognized as an increase in equity, and the remaining or loss generated by the exchange is recognized as a capital reserve or retained surplus (if the capital reserve is insufficient to offset).

• (4) Financial liabilities

Financial liabilities are classified as amortized costs or measured at fair value through profit or loss. Financial liabilities are classified as measured at fair value through profit or loss if they are held for trading, derivatives, or designated at initial recognition. Financial liabilities measured at fair value through profit or loss are measured at fair value, and related net benefits and losses, including any interest expense, are recognized in profit or loss.

The subsequent effective interest method for other financial liabilities is measured by amortized cost. Interest expenses and exchange gains and losses are recognized in profit or loss. Any profit or loss at the time of delisting is also recognized in profit or loss.

• (5) Exclusion of financial liabilities

The parent company excludes financial liabilities when the contractual obligations have been fulfilled, cancelled or expired. When the financial liability clause is modified and the cash flow of the revised liability is significantly different, the original financial liability is excluded and the new financial liability is recognized at fair value based on the revised terms.

When a financial liability is excluded, the difference between its carrying amount and the total consideration paid or payable (including any transferred non-cash assets or liabilities assumed) is recognized as profit or loss.

• (6) Mutual offset of financial assets and liabilities

Financial assets and financial liabilities are only offset when the

parent company currently has the legally enforceable right to offset and intend to deliver or simultaneously realise the assets and settle the liabilities on the net, and express them in the net balance sheet.

1. Inventory

Inventories are measured by the lower of cost and net realizable value. The cost includes

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the acquisition, production or processing costs and other costs incurred in bringing it to the available location and condition, and is calculated using the weighted average method. The cost of finished goods and work-in-process inventories includes manufacturing expenses that are apportioned to normal production capacity at an appropriate rate.

Net realizable value refers to the balance of the estimated selling price under normal operations minus the estimated cost required to complete the completion and the estimated cost required to complete the sale.

1. Investment-related enterprises

Affiliated companies are those companies that have significant influence over their financial and operating policies but are not controlled or jointly controlled. The parent company shall adopt the equity method to deal with the equity of the related companies. Under the equity method, the original acquisition is recognized based on cost, and the investment cost includes the cost of the transaction. The carrying amount of an investment-related enterprise includes the goodwill identified at the time of the original investment, less any accumulated impairment losses.

The parent financial statement includes from the date of significant influence to the date of loss of significant influence. After adjustments to the consistency of the parent company's accounting policies, the parent company recognizes the profit and loss of the investment-related enterprise and other amount of comprehensive profit and loss. When the related company's equity changes in non-profit and loss and other comprehensive profit and loss do not affect the shareholding ratio of the parent company, the parent company will be recognized as a capital reserve according to the shareholding ratio.

The unrealized benefits and losses arising from the exchange between the parent company and the affiliated company shall be recognized in the enterprise's financial statements only within the scope of the non-related investor's interest in the affiliated enterprise.

When the parent company should recognise the proportion of the affiliated company’s loss equal to or exceeds its equity in the affiliated company, it will stop recognizing its loss, but only when statutory obligations, deductions or payments have been made on behalf of the invested company within the scope, recognize additional losses and related liabilities.

1. Property, plant and equipment

2. Recognition and measurement

Property, plant and equipment items are measured by cost

(including capitalized borrowing costs) less accumulated depreciation and any accumulated impairment.

When the major components of property, plant and equipment have different durability, they are treated as separate items (main components) of property, plant and equipment. The property, plant and equipment disposition benefit or loss is recognized in profit or loss.

1. Follow-up costs

Subsequent expenditures are only capitalized when their future economic benefits are likely to flow into the parent company.

1. Amortization

Depreciation is calculated based on the cost of assets minus the residual value, and the straight-line method is recognized in profit or loss within the estimated useful life of each component.

The land is not subject to depreciation.

The estimated service life of the current period and the comparative period is as follows:

• (1) Housing and construction: 2 ~ 55 years

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• (2) Machine equipment: 2 ~ 8 years

• (3) Others: Except that lease improvements are listed according to the lease term, the rest are 2 to 8 years.

The parent company reviews the depreciation method, durability, and residual value on each reporting day, and makes appropriate adjustments as necessary.

11. Lease

Lease (applicable from January 1, 2019)

1. Lease judgment

2. The parent company evaluates whether the contract is a lease or contains a lease on the contract establishment date. If the contract transfers control over the use of the identified asset for a period of time in exchange for consideration, the contract is a lease or contains a lease. In order to evaluate whether the contract is a lease, the parent company evaluates the following items:

3. (1) The contract involves the use of an identified asset. The identified asset is specified in the contract or implied by the time when it is available for use. Its entity can distinguish or represent substantially all of its production capacity. If the supplier has substantive rights to replace the asset, the asset is not an identified asset; and

4. (2) The customer has the right to obtain almost all economic benefits from the use of the identified assets throughout the period of use; and

5. (3) The client obtains the right to lead the use of identified assets when one of the following conditions is met:

   • ‧ The customer has the right to lead the use and purpose of the identified assets throughout the use period; or

   • ‧ The relevant decisions about the use method and purpose of the asset are determined in advance, and:

     • The customer has the right to operate the asset during the entire use period, and the supplier does not have the right to change the operation instructions; or

     • The way the customer designs the asset has pre-determined the way and purpose of use for the entire period of use.

2. Lessee

• The parent company recognizes the right-of-use asset and lease liability on the lease start date. The right-of-use asset is originally measured at cost, which includes the original measured amount of the lease liability, adjusts any lease payments paid on or before the lease start date, and adds the original direct cost incurred and the estimated cost of dismantling, removing the underlying asset and restoring its location or underlying asset, and deducting any leasing incentives received.

The right-of-use asset is subsequently depreciated on a straight-line basis between the start of the lease and the end of the end-of-life of the right-of-use asset or the end of the lease period. In addition, the parent company periodically assesses whether the right-of-use asset is impaired and processes any impairment loss that has occurred, and cooperates to adjust the right-of-use asset when the lease liability is remeasured.

Lease liabilities are originally measured by the present value of the lease payments that have not been paid on the lease start date. If the implied interest rate of the lease is easy to determine, the discount rate is that rate. If it is not easy to determine, the incremental borrowing rate of the parent company is used. Generally speaking, the parent company uses its incremental borrowing rate as the discount rate.

Lease payments included in the measurement of lease liabilities include:

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• (1) Fixed benefits, including substantial fixed benefits;

• (2) The lease payment depends on the change of an index or fee rate, the original measurement is based on the index or rate of the lease start date;

• (3) The guaranteed amount of residual value expected to be paid; and

• (4) When reasonably determined that the purchase option or lease termination option will be exercised, the exercise price or the penalty payable.

• The lease liability is subsequently accrued by the effective interest method, and its amount is measured when the following occurs:

• (1) Changes in the index or rate used to determine lease payments result in changes in the future lease payments;

• (2) The guaranteed amount of residual value expected to be paid has changed;

• (3) The evaluation of the underlying asset purchase option has changed;

• (4) The estimate of whether to exercise the extension or termination option has changed, and the assessment of the lease period has been changed;

• (5) Modification of lease subject, scope or other terms.

  • When the lease liability is remeasured due to changes in the aforementioned index or rate used to determine lease payments, changes in the residual value guarantee amount, and changes in the evaluation of purchase, extension or termination options, the book value of the right-of-use asset should be adjusted accordingly, and When the carrying amount of the right-of-use asset is reduced to zero, the remaining remeasured amount is recognized in profit or loss.

For lease modifications that reduce the scope of the lease, the carrying amount of the right-of-use asset is reduced to reflect the partial or full termination of the lease, and the difference between the lease and the remeasured amount of the lease liability is recognized in profit or loss.

The parent company expresses the right-of-use assets and lease liabilities that do not meet the definition of investment real estate as separate line items in the balance sheet.

3. Lessor

The transaction of the parent company as the lessor is to classify the lease contract according to whether it transfers almost all the risks and rewards attached to the ownership of the underlying asset on the date of the lease establishment. If it is classified as a financial lease, otherwise it is classified as an operating lease. At the time of evaluation, the parent company considers whether it covers the relevant specific indicators such as whether it covers the main part of the economic life of the underlying asset during the lease period.

If the agreement includes lease and non-lease components, the parent company uses IFRS 15 to distribute the consideration in the contract.

Lease (applicable before January 1, 2019)

1. Lessor

Lease income from operating leases is recognized as income on a straight-line basis over the lease period. The original direct costs arising from negotiating and arranging operating leases are added to the carrying amount of the leased assets and are recognized as expenses on a straight-line basis during the lease period. The total incentives provided to the lessee to achieve the lease arrangement are recognized as a reduction in rental income using the straight-line method during the lease period.

2. Lessee

Other leases are operating leases, and these lease assets are not recognized in the parent company's balance sheet.

Rental payments for operating leases (excluding insurance and maintenance

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service costs) are recognized as expenses on a straight-line basis during the lease period.

12. Impairment of non-financial assets

The parent company assesses on each reporting day whether there is any indication that the carrying amount of non-financial assets (other than inventory, contract assets, deferred income tax assets) may be impaired. .

For the purpose of impairment testing, a group of assets whose cash inflows are largely independent of the cash inflows of other individual assets or asset groups is used as the smallest identifiable asset group.

The recoverable amount is the higher of the fair value of individual assets or cash-generating units minus the cost of sales and its use value. When assessing value in use, the estimated future cash flow is converted to the present value at a pre-tax discount rate, which should reflect the current market assessment of the time value of money and the specific risks of the asset or cash-generating unit. If the recoverable amount of an individual asset or cash-generating unit is lower than the carrying amount, an impairment loss is recognized. Impairment losses are recognized immediately in the current profit and loss.

13. Revenue recognition

1. Revenue from customer contracts

Revenue is measured by the consideration expected to be obtained for the transfer of goods or services. The parent company recognizes revenue when the control of goods or services is transferred to the customer and the performance obligations are met. The parent company is explained as follows according to the main income items:

• (1) Selling goods

The parent company recognizes revenue when the control of the product is transferred. The transfer of control of the product means that the product has been delivered to the customer, the customer can fully determine the sales channel and price of the product, and there is no unfulfilled obligation that will affect the customer's acceptance of the product. Delivery occurs when the product is shipped to a specific location, its obsolescence and risk of loss have been transferred to the customer, and the customer has accepted the product in accordance with the sales contract, the acceptance terms have lapsed, or the parent company has objective evidence that all acceptance conditions have been met.

The average credit period for the combined company’s sales is 90 days, which is consistent with the industry’s practice, so it does not include financing elements. The parent company recognizes the accounts receivable when delivering the goods, because the parent company has the right to receive the consideration unconditionally at that time.

(2) Engineering contract

The parent company is engaged in the contracting business of public works. Since the assets are controlled by customers at the time of construction, the revenue is gradually recognized over time based on the proportion of the engineering costs incurred so far to the estimated total contract costs. The contract includes

fixed and variable consideration. The customer pays a fixed amount according to the agreed time. Some changes in the consideration are estimated using the accumulated experience in the past as the expected value; other changes in

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the consideration are estimated based on the most likely amount. Considering that the construction progress of public works is influenced by factors that are not under the control of the parent company, the rewards for early completion are usually limited. The parent company only recognizes revenue within the scope of the cumulative income height that is unlikely to undergo a major turnaround. If the amount of the recognized income has not been requested, it is recognized as a contract asset. When there is an unconditional right to the consideration, the contract asset is transferred to the accounts receivable.

If it is not possible to reasonably measure the degree of completion of the performance obligations of the engineering contract, contract revenue is recognized only within the range of expected recoverable costs. When the parent company anticipates that the inevitable cost of fulfilling the obligations of an engineering contract exceeds the expected economic benefits from the contract, the liability provision for the lossy contract is recognized. If the situation changes, the estimates of income, cost, and degree of completion will be revised, and during the period when the management is informed of the change in the situation, the resulting changes will be reflected in profit or loss.

The parent company provides standard warranty for public works that conforms to the agreed specifications and has recognized warranty liability provisions for this obligation.

• (3) Financial components

The parent company expects that the time between the transfer of

all customer contracts for goods or services to the customer and the time for the customer to pay for the goods or services will not exceed one year. Therefore, the parent company does not adjust the monetary time value of the transaction price.

1. Cost of customer contract

2. The incremental cost of obtaining a contract

If the parent company expects to recover the incremental cost of obtaining a customer contract, the cost is recognized as an asset. The incremental cost of obtaining a contract is the cost incurred in obtaining a customer contract and not incurred if the contract is not obtained. The cost of obtaining a contract that will occur regardless of whether the contract is obtained is recognized as an expense when incurred, unless such cost is clearly chargeable to the customer regardless of whether the contract has been obtained.

The parent company adopts the standard practical expedient method. If the incremental cost of obtaining a contract is recognized as an asset and the amortization period of the asset is within one year, it is recognized as an expense when the incremental cost occurs.

1. The cost of fulfilling the contract

2. If the costs incurred in fulfilling the customer's contract are not within the scope of other standards (International Accounting Standard No. 2 "Inventory", International Accounting Standard No. 16 "Real Estate, Plant and Equipment" or International Accounting Standard No. 38 "Intangible Assets" "), The parent company will only begin when these costs are directly related to the contract or clearly identifiable expected contract, will generate or strengthen resources that will be used to meet (or continue to meet) performance obligations in the future, and are expected to be recovered. Such costs are recognized as assets.

General and administrative costs, wasted raw materials used to fulfill the contract but

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are not reflected in the contract price, labor or other resource costs, costs related to fulfilled (or partially fulfilled) performance obligations, and inability to distinguish between unsatisfied and unsatisfied performance. Costs related to obligations or fulfilled (or partially fulfilled) performance obligations are recognized as expenses when incurred.

1. Employee benefits

2. Determine the withdrawal plan

The obligation to determine the pension plan is recognized as an expense during the service period of the employee.

1. Determine the welfare plan

The parent company's net obligation to determine the benefit plan is calculated for each benefit plan based on the present value of the employee's future benefits earned during the current or previous period of service, and the fair value of any plan assets is deducted.

The determination of welfare obligations is carried out annually by a qualified actuary based on the expected unit welfare method. When the calculation result may be beneficial to the parent company, the recognized asset is limited to the present value of any economic benefits that may be obtained in the form of refunding the withdrawal from the plan or reducing the future withdrawal from the plan. When calculating the present value of economic benefits, any minimum funding requirements are considered.

The re-measured amount of net-determined welfare liabilities, including actuarial gains and losses, planned asset compensation (excluding interest), and any changes in the asset ceiling effect (excluding interest) are immediately recognized in other comprehensive profit and loss and accumulated in retained earnings . The parent company determines the net interest expense (income) of the net determined benefit liability (asset), using the net determined benefit liability (asset) and discount rate determined at the beginning of the annual reporting period. The net interest expense and other expenses that determine the benefit plan are recognized in profit or loss.

When the plan is revised or reduced, the number of changes in welfare related to previous service costs or reduced benefits or losses is immediately recognized as profit or loss. When liquidation occurs, the parent company recognizes and determines the liquidation profit and loss of the welfare plan.

1. Short-term employee benefits

Short-term employee benefit obligations are recognized as expenses when services are provided. If the parent company has current statutory or presumptive payment obligations due to employees providing services in the past, and the obligation can be reliably estimated, the amount is recognized as a liability.

1. Share-based payment transaction

Equity delivered with share-based payment agreement to give the fair value of the date, recognizing expenses and increasing relative equity during the period when employees reach unconditional remuneration. The recognized fee is adjusted according to the amount of rewards expected to meet the service conditions and the non-market price vesting conditions; the final recognized amount is based on the amount of rewards that meet the service conditions and non-market price vesting conditions on the vesting date.

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The non-estimated conditions for the share-based payment rewards have been reflected in the measurement of the share-based payment and the fair value of the day, and there is no need to verify the difference between the expected and actual results. The fair value of the share delivery value-added rights payable to employees in cash is the period during which employees reach unconditional remuneration, recognize expenses and increase relative liabilities. The liability is remeasured according to the fair value of the share appreciation rights on each reporting day and closing date, and any changes is recognized as profit or loss.

1. Income tax

Income tax includes current and deferred income tax. Except for those related to business combinations, items recognized directly in equity or other comprehensive profit or loss, current income tax and deferred income tax should be recognized in profit or loss. Current income tax includes the estimated income tax payable or tax receivable payable based on the taxable income (loss) of the current year, and any adjustments to income tax payable or tax receivable receivable in the previous year. The amount is based on the statutory tax rate on the reporting date or the tax rate of substantive legislation to measure the best estimate of the amount expected to be paid or received.

Deferred income tax measures and recognizes the temporary difference between the carrying amount of assets and liabilities for financial statementing purposes and their tax base. Temporary differences arising from the following circumstances are not recognized as deferred income tax:

1. Assets or liabilities originally recognized in a transaction that is not a

2. business combination, and does not affect accounting profits and taxable income (loss) at the time of the transaction;

3. Due to temporary differences arising from investment in subsidiaries, affiliated companies and joint venture interests, the parent company can control the timing of the temporary difference reversal and is likely to not revert in the foreseeable future.

Deferred income tax is measured at the tax rate at which the temporary difference is expected to reverse, and is based on the legal tax rate or substantive legislative tax rate at the reporting date.

• The parent company will only offset the deferred income tax assets and deferred income tax liabilities when it meets the following conditions at the same time:

• Have statutory enforcement power to offset current income tax assets and current income tax liabilities; and

• Deferred income tax assets and deferred income tax liabilities are related to one of the following taxpayers subject to income tax levied by the same tax authority; (1) The same taxpayer; or

• (2) Different taxpayers, but each entity intends to pay off the current income tax liabilities and assets on a net basis for each future period in which significant amounts of deferred income tax assets are expected to be recovered and deferred income tax liabilities are expected to be settled, or at the same time Assets and liquidation of liabilities.

For the unused taxable losses and unused income tax credits at the later stage of transfer and deduction, the temporary difference can be recognized as deferred income tax assets in the range where there is a possibility that future taxable income will be available. It will be reassessed on each reporting day to reduce the relevant income tax benefits to the extent

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that it is not likely to be realized; or to revert the amount that has been reduced to the extent that it is likely to have sufficient taxable income.

18. Earnings per share

The parent company lists the basic and diluted earnings per share attributable to the holders of the company's common equity. The basic earnings per share of the parent company is calculated by dividing the profit and loss attributable to the holders of the common stock equity of the company by the current weighted average number of common shares outstanding. Diluted earnings per share is calculated by adjusting the impact of all potential diluted common shares by dividing the profit and loss attributable to the common equity holders of the company and the weighted average number of common shares outstanding. The potential dilutive common stock of the merged company includes the employee's stock options and estimated employee compensation.

1. Department Information

The operating department is an integral part of the parent company and is engaged in business activities that may earn income and incur expenses (including income and expenses related to transactions between other components in the parent company). The operating results of all operating departments are regularly reviewed by the chief operating decision maker of the conslidated company to make decisions on the allocation of resources to that department and evaluate its performance. Each operating department has separate financial information.

5. Major sources of uncertainty in significant accounting judgments, estimates and assumptions

When the management team prepares this parent financial statement in accordance with the International Financial statementing Standards recognized by the Financial Supervisory Commission, it must make judgments, estimates and assumptions that will affect the adoption of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates.

Management team continues to review estimates and basic assumptions, and changes in accounting estimates are recognized during the period of change and future periods affected.

The accounting policy involves significant judgments and has no significant impact on the amount recognized in this parent financial statement.

Among uncertainties in assumptions and estimates, the existence of significant risks that will not cause major adjustments for the following year will be as follows: (1) Allowance loss for accounts receivable

The allowance loss for the accounts receivable of the parent company is estimated based on the assumption of default risk and expected loss rate. The company considers historical experience, current market conditions and forward-looking estimates on each reporting day to determine the assumptions and input values that must be used when calculating impairments. Please refer to Note 6 (4) for detailed explanations of relevant assumptions and input values.

• (2) Evaluation of inventory

Since inventory must be measured at the lower of cost and net realizable value, the

parent company assesses the amount of inventory due to normal wear and tear, obsolescence or no

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market sales value on the reporting date, and writes down the cost of inventory to net realizable value. This inventory evaluation is mainly based on the product demand in a specific period in the future as the basis for estimation, so it may cause significant changes due to rapid industrial changes. Please refer to Note 6 (5) for details of inventory evaluation and estimation.

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7. Financial Analysis and Risk Management

7.1 Comparison analysis of financial situations

Unit: NT $thousand

Year Items	2019	2018	Differences	Differences
			Amount	%
Current assets	2,018,295	2,027,895	(9,600)	(0.47)
Property, plant and equipments	537,937	634,949	(97,012)	(15.28)
Other assets	977,355	691,402	285,953	41.36
Total assets	3,533,587	3,354,246	179,341	5.35
Current liabilities	556,064	516,441	39,623	7.67
Noncurrent liabilities	130,511	53,650	76,861	143.26
Total liabilities	686,575	570,091	116,484	20.43
Capital shares	1,866,742	1,866,742	0	0.00
Capital reserve	441,683	441,608	75	0.02
Retained earning	573,929	440,642	133,287	30.25
Other equity	(1,413)	(84,382)	82,969	(98.33)
Treasury stocks	(149,507)	0	(149,507)	-
Noncontrolling equity	115,578	119,545	(3,967)	(3.32)
Total equity	2,847,012	2,784,155	62,857	2.26
Explanation for changes:(The changes between the previous and latest period reach more than 10% and the changed amount is more than 1% of total assets) 1.Decrease in property, plant and equipments: In addition to the depreciation occurred in this period, the disposal of the sub-subsidiary Dongguan Bright Rise Electronic Co. Ltd., also caused a significant reduction in the real estate, plant and equipment in the parent statement. 2.Increase in other assets: Due to the adoption of IFRS 16 in this period, the recognition of right-of-use assets of NT $176,617 thousands occurred. 3.Increase in noncurrent liabilities: Due to the adoption of IFRS 16 in this period and the recognition of lease liabilitiy of NT $ 90,822 thousand occurred. 4.Increase in retained earnings：due to the increased in profitability in this period. Future response plan:Despite the above changes in financial conditions, it will not have a significant impact on the company's operating conditions.

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7.2 Comparison Analysis of Operating Performance

Unit: NT $thousand

Year Items	2019	2018	Increased (decreased) amount	Change ratio ％
Operating income	1,763,659	1,650,740	112,919	6.84
Operating cost	1,339,117	1,303,626	35,491	2.72
Operating margin	424,542	347,114	77,428	22.31
Operating expenses	284,811	322,843	(38,032)	(11.78)
Operating profit	139,731	24,271	115,460	475.71
Non-operating income and expenses	119,816	86,990	32,826	37.74
Net (loss) profit before tax	259,547	111,261	148,286	133.28
Income tax	25,668	24,351	1,317	5.41
Net profit for the period	233,879	86,910	146,969	169.10
Explanation of changes:(the amount of change is up to 10 million yuan and the change rate is more than 20%): In 2019, due to the increase in the proportion of high value-added products and the decrease in fixed costs and expenses, resulted 6% increase in sales revenues compared to last year, 3% increase in gross margin, above 20% increase in operating margin, operating profit, net profit before tax and net profit for the period compared to last year.

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7.3 Cash Flow Analysis

7.3.1 Liquidity analysis for the last two years

Items Year	2019	2018	Change%
Cash flow ratio (%)	48.80	57.82	(16%)
Cash flow allowance ratio (%)	153.00	117.36	30%
Cash reinvestment ratio (%)	3.10	2.42	28%
Explanation for changes: In the recent five years, the cash inflow from operating activities has been stable, and capital expenditures have decreased, resulting in 30% and 28% increases in the cash allowabilityratio and cash reinvestment ratio,respectively.

• 7.3.2 Improvement plan for insufficient liquidity and analysis of cash liquidity for the coming year

• (1) Improvement plan for insufficient liquidity: Not applicable.

• (2) Analysis of cash liquidity for the coming year:

the coming year (1) Improvement plan for insufficient liquidity: Not applicable. (2) Analysis of cash liquidity for the coming year:	the coming year (1) Improvement plan for insufficient liquidity: Not applicable. (2) Analysis of cash liquidity for the coming year:	the coming year (1) Improvement plan for insufficient liquidity: Not applicable. (2) Analysis of cash liquidity for the coming year:	the coming year (1) Improvement plan for insufficient liquidity: Not applicable. (2) Analysis of cash liquidity for the coming year:
				Unit: NT$thousand
2019 Beginning cash balance	Net cash flow from operating activities throughout the year	Annual cash amount of investment and financing investment activities	Amount of cash surplus (deficient)	Remedies for insufficient cash
				Investment plan	Financial plan
783,088	250,000	(200,000)	833,088	-	-
Changes of cash flow and liquidity analysis: It is expected that the gross margin of products sold in the next year will remain stable, the net cash inflow of operating activities will be about NT $250,000. The number of cash dividends issued, investment income and financing repayments in the next year will be about NT $200,000 outflowed. The cash balance at the end of the period is still sufficient. With low current debt ratio, there is no cash liquidity risk. Remedy for insufficient cash: Not applicable.

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• 7.4 Review and analysis of major capital expenditures and their sources of funds

• 7.4.1 Utilization of major capital expenditures and sources of funds: N/A

• 7.4.2 Expected possible yields: Not applicable

• 7.5 The main reasons for the recent annual reinvestment policy and profit or loss from the reinvestment and its improvement plan and investment plan for the coming year

• 7.5.1 Reinvestment policy: The company's reinvestment policy considers the production and marketing strategies of products or expands the business areas of other industries.

• 7.5.2 The investment income recognized by the parent company in 2019 using the equity method is NT $9,121 thousands. An increase of NT $5,202 thousands compared to last year. The profit from the invested company has continued to improve.

• 7.5.3 Investment plan for the coming year: Currently no investment plan for the coming year.

7.6 Risk management and assessment

• 7.6.1 The impact of recent annual interest rate, exchange rate, and inflation on the company's profit and loss and future measures:

• (1) Interest rate: The financial assets affected by the variable interest rate in the 2019 annual parent statements of the company are NT $600,399 thousands and the financial liabilities are NT $59,784 thousands. When the interest rate increases or decreases by 0.25% assuming all other variables remain unchanged, the net profit before tax in 2019 will increase or decrease by NT $1,352 thousands.

• (2) Exchange rate: The company and its subsidiaries are mainly exposed to the risk of exchange rate changes arising from sales and purchase prices that are not denominated in functional currencies. When the above mentioned transactions in 2019 parent statements face appreciation or depreciation of 5% assuming all other factors remaining unchanged, the net profit before tax in 2019 will increase or decrease by NT $37,417 thousands.

• (3) Inflation: No significant inflation in the company and its subsidiaries’ main operating environments and their sales markets.

• 7.6.2 Main reasons of engaging in high-risk, high-leverage investment, capital loans to others, endorsement guarantees, policies of, profit or loss from derivatives commodities and future countermeasures:

• (1) According to the management policy, the company does not involve in high-risk, high-leveraged investment, nor does it operate derivative commodity transactions, so there is no relevant profit or loss in 2019.

• (2) The company's capital loan to others and endorsement guarantee tasks are all processed in accordance with the “Procedures for Governing Loaning of Funds and Making of Endorsements/Guarantees”.

• 7.6.3 The latest annual R&D projects, the current progress of the unfinished R&D projects, the R&D expenses that need to be reinvested, the estimated time to complete mass

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production, and the factors that will affect the success of R&D in the future: please refer to 5. Operational highlights.

• 7.6.4 The impact of recent domestic and foreign important policies and legal changes on the company's finance and business and its countermeasures: The company always concerns about important domestic and foreign policies and legal changes and immediately cooperates with the revision of relevant laws and regulations

• 7.6.5 The impact of recent technological changes on the company's finance and business and its countermeasures: The company is always concerned about changes in the technology industry, and is always ready to make adjustments in all aspects of R&D, production, sales, and operations to respond to industry changes.

• 7.6.6 The impact of recent corporate image changes on the company ’s crisis management and countermeasures: no such situation.

• 7.6.7 Expected profits and possible risks of M&A: No such situation.

• 7.6.8 Expected profits and possible risks of plant expansion: no such situation

• 7.6.9 Risks faced by the concentration of purchases or sales: no such situation.

• 7.6.10 For directors, supervisors or shareholders who hold more than 10% of the shares, the impact and risk of large-scale transfer or replacement of equity: no such situation.

• 7.6.11 Impact and risk of changes in management rights to the company: no such situation

• 7.6.12 Litigation or non-litigation cases: N/A

• 7.6.13 Other important risks and its countermeasures: N/A

7.7 Other important matters: N/A

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8. Financial Analysis and Risk Management

8.1 Information related to the company’s affiliates

8.1.1 Parent reports of affiliated companies

==> picture [501 x 337] intentionally omitted <==

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

Bright LED Electronics Corp.
WanHui Enterprise KoBrite Corp. LiSheng
Limited (HK) (Mauritius) International
100% 93% Limited compan y
(HK)
60%
DongGuan Bright KoBrite Taiwan DongGuan Bright Crystal DongGuan Bright
LED Electronics corporation KoBrite Company Rise Electronic Co.
Corp. 100% Corporation Limited(HK) Ltd. 100%
100% 100% 80%
Henan Briht
Crystal Company
Ltd.
100%
----- End of picture text -----

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8.1.2 Basic information of affiliated companies

Name	Date of establishment	Address	Paid-in capital	Major business or production items
WanHui Enterprise Limited (HK)	1991.06	Room 5, Floor 11, Hung Tai Industrial Building, No. 37-39, Hung To Road, Kwun Tong, Kowloon, HongKong	HKD 11,500,000	Import and export trade/ Holding investment
KoBrite Corp. (Mauritius)	2004.11	Level3, Alexander House, 35 Cybercity,Ebene Mauritius	USD 94,810,043	Holding investment
LiSheng International Limited company (HK)	2003.12	Room 406, Join-In Hang Seng Centre, 71-75 Container Port Road, Kwai Chung, New Territories	HKD 60,000,000	Holding investment

• 8.1.3 Affiliated companies presuming to have control and affiliation by the same shareholder: N/A

8.1.4 Affiliated companies’ businesses and their interrelationships

Industry	Name of subsidiaries	Relationship with other affiliated companies
Import and export trade/ Holdinginvestment	WanHui Enterprise Limited (HK)	N/A
Holding investment	KoBrite Corp. (Mauritius)	N/A
Holding investment	LiSheng International Limited company (HK)	N/A

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8.1.5 Information of directors, supervisors and general managers of affiliated companies

Unit: thousand shares; %

									Unit: thousand shares;%	Unit: thousand shares;%	Unit: thousand shares;%	Unit: thousand shares;%
	Company name			Title		Name or representative			Shareholding
									Shares		Shareholding ratio
	WanHui Enterprise Limited (HK)			Director Director		Bright LED Electronics Corp. Tsung-Jen Liaw			11,460 40		99.65 % 0.35 %
	KoBrite Corp. (Mauritius)			Director Director Director		Bright LED Electronics Corp. Representative: Tsung-Jen Liaw Chi-Chia Hsieh Hsin-Pei Liao			8,783,545 - -		92.64 % - -
	LiSheng International Limited company (HK)			Director Director Director		Bright LED Electronics Corp. Tsung-Jen Liaw Chieh Hsiao			35,740 17,682 2,280		59.57 % 29.47 % 3.80 %
	8.1.6 Overview of affiliated companies’ operations
Company name		Capital	Total assets		Total liabilities		Net worth	Operating income	Operating profit	Profit/loss of the period (after tax)		EPS(NT $) (after tax)
WanHui Enterprise Limited (HK)		48,876	2,628,944		423,664		2,205,280	1,341,038	121,913	161,692		14.06
KoBrite Corp. (Mauritius)		2,884,613	611,433		253,558		304,359	365,572	(20,810)	(13,874)		(0.00)
LiSheng International Limited company (HK)		253,719	161,070		62,972		98,098	93,130	7,032	11,414		0.19

8.1.7 Parent financial statements of affiliated companies

The company that should be included in the parent financial statements of affiliated companies is the same as the company’s parent financial statements prepared in accordance with international financial reporting standards, thus no separated parent financial statements of affiliated companies will be prepared.

• 8.1.8 The company is not a subsidiary of another company, so no relationship report need to be prepared.

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• 8.2 Status of a private placement of securities during the most recent fiscal year or the current fiscal year up to the date of printing of annual report: N/A

• 8.3 Holding or disposal of the company shares by the company’s subsidiaries during the most recent fiscal year or the current fiscal year up to the date of printing of annual report : N/A

• 8.4 Other matters that require additional disclosure: N/A

• 8.5 Any matter that set forth in Subparagraph 2, Paragraph 2, Article 36 of the Securities and Exchange Act, which might produce material impact on shareholders’ equity or the price of the company’s securities, has occurred during the most recent fiscal year or the current fiscal year up to the date of printing of annual report: N/A

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